69561 Pakistan Proposed World Bank Climate Change and Environment Program 2010-2015 Washington, June 5, 2010 June 5, 2010 1 I. STRATEGIC CONTEXT AND RATIONALE A. Country and sector issues 1. Pakistan achieved impressive macroeconomic results during the first half of the current decade , with ambitious reforms resulting in an acceleration of growth from 3.3 percent in 1997- 2002 to over 6.5 percent during 2002-20051. Even during this period of rapid economic growth, the country‘s social and natural resource indicators continued to point to development challenges, and more significantly, suggested severe obstacles to the country‘s poverty reduction efforts and plans for sustainable economic growth. The Bank‘s Strategic Country Environmental Assessment (SCEA) indicated that by 2005, environmental degradation costs Pakistan at least 6 percent of GDP, or approximately Rs. 365 billion, per year. Roughly 80 percent of these costs stem from increased mortality and morbidity associated with indoor and outdoor air pollution and waterborne diseases2. Infant child mortality rates, for instance, are the highest in South Asia and the prevalence of childhood diarrhea and acute respiratory infections are the second highest. More specifically, Pakistan‘s under-five mortality rate of 89 per 1,000 live births as well as its infant mortality rate of 72 per 1,000 live births are higher than those of both India (69 and 52) and Bangladesh (54 and 43), respectively3. 2. As of 20084, excluding the impact of malnutrition5, roughly one third of all child mortality in Pakistan (or approximately 132,000 children per year) was caused by environmentally related factors (64 percent of which was due to diarrhea, and 35 percent of which originated from acute lower respiratory illnesses)6. When malnutrition is taken into account in the calculations, mortality from environmental factors increased to 187,000 children per year (47 percent of all child mortality). Annual costs of the environmental health burden not accounting for malnutrition are in the order of 2.9 percent of GDP, and when malnutrition effects are included, annual costs increase to 4.1 percent of GDP. Moreover, when the longer-term effects of malnutrition (partly attributed to environment-related infections) on education and income are considered7, estimated annual costs may be as high as 8.8 percent of GDP. According to the World Development Report 2010, these costs will increase in the future with climate change if adaptation is slow.8 3. In this context, Pakistan‘s environmental management system is characterized by the need to: (i) strengthen Pakistan country environmental systems and related institutional and 1 Pakistan Strategic Country Environmental Assessment (2006), World Bank Report No. 36946-PK. 2 See Annex II of the Pakistan SCEA for a more detailed description of environmental challenges. 3 The State of the World‘s Children, UNICEF 2009. 4 Environmental Health and Child Survival, Epidemiology, Economics, Experiences (2008), The World Bank. 5 Malnutrition and child mortality are strongly interlinked. Malnourished children are particularly vulnerable to environmentally-related diseases and therefore at higher risk of death. Conversely, children that contract environmentally-caused infections have a high likelihood of becoming malnourished, regardless of their socio- economic level, although lower income children with limited access to treatment are at higher risk. 6 Comparable fractions of environmentally caused children mortality were found when analyzing the situation in Ghana. 7 Chronic malnutrition causes impairment of cognitive development, resulting in poor school performance and ultimately a loss of lifetime earnings. 8 World Development Report 2010, Development and Climate Change, The World Bank. June 5, 2010 2 regulatory frameworks so that infrastructure investments critical to the country‘s development can be made in a sustainable manner; (ii) design measures, and implement pilot demonstration projects, that address environmental priority problems hindering the country‘s efforts in development and poverty alleviation; and (iii) assist the government in preparing a strategy to prepare for and address the impacts of climate change. More specifically: (a) Institutional framework for country systems and sustainable infrastructure development. The 2007 Pakistan Infrastructure Implementation Capacity Assessment9 concluded that the country lacked infrastructure essential for sustained growth and competitiveness in both domestic and international markets. To overcome infrastructure constraints, the Government of Pakistan (GoP) has planned to more than triple infrastructure investments from 2005 to 2010. Sustaining economic growth rates above 6.5 percent/year by increasing infrastructure investments to support such growth requires an overall strengthening of Pakistan‘s country environmental systems both to enhance environmental performance in general and to ensure that infrastructure investments are made in a way that accounts for unintended adverse effects on the environment. Thus measures should be taken to strengthen: (i) the capacity underlying the GoP‘s policy and institutional framework so that GoP can both identify high priority environmental problems and address those problems in an effective manner, taking into account concerns of stakeholders (including the most vulnerable groups); and (ii) GoP‘s capability to adequately monitor and evaluate progress to overcome its high priority environmental problems. The Pakistan Environment Protection Act of 1997 transferred environmental management powers to provincial governments. While major environmental policies and guidelines are dictated, at the national level, by the Ministry of Environment (MoE) and the Pakistan Environmental Protection Agency (Pak EPA), it is the role of the provinces to implement and enforce them. However, there is currently little coordination between federal and provincial agencies, and depending on the province, little to no coordination between provincial authorities and district, as well as sub-district-level authorities. At present, there is no mechanism by which agencies involved in environmental management can participate in a consultative process for priority-setting, development of long-term action plans, and assessment of performance and impacts of specific initiatives. In addition, inter-sectoral coordination for the oversight of cross-cutting issues, including those outlined in the National Environmental Policy (NEP) and those related to infrastructure planning and development, is currently nonexistent. Some attempts have been made to establish Focal Points within other non-environment ministries (e.g. Ministry of Industry), but interactions amongst these Focal Points have not been institutionalized. (b) Interventions to tackle Pakistan’s high priority environmental problems. As indicated above, annual costs of the environmental health burden are a significant 9 Pakistan Infrastructure Implementation Capacity Assessment - PIICA (2007), The World Bank, Report No. 41630- PK. June 5, 2010 3 percentage of Pakistan‘s GDP. Inadequate environmental management resulting in poor environmental quality has a drastic impact on human health, and this has a direct effect on the productivity of the country‘s labor force, its competitiveness and the overall potential for economic growth. This linkage is well reflected for instance, in the limited opportunities for children to attend school and to become skilled workers in a context of high infant mortality and where cognitive development is affected by poor environmental quality. It is thus critical that a program developed to ultimately reduce environmental degradation costs focuses on improving the environmental health of children. This is a priority for the GoP, which, if it remains unaddressed, will have profound consequences on the government‘s development plans for generations to come, and which may severely threaten the country‘s progress towards achieving its Millennium Development Goals (MDGs). (c) Response to impacts from climate change. South Asia is one of the world‘s regions most at risk from climate change in terms of adverse impacts on the poor10. The socio-economic costs of climate change-related impacts are significant for Pakistan, and also have the potential to severely reverse the progress made by the country on development and poverty alleviation. Potential consequences of changes in climate patterns may include: (i) Melting glaciers on the Himalayan-Hindu Kush mountain ranges would initially result in excessive water flow and flooding. The complete disappearance of the glaciers would have severe future implications in terms of reduced availability of fresh water in the Indus basin. (ii) Climate change is expected to transform the vegetation and reduce the biodiversity of the Himalayan Hindu Kush mountain range, leading to a northward shift of vegetation and to the reduction and loss of alpine tundra cover in the dry and temperate mountains of the region11. (iii) Most delta regions in Pakistan, where shortfalls in precipitation and drought have already led to wetlands that are parched and degraded, will be at risk because of increased evapotranspiration. (iv) The rangelands and semi-deserts of Pakistan are vulnerable to desertification due to the projected increase in the intensity and frequency of drought in the future. Desertification has been identified as a major threat to Pakistan‘s biodiversity. (v) Yields of major cereals are anticipated to decline by 15 – 20% in Southern Pakistan and livestock production could fall by as much as 30%, with severe implications for nutrition, livelihoods, and foreign exchange earnings.12 10 Fourth Assessment Report: Climate Change (2007), Intergovernmental Panel on Climate Change (IPCC) . 11 Changes in precipitation in the dry temperate mountains are expected to expand conifer coverage at the expense of alpine vegetation even before mid-century. 12 Climate Change, Vulnerabilities in Agriculture in Pakistan (2009), IUCN and Ministry of Environment,. June 5, 2010 4 (vi) Pakistan is extremely vulnerable to natural disasters (such as floods and droughts) and since 1970, the number of reported natural disasters has been rising steadily. With climate change and rising population densities, damage and exposure to natural disasters is set to increase. B. Rationale for Bank involvement 4. The Government of Pakistan has requested the Bank’s assistance to strengthen the National Environmental Policy (NEP) through a Technical Assistance Loan (NEPTAL) and analytical work on Green Industrial Growth (GIG),Strategic Environmental and Poverty Aspects of Trade and Transport Reforms (SEPSA), Air Quality Management (AQM), and Sindh: Environmental Priorities for Poverty Alleviation (SEPPA). Realizing the costs and the potential long-term ramifications of environmental degradation, the Government of Pakistan (GoP) is giving top priority to the environment, which is in fact one of the policy pillars of the incumbent Pakistan People‘s Party (PPP). The GoP, through its Ministry of Environment (MoE), has requested a program from the Bank to develop a program that enables a reduction in environmental degradation and its economic consequences, with the aim of underpinning the country‘s sustainable economic growth. The government has further requested that this program be implemented within the framework of the 2005 NEP13, and that it serve as a vehicle to strengthen the capacity of national environmental management agencies. The implementation of the largely conceptual framework of the NEP poses some considerable challenges, as has been demonstrated by past and only moderately successful attempts to promote coordinated environmental management in Pakistan14,15. 5. The Bank has deepened its environmental dialogue in Pakistan with the aim of addressing environmental priorities linked with economic growth and poverty reduction. Activities currently being supported by the Bank include: i) Non Lending Technical Assistance to help the GoP identify opportunities to foster green industrial growth (GIG) and thereby enhance its competitiveness and access to global markets; ii) preparation of analytical work to identify environmental priorities linked with poverty reduction in the province of Sindh (SEPPA); (iii) identifying options for air quality management (AQM), iv) preparation of a strategic assessment to address the environmental, social and poverty implications of trade and infrastructure-related policies (SEPSA); v) mainstreaming of environmental considerations into policy-based and investment operations in sectors including education and poverty reduction; vi) strengthening country environmental safeguards; and vii) developing a portfolio of carbon financing operations Through this diversified environmental portfolio, the Bank has acquired a comprehensive understanding of challenges and opportunities faced by Pakistan to address environmental priorities as part of their development efforts. 6. The Bank brings 15 years of experience promoting environmental management in Pakistan. During the past fifteen years, Pakistan has made considerable progress in terms of the 13 Pakistan National Environmental Policy (NEP), 2005. The NEP provides broad guidelines to the federal, provincial and local governments for addressing environmental concerns and cross-sectoral issues such as poverty, health, trade and local governance. See Annex III for a brief summary of NEP objectives. 14 Implementation Completion Report – Environmental Protection and Resource Conservation Project, 2000. 15 See Annex III for a detailed summary of the evolution of environmental regulation in Pakistan. June 5, 2010 5 development of an institutional framework for environmental management. However, the level of priority of environmental issues within the country‘s economic agenda, and the resulting influence of environment regulatory agencies, has remained low. Until the political profile of environmental institutions is raised, environmental protection requirements will remain difficult to enforce. The Bank, having contributed to the establishment of current institutional arrangements in the country, is well positioned to assist the government to ensure that the activities proposed by the Pakistan Environment Program can actually be implemented effectively. Having completed analytical work and held consultations on how the Bank can best address its clients‘ needs through a new Environmental Strategy, and considering the significant amount of stakeholder and policy dialogue that the both of these processes catalyzed, the Bank has already achieved some success in tackling one of the underlying causes of insufficient environmental protection in Pakistan, namely lack of awareness of environmental degradation, and the economic implications of that degradation. The wide dissemination of the SCEA along with the estimated costs of environmental degradation (in terms of GDP points) has already had a noticeable impact; for example, references to Bank-generated information on costs of environmental degradation are regularly made in the media. 7. The Bank brings extensive experience in working on environmental programs in multiple countries. The Bank has a large body of experience in environmental institutional strengthening projects16. This experience includes work in developing priority setting mechanisms and consultation processes. All of these elements will be critical in the planned strengthening of local capacities for environmental management in Pakistan. 8. The Bank has extensive experience working with environmental health, air pollution and environmental sanitation and hygiene issues. Past and ongoing Bank projects have focused on environmental health, air pollution and environmental sanitation and hygiene issues across the world, and therefore successful experiences and lessons learned can be incorporated in the design of this program. The Bank can provide the expertise, technical skills, knowledge of international best practices and ability to facilitate stakeholders‘ collaboration for environmental management. These experiences can be adapted to the current context in Pakistan and used in the design and implementation of demonstration pilots that are aimed at reducing the country‘s environmental health burden in a sustainable manner. C. Higher level objectives to which the program contributes 9. This program response directly to the objectives that have been laid out in the CAS. The draft Country Assistance Strategy (CAS) for 2009-12 recognizes that environmental degradation constitutes a significant obstacle for economic growth and poverty reduction in Pakistan. To address this issue, the CAS indicates that the Bank‘s support will focus on: (i) strengthening institutional capacity of federal and provincial environmental agencies to address the main causes of environmental degradation; (ii) supporting cost-effective interventions to address the impacts of environmental degradation that reduce opportunities for human and economic 16 China Environmental Management TA(2002), Colombia Urban Environmental Management Program (1996), Ecuador Environmental Management TA (PATRA, 1998), Mongolia Capacity Building TA (2003), Vietnam Comprehensive Capacity Building Program (2004). June 5, 2010 6 development; (iii) enhancing country systems to anticipate and respond to emerging environmental challenges; and (iv) increasing the contributions of sustainable development to the country‘s competitiveness and infrastructure platform. The proposed PEP would directly contribute to all of these objectives. June 5, 2010 7 II. PROGRAM DESCRIPTION A. Program development objective 10. The program’s higher level objective is to build an environmental constituency and capability to address Pakistan’s burgeoning problems. This includes (i) establishing a well functioning policy and institutional framework including priority setting, planning and budgeting, monitoring and evaluation, (ii) reducing environmental degradation and its costs, especially in terms of environmental health risks to vulnerable populations, and (iii) developing and implementing a climate change strategy. 11. The Program Development Objective is to strengthen the government‘s capacity for environmental management, with the long-term purpose of enabling: (i) the creation of an institutional and policy framework that ensures environmental sustainability, including that of future infrastructure investments and responses for climate change adaptation and mitigation; and (ii) incremental reductions of environmental degradation and its costs, particularly in terms of environmental health of children. 12. The success of the program will be measured using the following set of indicators: (a) Strengthen the GoP‘s capacity to create and implement country environmental systems and identify and address environmental problems and priorities effectively; (b) Design efficient and effective environmental policies and programs aimed at sustaining the infrastructure platform needed for accelerated economic growth and improving the business climate; (c) Design and implement interventions to reduce environmental degradation and its economic consequences; and (d) Develop a national strategy and action plan for climate change adaptation and mitigation. B. Program components 13. The program includes safeguards support, analytical work, technical assistance and investments. The safeguards cross support to World Bank‘s loans will go beyond the mandatory safeguards policies to ensure mainstreaming of environmental considerations in investments. Analytical Work and Technical Assistance 14. The analytical work and technical assistance includes activities that support the Planning Commission, the Ministry of Industries, the Government of Sindh, the Pakistan Ministry of Environment, and the Pakistan Environmental Protection Agency. The analytical work on Green Industrial Growth assists the Ministry of Industries. The Strategic Environmental and Poverty Aspects of Trade and Transport Reforms supports the Planning Commission and the government agencies responsible for trade and freight transport. The Air Quality Management analytical work supports the Ministry of Environment and the Pakistan Environmental Protection Agency June 5, 2010 8 as well as provincial environmental protection departments. The Sindh: Environmental Priorities for Poverty Alleviation assists the Government of Sindh. 15. The table below highlights the analytical work and development policy activities. Activity Sector Issues Green Industrial The analytical work aims to develop an Industrial Competitiveness Growth Forum to discuss policy alternatives and build consensus for the Mainstreaming adoption, implementation, monitoring and evaluation of a sustainable Environmental industrial competitiveness strategy Sustainability in Industrial Competitiveness (P115048) NLTA for Sindh The main objectives of the NLTA are to identify the province‘s Environmental environmental priorities, assess the efficiency and effectiveness of Management for alternative interventions identified by GoSindh to address Economic Growth environmental priorities, and provide recommendations to strengthen and Poverty environmental management. Alleviation (P1150501) Institutional The project will strengthen institutional arrangements for air quality Assessment for Air management and assist in implementing the Pakistan Clean Air Quality Program. Management (P103883) Preparation Other Development Agencies, Ongoing and Proposed DFID Policy Support: - US$20 million programmatic DPL to support climate change adaptation in terms of implications for agriculture United Nations Policy Support: Development - US$12 million investment to support a program an environment Programme program Japan International Establishment of Environmental Monitoring System: Cooperation Agency - Support the development of institutional capacity to respond to challenges associated with climate change - Promotion of donor coordination around a climate change policy matrix Lending Instruments June 5, 2010 9 16. The lending instruments include the NEPTAL and investments and grants supporting to the Ministry of Industries on Green Industrial Growth, to the private sector on carbon financing, and the Government of Sindh on climate change mitigation and adaptation. 17. The NEPTAL components combine three elements to achieve the project development objectives. First, upgrading environmental management is addressed by a program of technical assistance activities to strengthen national and provincial environmental organizations. This comprises building federal, provincial, and local capacity for environmental priority setting, planning, budgeting, implementation and M&E. It also includes constituency building through targeted awareness building and dissemination. Second, specific pilot interventions to mitigate important environmental health problems in each province will be undertaken. These positive results generated by the pilots will in turn set the stage for scaling-up and replication country- wide. Third, the NEPTAL will build upon Government progress in defining a nationwide Climate Change strategy to assist with prioritizing interventions, developing action plans and launching implementation. These activities will be undertaken at the national and provincial levels. 18. The NEPTAL program has been carefully worked out with Federal and provincial government officials. They are, for the most part, based upon the dozen preliminary assessments carried out including institutional needs assessments (Federal and four provinces), environmental strategies and action plans (Federal and provinces), Climate Change assessments (institutional and strategies/action plans) and pilot environmental health interventions. 19. The first component of the NEPTAL addresses the challenges to strengthen federal and provincial institutions to make them capable of leading and managing robust, targeted and well- funded environmental programs. During preparation diagnostic studies were undertaken of national and provincial organizational strength to identify weaknesses requiring attention and opportunities for growth. The component will do the following: (a) The NEP TAL will review and refine national environmental priorities linked with economic growth, poverty reduction and available environmental data. The objective is to assist the Government to craft a satisfactory environmental strategy and action plan built upon: (i) Coordination with provinces regarding their needs and priorities (ii) Coordination across sectors regarding Ministerial and stakeholder priorities 20. If successful, Pakistan, will have a blueprint to coordinate future efforts. (b) The NEP TAL will assist provincial environmental management agencies to develop strategies and put in place action plans that will lead to targeted, efficient and effective interventions. The project will support agency efforts to develop: (i) Satisfactory environmental strategies and action plans at the provincial levels June 5, 2010 10 (ii) Reasonable budgeting and progress of priority environmental activities (iii) Functioning M&E units at the central and provincial levels (iv) Increased budgeting and expenditure on environmental programs and priorities (v) Regular revision of strategies, action plans and budgets in line with M&E results 21. If successful, Pakistan will see increased investments and a more results-based approach to budgeting and carrying out environmental initiatives. Also, at the national and provincial levels there should be sustainable M&E units capable of transparently tracking and reporting progress and feeding into planning and budgeting efforts. (c) Finally, the NEP TAL will support constituency building and strengthen social accountability mechanisms by disseminating programs and results to the public and opening performance to public scrutiny. (i) Publication of strategies, budgets, and action plans on easily available websites and including publication in mass media 22. The second component of the NEPTAL aims at reducing the costs of environmental degradation. The challenge is to launch pilots in provinces targeting critical environmental health issues thereby creating successful vehicles and building constituencies that will facilitate scaling- up country-wide. The pilots have been carefully selected in collaboration with provincial and Federal officials. They seek to perfect interventions so they can be readily scaled-up. Hence particular attention is paid to technologies, costs and benefits, logistics and approaches for engaging target populations. Each province will have at least one pilot from among the following: (a) Vehicle Exhaust Pollution Abatement. Ambient air pollution is a serious health problem in Pakistan‘s larger cities. (b) This will be done by piloting vehicle emission testing first in Pakistan‘s larger cities. Ambient Air Pollution Measuring, Standards and Dissemination. All pilots will be implemented in provinces that received assistance from JICA in the form of air pollution measuring equipment. This equipment is currently not being used in all provinces and where it is used, findings are not being transformed into tools (like color coding daily pollution) that will raise consciousness and lead to mitigation measures. The pilot will provide funding for use of JICA equipment, results interpretation and transforming results into effective pollution mitigation tools. (c) Indoor Air Pollution Abatement. In the some areas in Pakistan houses are poorly built and central heating consists of an inefficient traditional stove that is kept going all day imposing an added burden on surrounding forests. The inefficient insulation and stoves also pose a serious respiratory risk for women and children who spend much of the time indoors. These problems will be addressed in two pilots. The first is June 5, 2010 11 a package consisting of a highly improved stove and insulation improvements that have been piloted on a much smaller scale by a leading local NGO. (d) Hand Washing and Sanitation Education. Drinking water contamination is a problem in Pakistan, which translates into serious health related problems for the populations living in each of the provinces. Mitigation measures such as education on water purification methods, hand washing campaigns, and other sanitation education programs will be developed for schools, institutions, and households in order to address the problem. (e) Sustainable ship breaking. Pakistan has a history of ship building, with the majority of ship yards located in the province of Sindh. There is potential to extend the local expertise of the ship building industry to the ship breaking industry, which primarily takes place in Baluchistan (e.g. Gadani beach). The MOE has been part of the development of industry guidelines for occupational safety and transboundary movements of waste that have been prepared by the International Labor Association (ILO) and the Basel Convention, respectively. The MOE‘s goal is to see these guidelines adopted by the ship breaking industry in Pakistan, bringing the country in compliance with its international obligations. Pilots will be designed under the TAL to: (i) assess current ship breaking practices in Balochistan and Sindh, determine the current extent of their environmental impact and pilot interventions aimed at their improvement; and (ii) demonstrate cost-effective ways to dispose of large volumes of CFC-containing insulation panels recovered from ship breaking, which can be discarded while capturing their ozone depleting and global warming gases. The third component of the NEPTAL implements a portfolio of climate change mitigation and carbon finance projects. Project identification notes (PINs) and project documents (PDDs) have been developed by the consultant Winrock for the Pakistan‘s Ministry of Environment. The PINS and PDDs have been included as annexes of this document. Table 2 List of PINS and PDDs completed under the Carbon Financing PHRD Project Description Project Name Developer Location CERs/ PIN/ 7 Years PDD /PoA DD This program intends to Vertical Shaft Brick VSBK Islamaba PIN introduce energy efficient Kiln Conversion Pakistan d and environmentally Program of Activities friendly Vertical Shaft Brick Kiln (VSBK) technology by replacing the inefficient and highly polluting old brick production technology, June 5, 2010 12 namely Fixed Chimney Bull Trench Kilns (FCBTKs), under a technology transfer program. This Program intends to Karachi CNG Buses City Karachi 316,649 PIN control the transportation Program of Activities District problems and to improve Governmen the road traffic and t environmental situation in Karachi by reducing the use of personal forms of transport with the availability of an affordable, efficient and high quality CNG bus service KESC is intending to Conversion of Old KESC Karachi 700,000 PIN initiate an Energy Simple Cycle Plants Efficiency Project where to New Combined they intend to convert Cycle Plants three existing open cycle power stations to combined cycle power plants. The program intends to Domestic Biogas RSPN Punjab 144,400 PoA improve the quality of life Plants Program of DD of rural farmers, Activities particularly women, and their livelihoods in Pakistan through exploiting the market and non-market benefits of domestic biogas. This program involves Distribution of CFLs LESCo Lahore 60,412 PIN distribution of energy Program of Activities and efficient light lamps to PoA households at cost in the DD jurisdiction of LESCO in the Punjab province of Pakistan This program intends to Renewable Energy PPAF All over 374,730 PIN produce energy in rural (micro-hydro, solar, the areas of Pakistan through small wind) Program various renewable energy June 5, 2010 13 of Activities country sources such as off-grid mini/micro hydro, wind turbines, solar lights, solar water pumps, wind mills for water pumping and biogas. Through this program Energy Optimization Avanceon Lahore 1,000,00 PIN Avanceon Pvt. Ltd. Will Solutions Program of Ltd 0 launch Energy Activities Optimization Solutions using purpose built solutions iBoiler, iWater & iDC, to reduce energy footprint of industry by offering a turnkey managed care solution to optimize steam and water usage in the industry. The intent of the Improved Cook AKF Sindh 267,611 PIN Improved Cook Stove Stoves Program of (ICS) Program is to Activities promote and distribute ICS in the households in 15 villages/communities of Thatta and Badin districts in Sindh province in the south of Pakistan. This project focuses on Building Energy Ministry of Islamaba 3,500 PIN energy efficiency Efficiency Foreign d and improvement of Enhancement Affairs PoA government buildings Program of Activities DD through a variety of energy efficiency and conservation methods. Replacement of SHV Islamaba 36,884 PIN This project entails Residual Furnace Oil Energy d scaling up of SHV and Diesel by LPG in Pakistan Pakistan‘s current LPG June 5, 2010 14 Industrial (Pvt) Ltd business by entering into a Applications Project new market of replacing Residual Furnace Oil and Diesel Oil in Industrial Applications Kohala 1100 MW Welt Islamaba 18,133,0 PIN Kohala Hydro Power Hydro Project Konnect d 50 and Project is an 1100 MW PDD run of the river project to be constructed on the Jehlum River in Azad Jammu & Kashmir, Pakistan. Cholistan 50 MW Welt Islamaba 352,138 PIN This is a 50 MW Solar PV Solar PV Project Konnect d andP Power Generation Project DD to be set up in Cholistan, Punjab. June 5, 2010 15 III. SUSTAINABILITY 23. The Program is focused on finding the means to launch and/or consolidate environmental units, initiatives, procedures and funding so that they will be carried on in a sustainable manner. The PEP will need to confront the following challenges: (a) Implementation of environmental strategies and action plans once vetted by the Federal and provincial governments plus continual assessment and revision to reflect progress. The program focuses primarily on refining and vetting strategies and building constituencies in government and civil society through knowledge dissemination, engaging with stakeholders and pilots that will support program sustainability. (b) Implementation of recommendations to strengthen the MoE and Federal and Provincial EPAs, endowing them with the mandate, qualified staffing and funding required to update and carry out action plans. The Bank will support sustainability by building constituencies as indicated above and developing agendas and proposals based upon rigorous assessments. However, there are no guarantees that the funding will be forthcoming—a well documented study proposing substantial strengthening of the Federal EPA has been languishing for over a year without a response. (c) Implementation of Climate Change strategies and action plans once vetted by Federal and local governments. The program assists environmental officials in upgrading and vetting these first strategies and action plans. It also ‗consolidates‘ Climate Change ‘units‘ and supports the preeminent research institution in the field as means to build capacity and visibility. This coupled with the constituency building and legitimizing activities mentioned above should improve the sustainability of Climate Change programs. Donor Coordination on Climate Change Mitigation and Adaptation. 24. The Bank team has met with representatives from the Japan International Cooperation Agency (JICA) to discuss the potential of assisting the GoP in addressing Climate Change (CC) impacts by focusing on mitigation. JICA would like to contract an international consultant to develop a policy matrix for the assistance program. JICA plans to focus on three areas (i) disaster management, mainly through National Disaster Management Authority (NDMA), as well as working with the Pakistan Meteorological Department, the Federal Flood Commission, and the IPD of the Government of Sindh; (ii) efficient water use in irrigation, the IPD of the Government of Punjab is the main client; and (iii) energy: conservation, renewable, efficiency, etc., with the Ministry of Environment as the client - as part of their climate change program initiative with the Government of Pakistan. JICA has already held meetings with the MoE and other interested line agencies. JICA has proposed to work jointly with the WB program for the implementation of the NEP. JICA and the Bank agreed that mutual cooperation could benefit both the country as well as the climate change program itself. DFID‘s active portfolio includes only a minor environmental component in Pakistan. In their next assistance program for Pakistan (preparation will start around April 2009), DFID is planning to allocate around 10 million British Pounds for the environment portfolio, of which a large portion of funds will go into assisting the June 5, 2010 16 Government in the climate change program. Adaptation in terms of implications for agriculture is the primary focus of assistance and DFID plans to finalize design of the program by early next year. DFID has shown great interest in working with the Bank and particularly on climate change. Both DFID and the WB agreed to mutually exchange program documents when these become available. 25. The implementation of the PEP will provide wide-ranging economic benefits to Pakistan. The PEP will reduce environmental degradation in Pakistan, which costs the country at least 6 percent of GDP per year. The environmental health factors related to child mortality, including malnutrition, can cost up to 4.1 percent of GDP per year. When the longer-term effects of malnutrition (partly attributed to environment-related infections) on education and income are considered17, estimated annual costs may be as high as 8.8 percent of GDP. Improved institutional management of environmental systems, along with targeted pilot projects to reduce the incidence of environmental related diseases, will have a positive economic benefit to the country of Pakistan. 26. The interventions supported by the proposed program will target environmental problems that have been identified as priorities for Pakistan through detailed analytical work (SCEA, 2006). Technical measures financed under the program will thus be consistent with international standards, as well as state-of-the-art approaches to addressing environment-related problems (including health effects). The proposed program takes a comprehensive approach to tackling the top national environmental priorities (e.g. indoor and outdoor air pollution, sanitation and hygiene), which includes: i) measures that promote improvements in the efficiency and effectiveness of environmental management at the national and provincial levels; ii) technical interventions to improve environmental quality and mitigate environmental degradation; and iii) technical assistance for the development of a national climate change strategy. 27. This comprehensive approach will be illustrated in the selection of activities supported by the proposed program, which includes pilots that specifically address the country‘s top environmental priorities. Pilot programs tackling indoor air pollution may entail, for example: i) campaigns to promote the use of improved stoves; ii) construction of community kitchens; and iii) campaigns to promote the use of cleaner fuels. Urban air pollution pilots may include, for instance: i) introduction of low-sulfur fuel; ii) introduction of catalytic converters and inspection and maintenance programs; iii) retrofit particle-control technology; and iv) regulatory enforcement to reduce emissions from industry sources. These types of pilots have demonstrated impacts on air pollution, which have been extensively documented throughout the world. In addition, the proposed program will promote behavioral changes in terms of improved hygiene. Studies indicate that hand washing is one of the most effective interventions to reduce waterborne diseases, particularly diarrhea, and therefore pilots will be designed to promote these practices in affected areas. 28. In terms of climate change, the proposed program will support advanced analytical work to improve the current level of understanding of potential geographic, economic and social 17 Chronic malnutrition causes impairment of cognitive development, resulting in poor school performance and ultimately a loss of lifetime earnings. June 5, 2010 17 impacts. Once the analysis has been completed, the program will provide technical assistance based on the most current and recognized level of international expertise, aimed at preparing a national strategy and resulting action plans, to adapt to and mitigate the impacts of climate change. 29. The proposed program is not expected to have negative environmental impacts, but instead, it will have a positive environmental impact as it will improve environmental governance and management through the institutional strengthening activities. Also, the proposed program is not expected to have a direct social impact, but its secondary social impacts are expected to be positive. In particular, the program seeks to ensure that the opinions and interests of Pakistan‘s most vulnerable groups are taken into account in the decision-making process (i.e. that these groups have a seat at the table in the design of policies and programs that affect them). The proposed program will strengthen the ability of environmental institutions, and support the incorporation of all stakeholders‘ interests into policies and planning for environmental management in Pakistan. The program will also improve transparency and accountability in environmental with respect to government decision-making processes. June 5, 2010 18 IV. LESSONS LEARNED 30. The lessons learned, based upon the discussions with stakeholders on Pakistan‘s environmental issues, address problems associated with ownership of an environmental program in a country beset with far more immediate economic and political concerns, institutional weakness, funding constraints, and security concerns, especially in the NWFP and Baluchistan. (a) Growing Ownership. Given high rates of turnover and the volatile situation in Pakistan, ownership is a key challenge. The objective of the program is to arm these committed officials and their agencies with recommendations and arguments derived from a battery of rigorous diagnostics, strategies, and action plans pointing towards sustainable reform agendas. It is expected that the proposed interventions will enhance the profile of environmental agencies and officials and strengthen their claim on scarce resources. (b) Addressing Institutional Weakness. The Bank has begun preparing federal and provincial studies, including the elaboration of strategies and needs assessments, to configure agencies to carry out the resultant action plans. While needs will far outweigh the country‘s likely willingness to address them, critical bottlenecks can and should be addressed. Furthermore, the program has identified specific activities essential for the future success of environmental interventions. Hence it will focus on EIAs as a means of opening to public scrutiny public decisions of investments in various sectors that could potentially result in negative environmental impacts. A key lesson being incorporated into the program is the need to clearly define the horizontal and vertical relationships of authority and responsibility among different government levels and sectors, including those that are relevant for performance audits and public reporting. The PEP will also help address the ambiguities and overlaps that currently hamper cross-sector and inter-governmental coordination. (c) Building a Constituency. Support for environmental reforms is limited and fragmented. One pillar of the strategy for affecting sustainable change is to build the constituency through broad scale dissemination of strategies and performance results. A second pillar is to address environmental health concerns and eventually expand the pilots into national interventions. Also, the program will help build a climate change constituency, focusing on the linkages between future impacts of climate change and immediate responses to local problems, such as indoor and urban air pollution. (d) Addressing Knowledge Gaps. There are relatively few studies of the environmental establishment and challenges, including Climate Change. This has been addressed through a dozen preparatory studies funded through the SCEA and a PHRD grant that address federal and provincial strategies, institutions, climate change and environmental health pilots. Hence, the program‘s activities are firmly grounded in findings and recommendations of the Bank‘s analytical work. Institutional strengthening components will support deepening of the environmental knowledge base. June 5, 2010 19 (e) Adopting a Programmatic Approach. Based on Bank experiences the design of activities for subsequent years is based on iterative process of defining annual work programs, based on experiences and changing circumstances. (f) Collaboration with Other IFIs. There is interest and available funding from other institutions but coordination has often been weak. IFIs have different funding cycles and different priorities. This program will support a closer coordination around environmental, and especially climate change, priorities. June 5, 2010 20 31. June 5, 2010 21 Annex 1: Results Framework PAKISTAN ENVIRONMENT PROGRAM 2010-2015 PDO Program Outcome Use of Program Outcome Indicators Information Strengthen the government‘s 1. Strengthen GoP‘s capacity to capacity for environmental create and implement country management, with the long-term environmental systems and purpose of enabling: (1) the identify and address creation of an institutional and environmental problems and policy framework that ensures priorities effectively. environmental sustainability, 2. Design efficient and effective including that of future environmental policies and infrastructure investments; and programs aimed at sustaining (2) incremental reductions of the infrastructure platform environmental degradation and needed for accelerated its costs, particularly in terms of economic growth and environmental health of children. improving the business climate. 3. Design and implement interventions to reduce environmental degradation and its economic consequences. 4. Develop a national strategy and an action plan for climate change adaptation and mitigation. Intermediate Outcomes Intermediate Outcome Use of Intermediate Indicators Outcome Monitoring Component 1: Institutional Strengthening of Country Systems 1. Mechanisms for 1. Strategic performance-based - Slowness to set up environmental priority setting medium-term environmental procedures would point to defined at national and action plans developed by methodological or provincial levels. provinces, on the basis of coordination difficulties analytical work and as a result of consultative process. - Corrective measures during implementation of activities 2. Scope of environmental pilots for quality assurance and determined by each province timeliness of products to be following priority-setting delivered. June 5, 2010 22 mechanisms. 2. Mechanisms for coordination 3. Provincial implementation of - Lack of information transfer among environmental pilots (financial and technical) between environmental management agencies defined periodically followed up by agencies would prompt a at national and provincial MOE through well defined review of coordination levels. reporting channels. mechanisms and action plans 4. Achievement of pilot to correct deficiencies. milestones monitored at provincial and central levels. Accountability mechanisms enforced. 5. Lessons learned from pilot implementation replicated in different provinces. 3. Mechanisms for coordination 6. Environmental sustainability between environmental mainstreamed in the agendas management agencies and of selected government other government sectors sectors (e.g. Ministry of - Lack of coordination among defined. Industry, Ministry of Health) agencies from various sector to be addressed through 7. Through pilot corrective actions prompted implementation, provinces by high-level discussions develop: a. Methodologies for incorporating environmental concerns into provincial management plans. b. Proposals for incorporating environmental sustainability criteria into fiscal laws and regulations. c. Proposals for financial instruments that promote environmental sustainability across government sectors. 4. Capacity and effectiveness of 8. Comprehensive review of environmental management management and organization agencies strengthened. of environmental management agencies completed. 9. On the basis of recommendations: a. Appropriate annual operating budgets developed. - Slowness to set up June 5, 2010 23 b. Incentive structures for procedures would point to staff developed. methodological or c. New staff hired for coordination difficulties technical, management and - Corrective measures during support positions at the implementation of activities central and provincial for quality assurance and levels. timeliness of products to be d. Necessary computer and delivered. telecommunications equipment purchased. 5. Environmental regulatory 10. Environmental framework and enforcement management regulations, capacity of environmental consistent with NEP and management agencies relevant to national context, strengthened. updated at national and - Slowness to set up provincial levels. procedures would point to 11. Sanctions for methodological or environmental damages coordination difficulties updated. - Corrective measures during 12. Adequate environmental implementation of activities enforcement capacity for quality assurance and determined and necessary timeliness of products to be legal and technical staff delivered. hired. 13. Transparency of 6. Accountability mechanisms environmental management for environmental agencies enhanced through management agencies the dissemination of strengthened. environmental information. - Slowness to set up 14. Judicial tools for procedures would point to environmental conflict methodological or resolution developed. coordination difficulties 15. Policy forum mechanism - Corrective measures during established for open implementation of activities discussion of for quality assurance and environmental management timeliness of products to be topics. delivered. 16. Involvement of non- governmental agencies on issues concerning environmental management increased. 17. Monitoring and evaluation 7. Development of sound system established and - Slowness to set up monitoring and evaluation operational, measuring procedures would point to June 5, 2010 24 system. progress on achievement of methodological or improved environmental coordination difficulties management on pre- - Corrective measures during determined indicators. implementation of activities 18. Mechanism put in place to for quality assurance and systematically adjust timeliness of products to be environmental management delivered. systems according to - Environmental data feedback from monitoring disseminated more broadly to data. the public. 19. Dissemination of environmental performance to civil society. Component 2: Reducing the Costs of Environmental Degradation 1. Improved capacity for environmental management 1. Performance targets of - Slowness to set up demonstrated at national and individual pilots reached on procedures would point to provincial levels. schedule. methodological or 2. Behavioral changes are coordination difficulties. concrete when progress - Corrective measures during indicators are compared to implementation of activities baselines. for quality assurance and 3. Policy changes proposed at timeliness of products to be the local and national levels delivered. to support, magnify and/or - Environmental data replicate the impact of pilot disseminated more broadly to projects. the public. 4. Results of pilot projects periodically disseminated nation-wide. 2. Sustainability of programs 5. Increased participation of civil society in - Corrective measures during aimed at reducing environmental management implementation of activities environmental degradation demonstrated during pilot for quality assurance and and environmental health implementation. timeliness of products to be impacts, particularly on delivered. children, demonstrated. - Reallocation of funds from nonperforming to performing pilots/agencies as part of annual reviews. - Better understanding of health impacts of poor environmental management. - Environmental data disseminated more broadly to June 5, 2010 25 the public. Component 3: Climate Change and Carbon Finance. 1. Priorities for action 1. Knowledge and capacity identified. gaps in the understanding of climate change impacts assessed. - Analysis provides inputs for 2. Analytical work completed improved environmental to understand geographic, management decision economic and social impacts making. of climate change. 2. Institutional capacity of key 3. Capacity of environmental agencies strengthened. agencies to address climate change impacts in a manner consistent with national environmental priorities. 4. Ministry of Finance engaged in the development and set up of international and local financial instruments to - Lack of coordination among address climate change. agencies from various sector to be addressed through 5. Economic Affairs Division corrective actions prompted actively developing by high-level discussions. comprehensive donor program for reducing climate change impacts and promoting low carbon growth. 6. The government‘s understanding of linkages between trade liberalization and climate change enhanced. 7. Regional action plans for 3. Climate change strategy and adaptation and mitigation to regional action plans climate change developed, developed. focused on facilitating - Analysis provides inputs for access to international improved environmental resources. management decision 8. Fiscal instruments proposed making. to promote low carbon growth and climate-resilient development. June 5, 2010 26 4. Methodology developed to 9. Improved government‘s assess incrementality of understanding of financial climate-proofing impacts of mainstreaming investments. climate change on development agenda. 10. Baseline for accessing - System provides inputs for international incremental improved environmental financing determined. management decision 11. Pilot approach to access making. resources for climate- proofing investments demonstrated. 5. Programmatic carbon 12. Climate cells created in all financing operations provinces. developed. 13. Capacity of new climate cells to develop programmatic operations enhanced. 14. Private sector participation - Reallocation of funds from in carbon finance operations nonperforming to performing increased. agencies as part of annual reviews. June 5, 2010 27 Annex 2: Proposed Carbon Finance Investments List of PIN completed under the Carbon Financing PHRD S. Project Name Developed Project Brief Location CER/7 No Description Years 1. Vertical Shaft Vertical Shaft This program intends Islamabad Brick Kiln Brick Kiln to introduce energy Conversion Pakistan efficient and Program of environmentally Activities friendly Vertical Shaft Brick Kiln (VSBK) technology by replacing the inefficient and highly polluting old brick production technology, namely Fixed Chimney Bull Trench Kilns (FCBTKs), under a technology transfer program. 2. Karachi CNG City District This Program intends Karachi 527,748 Bus Project Government to control the Karachi (CDGK) transportation problems and to improve the road traffic and environmental situation in Karachi by reducing the use of personal forms of transport with the availability of an affordable, efficient and high quality CNG bus service 3. Open Cycle to Karachi Electric KESC is intending to Karachi 700,000 Combined Supply initiate an Energy Cycle Corporation Efficiency Project Conversion at (KESC) where they intend to Karachi convert three existing Electric open cycle power Supply stations to combined Corporation cycle power plants. Installed Units June 5, 2010 28 4. Domestic Rural Support The program intends Punjab 144,000 Biogas Plants Program Network to improve the quality Program of (RSPN) of life of rural Activities farmers, particularly women, and their livelihoods in Pakistan through exploiting the market and non-market benefits of domestic biogas. 5. Distribution of Lahore Electric This program involves Lahore 260,384 CFLs Supply Company distribution of energy (LESCO) efficient light lamps to households at cost in the jurisdiction of LESCO in the Punjab province of Pakistan 6. Renewable Pakistan Poverty This program intends Pakistan 374,730 Energy (micro- Alleviation Fund to produce energy in hydro, solar) (PPAF) rural areas of Pakistan Program of through various Activities renewable energy sources such as off- grid mini/micro hydro, wind turbines, solar lights, solar water pumps, wind mills for water pumping and biogas. 7. Energy Avanceon Pvt. Ltd Through this program Pakistan 1,000,000 Optimization Avanceon Pvt. Ltd. Solutions for Will launch Energy Industries in Optimization Pakistan Solutions using purpose built solutions iBoiler, iWater & iDC, to reduce energy footprint of industry by offering a turnkey managed care solution to optimize steam and water usage in the industry. June 5, 2010 29 8. Improved Agha Khan The intent of the Thatta/Badin 267,611 Cook Stoves Foundation/BACIP Improved Cook Stove Program of (ICS) Program is to Activities promote and distribute ICS in the households in 15 villages/communities of Thatta and Badin districts in Sindh province in the south of Pakistan. 9. Building This project focuses Islamabad 3,500 Energy Audit on energy efficiency and Efficiency improvement of Enhancement government buildings Project through a variety of Program of energy efficiency and Activities conservation methods. 10. Replacement SHV Energy This project entails Islamabad 36,884 of Residual Pakistan (Pvt) Ltd scaling up of SHV Furnace Oil Pakistan‘s current and Diesel by LPG business by LPG in entering into a new Industrial market of replacing Applications Residual Furnace Oil Project and Diesel Oil in Industrial Applications 11. Kohala 1100 Welt Konnect Kohala Hydro Power 18,133,050 MW Hydro Project is an 1100 Project (PDD) MW run of the river project to be constructed on the Jehlum River in Azad Jammu & Kashmir, Pakistan. 12. Cholistan 50 Welt Konnect This is a 50 MW Solar 352,138 MW Solar PV PV Power Generation Project (PDD) Project to be set up in Cholistan, Punjab. June 5, 2010 30 Annex 3: Proposed Carbon Finance Investments List of PDDs and POADDs completed under the Carbon Financing PHRD Project CER/7 No. Project Name Project Brief Description Location Participant Years 1. Domestic Rural The program intends to Punjab 144,000 Biogas Plants Support improve the quality of life Program of Program of rural farmers, Activities Network particularly women, and (PoADD) (RSPN) their livelihoods in Pakistan through exploiting the market and non-market benefits of domestic biogas. 2. Distribution Lahore This program involves Lahore 260,384 of CFLs Electric distribution of energy (PoADD) Supply efficient light lamps to Company households at cost in the (LESCO) jurisdiction of LESCO in the Punjab province of Pakistan 3. Energy Avanceon Through this program Pakistan 1,000,000 Optimization Pvt. Ltd Avanceon Pvt. Ltd. Will Solutions for launch Energy Industries in Optimization Solutions Pakistan using purpose built (PoADD) solutions iBoiler, iWater & iDC, to reduce energy footprint of industry by offering a turnkey managed care solution to optimize steam and water usage in the industry. 4. Building Ministry of This project focuses on Islamabad 3,500 Energy Audit Foreign energy efficiency and Affairs improvement of Efficiency government buildings Enhancement through a variety of Project energy efficiency and Program of conservation methods. Activities (PoADD) 5. Renewable Pakistan This program intends to Pakistan 374,730 Energy Poverty produce energy in rural (micro-hydro, Alleviation areas of Pakistan through June 5, 2010 31 solar) Fund various renewable energy Program of (PPAF) sources such as off-grid Activities mini/micro hydro, wind (PoADD) turbines, solar lights, and solar water pumps. 6. Kohala 1100 Welt Kohala Hydro Power 18,133,050 MW Hydro Konnect Project is an 1100 MW Project (PDD) run of the river project to be constructed on the Jehlum River in Azad Jammu & Kashmir, Pakistan. 7. Cholistan 50 Welt This is a 50 MW Solar PV 352,138 MW Solar PV Konnect Power Generation Project Project (PDD) to be set up in Cholistan, Punjab. June 5, 2010 32 Annex 4 Vertical Shaft Brick Kiln Conversion Program of Activities PIN Annex 5 Karachi CNG Bus Project PIN Annex 6 Open Cycle to Combined Cycle Conversion at Karachi Electric Supply Corporation Installed Units PIN Annex 7 Domestic Biogas Plants Program of Activities PIN Annex 8 Distribution of CFLs PIN Annex 9 Renewable Energy (micro-hydro, solar) Program of Activities PIN Annex 10 Energy Optimization Solutions for Industries in Pakistan PIN Annex 11 Improved Cook Stoves Program of Activities PIN Annex 12 Building Energy Audit and Efficiency Enhancement Project Program of Activities PIN Annex 13 Replacement of Residual Furnace Oil and Diesel by LPG in Industrial Applications Project PIN Annex 14 Kohala 1100 MW Hydro Project PIN Annex 15 Cholistan 50 MW Solar PV Project PIN June 5, 2010 33 PROJECT IDEA NOTE (PIN) Name of Project: “Kohala 1100 MW Hydro Project in Azad Jammu and Kashmirâ€? DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 34 A. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT To develop the Kohala Hydro Power Project – an 1100 MW run of the river project – to be constructed on the Jehlum River in Azad Jammu & Kashmir, Describe in not more than 5 lines Pakistan. PROJECT DESCRIPTION AND The Kohala Hydro Power Project is an 1100 MW run of the river project, which PROPOSED ACTIVITIES is going to be constructed on the Jehlum River. Environmental & feasibility About ½ page studies have been completed, and the environmental impact has been shown to be minimal. The head and the turbine will be connected by a tunnel. The project is expected to help alleviate the huge energy deficit in Pakistan. It will be the first clean energy project of its magnitude in Pakistan after many years of no activity in this sector and will be a large source of clean cheap energy. The project is expected to spur socio-economic growth in the Kohala region including creation of many jobs in the AJK region. TECHNOLOGY TO BE It is designed to be a concrete gravity dam with a foundation made of 18 EMPLOYED 2 sandstone sandwiched with shale. The total catchment area is 14,006 km with 3 3 Describe in not more than 5 lines average flow of 311 m /s and mean annual runoff 9.808 billion m . The total 3 storage is 15 million m and maximum dam height 64 m. There are 2 spillway gates of size 15 x 13 m. The length of tunnel is designed to be 17 km. The voltage class is 5 circuit, 500 kV. There are 4 turbines HL-LJ-500 with rated output of 280.6 MW. The generator power factor will be 0.9. TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF6 CO2 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 1e (mention what is applicable) See annex 1 for examples 18 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 35 LOCATION OF THE PROJECT Country Pakistan City Kohala Brief description of the location of The project will be developed on River Jehlum in the vicinity of Kohala. the project PROJECT PARTICIPANT Name of the Project Participant CWE & Trans Tech Role of the Project Participant a. Project Operator b. Owner of the site or project c. Owner of the emission reductions d. Seller of the emission reductions e. Project advisor/consultant f. Project investor g. Other, please specify:________________ Organizational category a. Government b. Government agency c. Municipality d. Private company e. Non Governmental Organization f. Other Contact person Habil Ahmed Khan, Director Operations Address Trans Tech Pakistan Suite 8, Ground Floor, Evacuee Trust Complex, Agha Khan Road, F-5/1, Islamabad, Pakistan Telephone/Fax 92+923005140020/92512870424 E-mail and web address, if any habil@weltkonnect.com; www.weltkonnect.com Main activities The TransTech group of companies is heavily involved in Infrastructure and Power development projects, including some Alternative energy projects. Welt June 5, 2010 36 Describe in not more than 5 lines Konnect, one of the companies of the Group, is involved in Solar PV, Wind, Bio Mass and Hydro Energy projects. Summary of the financials The total cost of the project is US $2,498,670,000 with a 70/30 debt/equity arrangement, 6 year grace period and 12 year payment period. Summary of the relevant Welt Konnect/TransTech does not have prior experience in such a project; experience of the Project however it has successfully implemented many large scale infrastructure Participant projects. Describe in not more than 5 lines A short list of some completed and ongoing Trans Techs projects is as follows: Projects Client Improvement of Karakoram Highway (Raikot – NHA Khunjerab Section) Pakistan Deep Water Container Port Dredging and KPT Reclamation Works Construction of Bridge over River Jehlum at Dangli WAPDA 560 MW Bin Qasim Combined Cycle Power Project KESC New Benazir Bhutto International Airport Package – 2 CAA Mangla Dam Raising Project WAPDA Indus Crossing, White Oil Pipe Line Project PEPCO Construction of Army Barracks for NLC in AJK. NLC Punjab Road Sector Development Project – Package P3 CWE Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date Jan 2012 Year in which the plant/project activity will be operational Estimate of time required before 6 years becoming operational after approval of the PIN Expected first year of 2018 CER/ERU/VERs delivery June 5, 2010 37 Project lifetime 50 years Number of years For CDM projects: 7 years twice renewable Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Feasibility studies finished project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of PIN is ready to be filed for No Objection/Endorsement of DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005______ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ June 5, 2010 38 B. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): GASES ABATED/ Up to and including 2012: 0 tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: 7,557,061 tCO2-equivalent (2011 being the first In metric tons of CO2-equivalent, year) please attach calculations Up to a period of 7 years: 0 tCO2-equivalent (2011 being the first year) BASELINE SCENARIO CDM/JI projects must result in This project will result in reduction of GHG emissions due to clean energy GHG emissions being lower than generation with hydro technology. “business-as-usualâ€? in the Host Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are CO2 being reduced by the proposed CDM/JI project? ï‚· What would the future look like without the In case the project is not implemented, more fossil fuel plants will be built proposed CDM/JI creating more greenhouse gases. Furthermore, the electricity deficit will project? continue unabated. About ¼ - ½ page ADDITIONALITY Please explain which additionality arguments apply to the project: (i) there is no regulation or incentive scheme in place (i) Government policy is certainly not encouraging for such projects borne by covering the project the fact that out of a total of 15 existing large hydro projects only one is privately (ii) the project is financially weak owned. or not the least cost option (ii) Due to high political risk, getting international capital is difficult and comes at (iii) country risk, new technology a high cost. The result is an IRR without CER revenue of 12.9%; it improves to for country, other barriers 14.3% with CER revenue. On the other hand, a thermal project costs less and (iv) other is erected much more quickly. (iii) The technology does not exist in Pakistan. Chinese technical support is being sought to construct the dam. Due to the law and order situation, bringing foreigners into the country has become a risky undertaking. June 5, 2010 39 (iv) The development and construction schedule of a Hydropower Project faces barriers not encountered by alternative thermal generation projects in Pakistan. The construction period of such a Project is significantly greater than the alternative thermal projects. An extended construction period creates increased exposure to the adverse conditions, increased exposure to construction risks and increase in development and financing costs. SECTOR BACKGROUND Please describe the laws, Despite the large hydropower potential, Pakistan‟s grid is predominantly fossil regulations, policies and strategies of the Host Country fuel intensive. Due to an average deficit of 3,000 - 4,000 MW load-shedding has that are of central relevance to become a regular feature of a common man‟s life. This situation forces planners the proposed project, as well as to turn once again to “quick fixâ€? thermal generation. As an example, there are any other major trends in the 19 rental thermal power stations of a total capacity of 2,734 MW at different relevant sector. stages of processing. Please in particular explain if the project is running under a public incentive scheme (e.g. The grid in Pakistan is predominantly thermal and over 70% comprises gas and preferential tariffs, grants, Official oil based generation. Heavily subsidized gas has virtually run out and is not Development Assistance) or is available for power generation forcing all forthcoming projects to be set up required by law. If the project is based on oil (with coal being designated as the fuel of choice in the longer already in operation, please describe if CDM/JI revenues were term). considered in project planning. There are no up front tariffs offered to developers. The system offers a three part tariff mechanism. The first stage gives a tariff at the end of the feasibility stage. The second stage issues a new tariff at the completion of the EPC cost (engineering, procurement and construction) contract stage which allows the investor the opportunity to go to financial institutions with a firm tariff commitment to base the lending decision upon. The third stage is the final tariff at the COD stage. METHODOLOGY Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM “Consolidated baseline methodology for grid-connected electricity generation Methodology or Approved from renewable sourcesâ€? – ACM0002 version 11 CDM Small-Scale Methodology (ii) project needs a new methodology June 5, 2010 40 (iii) project needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology C. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs US$ 7 million (Feasibility studies, legal fees, etc.) Capital cost US$ 2,498,670,000 Land ___ US$ million Other costs (please specify) US$ 0.11M (CDM expense etc.) SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity US $749,601,000 (30%) Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term US $1,749,069,000 (70%) Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status N/A of financing agreements and finance (in US$ million) June 5, 2010 41 Carbon finance advance N/A 19 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE TBD Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER US $10 20 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 21 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 0 first commitment period) A period of 10 years US$ 75,570,610 (2011 being the first year) A period of 7 years US$ 0 (2011 being the first year) Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. 19 Advance payment subject to appropriate guarantees may be considered. 20 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 21 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficientunderstanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN- accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 42 D. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Environment: E.g. impacts on local air, water and other pollution. ï‚· Reduced carbon emissions in the national grid and replacement of carbon intensive thermal generation; ï‚· The project not only reduces or replaces equivalent thermal generation with all the associated environmental benefits but it also promotes an overall environmental well being since the project will help to avoid all associated pollution caused through extraction, processing, storage and transportation of conventional fuels required for thermal generation; Development of hydropower potential: ï‚· The project will stimulate private investment to develop more hydro projects, especially, small to medium run-of-the river projects with low environmental impact. Saving foreign exchange and reduced cost of electricity: ï‚· Foreign exchange required to import oil to service an equivalent thermal generating plant will be saved; ï‚· Cost of electricity in the national grid will be reduced through improved thermal/hydro mix in the system. GLOBAL BENEFITS There will be significant reduction in GHG emissions through replacement of Describe if other global benefits fossil fuel generated electricity as well as much reduced transportation of oil than greenhouse gas emission needed for fossil fuel plants. reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects can be attributed to the project Economic benefits and which would not have occurred in a comparable situation without that project? ï‚· Greater local employment opportunities during construction (300-500 persons) and during operations (100 persons); Indicate the communities and the June 5, 2010 43 number of people that will benefit ï‚· Spin off benefits and stimulation of local economy through creation of from this project. business opportunities at different stages of project implementation to About ¼ page provide goods and services for the project both during construction and operations; ï‚· Reduction of poverty in an economically depressed region with very little industry and high unemployment. What are the possible direct 300-500 direct jobs are expected to be created during the construction phase effects (e.g. employment creation, provision of capital and another 100 during operations. required, foreign exchange effects)? About ¼ page What are the possible other effects (e.g. training/education Opportunity for improved skill set of local inhabitants through training and associated with the introduction capacity building for employment in the project contributing to growing technical of new processes, technologies and products and/or the effects of advancement. a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ The National Environmental Policy of Government of Pakistan states: PRIORITIES OF THE HOST COUNTRY “The government would promote energy efficiency and renewable sources of A brief description of the project‟s energy in order to achieve self reliance in energy supplies and as a means to consistency with the sustainable development.â€? environmental strategy and priorities of the Host Country About ¼ page June 5, 2010 44 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 45 PROJECT IDEA NOTE (PIN) Name of Project2: “CNG Buses in Pakistanâ€? Program of Activities Date submitted: April 12, 2010 Description of size and quality expected of a PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the ―business-as-usual‖ scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‘s financing) ï‚· the project‘s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 46 E. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE Establish on public-private partnership basis an integrated, efficient, PROJECT economically sustainable and affordable urban transport system that Describe in not more than 5  Meets the needs of citizens. lines  Supports rapid economic development/poverty alleviation.  Protects the environment.  Ensures service/road discipline.  Reduces green house gases and generates CERs. PROJECT DESCRIPTION The CNG bus project in Karachi is part of a mega transport project in AND PROPOSED which environment friendly transport is to be introduced in ten (10) cities ACTIVITIES of Pakistan – Karachi, Lahore, Rawalpindi/Islamabad, Faisalabad, About ½ page Multan, Quetta, Hyderabad, Peshawar, Sukkur and Gujranwala. The primary aim of the Government in pursuing this project is to control the transportation problems and to improve the road traffic and environmental situation. Additionally, the CNG Bus Project in Karachi aims at addressing the following objectives: ï‚· Meet the transportation needs of the citizens, ï‚· Support rapid economic development and poverty alleviation, ï‚· Protect the environment, ï‚· Ensure service / road discipline, ï‚· Reduce the use of personal forms of transport with the availability of an affordable, efficient and high quality CNG bus service, ï‚· Create a passenger friendly transport culture in the city. To meet the above objectives, a strategy has been framed to provide an urban transport system under a reformed program (based on lessons learnt from previous schemes) aimed at creating a win-win situation for all stakeholders by maintaining a balance between the provision of environment friendly, fast, high frequency, reliable, comfortable, safe and affordable service to the public and the need for Investors/Operators to make a reasonable return keeping in view the business and market conditions. The project will be implemented as a Program of Activities (PoA). This PIN has been prepared for Karachi under the first CPA of the PoA. There will be other CPAs for other cities resulting in emission reductions of June 5, 2010 47 less than or equal to 60 ktCO2 equivalent annually for each CPA. TECHNOLOGY TO BE Compressed natural gas (CNG) will be the fuel used by the buses. 22 EMPLOYED Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF CO2, CH4 6 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 2 (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan City Karachi Brief description of the The project will be implemented in ten (10) cities of Pakistan – Karachi, location of the project Lahore, Rawalpindi/Islamabad, Faisalabad, Multan, Quetta, Hyderabad, Peshawar, Sukkur and Gujranwala. PROJECT PARTICIPANT Name of the Project City District Government Karachi – Karachi Mass Transit Cell Participant Role of the Project Participant h. Project Operator i. Owner of the site or project j. Owner of the emission reductions k. Seller of the emission reductions l. Project advisor/consultant m. Project investor n. Other, please specify:________________ Organizational category g. Government h. Government agency i. Municipality 22 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 48 j. Private company k. Non Governmental Organization l. Other, please specify: Incorporated under section 42 of the companies‘ act 1984 it follows the regulatory requirements of the Securities and Exchange Commission of Pakistan. Sponsored by the Government of Pakistan and funded by the World Bank and other leading donors. Contact person Malik Zaheer Ul Islam, Director General, Karachi Mass Transit Cell, City District Government Karachi Address 6th Floor, Civic Center, University Road, Gulshan-e-Iqbal, Karachi Telephone/Fax 92-21-99230665/99231153/99231281 E-mail and web address, if any m.ab3@hotmail.com Main activities Karachi Mass Transit Cell has been created to plan, develop and Describe in not more than 5 implement an efficient transport system for the city of Karachi with lines integrated and holistic approach/vision. Summary of the financials The estimated cost of the Karachi project is about Rs 21B for induction of 4000 CNG buses during the next five years. It will be arranged by the private sector on 20:80 basis with banks financing 80%. Government will provide subsidy in the form of upfront grant of PRs 1.05B and interest subsidy over five years of PRs 1.32B; these amounts will become part of the 20% equity by the private sector operators. Besides, Government of Sindh will provide a concession package of PRs 240M during the project period in the form of relief in local taxes and CDGK will ensure enabling environment in the form of CNG green routes, bus stops and bus depots. Further Government of Pakistan will also provide 15% import duty concession on CBU buses. Summary of the relevant Since Karachi Mass Transit Cell/CDGK has been created to plan, experience of the Project develop and implement an efficient transport system for the city of Participant Karachi, it has hired staff experienced in transport systems. Besides, a Describe in not more than 5 Project Implementation and Monitoring Unit (PIMU) with skeleton staff lines will be established from the project funding. CDWP has already approved funding for the project period. Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date Jul 2010 Year in which the plant/project activity will be operational Estimate of time required 3 months before becoming operational after approval of the PIN Expected first year of 2010 CER/ERU/VERs delivery Project lifetime 28 years for the PoA June 5, 2010 49 Number of years For CDM projects: 10 years fixed for each CPA Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Contracting phase project Identification and pre- selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of PIN is ready to be filed for No Objection/Endorsement of DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Has the Host Country ratified/acceded to the Kyoto Protocol? Country with regard to the __________NO / YES, YEAR_2005______ Kyoto Protocol Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ F. Methodology and additionality ESTIMATE OF Annual (if varies annually, provide schedule): GREENHOUSE GASES Up to and including 2012: 52,775 tCO2-equivalent ABATED/ Up to a period of 10 years: 474,973 tCO2-equivalent CO2 SEQUESTERED Up to a period of 7 years: 316,649 tCO2-equivalent In metric tons of CO2- Note: The CERs have been calculated based on certain fuel consumption June 5, 2010 50 equivalent, please attach assumptions for both diesel and CNG; the assumptions will need to be calculations verified at the time of PoA-DD development. BASELINE SCENARIO CDM/JI projects must result in These projects will result in reduction of GHG emissions due to fuel GHG emissions being lower switching from diesel to natural gas leading to cleaner environment, than ―business-as-usual‖ in the carbon savings and sustainable development. Host Country. At the PIN stage questions to be answered are at least: CO2 ï‚· Which emissions are being reduced by the proposed CDM/JI In case the project is not implemented, more diesel buses will be added project? to the public transport system leading to more pollution, higher imports of diesel fuel and higher carbon emissions. ï‚· What would the future look like without the proposed CDM/JI project? About ¼ - ½ page Additionality Please explain which (i) There is no regulation or incentive scheme in place in the country additionality arguments apply for running CNG buses. to the project: (i) there is no regulation or (ii) The project is based on public-private partnership. Government is incentive scheme in place providing US $3,530 per bus as upfront subsidy for the covering the project purchase of buses. The remaining amount will be financed by (ii) the project is financially the operators through banks. Government will provide US weak or not the least cost $4,437 interest subsidy per bus over 5 years. All the revenue option collected in the form of bus fare (regulated by (iii) country risk, new Implementation and Regulatory Committee (IRC) headed by technology for country, other the District Coordination Officer) and non-fare revenue barriers (advertisement on buses) will be kept by the operators. As the (iv) other financial analysis Excel spreadsheet shows the NPV improves from negative US $21,510,272 to negative US $18,949,978 at 10% discount rate with the help of carbon credits. The project is financially weak. In addition an enabling environment comprising of bus depot, terminal facilities, bus-stops, CNG Stations, etc. will be provided by City Government of Karachi either from its own sources or with the support of concerned agencies / departments. All this additional expense has not been included in the financial analysis; it further underscores the need for carbon credits. (iii)CNG buses will be relatively new technology in Pakistan. June 5, 2010 51 Although CNG cars have been running for quite a few years, yet no CNG buses have been run in the past. Mechanics will need to be trained for maintenance of these buses. (iv) Private bus operators are used to running independently. Now they will need to comply to some government rules such as sticking to certain routes and charging fare in accordance with the concession agreement duly signed by operators and CDGK. It may create some conflict situations. SECTOR BACKGROUND Transport is one of the main problems in Karachi as the city has had a Please describe the laws, phenomenal increase in its area and population during the last few regulations, policies and decades without any corresponding improvement in the transport strategies of the Host Country facilities. A recent study by JICA reveals that daily there are about 24 that are of central relevance to million person trips generated in the city out of which about 60 % person the proposed project, as well trips (Captive Riders) are through public transport. Most of the offices, as any other major trends in business and commercial centers are located in the Commercial Business the relevant sector. District (CBD) area spread from Saddar to the Karachi Port. Industrial Please in particular explain if activities are concentrated in four industrial estates namely: Sindh the project is running under a Industrial Trading Estate, Landhi Industrial Trading Estate, Korangi public incentive scheme (e.g. Industrial Trading Estate and North Karachi Industrial Trading Estate. preferential tariffs, grants, Trip lengths are in the range of 20 – 40 km. However there are no mass Official Development transit facilities available in the city and the public transport system Assistance) or is required by merely consists of old buses, minibuses and special coaches. The law. If the project is already in estimated fleet size, ageing and structure of the Bus fleet of the Karachi operation, please describe if public transport is tabulated below: CDM/JI revenues were considered in project planning. Table: The Aging of the Bus fleet Age of Fleet No of Buses % age of Fle Between 45 to 65 years old 34 0.2% Between 25 to 45 years old 3,417 18.6% Between 15 to 24 years old 4,129 22.5% Between 5 to 15 years old 7,652 41.7% Less than 4 years old 3,118 17.0% It is evident from the above tables that the buses are not standardized, bus fleet is ageing and that the fleet is insufficient for the city‘s population. Moreover these buses are diesel based, thus adding pollution considerably to the city. Due to several reasons, principal among them is the non-existence of a proper mechanism for bus-financing and bus service monitoring, the number of buses has been decreasing over the years and the quality of service provided is also getting poorer day by day. The private transporters have mostly invested in minibuses and special coaches, June 5, 2010 52 which are smaller vehicles having about 26 seats. A maximum of about 40 passengers inclusive of the standees can be accommodated in these vehicles. The situation has worsened following the closure of bus service by the Karachi Transport Corporation (KTC) and the Karachi Circular Railway (KCR). The existing routes of public transport are not only unnecessarily long and overlapping; they are also unscientifically and irrationally planned, fostering unhealthy competition among the transporters and causing hardships and delays for the commuters. The Private Sector initiatives for inducting new city buses were dampened due to absence of enabling environment and government support in the form of concessions / incentives to the bus operators, sponsors and financiers. Methodology Please choose from the following options: For CDM projects: (i) project is covered by an Approved Small-Scale methodology: ―Emission reductions by low- existing Approved CDM greenhouse gas emitting vehicles‖ – AMS-III.C. Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) project needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology G. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) June 5, 2010 53 Development costs 0.2 US$ million (Feasibility studies, resource studies, etc.) Subsidy on purchase of buses Down payment: 11,772,709 US$ (Property plant, equipment, etc.) Interest: 13,457,354 US$ Land ___ US$ million Other costs (please specify) 0.3M US$ (Legal, consulting, CDM expense etc.) Total pre-operational project 25,275,063.5 US$ costs SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity All funding will come from Government of Pakistan. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term N/A Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, N/A status of financing agreements and finance (in US$ million) Carbon finance advance N/A 23 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE TBD Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE US $10 CER/ERU/VER PRICE PER tCO2e24 Price is subject to negotiation. Please indicate VER or CER preference if known.25 23 Advance payment subject to appropriate guarantees may be considered. 24 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 25 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficientunderstanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN- accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 54 TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 522,330 first commitment period) A period of 10 years US$ 4,701,010 A period of 7 years US$ 3,134,010 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section ―Indicative CER/ERU/VER Price‖. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. H. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS There are two main areas of environmental benefits to be gained from E.g. impacts on local air, water transport improvement: and other pollution.  Reduction of traffic with its associated emissions and noise problems by converting ridership from private cars to mass transit.  Cleaner air as CNG does not emit any particulates whereas diesel is a big polluter with all the particulates it emits.  Ensuring a viable business model encourages investment in new bus fleets with clean technology engines. GLOBAL BENEFITS Reduction in GHG emissions from replacement of dirty fuel by cleaner Describe if other global fuel benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic Economic benefits effects can be attributed to the Providing mass transit at an affordable price to citizens (as well as project and which would not affordable to government) delivers many tangible and direct economic have occurred in a comparable benefits particularly in the area of saving time and improving situation without that project? productivity. Specifically the economic benefits can be identified as: Indicate the communities and  Better movement of passengers, freight and goods leading to the number of people that will increased productivity; benefit from this project. June 5, 2010 55 About ¼ page  Improved physical health reducing health costs in terms of direct medical cost, mortality, loss of productive work (absenteeism) due to illness and traffic accidents;  Improved mental health and well being impacting productivity and social well being;  Improved mobility opportunity to pursue educational and career opportunities;  Improved tourism income as the city environment becomes more attractive and more convenient to visitors;  Reduced energy costs and their inflationary impacts on the economy. Social and community benefits The quality of the transport system has huge impact on the quality of life and especially the daily commuting experience. The system must not only be sustainable, it must contribute positively to the social benefits. Measuring this benefit can be done in a number of ways, including measuring service quality indicators and measuring environmental outputs. Air quality in particular is the most easily recognized indicator and is a critical factor on health and quality of life. Having clean air to breathe is a verifiable measure of success. Improving transport connections to the suburbs offers greater opportunity for integration with mainstream society, work and education opportunities. This creates more options for low income sectors to move to outer suburbs without the isolation which existed previously. Women especially, in their task of caring for families, households and having outside employment will find the reduction in travel time valuable in restoring time to other essential demands of family and children. A particular impact on the urban poor is the cost penalty of a second bus fare when changing buses. The need to keep fares low is because any one journey may entail the cost of two or more trips. Making fares distance based through a common ticket across the system will address this problem. What are the possible direct 20,000 direct jobs are expected to be created with the induction of 4000 effects (e.g. employment buses in five years just in Karachi. Similar scenario is envisaged for creation, provision of capital other cities. required, foreign exchange effects)? About ¼ page What are the possible other CNG buses will bring in relatively new technology. In addition, high effects (e.g. training/education pressure CNG filling stations will be introduced. associated with the introduction of new processes, June 5, 2010 56 technologies and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL The National Energy Conservation Policy is being implemented under STRATEGY/ PRIORITIES the Ministry of Environment. The Program of Activities supports the OF THE HOST COUNTRY mission statement of Enercon (The National Energy Conservation A brief description of the Centre, Government of Pakistan) ―Cultivating a new energy culture project‘s consistency with the focusing on achieving sustainable development through conservation and environmental strategy and efficient use of energy resources‖. priorities of the Host Country About ¼ page More specifically the PoA supports 2 out of 4 strategic goals of the National Energy Conservation Policy as follows:  Goal #1: Sustainable Development Energy conservation, as a least cost supply option, will help in meeting the requirements of the rising levels of energy consumption without putting corresponding additional burden on the environmental resources.  Goal #3: GHG Mitigation and Climate Control Energy efficiency and conservation measures will reduce CO2 emissions and help Pakistan meet its international climate change responsibilities. Efficient use of energy in various sectors of economy will reduce adverse local environmental effects which are otherwise attributed to energy inefficiency and wasteful energy use practices. June 5, 2010 57 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 58 PROJECT IDEA NOTE (PIN) Name of Project: Replacement of inefficient grid connected simple cycle power stations with more efficient grid connected combine cycle power stations using natural gas DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 59 I. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT The main objectives of this Energy Efficiency Project are: (a) To introduce energy efficiency measures in KESC‟s operations Describe in not more than 5 lines (b) To increased generation without burning additional fossil fuel (c) To substantially reduce GHG emissions PROJECT DESCRIPTION AND Project Background PROPOSED ACTIVITIES Karachi Electric Supply Company Limited (“KESCâ€? or the “Companyâ€?) is the About ½ page only vertically integrated utility in Pakistan that is engaged in electricity Generation, Transmission and Distribution. The KESC consumer base includes industrial, commercial, agricultural and residential users of Karachi, the largest city and metropolitan hub in Pakistan. The Company has a strong consumer base of 2.2 million which is expanding at a rapid phase. The city of Karachi, like the rest of the country, is facing electricity shortage and the existing supply-demand gap is expanding at a rapid phase. The existing demand for Karachi area is over 2,200 MW, whereas KESC installed capacity is around 1,600 MW. The Company supplies electricity to its consumers through electricity generated from own sources and other Independent Power Producers; however this is not sufficient to meet total demand causing a shortfall of 400MW-500MW. Interruptions in supply are caused due to inefficiencies in system that stem from aged generation infrastructure and /rise in fuel prices. Given the current scenario, KESC is in the process of adding generation capacity and upgrading systems through more efficient technologies so as to: 1) Increase power supply 2) Save on fuel and CO2 emission by introducing more energy efficient technologies a. Replacing aged plants with new plants b. Installing heat recovery systems 3) Improve current system, equipment and processes to reduce electricity Transmission and Distribution losses Project Description The scope of this Project involves short term supply side initiatives taken by KESC to enhance efficiency along with installed capacity of three existing Power Stations. Under this Project, CO2 emissions from generating electricity will decrease significantly as compared to the Baseline. it involves converting Simple Cycle (SC) plants into Combined Cycle (CC) power stations through installation of a Heat Recovery Steam Generator (HRSG) and a Steam Turbine (ST). The HRSG will capture hot exhaust gas/steam of the SC plant and use the heat from the exhaust gas to generate steam. This steam will drive the ST, June 5, 2010 60 thereby generating additional electricity without burning additional fuel. Details of three plants covered under this Project are as follows: Korangi Town Gas Turbine (KTGT) Convert KTGT II into a Closed Cycle plant through Installation of a HRSG and a ST 10.66 MW, thereby generating an additional 10.66MW from KTGT II without burning extra fuel. Site Gas Turbine Power Station (SGTPS) Convert SGTPS II into a closed cycle plant through Installation of a HRSG and a ST 10.66 MW, thereby generating an additional 10.66MW from STGPS II without burning extra fuel. Korangi Thermal Power Station (KTPS) Convert KTPS Units I & II into a closed cycle plant through Installation of a HRSG and a steam turbines of 26 MW generating an additional 52 MW from KTPS II without burning extra fuel. The additional power produced through improved efficiency and HRSG will be added to the grid and would be instrumental in reducing existing supply- demand gap. Additionally, CO2 emissions will reduce significantly as this additional electricity will be produced from exhaust/waste heat without consuming additional fuel. If this project was not initiated, the same level of additional electricity generation would have consumed more fossil fuel. Future Plans KESC is in the process of planning and initiating other clean energy projects across its Generation, Transmission and Distribution network. TECHNOLOGY TO BE Installation of HRSG and GE Thermodyn Steam Turbines in all three plants EMPLOYED 26 along with Step-Up Transformer and Turbo Generator Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO2 CO2/CH4/N2O/HFCs/PFCs/SF6 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 3e (mention what is applicable) See annex 1 for examples 26 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 61 LOCATION OF THE PROJECT Country Pakistan City Karachi Brief description of the location of The three generation units are located in Karachi, Pakistan in the Korangi and the project SITE area. Korangi and SITE fall in the industrial zones of Karachi. No more than 3-5 lines PROJECT PARTICIPANT Name of the Project Participant Karachi Electric Supply Company Limited (KESC) Role of the Project Participant o. Project Operator ï?? p. Owner of the site or project ï?? q. Owner of the emission reductions ï?? r. Seller of the emission reductions ï?? s. Project advisor/consultant t. Project investor ï?? u. Other, please specify:________________ Organizational category m. Government n. Government agency o. Municipality p. Private company q. Non Governmental Organization r. Other, please specify: ï?? Public Limited Company (Privatized Entity) Contact person Khurrum Javed, Deputy General Manager Strategy and Business Development Group Address Karachi Electric Supply Company 3rd Floor, KESC House 39-B, Sunset Boulevard Phase II, Defence Housing Authority Karachi , Pakistan Telephone/Fax +92 (0) 21 564 7077 Mobile: +92 (0) 300 - 863 4969 Fax: +92 (0) 21-9205192 E-mail and web address, if any khurrum.javed@kesc.com.pk www.kesc.com.pk June 5, 2010 62 Main activities ï‚· Karachi Electric Supply Company is a fully integrated electric utility involved in generation, transmission and distribution of electric energy to industrial, Describe in not more than 5 lines commercial, agricultural and residential consumers in Karachi, Pakistan. ï‚· KESC has an installed capacity of over 1,600 MW with 560MW in the commissioning stage. This would increase the capacity to over 2,160 MW. Summary of the financials The project cost is about US$90 million. The project is funded through equity and cash flows from operations. Therefore it is self financed by KESC Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant KESC has not been involved in any such energy efficiency activity in the past, experience of the Project however KESC has been in the business of electricity generation for over 8 Participant decades and has sufficient experience and expertise to execute this Project. Describe in not more than 5 lines PROJECT PARTICIPANT Name of the Project Participant Single Project participant (KESC.) For detailed information please see contact details above. Role of the Project Participant a. Project Operator: b. Owner of the site or project: c. Owner of the emission reductions: d. Seller of the emission reductions: e. Project advisor/consultant: f. Project investor: g. Other, please specify: ________________ Organizational category a. Government: b. Government agency: c. Municipality: d. Private company: e. Non Governmental Organization: f. Other, please specify___ Contact person Address Telephone/Fax E-mail and web address, if any Main activities Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines June 5, 2010 63 Summary of the relevant experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date 2010 Year in which the plant/project activity will be operational Estimate of time required before Time required for financial commitments: 3 months becoming operational after approval of the PIN Time required for legal matters: 2 months Time required for delivery and installation: 8 months Expected first year of 2010 CER/ERU/VERs delivery Project lifetime 25 years Number of years For CDM projects: 7 years with two renewals Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Equipment for all three units has been selected. However, the decision and project feasibility depend on the revenue available from the associated Carbon Credits. Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and June 5, 2010 64 indicate the documentation) Current status of acceptance of the Host Country ï‚· NOC: Application to be filed for No Objection/Endorsement with DNA. Letter of No Objection/Endorsement is available; Letter of No ï‚· LoA: As per DNA requirements, LoA is issued after submission of PDD Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR__2005_____ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ J. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): 141,000 tCO 2-equivalent GASES ABATED/ Up to and including 2012: 282,000 tCO2-equivalent (for 2011-12 only) CO2 SEQUESTERED Up to a period of 10 years: 1,410,000 tCO2-equivalent In metric tons of CO2-equivalent, please attach calculations Up to a period of 7 years: 988,000 tCO2-equivalent BASELINE SCENARIO This CDM project results in reduction of CO2 . In the absence of the proposed project, the electricity will be generated/supplied by either of the four options: CDM/JI projects must result in GHG emissions being lower (i) Power generation by operating existing power stations/plants without than “business-as-usualâ€? in implementation as a CDM project (status quo) the Host Country. At the PIN (ii) Power generation by import of electricity from other grid connected stage questions to be power stations including the possibility of new interconnections answered are at least: (iii) By continue operating the existing plants in open cycle operation (iv) By generating power/electricity using the same technology by using ï‚· Which emissions are different fuel June 5, 2010 65 being reduced by the (v) By generating power using natural gas from technologies other than the proposed CDM/JI project activity project? ï‚· What would the future look like without the In existing situation electricity is supplied from operation of existing power proposed CDM/JI stations in Simple Cycle as well as purchase from other grid-connected project? power stations. The electricity is supplied from KESC‟s own power stations, About ¼ - ½ page purchased from IPPs and Wapda. However, the current supply of electricity from all sources is not enough to meet the demand of the city of Karachi. As there is demand-supply gap, additional power is required. Considering the existing ground realities, it is safe to assume that baseline would be the addition of new generation sources to the KESC grid. As per methodology the baseline scenario should also look at realistic and credible alternative available to project proponents. The next section on Additionality goes into detail about different technologies and options available to the project proponents. However, briefly different options are discussed below: 1. The supply of natural gas is restricted and is not available for an additional power plant; 2. Commercial operations date for power generation from wind and hydro would take such a long time to materialize that it defeats the entire purpose of the project which is to reduce the supply-demand gap in the shortest possible time. Generation from Wind turbines is also expensive and commissioning wind power plants is time consuming. Furthermore as the tariff for wind power is loaded upfront, it makes the cost of procuring power very high and works against the management‟s goal of reducing operating costs. 3. Solar, coal and nuclear are not viable technologies due to technical and financial barriers. In addition, these Projects cannot be implemented in the short term. (This point is further explained under additionality) 4. Power generation on High Speed Diesel is very expensive 5. In light of above-mentioned points, the only viable alternative is construction of additional plant on RFO/HSFO. Hence the baseline is a new plant(s) using RFO/HSFO as fuel. As per the latest version of the methodological tool, “combine tool to identify the baseline scenario and demonstrate additionalityâ€? if there is only one alternative that is not prevented by any barrier and if this alternative is not the proposed project activity undertaken without being registered as a CDM project activity, then this alternative is identified as the baseline scenario. ADDITIONALITY Please explain which additionality arguments apply to the project: There is a supply – demand gap and KESC is initiating projects to reduce this (i) there is no regulation or gap. Options available to KESC are: incentive scheme in place June 5, 2010 66 covering the project (i) Install new combine or simple cycle power stations using clean fuel, i.e., gas or LSFO; (ii) the project is financially weak (ii) Erect a new or used power plant either combine cycle or simple cycle using or not the least cost option coal; (iii) Erect a new or used power plant either combine cycle or simple cycle using (iii) country risk, new technology heavy fuel (RFO/HSFO); for country, other barriers (iv) Erect a new renewable power plant; (iv) other (v) Erect a new nuclear power plant; (vi) Convert existing simple cycle power stations/plants to combine cycle power plants/stations, I.e., capture waste heat that is currently being waste ; (vii) Erect a new simple cycle base load steam power plant; (viii) Retrofit existing power stations to improve efficiency. (A) Barrier Analysis Various technological and investment barriers are listed in the proceeding paragraphs. As a result of these barriers, option (vi) from the above listed options is the only viable scenario in the immediate and near future. This is primarily because of the following reasons: Technological Barriers (i) Pakistan is facing a shortage of gas supply countrywide and additional gas is not available for power generation. Furthermore, operating power stations on clean oils is very expensive. Hence running inefficient plants on gas or clean fuel is a very expensive and infeasible option (ii) Commercial operations date for power generation from wind and hydro would take such a long time to materialize that it defeats the entire purpose of the project which is to reduce the supply-demand gap in the shortest possible time. Besides the nature of generation from wind makes it less reliable and more expensive. (iii) Solar energy is another possible option, is not viable because of technical and financial barriers and a formal Solar Power Policy by the government. (iv) Technical and time lag issues in the construction of a nuclear plant also exclude this source from the list of solutions (v) Coal fired power stations using scrubbers and other environmentally friend technology is the long-term solution. Such plants could rely on cheap indigenous fuel as well as can be used as a base load power stations. However, infrastructure developments could take significant time. As there is need to act now, this option may be viable in the long term (vi) The option to construct another plant on heavy fuel (RFO/HSFO) is not an environmentally friendly option. Considering that there are options, which can result in generation of electricity with far less environmental issues, this option is not a preferred option. (vii) Simple cycle base load power plant is not considered as a viable option. The efficiency of such plants is too low when compared with other options resulting in higher generation costs. (viii) Retrofitting is again not a cost effective and financially viable option. June 5, 2010 67 Investment Barriers other than insufficient Financial Returns (ix) The current financial position of KESC makes raising financing for expensive projects very challenging and expensive. This makes raising finances from the local market makes an expensive option. In addition, banks are left with limited appetite and liquidity for financing projects in power sector. (B) Investment Analysis For investment analysis, KESC WACC and project IRR has been used to prove additionality. KESC WACC is estimated to be 19.61%. The Project IRR without CER revenue is 8.70%, which is much below the hurdle rate. Furthermore, since this Project is likely to be an equity based project, the cost of raising equity will be 2% higher than the KESC WACC, increasing financing cost to 21.61%.. The KESC management is taking steps to improve systems and reduce T&D losses from existing level of 34% to more manageable levels in order to improve system efficiencies and transform the Company into a profitable entity. Such measures include both technical as well as anti-power theft campaign in print and electronic media. Such measures and targets sets by the management make the project IRR viable in the long run. CER revenues play an important part in making project financially viable. While the project is financially not viable at present, CER revenue and measures introduced by the management makes the Project an attractive proposition. Therefore, it is safe to state the project is additional. KESC WACC has been calculated using the following equation: WACC = wdKd(1-T) + weKe Where: (i) wd is percentage of debt financing which equals to 39% in case of KESC (ii) Kd is the average cost of debt financing which happens to be 15.96%. This is based on average KIBOR for 2009 plus a premium of 350 basis points (iii) we is percentage of equity financing which is 61%. This is based on the market capitalization of KESC. (iv) Ke is the average cost of equity financing which is 21.975%. It is calculated using the following equation: June 5, 2010 68 Ke = RF + CDS + PE Where RF is risk free rate assumed to 10 year USD bond. At present 10 year USD bond is 3.625%; CDS is Country Default Spread. The current Pakistan rating of B3 by Moody translates into CDS of 14.25%; PE is equity risk premium. The default value of 4.1% has been used. (v) T is the tax rate. Currently the tax rate is 35%. However, we are assuming that after tax and before tax profits to be the same for two reasons: a. This is an equity based project and so as such there is no tax credit b. As KESC has incurred losses over the last few years, it has a tax rebate. The current tax regime allows losses to be carried forward up to seven years. It is expected that the company will start paying taxes from 2018 onwards. This project is financially not viable without CER revenue. It may be important to mention here the 2002 Power policy guarantees IRR of 15%, which is again less than KESC WACC. It is difficult to find carryout investment analysis for all alternatives by including all relevant costs such as EPC costs including equipment procurement costs as well as operations and maintenance costs for the following reasons: ï‚· Investment costs especially EPC costs are difficult to assess for all available technologies. While the costs of the turbines may be ready available, the costs for the balance of plants, construction costs, etc may not be readily available. Cost estimation may not make investment analysis for all available technologies comparable. ï‚· Power plant output and efficiency at site may not be available. Such numbers are provided by EPC contractor using sophisticated software which project proponents don‟t have technical expertise to operate. ï‚· O&M operators are not willing to provide O&M numbers unless they know plant efficiency and output numbers. Based upon the above information and analysis, the project additionality is proven. (C) Common Practice Analysis Private Power Infrastructure Board (PPIB), an institution of Government of Pakistan, which oversees the development of power plants by private sector, has been issuing Letter of Intents (LOI) for power plants using heavy fuel (RFO/HSFO). As a result, in future majority of power supply that will be procured from IPPs will be generated from burning of RFO/HSFO. This is June 5, 2010 69 primarily because of the following reasons: 1. In the absence of natural gas, the most readily available fuel is HFO. Other cleaner fuels like LSFO, HSD are more expensive which results in higher tariff. The general public has protested to increase in tariff and government in the past was forced to reduce power tariff. NEPRA, which is the tariff regulator body in Pakistan has taken a conservative approach and is reluctant to increase tariff and pass on the burden to general consumers. Hence it is safe to assume that the additional power stations would be on HSFO. 2. The banks and financial institutions are not willing to finance any power plant unless fuel supply has been assured. There are no barriers or hurdles to fuel for Furnace oil, however, gas supply is restricted to the gas allocation limits and availability, which is limited (D) General Comments It is important to mention here that KESC is focusing on reducing its generating costs to become more cost effective. The government is gradually phasing out consumer subsidy built into the tariff. It is therefore pertinent for KESC to improve efficiency and T&D systems so that the entire burden of phasing out of tariffs is not passed on the consumers and general public. As a result, KESC management has taken various initiatives to reduce costs. Among them reducing generating costs needs to be specially mentioned here. Considering the points mentioned above, the quickest short term solution to decrease generation costs in an environmentally friendly way is to replace its existing plants with more efficient combine cycle technology using natural gas. As established above, the baseline is electricity generation using RFO/HSFO; it is safe to state the project is additional. The case is further strengthened because of the following reasons: (i) There is no regulation or incentive scheme in place in the country requiring waste heat recovery. Similarly, there is no regulation concerning energy efficiency in the country. (ii) Waste heat generated under simple cycle is not utilized in any way on-site and is being wasted. It will continue to be wasted until waste heat recovery unit is installed at the site as envisaged in the project SECTOR BACKGROUND Power sector is highly regulated sector in the country. NEPRA, as regulator has been instructed to look after the interest of consumers as well as power Please describe the laws, utilities. It was established under NEPRA Act. regulations, policies and strategies of the Host Country that are of central relevance to the proposed project, as well Currently there are no laws or regulations covering supply side energy as any other major trends in conservation. June 5, 2010 70 the relevant sector. There is no public incentive scheme. Please in particular explain if the project is running under a public incentive scheme (e.g. preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY This is a CDM Project and the applicable baseline methodology is ACM0007 titled “Baseline Methodology for Conversion from Simple Cycle to Combine Please choose from the following Cycle Power Generation.â€?. This methodology is applicable for the following options: reasons: ï‚· The project developers are utilizing previously unused waste heat from a power plant with a single cycle capacity and utilize the heat to produce For CDM projects: steam for a turbine; (i) project is covered by an ï‚· Waste heat generated on-site is not used for any other purpose; and existing Approved CDM ï‚· Project activity does not increase the life of the existing gas turbines. Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) projects needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology K. FINANCE June 5, 2010 71 TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs 0.3 US$ million (Feasibility studies, resource studies, etc.) Installed costs 89.0 US$ million (Property plant, equipment, etc.) Land Nil US$ million (to be installed at the existing premises) Other costs (please specify) 0.7 US$ million (stores and spares, etc) Total project costs 90.0 US$ million SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Self Financing by KESC Name of the organizations, status 90.0 US$ million of financing agreements and finance (in US$ million) Debt – Long-term Presently undecided Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status of financing agreements and finance (in US$ million) Carbon finance advance 27 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) 27 Advance payment subject to appropriate guarantees may be considered. June 5, 2010 72 INDICATIVE CER/ERU/VER US $10 28 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 29 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 2.82 million first commitment period) A period of 10 years US$ 14.10 million A period of 7 years US$ 9.88 million Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. L. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS ï‚· Improved air quality resulting in better health of inhabitants living around the power stations; E.g. impacts on local air, water ï‚· The successful implementation of the Project would also be an example to and other pollution. other IPPS operating under 1992 Power Policy for initiating efficiency improvement projects. GLOBAL BENEFITS ï‚· Reduction in GHG emissions ï‚· Waste heat recovery would result in a lower consumption of fossil fuel Describe if other global benefits which would eventually reduce CO2 emissions than greenhouse gas emission 28 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 29 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 73 reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects ï‚· There is great social unrest in Karachi due to the existing supply-demand can be attributed to the project gap which results in frequent and timely power outages. The increase in and which would not have generation capacity through new units without incurring significant fuel cost occurred in a comparable will have a positive impact. situation without that project? ï‚· It is estimated that the additional generation of 60-65MW would be sufficient to fulfill the requirements of over 100,000 residential connections Indicate the communities and the or 5,000 industrial units depending upon the load requirement of industrial number of people that will benefit units from this project. About ¼ page What are the possible direct The significant direct impacts are listed below: effects (e.g. employment creation, provision of capital ï‚· It is expected that employment would increase by 8 to 10 people. Most of required, foreign exchange the people employed would be technical and qualified professionals; effects)? ï‚· No significant direct effect is expected on foreign exchange reserves About ¼ page What are the possible other It is expected to have a positive impact on commercial activity, as KESC would effects (e.g. training/education be able to generate more units without increasing tariff. Furthermore, this associated with the would instrumental in reducing KESC‟s reliance on other electricity power introduction of new processes, companies (Wapda/NTDC) for purchase of additional electricity. The technologies and products electricity spared can then be supplied in other parts of the country and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ This project is in line with the environmental strategy and priorities of the PRIORITIES OF THE HOST country. The following few paragraphs briefly describe the impact this COUNTRY project will have on various avenues. A brief description of the project‟s consistency with the environmental strategy and Energy Crisis priorities of the Host Country Pakistan is currently facing an energy crisis due to fuel shortage, rising fuel About ¼ page process and system inefficiencies installed capacity for electricity generation is insufficient to meet the existing demand. As a result the Government of Pakistan has taken a number of initiatives to increase generation capacity and at the same time reduce energy consumption and enhance conservation. This project undertaken by KESC is in line with the GoP‟s initiatives as it increases power generation in the shortest possible time. June 5, 2010 74 This Project will not adversely affect the tariff that KESC is currently charging to its customers. At the same it enables KESC to add 60-65MW of additional power to the grid, thereby reducing the current demand-supply gap. Impact on Law & Order Situation In recent times Karachi has witnessed what has been termed as “power riotsâ€?. Hence, this additional generation would help law and order situation in the city of Karachi. GHG Emissions Pakistan ranks amongst the top 30 GHG emitters in the world. As its energy needs grow, so would the level of GHG emissions. This project will help in keeping GHG emissions low while at the same time increase power generation. Impact on Natural Resources and Balance of Payments Pakistan is dependent on imported oil. Increase power generation on oil will add significantly to the import bill. Using waste heat, it has resulted in saving millions of foreign exchange for the country The natural gas resources of Pakistan are limited. Furthermore, the demand for electricity in the country is increasing rapidly and is outstripping the increase in supply. . By using same fuel more efficiently, KESC will play an important role in natural resource conservation. Future Possible Impacts There is an excellent chance that once this project is implemented, it will be replicated across other generation units that are still functioning as Simple cycle units. Project Consistent with Strategy & Priorities In light of these, the project will: ï‚· is a quick means of increasing generation; ï‚· reduces pressure on existing resources; ï‚· reduces GHG emissions; & ï‚· is consistent with the Government‟s policy on Energy Conservation. June 5, 2010 75 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 76 PROJECT IDEA NOTE (PIN) Name of Project4: Pakistan Domestic Biogas Programme, CDM Program Activity 1, Central Punjab, Pakistan Date submitted: December 2009 DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 77 M. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT Pakistan Domestic Biogas Programme (PDBP) (Central Punjab) aims to construct 18,000 domestic biogas plants at household level. These Describe in not more than 5 lines biogas plants displace the unsustainable biomass being used as domestic energy sources with biogas produced from the biogas plant using animal manure. The biogas can be used as a fuel for cooking. PROJECT DESCRIPTION AND The proposed CDM program activity is the first CPA of the Pakistan PROPOSED ACTIVITIES Domestic Biogas Programme CDM Program of activities (PoA). The About ½ page PoA envisions a period of 10 years to establish a commercially viable biogas sector with the target of installing 300,000 biogas plants in Pakistan. Rural Support Programmes Network (RSPN) is the managing/ coordinating entity of the PoA. The program will be implemented through a modular approach. Each module will be carried out to fit within a small-scale CPA activity which generates no more than 45 MWth power. The financing of each module will be achieved through a combination of carbon financing and self financing by users and through the use public sector funding or ODA for meeting technical assistance and investment costs to the extent required. The first CPA is being implemented in the central Punjab (Faisalabad, Tobatek Singh, Sargodha, Jhang, Khushab, Mianwali, Bhakkar) with a target to install 18,000 biogas plants in 4 year time period starting from November 2009. Biogas construction companies (BCCs) promoted by the PDBP, will be responsible for services such as construction, after sales service, and user training. To ensure the quality of the plant a quality ensuring discount of PKR 7,500 ($90) will be provided to the households channeled through biogas companies. While receiving the quality ensuring discount from the program, the household (owner of the biogas plant), signs an agreement with PDBP/RSPN and transfers the legal rights of carbon credit. TECHNOLOGY TO BE The technologies used in the CPA are domestic biogas digesters of fixed June 5, 2010 78 30 EMPLOYED dome type. Proven in several other countries, the technology is robust, reliable and requires minimum maintenance. The concrete – masonry Describe in not more than 5 lines structure can be constructed with locally available materials and skills, and typically has a life of over 20 years. The program covers the biogas plants with capacity ranging from 4-15 m3. The biogas plants will provide biogas to meet the thermal energy needs of households which have at least 2 heads of cattle (cows or buffaloes). The use of biogas digester plants will displace the domestic energy sources like and unsustainable biomass with biogas produced from the biogas plant using animal manure. The fixed dome design, called GGC 2047 model, which was initially designed and developed in Nepal, will be installed with slight modifications. This model is considered to be reliable, well functioning, simple, durable and with low maintenance cost. TYPE OF PROJECT Greenhouse gases targeted CO2 Type of activities Abatement Abatement/CO2 sequestration Field of activities 1. Renewables - 1b. Biogas LOCATION OF THE PROJECT Country Islamic Republic of Pakistan City Punjab Province Brief description of the location of The project will be located in Faisalabad, Tobatek Singh, Sargodha, the project Jhang, Khushab, Mianwali, Bhakkar districts of the Punjab province of Pakistan. PROJECT PARTICIPANT Name of the Project Participant Rural Support Programmes Network Role of the Project Participant Project Implementer Organizational category Non Governmental Organization 30 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 79 Contact person Ms. Shandana Khan, Chief Executive Officer Address Street 49, House No.7, F-6/4 Islamabad, Telephone/Fax 00-92-51-2829115 E-mail and web address, if any Email: shandana@rspn.org.pk Website: www.rspn.org Main activities RSPN will act as the coordinating/managing entity of the Pakistan Domestic Biogas Programme PoA. At the same time the 1st CPA will also be implemented by RSPN. The steering committee formed for the coordination of the PDBP will provide the overall guidelines for the program and help to create the favorable policy environment for the successful implementation of this CPA. Summary of the financials In addition to working as the coordinating/managing entity, RSPN is also implementing the first CPA in the central Punjab. RSPN has been mobilizing around 3 million euro for the program in central Punjab. Summary of the relevant RSPN has been implementing the first CPA in central Punjab area. It has experience of the Project already trained 90 masons and partnered with several stakeholders for Participant the implementation of this project. COORDINATING/MANAGING ENTITY OF THE POA Name of the Project Participant Rural Support Programmes Network (RSPN) Role of the Project Participant Managing/Coordinating of the PoA Organizational category Non Governmental Organization Contact person Ms. Shandana Khan, Chief Executive Officer Address Street 49, House No.7, F-6/4 Islamabad, Telephone/Fax 00-92-51-2829115 E-mail and web address, if any Email: shandana@rspn.org.pk Website: www.rspn.org Main activities RSPN will act as the coordinating/managing entity of the Pakistan Domestic Biogas Programme PoA. The steering committee formed for the coordination of the PDBP will provide the overall guidelines for the program and help to create the favorable policy environment for the successful implementation of this CPA. June 5, 2010 80 Summary of the financials In addition to working as the coordinating/managing entity, RSPN is also implementing the first CPA in the central Punjab. RSPN has been mobilizing around 3 million euro for the program in central Punjab. Summary of the relevant RSPN has been implementing the first CPA in central Punjab area. It has experience of the Project already trained 90 masons and partnered with several stakeholders for Participant the implementation of this project. Describe in not more than 5 lines GOVERNMENT AGENCY TO FACILITATE THE PROJECT Name of the Project Participant Department of Environment, Ministry of Environment Role of the Project Participant Project Facilitator Organizational category Government Organization Contact person Mr. Jawed Khan, Director General, Environment Address Ministry of Environment, G-5/2,Islamabad. Islamabad, Pakistan Telephone/Fax +(92-51)9245528 Fax: +(92-51)9245533 E-mail and web address, if any www.moenv.gov.pk Main activities Ministry of Environment, Local Government and Rural Development was bifurcated and an independent Ministry of Environment was established on Describe in not more than 5 lines 22-04-2002. Ministry of Environment is the focal point on the subjects of Environment, Ecology, Human Settlement and Forests in Pakistan. Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant Ministry of Environment hosts the Designated National Authority (DNA). experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date November 2009 June 5, 2010 81 Year in which the plant/project activity will be operational Estimate of time required before Time required for financial commitments: 3 months becoming operational after approval of the PIN Time required for legal matters: 1 months Time required for construction: 48 months Expected first year of 2011 CER/ERU/VERs delivery Project lifetime 4 years Number of years For CDM projects: 7 years twice renewable Expected Crediting Period Current status or phase of the The project proposal is prepared and resource mobilization is being done. project Current status of acceptance of Letter of intent for the Pakistan Domestic Biogas Programme, CDM Program of the Host Country Activities is submitted. Letter of support from DNA has been received. The project has done the Initial Environmental Examination and submitted for no objection letter from Pakistan Environment Protection Agency (PEPA). Once the letter from the PEPA received, RSPN will apply for Host Country Approval. The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol YES, YEAR 2005 Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? YES, YEAR 2005 June 5, 2010 82 N. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): GASES ABATED/ Emission reduction from the first CPA. CO2 SEQUESTERED In metric tons of CO2-equivalent, New Cumulative Number Emission please attach calculations Years Plants of Operational Plants Reductions 0 1,500 1,455 1 3,000 4,365 1,635 2 5,000 9,215 6,538 3 8,500 17,460 15,256 4 17,460 29,966 5 17,460 39,229 6 17,460 39,229 7 39,229 Total for the Crediting Period of 7 years 171,081 Annual average = 24,440 tCO2-equivalent Up to and including 2012: 23,428 tCO2-equivalent Up to a period of 7 years: 171,081 tCO2-equivalent BASELINE SCENARIO These biogas plants displace the unsustainable biomass being used as domestic energy sources with biogas produced from the biogas plant CDM/JI projects must result in GHG emissions being lower using animal manure. Recent Survey (Energy Utilization and Demand than “business-as-usualâ€? in Baseline Assessment Survey, 2009) in the Punjab shows the households the Host Country. At the PIN are using around 257 kg of fire wood per month for cooking. In the stage questions to be absence of the project, the households will continue using the answered are at least: unsustainable biomass for cooking. ï‚· Which emissions are being reduced by the proposed CDM/JI Data from the Forestry Sector Master Plan shows the annual increment project? of the woody biomass in Punjab is 6,355,000m3/year, which is far below ï‚· What would the future look like without the of the annual harvest of 31,641,089 m3/year. This shows the biomass is proposed CDM/JI being harvested unsustainably. Hence, the share of the non renewable project? biomass is 80% in the Punjab province. As per the methodology, the About ¼ - ½ page share of non renewable biomass will be used for the calculation of June 5, 2010 83 baseline emission. ADDITIONALITY Implementation of this project is not mandatory for the project Please explain which additionality participant and the household. This is a voluntary action of the household arguments apply to the project: (i) there is no regulation or and the project participant. incentive scheme in place covering the project The average cost of the biogas plant ranges from US$406-541 depending (ii) the project is financially weak or not the least cost option upon the size. The proposed project will provide the discount of $90. The remaining cost need to be covered by the household. Compared to the (iii) country risk, new technology for country, other barriers other options for cooking like using LPG and Kerosene stove, this is not the least cost option. So there is a need for massive awareness and (iv) other confidence building of the users over this technology through quality control and readily available after sales services. The ability to run a large national biogas program with strict quality control did not exist in the country. The Pakistan Domestic Biogas Program will provide this capability by transferring the expertise from regional countries like Nepal where a similar program has been running for over 15 years. At the program level there is a funding gap which is expected to be fulfilled by the combination of carven revenue and the loan from the financial institution against the future carbon revenue. Carbon revenue was considered as the source of fund from the feasibility stage of the program. SECTOR BACKGROUND Although the Government of Pakistan acknowledges the importance of alternative energy, Pakistan does not currently have a program Please describe the laws, regulations, policies and supporting the large scale dissemination of domestic biogas in southern strategies of the Host Country Punjab. Recently RSPN has started the PDBP with the vision of that are of central relevance to installing 300,000 biogas plants in Pakistan over the next 10 years the proposed project, as well period. as any other major trends in the relevant sector. For the first CPA, to be implemented in central Punjab, the Embassy of Please in particular explain if the the Kingdom of Netherlands has provided the partial funding. The project is running under a funding gap will be fulfilled by the combination of carbon fund and the June 5, 2010 84 public incentive scheme (e.g. loan taken against the future carbon revenue. preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY AMS-I.E. ―Switch from Non-Renewable Biomass for thermal applications by the user‖ Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM Methodology or Approved CDM Small-Scale Methodology O. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs US$ 2,587,284 Monitoring, quality control, capacity building of the various stakeholders etc.) Installed costs US$ 4,244,968 (Total cost of the Biogas Plants) Land Other costs (please specify) Total project costs US$ 6,832,252 SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Farmers equity - $ 3,407,146 Name of the organizations, status of financing agreements and finance (in US$ million) Donor Funding - $ 2,754,985 June 5, 2010 85 Debt – Long-term US$ 670,121( Loan payable against future carbon revenue) Name of the organizations, status Discussion going on with various financial institutions) of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status of financing agreements and finance (in US$ million) Carbon finance advance 31 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON NA FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER Indicative CER Price – US$13 32 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 33 preference if known. 31 Advance payment subject to appropriate guarantees may be considered. 32 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 33 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 86 TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the 304,567 US$ first commitment period) A period of 10 years 2,900,774 US$ A period of 7 years 1,370,856 US$ Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. P. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Biogas project contributes towards reduced air pollution, associated respiratory diseases and accidents from open fire, improved sanitation E.g. impacts on local air, water and other pollution. and hygiene education, reduced parasitic infections, diarrhoea and other water and vector-borne diseases. At the Household levels, biogas provides energy source for cooking and lighting, improves health through better indoor air quality and reduce the workload of women. At the national level- It replaces the use of non renewable biomass and contributes towards forest conservation. The biogas sector creates employment at local level and contributes towards the development of responsible private sector. GLOBAL BENEFITS At the global level- it reduces the greenhouse gas emission and Describe if other global benefits contributes towards the climate change mitigation. than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS June 5, 2010 87 What social and economic effects Biogas plant reduces the expenses on cooking fuel. The slurry that comes can be attributed to the project out as the by-product of the biogas plant is very good organic fertilizer. and which would not have occurred in a comparable This replaces the use of chemical fertilizer and also increases the situation without that project? agriculture production. Indicate the communities and the number of people that will benefit from this project. The households who are still deprived from using the natural gas connection will have access to another form of clean energy for cooking. About ¼ page Hence it also contributes to promote social equity in the community. What are the possible direct This proposed CPA will generate the employment opportunity of 980 effects (e.g. employment person years. As most of the materials used in biogas plant construction creation, provision of capital required, foreign exchange can be available locally so it helps increasing the economic activities at effects)? local level. About ¼ page What are the possible other The biogas is a proven technology in number of Asian countries effects (e.g. training/education including Nepal, Vietnam, Bangladesh, Cambodia and Laos. The associated with the introduction of new processes, technical and the business model is being replicated from the technologies and products successful programmes from other countries. So it will result into and/or technology and know-how transfer. the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ The proposed project is in consistent with the various policies of the PRIORITIES OF THE HOST Government of Pakistan. COUNTRY A brief description of the project‟s The National Energy Conservation Policy and strategy aims to promote consistency with the renewable energy technologies such as biogas plant among others. environmental strategy and priorities of the Host Country About ¼ page The National Forest Policy of Pakistan aims to promote alternative energy sources for cooking purpose so that the pressure on forest could be reduced. Biogas is a good alternate for fire wood. In an average a biogas plant saves 257kg of fire wood per month. Biogas in one of the renewable energy technology and also contributes to reduce the Green House Gas emission. In an average a biogas plant reduces around 2.25 tCO2e per year. As PDBP envisions installing the 300,000 biogas plants in next 10 years period, these plants may June 5, 2010 88 contributes to reduce the GHG emission of 674,031 t CO2e per year. Under the section 4.2 of the National Environment Policy it is mentioned that The Government of Pakistan shall ―Promote renewable forms of energy (wind, solar, bio-gas etc.) at a wider scale‖ This proposed programme is promoting biogas plants in a wider scale with a target to install 18000 plants in Central Punjab in next 4 years period. June 5, 2010 89 PROJECT IDEA NOTE (PIN) Name of Project5: LESCO’S Energy Efficiency Project Under World Bank’s Financing Date submitted: June, 2009 DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 90 Q. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT The main objectives of this Energy Efficiency Project (CFL) are: (d) Reducing Green House Gases emissions Describe in not more than 5 lines (e) Provision of CFLs to customers with attractive prices and effective distribution (f) Creating demand for high quality CFLs, so that people could gain confidence on long life and efficient lamps (g) Facilitating low income group customers to have efficient lights (h) Phasing out the inefficient Incandescent bulbs PROJECT DESCRIPTION AND The project will be implemented within municipal boundaries of five districts of PROPOSED ACTIVITIES Punjab, i.e, Lahore, Sheikhupura, Kasur, Nankana and Okara. About ½ page Demand Side Management (DSM), entailing Energy Efficiency is defined as a program that aims at changing the timing or quantity of electricity usage by the customers. This is in contrast to Supply Side Management (SSM) that aims at increasing the supply of electricity. Electricity DSM strategies have the goal of maximizing end-use efficiency to reduce demand and thus avoid or postpone construction of new generating plants. The Energy Efficiency Project to be financed by the World Bank consists of following three sub-projects: (i) Creating Demand for high quality Compact Fluorescent Lights (CFL) in the market, through distribution of 412,235 CFLs, 25 W each (ii) Installation of LT Capacitors at tube wells and small industrial (B-1) connections, 132 MVAR Capacitors will be added at distribution voltage (iii) Smart Metering / Automated Meter Reading (AMR) Pilot Project, consisting of installation of 4137 smart meters Only the CFL Sub-Project is included under this CDM project activity, as the remaining two sub-projects, although also infeasible without CDM, have been left out because of the relatively small amounts of abatement and because the AMS II.J methodology does not allow their inclusion. TECHNOLOGY TO BE CFL Sub-Project June 5, 2010 91 34 EMPLOYED A CFL utilizes about 75-80 % less power than an incandescent lamp to produce same lumens per watt. Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO2 CO2/CH4/N2O/HFCs/PFCs/SF6 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 3e (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan City Lahore Brief description of the location of The five districts of Punjab – Lahore, Sheikhupura, Nankana, Kasur and Okara the project No more than 3-5 lines PROJECT PARTICIPANT Name of the Project Participant LESCO Energy Efficiency – CFL Distribution Sub-Project Role of the Project Participant v. Project Operator w. Owner of the site or project x. Owner of the emission reductions y. Seller of the emission reductions z. Project advisor/consultant aa. Project investor bb. Other, please specify:________________ Organizational category s. Government t. Government agency u. Municipality v. Private company w. Non Governmental Organization x. Other, please specify: ________________ 34 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 92 Contact person Omer Haroon Malik Address LESCO Head Quarter, 22-A Queens Road Lahore Telephone/Fax 042-9204854, 0345-4950199 E-mail and web address, if any omer_uetian@yahoo.co.in Main activities Creating awareness, Describe in not more than 5 lines Bulk procurement of high quality CFLs, Distribution of CFLs (1-4 per household), Recovery of costs of CFLs from consumers through equal installments over 18 months, Monitoring and Control of the project. Summary of the financials There is a 20 year World Bank loan of US $1.2M at 12% interest with 3 year grace period to finance this project. $960,000 will be used to purchase the Summarize the financials (total CFLs and this amount will be recovered from the consumers over 1.5 years. assets, revenues, profit, etc.) $0.12M will be spent on awareness campaign over 7 years and the in not more than 5 lines remaining $0.12M will be spent on overhead. As the project entails distribution of CFLs at cost to consumers, and incurs additional costs for awareness raising and project management, overall it would be loss making without carbon revenue. With carbon revenue the project expects to have an IRR of 10%. Summary of the relevant Project participant is the largest utility in Pakistan with a total consumer base of experience of the Project 23 million customers. Participant Strong procurement department Describe in not more than 5 lines We have exp in distributing the bills and collection of revenues Hundredes of Customer Care Centres, Sub-division etc. Strong man force etc PROJECT PARTICIPANT Name of the Project Participant Role of the Project Participant h. Project Operator i. Owner of the site or project j. Owner of the emission reductions k. Seller of the emission reductions June 5, 2010 93 l. Project advisor/consultant m. Project investor n. Other, please specify: ________________ Organizational category g. Government h. Government agency i. Municipality j. Private company k. Non Governmental Organization l. Other, please specify: ________________ Contact person Address Telephone/Fax E-mail and web address, if any Main activities Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date 2010 Year in which the plant/project activity will be operational Estimate of time required before Time required for financial commitments: _0_ months becoming operational after approval of the PIN Time required for legal matters: _0_ months Time required for construction: _6_ months Expected first year of 2010 CER/ERU/VERs delivery Project lifetime 7 years June 5, 2010 94 Number of years For CDM projects: 7 years Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Pre-feasibillity study finished; contracting phase project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of the Host Country Letter of No Objection/Endorsement is Application is being filed for No Objection/Endorsement with DNA. available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR__2005_____ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ June 5, 2010 95 R. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): 10,069 tCO2-equivalent GASES ABATED/ 2011 CO2 SEQUESTERED 2012 In metric tons of CO2-equivalent, please attach calculations … Up to and including 2012: 35,069 tCO2-equivalent Up to a period of 10 years: ___ tCO2-equivalent Up to a period of 7 years: 61,747 tCO2-equivalent BASELINE SCENARIO CDM/JI projects must result in GHG emissions being lower than “business-as-usualâ€? in the Host Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are being reduced by the proposed CDM/JI project? ï‚· What would the future ï‚· CO2 look like without the proposed CDM/JI project? About ¼ - ½ page ï‚· In case the project is not implemented most domestic consumers of LESCO would continue to use inefficient incandescent lamps. The knowledge about high quality CFLs will not be widespread. ADDITIONALITY Please explain which additionality arguments apply to the project: June 5, 2010 96 (i) there is no regulation or incentive scheme in place covering the project (i) There is no regulation or incentive scheme in place in the country requiring adoption of CFLs. (ii) the project is financially weak or not the least cost option (ii) NPV of the project is negative without carbon credits. With carbon credits the project has an IRR of 10%. As the project would lose money there would be (iii) country risk, new technology little incentive for LESCO to carry it out without carbon revenue. As a public for country, other barriers sector utility which is required to cover costs, LESCO would have a strong incentive to carry out this project and to replicate it within other parts of its (iv) other distribution network with income from carbon credits. It is expected that distribution of CFLs will be developed as a Program of Activities (PoA) with the current project as the first CDM Program Activity (CPA). SECTOR BACKGROUND Currently there are no laws or regulations covering demand side energy conservation. CFLs have been around for several years but due to their much Please describe the laws, higher cost (about 7-8X) than that of the incandescent lamps, their penetration regulations, policies and level has stayed low. There has not been any organized effort to increase their strategies of the Host Country usage on a mass level. that are of central relevance to the proposed project, as well as any other major trends in the relevant sector. The project entails distributing CFLs to customers (selected based on survey results) on cost basis; in addition the cost will be recovered over a 1 ½ year time period in installments. Please in particular explain if the project is running under a public incentive scheme (e.g. preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM (i) This will be developed as a small-scale CDM PoA using AMS II.J as the Methodology or Approved baseline methodology. CDM Small-Scale Methodology (ii) project needs a new methodology (iii) projects needs modification of June 5, 2010 97 existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology S. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs _0.12 US$ million (Feasibility studies, resource studies, etc.) Installed costs _0.96 US$ million (Property plant, equipment, etc.) Land ___ US$ million Other costs (please specify) _0.12 US$ million (awareness campaign) Total project costs 1.2 US$ million SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity None Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term LESCO is taking US $ 1.2 million loan from the World Bank for this energy efficiency –CFL project. The loan will be repaid over the period of twenty years Name of the organizations, status with a three years grace period. of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status of financing agreements and June 5, 2010 98 finance (in US$ million) Carbon finance advance 35 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER US $10 36 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 37 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the ___ US$ / € first commitment period) A period of 10 years ___ US$ / € A period of 7 years 617,470 US$ 35 Advance payment subject to appropriate guarantees may be considered. 36 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 37 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 99 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. T. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS ï‚· Improvement in voltage profile ï‚· Enhance and improve the quality of life of local community E.g. impacts on local air, water and other pollution. GLOBAL BENEFITS Reduction in GHG emissions from reduced electricity demand Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects ï‚· The distribution of high quality CFLs will invoke the demand for efficient can be attributed to the project CFLs. The CFLs distributed will replace the incandescent and low and which would not have quality CFLs as well. This will reduce the energy bills of the customers occurred in a comparable and improve the quality of the supply as well. situation without that project? ï‚· It is estimated that about 0.1 to 0.2 million customers will benefit from this project. However, the number of people having positive effect from Indicate the communities and the this project is estimated to be larger than 0.1 million. number of people that will benefit from this project. About ¼ page What are the possible direct effects (e.g. employment creation, provision of capital required, foreign exchange effects)? About ¼ page What are the possible other Awareness on efficient electrical appliances especially the CFLs will be made. effects (e.g. training/education Trainings on project management and energy efficiency will also be associated with the conducted. The organization will gain experience to implement energy introduction of new processes, efficiency projects and value in the eyes of its customers. technologies and products June 5, 2010 100 and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ PRIORITIES OF THE HOST COUNTRY A brief description of the project‟s The project is consistent with the environment policies of Pakistan government. consistency with the Government is keen on energy conservation; as an example, Ministry of environmental strategy and Environment has a department – ENERCON – to devise and implement priorities of the Host Country energy conservation strategies. There is an excellent chance that once this project is implemented, it will be replicated in other districts of Punjab under About ¼ page LESCO as well as other distribution companies will be eager to implement it in their areas. June 5, 2010 101 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 102 PROJECT IDEA NOTE (PIN) Name of Project: Pakistan Poverty Alleviation Fund – CO2 Abatement Program of Activities Date submitted: November 6, 2009 DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 103 U. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT  Produce energy in rural areas of Pakistan through various renewable energy sources such as off-grid mini/micro hydro, wind turbines, solar lights, solar Describe in not more than 5 lines water pumps, wind mills for water pumping and biogas  Reduce green house gases and generate CERs PROJECT DESCRIPTION AND The proposed project focuses on energy production in rural areas of Pakistan PROPOSED ACTIVITIES through various renewable energy sources as described in the following paragraphs. It will be implemented through partner organizations of PPAF About ½ page through the Community Driven Development (CDD) process. a. Off-grid mini/micro-hydro: A total of 200 power plants ranging in capacity from 50 kW to 500 kW will be installed over a period of 5 years (2010 to 2014) to replace diesel generators being used for electricity generation in rural areas. b. Wind turbines: 0.5 to 2kW size turbines will be installed in 450 villages over a period of 5 years (2010 to 2014) to replace diesel generators being used for electricity generation in rural areas. c. Solar lights: A combination of solar street lights and household lights will be installed in 1500 villages over a period of 5 years (2010 to 2014). These will eliminate use of diesel generators for lighting in homes and streets. d. Solar pumps: 1-2 hp solar pumps will be installed in 700 villages over a period of 5 years (2010 to 2014) to replace diesel generators being used for water pumping. e. Wind mills: Wind mills delivering 1-2 hp will be installed in 400 villages over a period of 5 years (2010 to 2014) to draw water and replace diesel generators being used for water pumping. f. Biogas: Biogas plants will be installed in 15 household clusters of 100 villages each over a period of 5 years (2010 to 2014). The biogas produced will be used for cooking and lighting and thus will eliminate use of wood and kerosene oil in homes. The project will be implemented as a Program of Activities (PoA). This PIN is being prepared for the first 3 CPAs of the PoA. Some key benefits of the project are: Mini/Micro-hydro Economic well-being: a. Since electricity will be able in larger quantities, local industry will prosper, resulting in creation of new jobs. b. Since higher quality light will be available in homes for longer hours, women folk will be able to engage in income generation activities such as June 5, 2010 104 stitching, carpet weaving, etc even at night. c. New jobs related to hydro-electric generation will be created locally. Social well-being: i) Through this project it is expected that the energy bills to the consumers would be minimized, thereby, allowing the households to divert saved income to other requirements. ii) Since electricity generated from hydro plants will be used for cooking and heating, deforestation will go down. iii) Since greater quantity of electricity will be available, children will be able to study longer at night. iv) Elimination of diesel generators will result in lowering of environmental pollution. New Technology These plants will bring new technology to the area thus upgrading the technical know-how of local people. Wind Turbines Economic well-being: i) Since higher quality light will be available in homes for longer hours, women folk will be able to engage in income generation activities such as stitching, carpet weaving, etc even at night. ii) New jobs related to wind power generation will be created locally. Social well-being: i) Villagers will save money they have to spend on kerosene oil, thereby, allowing the households to divert saved income to other requirements. ii) Since better quality light will be available for longer hours at night, children will be able to study longer. iii) Elimination of kerosene lamps will result in healthier environment inside the homes. New Technology Wind turbines will bring new technology to the area thus upgrading the technical know-how of local people. Solar Lights June 5, 2010 105 Economic well-being: i) Since higher quality light will be available in homes for longer hours, women folk will be able to engage in income generation activities such as stitching, carpet weaving, etc even at night. ii) New jobs related to solar power generation will be created locally. Social well-being: i) Villagers will save money they have to spend on kerosene oil, thereby, allowing the households to divert saved income to other requirements. ii) Since better quality light will be available for longer hours at night, children will be able to study longer. iii) Elimination of kerosene lamps will result in healthier environment inside the homes. iv) With lighted streets the environment will be more secure against both human as well as animal predators. New Technology Solar lights will bring new technology to the area thus upgrading the technical know-how of local people. Solar Pumps Economic well-being: i) Water in larger quantities will be available boosting agricultural activities. ii) Since women will no longer be involved in the laborious task of hauling water every day from long distance, they will have more time to engage in income generation activities such as stitching, carpet weaving, etc. iii) A small industry related to solar pumps is expected to spawn locally thus creating new jobs. Social well-being: i) Clean drinking water will be available in close proximity resulting in better health, especially, of children. ii) With less time spent on fetching water women will have more time to socialize. New Technology Solar pumps will bring new technology to the area thus upgrading the technical know-how of local people. June 5, 2010 106 Wind Mills Economic well-being: i) Water in larger quantities will be available boosting agricultural activities. ii) Since women will no longer be involved in the laborious task of hauling water every day from long distance, they will have more time to engage in income generation activities such as stitching, carpet weaving, etc. iii) A small industry related to wind mills is expected to spawn locally thus creating new jobs. Social well-being: i) Clean drinking water will be available in close proximity resulting in better health, especially, of children. ii) With less time spent on fetching water women will have more time to socialize. New Technology Wind mills will bring new technology to the area thus upgrading the technical know-how of local people. Biogas Economic well-being: ii) Since biogas can be used to light lamps, higher quality light will be available in homes for longer hours; women will be able to engage in income generation activities such as stitching, carpet weaving, etc even at night. iii) New jobs related to biogas plants will be created locally. iv) Biogas plants produce excellent organic fertilizer and nourishing water for the crops resulting in lower expenses for the farmers and better quality crops. Social well-being: i) Villagers will save money they have to spend on wood and kerosene oil, thereby, allowing the households to divert saved income to other requirements. ii) Since biogas will be used as a fuel, deforestation is expected to go down. iii) Since better quality light will be available for longer hours at night, children will be able to study longer. iv) Elimination of wood burning and kerosene lamps will result in healthier environment inside the homes, especially, for women who have to cook in a very smoky environment. v) The village environment will be much cleaner with no dung lying around. June 5, 2010 107 New Technology Biogas plants will bring new technology to the area thus upgrading the technical know-how of local people. TECHNOLOGY TO BE Mini/Micro-hydro 38 EMPLOYED State-of-the-art hydro turbines will be used. Describe in not more than 5 lines Wind Turbines Since micro turbines will be used, these will be using mature wind turbine technology. Solar Lights & Solar Water Pumps Photovoltaic (PV) technology will be used for generation of electricity. Wind Mills Wind mills for drawing water have been used for hundreds of year so mature wind mill technology will be used. Biogas Fixed dome type biogas plants of appropriate sizes will be built for individual households or clusters of households. TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF6 CO2 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration 38 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 108 Field of activities 1e (mention what is applicable) 1g See annex 1 for examples 1b LOCATION OF THE PROJECT Country Pakistan City Brief description of the location of The project will be implemented in rural areas all over Pakistan. the project PROJECT PARTICIPANT Name of the Project Participant Pakistan Poverty Alleviation Fund (PPAF) Role of the Project Participant cc. Project Operator dd. Owner of the site or project ee. Owner of the emission reductions ff. Seller of the emission reductions gg. Project advisor/consultant hh. Project investor ii. Other, please specify:________________ Organizational category y. Government z. Government agency aa. Municipality bb. Private company cc. Non Governmental Organization dd. Other, please specify: Incorporated under section 42 of the companies‟ act 1984 it follows the regulatory requirements of the Securities and Exchange Commission of Pakistan. Sponsored by the Government of Pakistan and funded by the World Bank and other leading donors. Contact person Zaffar Sabri Address PPAF, Water Management Center, 249-B, Street 52, F-10/4, Islamabad Telephone/Fax 92-51-2101723/2101726 E-mail and web address, if any zaffar@ppaf.org.pk Main activities PPAF is the lead apex institution of the country wholesaling funds to civil society organizations for micro-finance, infra-structure development and Describe in not more than 5 lines livelihood enhancement projects. Before finalizing partnerships the PPAF ensures that the partners have well targeted community outreach programs that are committed to enhancing the economic welfare and income of the disadvantaged people. Summary of the financials Resource base of over US $1B. Summary of the relevant PPAF has financed communities to carry out a number of off-grid based rural June 5, 2010 109 experience of the Project electrification projects with technical oversight and social mobilization by its Participant partner organizations. The list currently includes 63 micro-hydro systems, 32 wind turbine systems, 16 village-based solar PV clusters and 12 solar water Describe in not more than 5 lines pumps. PROJECT PARTICIPANT Name of the Project Participant Role of the Project Participant o. Project Operator p. Owner of the site or project q. Owner of the emission reductions r. Seller of the emission reductions s. Project advisor/consultant t. Project investor u. Other, please specify: ________________ Organizational category m. Government n. Government agency o. Municipality p. Private company q. Non Governmental Organization r. Other, please specify: ________________ Contact person Address Telephone/Fax E-mail and web address, if any Main activities Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date October 2009 Year in which the plant/project June 5, 2010 110 activity will be operational Estimate of time required before becoming operational after approval of the PIN Expected first year of 2011 CER/ERU/VERs delivery Project lifetime 28 years for the PoA Number of years For CDM projects: 7 years twice renewable for each CPA Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Different projects are at different stages of implementation. project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of PIN is ready to be filed for No Objection/Endorsement of DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? June 5, 2010 111 with regard to the Kyoto __________NO / YES, YEAR_2005______ Protocol Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ V. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): ___ tCO 2-equivalent GASES ABATED/ Up to and including 2012: 55,646 tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: 642,015 tCO2-equivalent In metric tons of CO2-equivalent, please attach calculations Up to a period of 7 years: 374,730 tCO2-equivalent BASELINE SCENARIO CDM/JI projects must result in These projects will result in reduction of fossil fuel usage leading to carbon GHG emissions being lower savings and sustainable development. than “business-as-usualâ€? in the Host Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are being reduced by the proposed CDM/JI project? CO2 ï‚· What would the future look like without the proposed CDM/JI project? In case the project is not implemented the villagers will continue to be About ¼ - ½ page dependent on dirty fossil fuel usage resulting in no economic and social well- being opportunities. ADDITIONALITY Please explain which additionality arguments apply to the project: (i) There is no regulation or incentive scheme in place in the country (i) there is no regulation or covering the project. incentive scheme in place (ii) PPAF has a financing gap between the investment required and June 5, 2010 112 covering the project the available funding. (iii) The NPV of the Project at 15% discount rate without CDM is (ii) the project is financially weak negative $52,784,599; it improves to negative $49,607,943 with or not the least cost option CDM credits; so it is a financially weak project that gets better with carbon credits. (iii) country risk, new technology (iv) New technology will be brought into the country in the form of solar for country, other barriers lights, wind turbines, solar water pumps, wind mills, fixed dome (iv) other biogas plants and hydro turbines. SECTOR BACKGROUND Government of Pakistan has put in place its policy – Development of Renewable Energy for Power Generation (2006) – to promote off-grid Please describe the laws, renewable energy supply systems to achieve its goal of universal electrification regulations, policies and in the country. Budgets have been indicated within the Medium Term strategies of the Host Country Development Framework (2005-2010) to finance significant rural electrification. that are of central relevance to So far AEDB has installed about 3000 solar home systems in villages and the proposed project, as well PPAF has financed 63 mini/micro-hydro systems, 32 wind turbine systems, 16 as any other major trends in village-based solar PV clusters in and 12 solar water pumps. the relevant sector. Please in particular explain if the The model followed by PPAF is that of public-private partnership with PPAF project is running under a providing 80-90% funding and the community 10-20% with a partner public incentive scheme (e.g. organization, generally, an NGO doing project implementation. However, in preferential tariffs, grants, disaster affected areas (e.g. earthquakes, floods, cyclones, seawater intrusion, Official Development etc) the community contribution can be significantly reduced or completely Assistance) or is required by waived. There is no ODA involvement and there is no law requiring execution law. If the project is already in of such projects. operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM (i) Mini/micro-hydro, wind turbines, solar water pumps and solar lights Methodology or Approved – AMS-I.A. CDM Small-Scale (ii) Wind mills – AMD-I.B. Methodology (iii) Biogas – AMS-I.E. (ii) project needs a new methodology (iii) projects needs modification of existing Approved CDM Methodology June 5, 2010 113 For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology W. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs 0 US$ million (Feasibility studies, resource studies, etc.) Installed costs 57,274,096 US$ (Property plant, equipment, etc.) Land ___ US$ million Other costs (please specify) 75,000 US$ (Legal, consulting, etc.) CDM expense Total pre-operational project 57,349,096 US$ costs SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Most funding will come from World Bank and KSW. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term N/A Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status N/A of financing agreements and finance (in US$ million) June 5, 2010 114 Carbon finance advance N/A 39 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE TBD Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER US $10 40 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 41 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 556,460 first commitment period) A period of 10 years US$ 6,420,150 A period of 7 years US$ 3,747,300 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at 39 Advance payment subject to appropriate guarantees may be considered. 40 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 41 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 115 www.carbonfinance.org is recommended. X. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Cleaner and healthier environment inside as well as outside homes as there are no fossil fuels being burnt inside the homes and the villages will be rid of E.g. impacts on local air, water manure in the case of biogas installations. In addition, clean water will be and other pollution. available in close proximity resulting in reduction of water related diseases as well as higher agriculture production. Deforestation is also expected to go down as alternate fuel will now be available. GLOBAL BENEFITS Reduction in GHG emissions from reduced fossil fuel burning as well as minimized deforestation. Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects ï‚· There will be more jobs due to technology infusion and thus better can be attributed to the project economic conditions. and which would not have ï‚· With better lighting conditions women will be able to work longer hours on occurred in a comparable income generation activities such as stitching, carpet weaving etc. situation without that project? Similarly children will be able to study longer hours at night. ï‚· In case of water pumping through solar water pumps or wind mills, women Indicate the communities and the will not have to fetch water from long distances and thus will have more number of people that will benefit free time to devote to income generation activities. from this project. ï‚· The environment inside the homes will be healthier with no fossil fuels burning. About ¼ page What are the possible direct The project implementation will generate a large number of opportunities -- new effects (e.g. employment jobs that otherwise would not be created. Similarly introduction of new creation, provision of capital technology is expected to spawn new cottage industry related to the technology required, foreign exchange thus creating more job opportunities. effects)? About ¼ page What are the possible other Since new technologies will be introduced, there will be trainings and the effects (e.g. training/education technical know-how of partner organizations (POs) and villagers will be associated with the enhanced. introduction of new processes, technologies and products June 5, 2010 116 and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ National Energy Conservation Policy being implemented under Ministry of PRIORITIES OF THE HOST Environment, Government of Pakistan, has renewable energy as a Sectoral COUNTRY Initiative with focus on development and deployment of biogas, mini/micro- hydro, solar energy, wind energy etc. A brief description of the project‟s consistency with the environmental strategy and priorities of the Host Country About ¼ page June 5, 2010 117 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 118 PROJECT IDEA NOTE (PIN) Name of Project7: Launch Energy Optimization Solutions using purpose built solutions iBoiler, iWater & iDC internationally in Kyoto Protocol signatory countries. iBoiler, iWater & iDC are the intellectual property of Avanceon Ltd. SECTOR Scope: All manufacturing industries using Steam, Water and Chilled Water Date submitted: 27 April 27, 2010 DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 119 Y. PROGRAM DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE Avanceon after extensive research and development has identified a unique PROGRAM methodology to reduce energy footprint of industry by offering a turnkey managed care solution to optimize steam and water usage in the industry. Describe in not more than 2 lines (Policy, Technology, other goal) DESCRIPTION OF PROGRAM The program plans to utilize Avanceon‟s intellectual property and managed care approach to offer guaranteed optimization in Steam and Water usage. The objective is to offer a program through which energy savings at each site pay back for the investment of Avanceon in the infrastructure and human resource About ½ page that offers 24/7 managed care ensuring no degradation throughout the life cycle of the project. Details of the programs that can be used individually or collectively in a wide range of industries that include Food, Life Sciences, Petrochemical, Oil & Gas, Fertilizer, Specialty Chemicals etc are: iBoiler: • Benchmarks boilers‟ performance and measures subsequent fuel savings and emissions reduction after optimization. • Continually measures boiler efficiency throughout the firing range • Calculates real time Key Performance Indicators: • Cost of steam production • Fuel to steam ratio • Alerts based on losses in efficiency; proactively alerts operations team to take action when a loss is detected. • Dynamically calculates how much steam each boiler should produce to give you the lowest cost per ton of steam • Automatically sets each boiler to this optimal combination or “recipeâ€? to achieve drastic energy savings. • Managed care ensures that the savings do not degrade iWater: • Benchmarks water pumping system performance and calculates electricity savings after optimization. • Defines an algorithm that helps calculate the minimum flow needed for a specific process requirement • Achieves over 30% electricity saving by running the Water June 5, 2010 120 Pumping System efficiently. • Managed care ensures that the savings do not degrade iChiller or iDistrict Cooling: • Benchmarks Chiller performance and measures subsequent savings after optimization • Defines an algorithm that helps run the chilled water plant close to the best energy benchmark • Runs the complete chilled water system to achieve over 30% electricity saving • Managed care ensures that the savings do not degrade PROGRAM FINANCE Avanceon through its shareholders has already invested in developing the intellectual property. The implementation model is very robust, scalable and sustainable. The business plan entails offering a guaranteed payback solution (energy cost savings pay for capital expenditure) to the end user and (Description of financial subsequently ensuring sustainable operation with a managed care program. mechanism to be used by the Avanceon as a trial has successfully implemented several projects in different program – loan/subsidy/grant, industry verticals over the last 2 years. We do not envisage any direct financial if any. Also describe the requirement at this stage and believe the CERs earned would be enough to impact of program finance on subsidize the program CPA implementation, if any.) COORDINATING ENTITY Avanceon Ltd (Public/Private, state legal and financial status and program implementation, monitoring and management capacity) DESCRIPTION OF The program utilizes standard mechanical and thermodynamic applications TECHNOLOGY or embedded in Avanceon‟s proprietary iBoiler, iWater and iDC software. The MEASURES TO BE equipment used to modify the existing mechanical and electric installations, EMPLOYED however, is industry standard. The software is Microsoft certified and uses SharePoint and .net technology. The system is web enabled and industry experts through Avanceon‟s Managed Program ensure that the system does not degrade in performance. TYPE OF PROGRAM Sectoral Scope Vertically across all industries which use fuel, water & steam e.g. Petrochemical, Oil & Gas, Fertilizer, Food & Beverages etc. (mention what is applicable) June 5, 2010 121 Greenhouse gases targeted CO2, CH4, SF6 CO2/CH4/N2O/HFCs/PFCs/SF6 (mention what is applicable) Abatement/CO2 sequestration Abatement (mention what is applicable 28 Years LENGTH OF PROGRAM (Up to 28 years) LOCATION OF THE PROGRAM Country / Region Within 2 years - Pakistan, Middle East (UAE, Qatar and Kingdom of Saudi Arabia), Canada, USA (non Kyoto signatory but with the biggest market) (one or more) After 2 years – Europe - RELATIONSHIP BETWEEN Not applicable PROGRAM & PROJECT (if any existing between coordinating entity and CPA owner; if not, what is expected in the future) ELIGIBILITY CRITERIA Avanceon has carried out an extensive market research of the markets / countries where it wants to launch the program. A list of prospective projects to be pursued will be submitted every year. It is important to note here that the implementation methodology for each project across different industry or (Which projects will be allowed to clients remains the same. join the program and how will they be identified?) EXPECTED PROGRAM SCHEDULE PROGRAM START DATE 2010 Year in which the Program will become operational PROGRAM IMPLEMENTATION Avanceon operates in Pakistan, UAE and USA. Detailed business plan for each June 5, 2010 122 SCHEDULE region has been prepared. The business is already successful at a smaller scale. We are seeking to scale the operation after getting our Program Methodology approved. Estimate of time required before Right away as the core team and infrastructure are in place. becoming operational after approval of the PIN Expected first year of 2011 CER/ERU/VERs delivery Current status or phase of the Feasibility - Completed PROGRAM DESIGN (Pre- selection phase/opportunity Proof of Concept - Completed study finished/pre-feasibility study finished/feasibility study Technology Development - Completed finished/negotiations phase/contracting phase etc.- Trial Installation and Testing - Completed mention what is applicable and Successful Installations (8 projects) with client - Completed indicate the documentation) Launch International Business Plan - In Progress Current status of acceptance PIN is ready to be filed for No Objection/Endorsement of DNA. of the Host Country (or countries) Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? (or countries) with regard to the Kyoto Protocol __________NO / YES, YEAR_2005______ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ June 5, 2010 123 Z. METHODOLOGY AND ADDITIONALITY Methodology Please choose from the following AMSII.D. Energy efficiency and fuel switching measures for industrial facilities options: For CDM PROGRAMS: (i) Covered by an existing Approved CDM Methodology or Approved CDM Small- Scale Methodology (ii) Needs a new methodology (iii) Needs modification of existing Approved CDM Methodology ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): GASES ABATED/ Up to and including 2012: 31,149 tCO2-equivalent CO2 SEQUESTERED BY ONE TYPICAL CPA Up to and including 2017: 109,000 tCO2-equivalent In metric tons of CO2-equivalent, please attach calculations BASELINE SCENARIO The program is unique in its nature of setting the benchmark of “business-as- usualâ€?. It first benchmarks the energy usage of the process based on its CDM/JI PROGRAMS must result existing use and prevalent industry standards. After process modifications, the in GHG emissions being lower system in a real time manner calculates the energy saved which are then than “business-as-usualâ€? in translated into CERs based on host country grid or self generation standards. the Host Country. At the PIN It is even simpler in the case of steam savings, as custody transfer metering is stage questions to be capturing exactly the fuel saved after process modification which can be answered are at least: directly converted into CER savings. ï‚· Which emissions are June 5, 2010 124 being reduced by the proposed CDM/JI program? CO2 ï‚· What would the future look like without the proposed CDM/JI If the project is not implemented, the industry will continue with its wasteful program? practices. About ½ - 1 page ADDITIONALITY The program is to be launched with a guaranteed savings approach which Please explain which additionality essentially takes away the risk of investment from the user. This will further arguments apply to the program help overcome the complacency of industries in opting for process (This should be reflected directly modification. Further: in program design): i) The savings cannot occur without the technology or the CDM program. (i). Would these emission reductions occur without this CDM program or the policy/technology that it supports? ii) The Scheme, Algorithm or Technology is the intellectual property of Avanceon and did not exist earlier. (ii) The policy, regulation or incentive scheme covered by this program was either not existing earlier or not implemented effectively iii) As the program entails financial guarantees for projected energy saving (require proof for latter) or CER reductions, it effectively offers financial support till the project is completed. Subsequently during the payback period, the savings (iii) the program provides would pay for the program. financing/grant support, iv) No country risk as the technology has already been tested in different without which projects would markets. not be implemented (iv) country risk, new technology for country, other barriers (v) other SECTOR BACKGROUND There are no regulations forcing the industry to go for energy efficiency and companies like Avanceon have to educate the industries to implement an Please describe the laws, energy foot print reduction. There are a lot of legacy systems in our country that regulations, policies and are far from the energy KPIs that rest of the world has already achieved. strategies of the Host Country (or multiple countries) that are of central relevance to the proposed program, as well as any other major trends in the relevant sector. June 5, 2010 125 AA. PROGRAM FINANCE TOTAL PROGRAM COST ESTIMATE Development costs __3_ US$ million (Feasibility studies, resource studies, etc.) Management costs _1.0_ US$ million (Management of program) Program Costs ___1.0 US$ million (If any subsidy/loan/incentive for program participants) Other costs (please specify) _0.25__ US$ million (Legal, consulting, etc.) Total project costs _5.25___ US$ million SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Self Generation Name of the organizations, status Equity injection by the parent company, Engro Chemicals Ltd. of financing agreements and finance (in US$ million) This equity has been used up in developing the intellectual property & proof of concept and successful implementation at different vertical industries. (Reference sites in Food, Oil & Gas, Petrochemical & Fertilizer.) We expect the CERs to finance the Management and Program costs Debt – Long-term As explained earlier the client pays back through the savings that are achieved using our program. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status of financing agreements and finance (in US$ million) June 5, 2010 126 Carbon finance advance 42 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON Have looked into local brokers FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER Euro 10 indicative price PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 5.0 M first commitment period) Period till end of Program US$ 20 to 40M BB. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS – PROGRAM LEVEL LOCAL BENEFITS Reduce electric energy & fuel usage footprint in industry. Improve society‟s sustainability as a whole and impact positively to the air quality. E.g. impacts on local air, water and other pollution. GLOBAL BENEFITS Less dependence on fossil fuel. Reduction of GHGs Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects Employment creation, development of HR and encouraging SME in the host 42 Advance payment subject to appropriate guarantees may be considered. June 5, 2010 127 can be attributed to the country. Brings export foreign exchange into the host country. PROGRAM or a typical PROJECT under the PROGRAM which would not have occurred in a comparable situation without that project? Indicate the communities and the number of people that will benefit from this project. About ¼ page What are the possible direct As the program is built around a managed care concept, success of the effects (e.g. employment concept internationally will mean adding at least 2 professionals for every 10 creation, provision of capital contracts. Field implementation of each program would create business for required, foreign exchange SMEs that offer industrial installation services. effects)? About ¼ page What are the possible other As explained our product / IP uses latest tools. Success of the program would effects (e.g. help a team of people raise their skill sets on cutting edge technology. training/education associated with the introduction of new processes, technologies and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ Carbon Finance has recently become a priority due to lack of generation PRIORITIES OF THE HOST capacity. The program fits in perfectly with present situation where industry is COUNTRY being affected due to energy shortage. A brief description of the PROGRAM and CPA‟s consistency with the environmental strategy and priorities of the Host Country About ¼ page CC. DESCRIPTION OF A TYPICAL PROJECT ACTIVITY – UNDER THE PROGRAM PROJECT ACTIVITY (CPA) DESCRIPTION OF A TYPICAL Already explained earlier in Section A PROJECT ACTIVITY (What does a project propose to June 5, 2010 128 do, how and what is the expected result?) BOUNDARY By Industry (How will each CPA be distinctly identified?) EXPECTED LOCATION OF All industries using Fuel, Water and Steam PROJECT ACTIVITY (Site of actual technology implementation within the CPA geographical boundary) LIFETIME of EACH PROJECT Managed care concept ensures upgrades, improvement to sustain the CERs. ACTIVITY (Number of years) For CDM projects: 7 years twice renewable Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) PROJECT PARTICIPANTS The owner of the CPA will be Avanceon. The resulting CERs will also be owned by Avanceon (Who will be the owners of the CPA?) Current status or phase of CPA Have already picked the prospective industries and feasibility of a number of IDENTIFICATION such opportunities have been finalized. (Pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc.- mention what is applicable and indicate the documentation) DD. DESCRIPTION OF THE FIRST PROJECT ACTIVITY – UNDER THE PROGRAM June 5, 2010 129 DETAILS OF FIRST CPA IF identified – This will be a critical requirement for validation of the Program a. Organizational category i. Government ii. Government agency iii. Municipality iv. Private company v. Non Governmental Organization vi. Other, please specify: ________________ b. Name of the organization i. Nestle Kabirwala Plant, Kabirwala ii. Rupafil Ltd. Shurkpur Road, Sheikhupura iii. Mirpurkhas Sugar Mills Ltd., Mirpurkhas Sindh iv. Engro Fertilizer Ltd. (Efert), formerly ECPL, Dharki v. Agritech Ltd. (formerly Pak American Fertilizers Ltd.), Sikandrabad Location of the project activity Various Expected start date of project Already started in October 2008 Expected volume of cer/ver/eru CERs: 109,000 in 7 years June 5, 2010 130 PROJECT IDEA NOTE (PIN) This PIN was structured according to the template available from The World Bank Carbon Finance Unit http://carbonfinance.org Name of Project8: Improved Cooking Stove (ICS) Program, Sindh DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO 2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognized that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org June 5, 2010 131 EE.PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT The main objective of the Improved Cook Stove (ICS) Program is to promote and distribute ICS in the households in rural areas of Sindh. The program Describe in not more than 5 lines will focus on maintaining the quality of ICS distributed through regular monitoring. PROJECT DESCRIPTION AND PROPOSED ACTIVITIES About 90 percent of rural households in Sindh province use traditional stoves, which are inefficient in fuel use and emit smoke inside the kitchen causing About ½ page various health hazards. The problems related to use of firewood is widely prevalent, causing environment, health and economic problems and hardship (including for the poor rural communities, particularly women. a technical description of the project) The project plans to promote and install a number of ICS units in 15 villages/communities of Thatta and Badin districts in Sindh province in the south of Pakistan. This is an area among the most remote and economically disadvantaged areas of Pakistan. Under its program approach, BACIP plans to undertake the following proposed project activities: 1. Installation of smoke free stoves to reduce firewood use in cooking, 2. Entrepreneurship development and artisan training, 3. Integration of women in the project implementation process 4. Awareness raising and demand generation, 5. Monitoring and evaluation. The adoption of ICS will be expected to result in a 40% reduction in annual firewood consumption at the household level. In addition to firewood savings, the ICS proposed by the project will save the women of the households‟ significant amounts of time currently spent on collecting firewood. The project activity will also substantially reduce indoor air pollution and lead to improvement in the health of household members (expected reduction by 50% of cold and smoke related disease incidence). Furthermore, this project can be expected to significantly reduce deforestation of local forests. TECHNOLOGY TO BE The ICS design consists of covered openings for two pots with a vertical EMPLOYED 43 chimney pipe to remove the smoke from the room. A single pipe thermo-siphon system heats water in a 50 liter barrel while the food is being cooked by utilizing Describe in not more than 5 lines the wasted heat energy from the stove to heat water. The heat exchanger (copper coil) introduced in the chimney traps wasted heat and helps in heating water in a plastic drum (50L). Cold water in the drum travels through the metallic coil from bottom tube, which again heats the water and creates a heat 43 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 132 current. In this way, the entire water in the drum gets heated in 15 to 20 minutes without using any additional fuel. Trapping of hot gases in the chimney help in reducing thermal pollution and carbon particulate from the environment. TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O CO2/CH4/N2O/HFCs/PFCs/SF6 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 1. Renewables / 1a Biomass (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Region South Asia Country Pakistan City The project will be managed in 15 villages/communities of districts Thatta and Badin in Sindh province. Brief description of the location of The total area of District Thatta is 17,355 square kilometers with a total the project population of 1.3 million people. The population is higher in the rural side, consisting of 88.80% of the total population with the urban areas population No more than 3-5 lines at 11.20% The district is bounded on the north by Dadu district, on the east by Hyderabad and Badin districts and India, on the South by Runn of Kutch area and Arabian Sea and on the west by Karachi division. District Badin has a total area of 6,726 square kilometres with a population of 1.13 million people of which 16.42% are urban. It is bounded on the north by Hyderabad District on the east by Mirpurkhas and Tharparker districts, on the south the Arabian Sea and Rann of Kutch, which also forms part of the disputed boundary with India, and on the west it is bounded by Thatta and Hyderabad districts. PROJECT PARTICIPANT Name of the Project Participant Aga Khan Planning and Building Service, Pakistan (AKPBS,P) Role of the Project Participant jj. Project Operator kk. Owner of the site or project ll. Owner of the emission reductions June 5, 2010 133 mm. Seller of the emission reductions nn. Project advisor/consultant oo. Project investor pp. Other, please specify:________________ Organizational category ee. Government ff. Government agency gg. Municipality hh. Private company ii. Non Governmental Organization jj. Other, please specify: ________________ Contact person Mr. Khizer Farooq Omer rd Address Aga Khan Planning and Building Service, Pakistan, 310-311, 3 Floor, Kassam Court, BC-9, Block 5, Clifton, Karachi-75600, Pakistan. Telephone/Fax Tel: +92-21-536 1802(-04); Fax: +92-21-536-1807 E-mail and web address, if any khizer.omer@akpbsp.org Main activities The Aga Khan Planning and Building Service Pakistan (AKPBS, P) will implement this project through its Building and Construction and Describe in not more than 5 lines improvement Program (BACIP) as well as monitor the quality of ICS installed. AKPBS, P has more than two decades of experience of successfully undertaking built environment related infrastructure projects and development programs. Summary of the financials Summarize the financials (total KPBS, P offices, staff and financials: assets, revenues, profit, etc.) in not more than 5 lines a) 5 offices in i) Karachi; ii) Gilgit; iii) Chitral; iv) Thatta, Sindh; v) Skardu, Baltistan. b) Number of employees = 125 c) Fixed Assets = Rs 13 million (US$ 0.2 million) d) Annual turnover = Rs 159 million ($ 2.45 million). Summary of the relevant AKPBS, P launched the BACIP program in 1997 to improve the living experience of the Project conditions inside traditional houses in the Northern Areas and Chitral (NAC) Participant region. Describe in not more than 5 lines BACIP has developed, through action research in these communities, over 50 different types of housing and living improvement products, including energy efficient cooking stoves, water heating facilities, and energy conservation technologies such as the roof hatch window and low cost insulation techniques for roofs, walls and floors of houses. Under its program approach, BACIP undertakes awareness raising, training of crafts-persons June 5, 2010 134 and entrepreneurs, and marketing of products. BACIP has so far been successful in having over 22,000 products adopted on self-finance basis by around 10,000 households, which is 8% of the population of the program area. Loan facilities for the purchase of these products have also been offered through local micro credit institutions. In addition to implementation, BACIP is also responsible for documentation, monitoring and evaluation of these products. PROJECT PARTICIPANT Name of the Project Participant Winrock International Pakistan Role of the Project Participant a. Project Operator b. Owner of the site or project c. Owner of the emission reductions d. Seller of the emission reductions e. Project advisor/consultant f. Project investor g. Other, please specify:________________ Organizational category a. Government b. Government agency c. Municipality d. Private company e. Non Governmental Organization f. Other, please specify: _ ______________ Contact person Mr. Bikash Pandey Country Representative Winrock International Pakistan Address House 40, St 27, Sector F-6/2 P. O. Box 44000 Islamabad, Pakistan Telephone/Fax Cell: +92 301 509 4846 Tel: +92 51 265 2258 Fax: +92 51 831 4937 E-mail and web address, if any Email: bikashpan@gmail.com Main activities For this project, Winrock International Pakistan will act as technical backstopping organization for preparation of CDM documentation. Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant Winrock International Pakistan has considerable experience with CDM project experience of the Project development and have recently developed the PDD for a hydro project in the northern areas of the country apart from working on a number of PIN/PDDs across a number of sectors as part of their CDM capacity building initiative. June 5, 2010 135 Participant Describe in not more than 5 lines EXPECTED SCHEDULE Earliest project start date July 2010 is proposed as the start date. Year in which the plant/project activity will be operational Estimate of time required before Time required for financial commitments: 3 month becoming operational after approval of the PIN Time required for legal matters: 3 month Time required for construction: 1 month Expected first year of 2011 CER/ERU/VERs delivery Project lifetime 7 years Number of years For CDM projects: 7 years Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Opportunity study has been completed. project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) June 5, 2010 136 Current status of acceptance of No contact with the DNA has been established yet. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005___ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR_2005___ FF. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): ___ tCO 2-equivalent GASES ABATED/ Up to and including 2012: 66,183 tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: ___ tCO2-equivalent In metric tons of CO2-equivalent, please attach calculations Up to a period of 7 years: 267,611 tCO2-equivalent Assumptions were set as follows: 1) a 7 year crediting period; 2) 12,000 and 18,000 new stoves to be installed in the first and second years respectively and 20,000 stoves each to be installed in the third and fourth years; 3) Stoves have a lifetime of 1 year and thus to be replaced each year. Schedule st 1 year of project (2010): 11,400 operational stoves = 8,633 tCO2e ERs nd 2 year of project (2011): 28,500 operational stoves = 21,582 tCO2e ERs June 5, 2010 137 rd 3 year of project (2012): 47,500 operational stoves = 35,969 tCO2e ERs th th 4 to 7 year of project (2013-16): 66,500 operational stoves = 50,357 tCO2e ERs BASELINE SCENARIO According to estimates the average consumption of each household for cooking and heating is 2.5 tons of fuel wood per annum. It is estimated that 70% of this CDM/JI projects must result in firewood can be characterized as Non-renewable Biomass. The actual GHG emissions being lower percentage of non-renewable biomass needs to be confirmed with a rigorous than “business-as-usualâ€? in survey. the Host Country. At the PIN stage questions to be The project implementation will reduce emissions from non-renewable biomass answered are at least: harvesting; Without the project, fuelwood burning in open fires will continue to rise following current trends, leading to an increase of non-renewable biomass ï‚· Which emissions are extraction and associated greenhouse gases emissions. being reduced by the proposed CDM/JI project? ï‚· What would the future look like without the proposed CDM/JI project? About ¼ - ½ page ADDITIONALITY Household Level Additionality Please explain which additionality arguments apply to the project: Although the returns to individual households on the investment made into the (i) there is no regulation or ICS is expected to be extremely high (full investment expected to be incentive scheme in place returned in less than 12 months), the experience so far is that the potential covering the project beneficiary households in the various districts of Sindh have not adopted these technologies to any significant extent. The main barriers appear to be: (ii) the project is financially weak or not the least cost option a) insufficient knowledge about the availability of energy efficient technologies and the extent of benefits which users could capture; (iii) country risk, new technology for country, other barriers b) lack of a ready supply of high quality technologies in the remote rural areas where they are needed; (iv) other The above stated barriers can be overcome through the proposed AKPBSP program with outreach and awareness and training of entrepreneurs and creating market conditions to supply energy efficient technologies in remote rural communities. Program Level Additionality AKPBSP‟s BACIP program has in the recent past been successful in having over 22,000 products adopted by around 10,000 households in the Northern June 5, 2010 138 Areas of Pakistan. While the communities found these products to be effective and useful, the speed at which the technologies are being adopted, however, is currently slow and is barely keeping up with the population increase taking place. The proposed project activity proposes to increase the coverage to cover approximately 50% of households in the region and substantially reduce the non-renewable firewood use in the region. This would not happen in the business as usual scenario. SECTOR BACKGROUND At present, no specific local guidelines are in place to monitor the use of firewood for domestic purposes. The sector specific environmental guidelines in Please describe the laws, the country are still in the process of development with environmental regulations, policies and awareness still in its infancy stages though rapidly gaining momentum with the strategies of the Host Country spread of awareness regarding protecting the environment. that are of central relevance to the proposed project, as well However, the generic guidelines in the framework of environmental protection in as any other major trends in the country are namely the Pakistan Environmental Protection Act-1997, the relevant sector. National Conservation Strategy (2007) and National Environment Policy. Please in particular explain if the There is no public incentive scheme. project is running under a public incentive scheme (e.g. preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. June 5, 2010 139 METHODOLOGY This is a CDM Project and falls under the existing Approved CDM Small-Scale Methodology: AMS-II.G: Energy Efficiency Measures in Thermal Applications of Please choose from the following Non-Renewable Biomass. options: This specific methodology covers project activities involving efficiency improvements in the thermal applications of non-renewable biomass such as high efficiency cook stoves. In addition, since the proposed project activity is For CDM projects: the first of its kind in the area, no previously registered projects exist which might be claiming saving of non-renewable biomass in the area. Thus this (i) project is covered by an small scale methodology under Category II.G is appropriate for the proposed existing Approved CDM project activity. Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) projects needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology GG. FINANCE TOTAL CAPITAL COST ESTIMATE (DURING CREDITING PERIOD 2010-2016) Development costs US$ 0.4 million (Feasibility studies, resource studies, etc.) Installed costs US$ 10.85 million at $155 per stove Land Not applicable Other costs (please specify) US$ 0.1 million running costs per year Total project costs US$ 11.35 million resulting from $ 0.4M (development cost) + $10.85 M (cost of fuel efficient stoves) + $0.1M (running costs) June 5, 2010 140 SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity None. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term No loans are sought for the project to further develop during the crediting period. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term No loans are sought for the project to further develop during the crediting period. Name of the organizations, status of financing agreements and finance (in US$ million) Carbon finance advance None. 44 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON International Finance Corporation (IFC) will be contacted along with other FINANCE institutions to discuss the possibility of obtaining carbon financing for the proposed project activity. Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER An average value of 15 US$ tCO2e was used for the calculations. 45 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 46 preference if known. 44 Advance payment subject to appropriate guarantees may be considered. 45 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 46 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 141 TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 992,750 first commitment period) A period of 10 years Not applicable US$ / € A period of 7 years US$ 3,258,809 Find attached to the present document a PIN Financial Analysis Model of the ICS Program, Sindh project proposed activities. Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. HH. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Local benefits include healthy kitchens and better conserved forests, which supply local environmental services, such as water infiltration, soil quality, E.g. impacts on local air, water biodiversity, landscape aesthetics among others. and other pollution. GLOBAL BENEFITS Reduction in green house gas emissions and mitigation of global warming. Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects The adoption of BACIP energy saving technology and efficient cooking practice can be attributed to the project will result in reduction in fuel consumption, smoke-free indoor domestic and which would not have environment, and warmer indoor temperatures in winter. The resulting socio occurred in a comparable economic benefits which are expected to result from the BACIP intervention situation without that project? include: June 5, 2010 142 Indicate the communities and the ï‚· Savings in fuel expenditure number of people that will benefit ï‚· Up to 50 percent reduction in smoke related diseases amongst women from this project. and children. ï‚· Savings on health expenditure. About ¼ page ï‚· Reduced deforestation and land degradation resulting in increased agricultural and economic activity (employment creation and entrepreneurship development) Time saving during cooking and fuel wood collection. The time saved can be utilized for economically profitable activities, leisure or social activities, or home and health improvement purposes. What are the possible direct The BACIP technologies will generate employment for craftsmen (iron smiths), effects (e.g. employment material (iron, insulation materials) entrepreneurs and social mobilizers for a creation, provision of capital promotional campaign. This process will create a market and generate required, foreign exchange opportunities for employment and income generation. effects)? About ¼ page What are the possible other Women are the primary users/ customers of the BACIP products. Special effects (e.g. training/education training and workshops are held for the women explaining the use and associated with the benefits (health and economic) of the BACIP energy efficiency technologies. introduction of new processes, These workshops also include training and awareness generation on health technologies and products and hygiene issues especially amongst women and children. and/or the effects of a project on other industries)? Training in stove manufacturing and metal work will be provided to local artisans and ironsmiths. More efficient cutting tools will be introduced for About ¼ page efficient and speedy manufacturing of stoves. These new techniques introduced by the project will increase skills and improve metal working technologies available in these remote areas. The manufacture of stoves and installing these technologies in households will create jobs in the region. ENVIRONMENTAL STRATEGY/ Pakistan has a number of national laws and sustainable development policies, PRIORITIES OF THE HOST strategies and plans. These include Pakistan Environmental Protection Act- COUNTRY 1997, National Conservation Strategy (2007), National Environment Policy, National Forestry Policy, National Renewable Energy Policy (2006). These A brief description of the project‟s reflect a high level of commitment of the government to the country‟s consistency with the environment. Promotion of ICS to reduce pressure on forests is consistent with environmental strategy and all these policies and environmental strategies of the Government of Pakistan. priorities of the Host Country About ¼ page ANNEX I - Technologies June 5, 2010 143 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 144 PROJECT IDEA NOTE (PIN) Name of Project9: “Energy Efficiency in Government Buildingsâ€? Program of Activities DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 145 II. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT  Improve energy efficiency of government buildings  Reduce green house gases and generate CERs Describe in not more than 5 lines PROJECT DESCRIPTION AND The proposed project focuses on energy efficiency improvement of government PROPOSED ACTIVITIES buildings through a variety of methods as follows: About ½ page g. Generic with most applicability and with most energy conservation potential, yet low cost; such as roof and wall insulation, Aluminum glazed windows, protection against high wind, overhangs over windows for shade, orientation of buildings to catch winter sun and keep out summer sun, use of energy savers, efficient gas heaters in offices and lodges; movement detectors for turning lights on and off; solar water heating etc. h. Introduction of new technologies not yet common in Pakistan such as the use of heat pump technology (geothermal for cooling and heating). i. Highly reliable renewable energy supply options such as solar PV for critical applications such as lights, computers and fans. The project will be implemented as a Program of Activities (PoA). This PIN has been prepared for three buildings of MoFA under the first CPA of the PoA. There will be other CPAs with clusters of buildings resulting in energy saving of under 60 GWh for each CPA. Some key benefits of the project are: Economic well-being: d. Electricity and gas bills will be significantly lowered for the buildings. e. There will be reduction in peak demand for gas and electricity to the utility companies. Savings from these efficiency measures will help improve the present situation of massive electricity and gas shortages in the country to some extent. f. New jobs, related to retrofitting of buildings with insulation, installation of double glazed windows, as well as supply and installation of solar PV and heat pump technology, will be created locally. June 5, 2010 146 Social well-being: a. As a sizable number of government buildings go through the improvement process, a transformation in the construction industry towards high energy efficiency can be expected. As an example, Ministry of Housing is planning to construct one million homes for government employees. They can be expected to incorporate many building efficiency measures in their construction. Similarly the private sector developers will be motivated to follow suit. b. As the buildings go through energy efficiency improvements, the employees will also go through a learning process and can be expected to apply some of the learning in their own homes; it will result in lower utility bills for them. New Technology New technology such as glazed windows, solar water heating, solar PV and geothermal heat pumps will be introduced to the construction industry, thus upgrading the technical know-how of local architectural, engineering, and equipment supply firms. TECHNOLOGY TO BE a. Roof and wall insulation EMPLOYED 47 b. Glazed windows c. CFLs Describe in not more than 5 lines d. Efficient heaters, fans, refrigerators, and air conditioners e. Solar water heating f. Geothermal heat pumps g. Solar PV TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF6 CO2 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 1f, 1g, 1h, 3e 47 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 147 (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan City Brief description of the location of The project will be implemented in government buildings all over Pakistan. the project PROJECT PARTICIPANT ENERCON, Ministry of Environment Role of the Project Participant qq. Project Operator rr. Owner of the site or project ss. Owner of the emission reductions tt. Seller of the emission reductions uu. Project advisor/consultant vv. Project investor ww. Other, please specify:________________ Organizational category kk. Government ll. Government agency mm. Municipality nn. Private company oo. Non Governmental Organization pp. Other, please specify: Incorporated under section 42 of the companies‟ act 1984 it follows the regulatory requirements of the Securities and Exchange Commission of Pakistan. Sponsored by the Government of Pakistan and funded by the World Bank and other leading donors. Contact person K,M. Zubair Address Chief, ENERCON, Ministry of Environment, Islamabad Telephone/Fax E-mail and web address, if any kmzeee@hotmail.com Main activities ENERCON is the lead institution of the country responsible for energy conservation measures in Pakistan. Describe in not more than 5 lines Summary of the financials Government of Pakistan is the source of funding for this project. Summary of the relevant ENERCON has been in the energy conservation business for many years.. experience of the Project Participant June 5, 2010 148 Describe in not more than 5 lines PROJECT PARTICIPANT Name of the Project Participant Role of the Project Participant v. Project Operator w. Owner of the site or project x. Owner of the emission reductions y. Seller of the emission reductions z. Project advisor/consultant aa. Project investor bb. Other, please specify: ________________ Organizational category s. Government t. Government agency u. Municipality v. Private company w. Non Governmental Organization x. Other, please specify: ________________ Contact person Address Telephone/Fax E-mail and web address, if any Main activities Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant experience of the Project Participant Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date Jan 2011 Year in which the plant/project activity will be operational June 5, 2010 149 Estimate of time required before 1 year becoming operational after approval of the PIN Expected first year of 2012 CER/ERU/VERs delivery Project lifetime 28 years for the PoA Number of years For CDM projects: 10 years fixed for each CPA Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Feasibility study for first CPA finished project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of PIN is ready to be filed for No Objection/Endorsement of DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005______ June 5, 2010 150 Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ JJ. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): 500_ tCO2-equivalent for first GASES ABATED/ CPA for „pilot activity‟ CO2 SEQUESTERED Up to and including 2012: 1,000 tCO2-equivalent In metric tons of CO2-equivalent, Up to a period of 10 years: 5,000 tCO2-equivalent please attach calculations Up to a period of 7 years: 3,500 tCO2-equivalent BASELINE SCENARIO CDM/JI projects must result in These projects will result in reduction of electricity and gas usage leading to GHG emissions being lower carbon savings and sustainable development. than “business-as-usualâ€? in the Host Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are being reduced by the proposed CDM/JI project? CO2 ï‚· What would the future look like without the proposed CDM/JI project? In case the project is not implemented, the government buildings will continue About ¼ - ½ page to waste energy and contribute to energy shortage in the country. ADDITIONALITY Please explain which additionality arguments apply to the project: v) There is no regulation or incentive scheme in place in the country covering (i) there is no regulation or the project. incentive scheme in place vi) The project overcomes barriers of common practices as currently exist covering the project in the building sector in Pakistan. Although a number of the energy efficiency investments could potentially have attractive pay back, they (ii) the project is financially weak are not being practiced. The first CPA is a pilot activity and the carbon June 5, 2010 151 or not the least cost option revenue will provide only marginal revenue to the project. Subsequent CPAs will also depend on some kind of up front government or donor (iii) country risk, new technology funding; however, the benefits of carbon revenue can reduce the for country, other barriers required grants substantially and if the CER prices are attractive, could make the investments cost- covering or even financially attractive, (iv) other vii) Adoption of new technologies is currently hindered by a number of barriers. Geothermal heat pumps and solar PV for office buildings are both new in Pakistan and there is limited technical expertise in the country to design and implement them. Glazed windows and insulation are available in country but their use is not widespread, and is particularly lacking from government buildings. SECTOR BACKGROUND The construction sector in Pakistan is quite archaic. There have not been any significant innovations to reduce energy consumption; rather the sector has Please describe the laws, been regressive. As an example, in the old days the ceilings used to be quite regulations, policies and high with ventilators and the walls used to be much thicker, thus providing strategies of the Host Country passive temperature control. But now a much bigger population is dictating that are of central relevance to compact buildings in need of active weather controls such as air-conditioning. the proposed project, as well Air conditioning alone is thought to account for around 25% of peak power as any other major trends in demand in the country. the relevant sector. Please in particular explain if the The other area of concern is that government has building energy codes that project is running under a were developed by Enercon in 1992 and are outdated now. A new building public incentive scheme (e.g. code and implementation/enforcement of codes are both needed. preferential tariffs, grants, Official Development Assistance) or is required by There is no public incentive scheme to encourage the use of building energy law. If the project is already in efficiency measures. operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM Approved Small-Scale methodology: “Energy efficiency and fuel switching Methodology or Approved measures for buildingsâ€? – AMS-II.E. CDM Small-Scale Methodology (ii) project needs a new methodology June 5, 2010 152 (iii) projects needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology KK. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs 0 US$ million (Feasibility studies, resource studies, etc.) Installed costs 1,000,000 US$ (Property plant, equipment, etc.) Land ___ US$ million Other costs (please specify) 30,000 US$ (Legal, consulting, etc.) CDM expense Total pre-operational project 1,030,000 US$ costs SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Most funding will come from donor agencies or Government of Pakistan. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term N/A Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status June 5, 2010 153 of financing agreements and N/A finance (in US$ million) Carbon finance advance N/A 48 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE TBD Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER US $10 49 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 50 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 10,000 first commitment period) A period of 10 years US$ 50,000 A period of 7 years US$ 35,000 48 Advance payment subject to appropriate guarantees may be considered. 49 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 50 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 154 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. LL. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Cleaner and healthier environment inside as well as outside the buildings as less fossil fuels will be burnt. E.g. impacts on local air, water and other pollution. GLOBAL BENEFITS Reduction in GHG emissions from reduced fossil fuel burning as less electricity will need to be generated and less natural gas will be used in the buildings. Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects Economic well-being: can be attributed to the project and which would not have a. Electricity and gas bills will be lower for the buildings. occurred in a comparable b. There will be reduction in peak demand for gas and electricity to the utility situation without that project? companies. Savings from these efficiency measures will help improve the present situation of massive electricity and gas shortages in the country to Indicate the communities and the some extent. This will have a positive impact to the country‟s economy. number of people that will benefit from this project. About ¼ page Social well-being: a. As a sizable number of government buildings go through the improvement process, a transformation in the construction industry towards high energy efficiency can be expected. As an example, Ministry of Housing is planning to construct one million homes for government employees. There will be high probability that they will incorporate many building efficiency measures in their construction. Similarly the private sector developers will be motivated to follow suit. b. As the buildings go through energy efficiency improvements, the employees will also go through a learning process and can be expected to apply some of the learning in their own homes; it will result in lower utility bills for them. June 5, 2010 155 What are the possible direct New jobs related to, retrofitting of buildings with insulation, installation of double effects (e.g. employment glazed windows, as well as supply and installation of solar PV and heat pump creation, provision of capital technology will be created locally. required, foreign exchange effects)? About ¼ page What are the possible other Since new technologies will be introduced, there will be trainings and the effects (e.g. training/education technical know-how of local firms and professionals will be enhanced. associated with the introduction of new processes, technologies and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ The National Energy Conservation Policy is being implemented under the PRIORITIES OF THE HOST Ministry of Environment. The Program of Activities supports the mission COUNTRY statement of ENERCON (The National Energy Conservation Centre, Government of Pakistan) “Cultivating a new energy culture focusing on A brief description of the project‟s achieving sustainable development through conservation and efficient use of consistency with the energy resourcesâ€?. environmental strategy and priorities of the Host Country About ¼ page The PoA further supports the National Energy Conservation Policy (Ministry of Environment, Government of Pakistan) in its initiatives such as: a. Policy initiative: Create public awareness through training, education, information dissemination and demonstration. b. Sectoral initiative – Buildings: o Encourage adoption of energy efficient considerations in the households. o Encourage use of energy efficient equipment, fixtures and appliances in buildings. In addition the PoA supports 2 out of 4 strategic goals of the National Energy Conservation Policy as follows: o Goal #1: Sustainable Development: Energy conservation, as a least cost supply option, will help in meeting the requirements of the rising levels of energy consumption without putting corresponding additional burden on the environmental resources. o Goal #3: GHG Mitigation and Climate Control June 5, 2010 156 Energy efficiency and conservation measures will reduce CO 2 emissions and help Pakistan meet its international climate change responsibilities. Efficient use of energy in various sectors of economy will reduce adverse local environmental effects which are otherwise attributed to energy inefficiency and wasteful energy use practices. June 5, 2010 157 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 158 PROJECT IDEA NOTE (PIN) Name of Project10: “Replacement of Residual Furnace Oil and Diesel by Liquid Petroleum Gas in Industrial Applicationsâ€? – Project by SHV DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 159 MM. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE Scale up SHV Pakistan‟s current LPG business by entering into a new market PROJECT of replacing Residual Furnace Oil and Diesel Oil in Industrial Applications. Describe in not more than 5  Meets the energy needs of industry with reliable and safe supply of gas. lines  Protects the environment with LPG being a cleaner fuel than both RFO and Diesel.  Reduces green house gases and generates CERs. PROJECT DESCRIPTION AND Super Gas Bulk (a brand name of SHV products) caters to industrial usage of PROPOSED ACTIVITIES meeting fuel requirements by providing LPG in bulk tanks installed at customer premises and safely replenished through an efficient fleet of LPG road tankers. About ½ page These industries are normally using other fuels like furnace oil, kerosene, high speed diesel (HSD), light diesel oil (LDO), rice husk, wood, electricity or natural gas but want the security, economy and reliability of Super Gas Bulk. Super Gas Bulk has the properties to cater to applications such as steam generation, furnaces, annealing, grain drying, poultry rearing, agriculture, CO2 enrichment, green houses, singeing, and catering. The types of activities will be as follows: ï‚· Storage and distribution of LPG, ï‚· Installation of storage at customer sites, ï‚· Technical services regarding energy advisory, system design and required retrofit. TECHNOLOGY TO BE Liquid Petroleum Gas (LPG) will be the fuel used. It will be brought in tankers to 51 EMPLOYED the industrial sites. Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF6 CO2 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration 51 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 160 Field of activities 2 (fossil fuel switch) (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan City Ten cities Brief description of the location The project will be implemented in ten (10) cities of Pakistan – Karachi, Lahore, of the project Rawalpindi/Islamabad, Faisalabad, Multan, Quetta, Hyderabad, Peshawar, Sukkur and Gujranwala. PROJECT PARTICIPANT Name of the Project SHV Energy Pakistan (Pvt) Ltd Participant Role of the Project Participant xx. Project Operator yy. Owner of the site or project zz. Owner of the emission reductions aaa. Seller of the emission reductions bbb. Project advisor/consultant ccc. Project investor ddd. Other, please specify:________________ Organizational category qq. Government rr. Government agency ss. Municipality tt. Private company uu. Non Governmental Organization vv. Other, please specify: Contact person Naveed Solaija, HSE Manager Address 52, Margalla Road, F-8/2 Islamabad June 5, 2010 161 Telephone/Fax 92-300-8506104/92-51-2852717 E-mail and web address, if any nsolaija@shvpk.com Main activities SHV Energy Pakistan is part of SHV Gas, that operates in the down-stream LPG distribution business in 24 countries in Europe, South America and Asia Describe in not more than 5 and at present is the largest LPG marketing and distribution Company in the lines world. In developing countries such as Pakistan, Philippines and China, it specializes in providing cheap, alternative energy to remote areas to replace wood, kerosene and cow dung used for cooking. Summary of the financials SHV will fund the activity with its own resources with some short term borrowing. The borrowing cost has been assumed to be 15% of the required capital. Summary of the relevant SHV Energy Pakistan has vast experience of serving the needs of Pakistan experience of the Project energy market. This long history has seen SHV Energy Pakistan develop into Participant the largest LPG marketing company, selling around 85,000 metric tons of gas per annum in cylinders and bulk. SHV has one of the largest LPG Describe in not more than 5 infrastructures in Pakistan with cylinder filling plants strategically located lines throughout the country. It has nation-wide network of distributors and customers and has expertise in addressing industrial applications through Super Gas Bulk Solutions. Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date Jan 2011 Year in which the plant/project activity will be operational Estimate of time required 3 months before becoming operational after approval of the PIN Expected first year of 2011 CER/ERU/VERs delivery Project lifetime 10 years Number of years For CDM projects: 10 years fixed Expected Crediting Period 7 years twice renewable or 10 years fixed June 5, 2010 162 For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the Contracting phase project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of PIN is ready to be filed for No Objection/Endorsement of DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005______ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ NN. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): GASES ABATED/ Up to and including 2012: 7,598 tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: 55,231 tCO2-equivalent In metric tons of CO2-equivalent, June 5, 2010 163 please attach calculations Up to a period of 7 years: 36,884 tCO2-equivalent BASELINE SCENARIO CDM/JI projects must result in The project will result in reduction of GHG emissions due to fuel switching from GHG emissions being lower than diesel and residual fuel oil to cleaner LPG in large industrial applications “business-as-usualâ€? in the Host leading to cleaner environment, carbon savings and sustainable development. Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are being reduced by the CO2 proposed CDM/JI project? ï‚· What would the future look like without the proposed CDM/JI In case the project is not implemented, industry will continue to use residual fuel project? oil and diesel and keep contaminating the air quality. About ¼ - ½ page ADDITIONALITY Please explain which additionality arguments apply to the project: (i) There is no regulation or incentive scheme in place in the country for (i) there is no regulation or promoting LPG. incentive scheme in place covering the project (ii) The project yields an IRR of only 10.44% without CER revenue; thus it is a financially weak project. The IRR moves up to 15.29% with CERs. (ii) the project is financially weak or not the least cost option (iii) country risk, new technology for country, other barriers (iv) other SECTOR BACKGROUND Please describe the laws, regulations, policies and strategies of the Host Country that are of central relevance to the proposed project, as well as any other major trends in the relevant sector. Please in particular explain if the project is running under a public incentive scheme (e.g. June 5, 2010 164 preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY Please choose from the following options: For CDM projects: (i) project is covered by an existing Approved CDM Approved Small-Scale methodology: “AMSIII.B. Switching fossil fuelsâ€? Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) project needs modification of existing Approved CDM Methodology For JI projects: (i) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (ii) project will use Approved CDM or CDM Small-Scale Methodology OO. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs 0 US$ million (Feasibility studies, resource studies, etc.) Land 0 US$ million June 5, 2010 165 Other costs (please specify) 0 US$ million (Legal, consulting, CDM expense etc.) Total pre-operational project 0 US$ million costs SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity SHV will fund the project with its own resources. Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term N/A Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status N/A of financing agreements and finance (in US$ million) Carbon finance advance N/A 52 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE TBD Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER US $10 53 PRICE PER tCO2e Price is subject to negotiation. Please indicate VER or CER 54 preference if known. 52 Advance payment subject to appropriate guarantees may be considered. 53 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 54 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficientunderstanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN- accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon June 5, 2010 166 TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the US$ 75,980 first commitment period) A period of 10 years US$ 552,310 A period of 7 years US$ 368,840 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. PP. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS  Cleaner air as LPG is a much cleaner fuel than RFO and E.g. impacts on local air, water HSD. and other pollution. GLOBAL BENEFITS Reduction in GHG emissions from replacement of dirty fuel by cleaner fuel Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects can be attributed to the project Economic benefits and which would not have Since through this project SHV will meet the energy needs of industry with occurred in a comparable reliable and safe supply of gas, it will make a positive contribution to the situation without that project? economic growth in the country. Indicate the communities and the number of people that will benefit Social benefits risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 167 from this project. As jobs are created in the industry as a result of this project the living standard will go up and bring in various social benefits such as better education and health About ¼ page opportunities to the local population. What are the possible direct As the business of SHV grows in the industrial sector, more jobs will be effects (e.g. employment created. creation, provision of capital required, foreign exchange effects)? About ¼ page What are the possible other LPG business is a fairly technical business. It requires skilled manpower. As the effects (e.g. training/education business grow, more workers will be required; hence, more unskilled persons associated with the introduction will undergo training. of new processes, technologies and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ The National Energy Conservation Policy is being implemented under the PRIORITIES OF THE HOST Ministry of Environment. This Project activity supports the vision statement of COUNTRY ENERCON (The National Energy Conservation Centre, Government of Pakistan) “To Steer Pakistan towards an Energy Efficient A brief description of the project‟s and Environment Friendly Tomorrow " consistency with the environmental strategy and More specifically the PoA supports strategic goal #3 of the National Energy priorities of the Host Country Conservation Policy as follows:`  Goal #3: GHG Mitigation and Climate Control About ¼ page Fuel switching in this project will reduce CO2 emissions and help Pakistan meet its international climate change responsibilities. June 5, 2010 168 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 169 PROJECT IDEA NOTE (PIN) Name of Project11: Vertical Shaft Brick Kiln Program, Pakistan Date submitted: November, 2009 DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 170 QQ. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT The main objective of this programme is to introduce energy efficient and environmentally friendly Vertical Shaft Brick Kiln (VSBK) technology by Describe in not more than 5 lines replacing the inefficient and highly polluting old brick production technology, namely Fixed Chimney Bull Trench Kilns (FCBTKs), under a technology transfer programme. PROJECT DESCRIPTION AND Bricks are the major building material used in Pakistan and will remain so in the PROPOSED ACTIVITIES foreseeable future due to the higher cost of alternative building materials. Brick making is still dominated by the Bull Trench Kiln (BTK) in Pakistan while clamps About ½ page and MBTKs are negligible in number. One of the major obstacles associated with the BTK is the excessive local pollution as well as the resulting high greenhouse gas emissions. Local people often complain of the high pollution resulting from brick kiln use. Although VSBK technology is quite common in many countries and is now being introduced in Pakistan, the entrepreneurs are not being attracted to this more efficient technology due to its high investment and lower returns compared to FCBTK. In addition, VSBK being a new technology, breeds a natural reluctance for adaptation. With increasing pressure from both the government as well as the general public to replace the existing traditional kilns, brick entrepreneurs are on the lookout for an alternate technology which would prove economical as well as satisfy the Government directives. As a result, considerable interest has been expressed towards VSBK technology which is more energy efficient and reduces GHG emissions as well as local air pollutants significantly. VSBKs result in air pollution emissions within the permissible limit of the government‟s emission standards. Due to temperature control and loading pattern, bricks produced by VSBK have uniform quality resulting in ore number of Class One bricks and with breakage substantially lower than from FCBTK. The brick breakage rate from BTK is about 10 to 12 percent whereas in the case of VSBK, it is less than 2 percent. The proposed EEBP Pakistan aims to construct demonstrative VSBK in Pakistan, with a view to disseminating the technology to existing as well as new entrepreneurs as an alternate to BTKs. A programmatic approach is planned based on the success of the VSBK pilot projects to act as a catalyst with the objective of replacing the existing BTKs with VSBKs in a number of cities across the country. The inception phase of the programme is being funded by Agency for Development and Cooperation (SDC). The EEBP Pakistan will ultimately take over the shape of a technology transfer company after the inception phase. TECHNOLOGY TO BE The VSBK is a vertical kiln with „stationary fire and moving brick arrangement‟. EMPLOYED 55 The kiln operates like a counter current heat exchanger, with heat transfer taking place between the air (moving upwards) and the bricks (moving downwards), thus consuming fuel more efficiently (energy use is reduced by as 55 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 171 Describe in not more than 5 lines much as 40% compared to FCBTK). A batch of bricks is loaded and unloaded every 1.5 to 2 hours. Production capacity of the VSBK is 4,500 bricks per day per shaft. TYPE OF PROJECT Greenhouse gases targeted CO2, CH4, N2O CO2/CH4/N2O/HFCs/PFCs/SF6 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 3e (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan City The proposed VSBK projects are expected to be developed in the cities of Rawalpindi/Islamabad. In addition, under the planned programmatic approach, VSBK projects will also be developed in the following cities: Peshawar, Haripur, Sohawa, Sheikhupura, AJK Mirpur and southern Punjab. Brief description of the location of The proposed projects are planned to be developed across Pakistan in the the project different cities mentioned above since these are the main brick making areas of the country. BTKs are generally located in clusters in regions with No more than 3-5 lines good quality soil and relatively cheap coal mines to maximum profitability. PROJECT PARTICIPANT Name of the Project Participant Energy Efficient Brick Production, Pakistan Role of the Project Participant eee. Project Operator fff. Owner of the site or project ggg. Owner of the emission reductions hhh. Seller of the emission reductions iii. Project advisor/consultant jjj. Project investor kkk. Other, please specify:________________ Organizational category ww. Government xx. Government agency June 5, 2010 172 yy. Municipality zz. Private company aaa. Non Governmental Organization bbb. Other, please specify: ________________ Contact person Ms. Marianne Pecnik, Programme Advisor Address House A-17, Main Double Road, Pak PWD Housing Society Islamabad Telephone/Fax + 92-51 597 0540-41/ + 92-51 595 7746 E-mail and web address, if any info@eebp.pk, www.eebp.pk Main activities The main activities of the programme are in energy efficient, socially and environment friendly brick production technologies and practices. As a Describe in not more than 5 lines whole, the programme focuses on the overall energy efficient construction sector including energy efficient building materials and products. Summary of the financials Provide the total and annual budget details of EEBP for Pakistan. Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant Skat _ Swiss Resource Centre and Consultancies for Development is the experience of the Project executing agency for EEBP, Pakistan Programme made responsible for Participant provision of expertise, equipment and flow of technology transfer information within the region. Similar VSBK programmes/ projects have been executed by Describe in not more than 5 lines Skat in Nepal, Afghanistan and now in Bangladesh. A new project for South Africa is also in the pipeline. Seed money for the pilot project is funded by SDC for the promotion of VSBK technology in Pakistan. Name of the Project Participant Winrock International Pakistan Role of the Project Participant a. Project Operator b. Owner of the site or project c. Owner of the emission reductions d. Seller of the emission reductions e. Project advisor/consultant f. Project investor Other, please specify:________________ Organizational category International Non-governmental Organization Contact person Mr. Bikash Pandey Country Representative Winrock International Pakistan Address House 40, St 27, Sector F-6/2 P. O. Box 44000 Islamabad, Pakistan Telephone/Fax Cell: +92 301 509 4846 Tel: +92 51 265 2258 Fax: +92 51 831 4937 E-mail and web address, if any Email: bikashpan@gmail.com June 5, 2010 173 Main activities For this project, Winrock International Pakistan will act as technical backstopping organization for preparation of CDM documentation. Describe in not more than 5 lines Summary of the financials Summarize the financials (total assets, revenues, profit, etc.) in not more than 5 lines Summary of the relevant Winrock International Pakistan has considerable experience with CDM project experience of the Project development and have recently developed the PDD for a hydro project in the Participant northern areas of the country apart from working on a number of PIN/PDDs across a number of sectors as part of their CDM capacity building initiative. Describe in not more than 5 lines Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date 2010 Year in which the plant/project activity will be operational Estimate of time required before Time required for financial commitments: __ months becoming operational after approval of the PIN Time required for legal matters: __ months Time required for construction: __ months Expected first year of 2011 CER/ERU/VERs delivery Project lifetime Number of years For CDM projects: 7 Years with two renewals Expected Crediting Period 7 years twice renewable or 10 years fixed For JI projects: Period within which ERUs are to be earned (up to and including 2012) June 5, 2010 174 Current status or phase of the Identification and pre-selection phase project Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of Letter of No Objection has been received from the DNA. the Host Country Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005____ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005____ RR. METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): ___ tCO2-equivalent GASES ABATED/ Up to and including 2012: ___ tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: ___ tCO2-equivalent In metric tons of CO2-equivalent, please attach calculations Up to a period of 7 years: ___ tCO2-equivalent June 5, 2010 175 BASELINE SCENARIO This CDM project results in reduction of CO2, CH4 and N2O. CDM/JI projects must result in GHG emissions being lower Without the proposed CDM programme, the current situation of the majority of than “business-as-usualâ€? in brick making units, using polluting BTK technology, will continue to persist and the Host Country. At the PIN will result in limited adoption of improved technologies like VSBK for brick stage questions to be making across the country. answered are at least: As a consequence, the use of large quantities of coal in the BTKs will also persist and the brick making industry in the country will continue to contribute to ï‚· Which emissions are global warming through emitting large volumes of GHGs. being reduced by the proposed CDM/JI project? ï‚· What would the future look like without the proposed CDM/JI project? About ¼ - ½ page ADDITIONALITY The replacement options available apart from the baseline scenario involve use Please explain which additionality of either the MCBTK or other BTK technology based kilns. These alternate arguments apply to the project: options, when compared to the project option are less capital intensive, have (i) there is no regulation or higher production capacities and are tried and tested technologies which incentive scheme in place have been around for a considerable amount of time and are considered covering the project reliable investments. (ii) the project is financially weak In addition, operation of the VSBK requires technical expertise involving training or not the least cost option of the employees coupled with unforeseen problems during start up and operation. The high initial capital investment required to develop the project (iii) country risk, new technology option along with the project option being the „first of its kind‟ project makes for country, other barriers this project less desirable than the other options available. (iv) other Furthermore, the cost of brick production would also not be competitive compared to the existing BTK technologies currently in use in the market and would significantly affect the IRR for the project. Based on the reasons cited above, the project would be additional. SECTOR BACKGROUND At present, no specific local guidelines are in place to monitor the emissions or operations from the brick industry. The sector specific environmental guidelines Please describe the laws, in the country are still in the process of development with environmental regulations, policies and awareness still in its infancy stages though rapidly gaining momentum with the strategies of the Host Country spread of awareness regarding protecting the environment. that are of central relevance to the proposed project, as well However, the generic guidelines in the framework of environmental protection in as any other major trends in the country are namely the Pakistan Environmental Protection Act-1997, the relevant sector. National Conservation Strategy (2007) and National Environment Policy. The brick industry in the country, comprising of BTKs spread across the country Please in particular explain if the is owned by individual businessmen or are family owned businesses, employing project is running under a decades old practices of brick production passed on from generation to generation. Profit margins are maximized through exploitation of cheap labor June 5, 2010 176 public incentive scheme (e.g. and by not employing any environmental controls or safety protocols for the preferential tariffs, grants, workers at these brick kilns. Official Development Assistance) or is required by The project development is to be financed by SDC under a grant. law. If the project is already in operation, please describe if CDM/JI revenues were considered in project planning. METHODOLOGY This is a CDM Project and falls under the small scale category II.D (energy efficiency and fuel switching measures for industrial facility). Since VSBK Please choose from the following consumes less energy per brick fired than conventional brick making options: technologies such as FCBTK, introduction of VSBK technology will lead to energy savings per brick. Type II under Category II.D is therefore appropriate for the proposed project activity. In addition, the baseline methodology has further given the limit of annual For CDM projects: energy saving due to the project activity as: the aggregate energy savings of a single project may not exceed the equivalent of 180 GWh thermal per (i) project is covered by an year in fuel input. The proposed project falls within this limit. existing Approved CDM Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) projects needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology SS. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs ___ US$ million (Feasibility studies, resource studies, etc.) June 5, 2010 177 Installed costs ___ US$ million (Property plant, equipment, etc.) Land ___ US$ million Other costs (please specify) ___ US$ million (Legal, consulting, etc.) Total project costs ___ US$ million SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status of financing agreements and finance (in US$ million) Carbon finance advance N/A 56 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON N/A FINANCE Name of carbon financiers other than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER 57 PRICE PER tCO2e Price is subject to negotiation. 56 Advance payment subject to appropriate guarantees may be considered. 57 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). June 5, 2010 178 Please indicate VER or CER 58 preference if known. TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the ___ US$ / € first commitment period) A period of 10 years ___ US$ / € A period of 7 years ___ US$ / € Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. TT. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Energy efficiency in building materials and Environment Up-gradation, specially the “Air quality improvementâ€? is one of the main priorities of Government of E.g. impacts on local air, water Pakistan. Brick kilns are the major contributors, degrading air quality in and other pollution. Pakistan. Recently in view of the environmental hazards, the Government has banned almost 15 BTKs in Rawalpindi / Islamabad area. The entrepreneurs are now looking forward to cleaner and more energy efficient technologies to replace BTKs. However, at present brick kiln operators are not required by law to replace their BTKs as long as they are complying with the local pollution quality standards. Thus, majority of the brick entrepreneurs are still reluctant to adopt alternate technologies which are more efficient, such as the VSBKs, primarily due to the natural inertia / reluctance to adopt changes. 58 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficient understanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN-accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 179 GLOBAL BENEFITS Reduction in green house gas emissions and mitigation of global warming. Describe if other global benefits than greenhouse gas emission reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects The proposed cleaner VSBK brick making technology would help promote can be attributed to the project processed products having uniform quality and record keeping would ensure and which would not have the future growth of this sector, enabling it to be declared as an industry eligible occurred in a comparable for legitimate business benefits and concessions. This will also help promote situation without that project? investment and employment opportunities. The industry would also improve the overall image of the brick industry in the Indicate the communities and the country from the communities settled in the vicinity of brick kilns as well as from number of people that will benefit the government. from this project. Direct benefits would go to the people living in the immediate vicinity of the brick kilns in terms of reduced health impacts, potential employment About ¼ page opportunities and improved environmental conditions. Furthermore, improved quality of bricks through consistent firing would increase the consumer satisfaction with bricks and would help to boost the image of the sector. What are the possible direct This programme will also enhance local capabilities. Direct impacts of the effects (e.g. employment programme would be on providing employment to the local communities. creation, provision of capital Priority would be given to local people for employment in skilled jobs. Intra required, foreign exchange country brick migrant community would benefit most as they would have jobs effects)? for majority of the year, the technology being less affected by weather constraints. About ¼ page What are the possible other The technology will create skilled laborers in the brick making sector and due to effects (e.g. training/education the acquired skill, wage scales will also increase, resulting in prosperity to associated with the the kiln laborers and help to mitigate bonded and child labor abuses. introduction of new processes, Training to the local people on construction and operation of VSBK would be technologies and products another positive effect of this programme. EEBP, Pakistan Program is not and/or only providing more efficient and green technology but also promoting social justice. the effects of a project on other industries)? About ¼ page Social actions under the holistic approach of VSBK technology transfer include improvement of workers‟ health and their children‟s education and establishment of childcare centers, sanitation, shelter, and adult literacy classes. ENVIRONMENTAL STRATEGY/ This project is in line with the environmental strategy and priorities of the PRIORITIES OF THE HOST country. COUNTRY Pakistan has a number of national laws and sustainable development policies, A brief description of the project‟s strategies and plans. These include Pakistan Environmental Protection Act- consistency with the 1997, National Conservation Strategy (2007) and National Environment Policy. environmental strategy and These reflect a high level of commitment of the government to the country‟s environment. Promotion of an environmentally friendly and energy efficient June 5, 2010 180 priorities of the Host Country method of producing high quality bricks which results in lower GHG emissions is consistent with all these policies and environmental strategies of the About ¼ page Government of Pakistan. June 5, 2010 181 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 182 12 PROJECT IDEA NOTE (PIN) Name of Project12: “50 MW Solar PV Project in Cholistan, Punjabâ€? – Project by Welt Konnect DESCRIPTION OF SIZE AND QUALITY EXPECTED OF A PIN Basically a PIN will consist of approximately 5-10 pages providing indicative information on: ï‚· the type and size of the project ï‚· its location ï‚· the anticipated total amount of greenhouse gas (GHG) reduction compared to the “business- as-usualâ€? scenario (which will be elaborated in the baseline later on at Project Design Document (PDD) level) ï‚· the suggested crediting life time ï‚· the suggested Certified Emission Reductions (CERs)/Emission Reduction Units (ERUs)/Verified Emission Reduction (VERs) price in US$ or € /ton CO2e reduced ï‚· the financial structuring (indicating which parties are expected to provide the project‟s financing) ï‚· the project‟s other socio-economic or environmental effects/benefits While every effort should be made to provide as complete and extensive information as possible, it is recognised that full information on every item listed in the template will not be available at all times for every project. NOTE: For forestry projects, please use the PIN Template for LULUCF projects available at www.carbonfinance.org. June 5, 2010 183 UU. PROJECT DESCRIPTION, TYPE, LOCATION AND SCHEDULE OBJECTIVE OF THE PROJECT develop Cholistan Solar PV Project – a 50 MW project to be implemented in To phases of 5 MW – in the Cholistan desert in Punjab, Pakistan Describe in not more than 5 lines PROJECT DESCRIPTION AND The Cholistan Solar PV Project is a 50 MW solar PV installation project, PROPOSED ACTIVITIES planned to be implemented in phases of 5 MW each. The project will be a pure solar PV grid connected installation. About ½ page The project would become operational and start generating CERs directly after the completion of the first phase of the project, with work on the other phases continuing. The project is expected to help alleviate the huge energy deficit in Pakistan. It will be the first Solar PV project of its magnitude in Pakistan and will be a large source of clean energy. TECHNOLOGY TO BE The project is expected to be using Poly Crystalline silicon solar cells. Meetings 59 EMPLOYED are going to be held with various PV manufacturers to sort out the details. Describe in not more than 5 lines TYPE OF PROJECT Greenhouse gases targeted CO2/CH4/N2O/HFCs/PFCs/SF6 CO2 (mention what is applicable) Type of activities Abatement Abatement/CO2 sequestration Field of activities 1g (renewables – photovoltaics) (mention what is applicable) See annex 1 for examples LOCATION OF THE PROJECT Country Pakistan 59 Please note that support can only be provided to projects that employ commercially available technology. It would be useful to provide a few examples of where the proposed technology has been employed. June 5, 2010 184 City Marot, Cholistan Brief description of the location of project will be developed in Marot, in the Cholistan Desert of Punjab. The area The the project has scant vegetation and is dry with abundant sunshine. PROJECT PARTICIPANT Name of the Project Participant Welt Konnect Role of the Project Participant lll. Project Operator mmm. Owner of the site or project nnn. Owner of the emission reductions ooo. Seller of the emission reductions ppp. Project advisor/consultant qqq. Project investor rrr. Other, please specify:________________ Organizational category ccc. Government ddd. Government agency eee. Municipality fff. Private company ggg. Non Governmental Organization hhh. Other Contact person Habil Ahmed Khan, Director Operations Address Welt Konnect Associates Suite 8, Ground Floor, Evacuee Trust Complex, Agha Khan Road, F-5/1, Islamabad, Pakistan Telephone/Fax 92+923005140020/92512870424 E-mail and web address, if any habil@weltkonnect.com; www.weltkonnect.com Main activities The TransTech group of companies is heavily involved in Infrastructure and Power development projects, including some Alternative energy projects. Welt Describe in not more than 5 lines Konnect, one of the companies of the Group, is involved in Solar PV, Wind, Bio Mass and Hydro Energy projects. Summary of the financials The total cost of the project is estimated to be US $180,000,000 with a 75/25 debt/equity arrangement. Summary of the relevant experience Welt Konnect is an integrator and solution provider in the solar energy sector in of the Project Participant Pakistan. It has implemented small scale Solar PV solutions for various private clients. Trans Tech, the parent concern of Welt Konnect, has successfully Describe in not more than 5 lines implemented many large scale infrastructure projects. A short list of some completed and ongoing Trans Techs projects is as follows: June 5, 2010 185 Project Client Improvement of Karakoram Highway (Raikot – NHA Khunjerab Section) Pakistan Deep Water Container Port Dredging and KPT Reclamation Works Construction of Bridge over River Jehlum at Dangli WAPDA 560 MW Bin Qasim Combined Cycle Power Project KESC New Benazir Bhutto International Airport Package – 2 CAA Mangla Dam Raising Project WAPDA Indus Crossing, White Oil Pipe Line Project PEPCO Construction of Army Barracks for NLC in AJK. NLC Punjab Road Sector Development Project – Package P3 CWE Please insert information for additional Project Participants as necessary. EXPECTED SCHEDULE Earliest project start date April 2012 Year in which the plant/project activity will be operational Estimate of time required before 1.5 years becoming operational after approval of the PIN Expected first year of 2012 CER/ERU/VERs delivery Project lifetime 25 years Number of years For CDM projects: Expected Crediting Period 7 years twice renewable 7 years twice renewable or 10 years fixed June 5, 2010 186 For JI projects: Period within which ERUs are to be earned (up to and including 2012) Current status or phase of the project Feasibility studies underway Identification and pre-selection phase/opportunity study finished/pre-feasibility study finished/feasibility study finished/negotiations phase/contracting phase etc. (mention what is applicable and indicate the documentation) Current status of acceptance of the Host Country PIN is ready to be filed for No Objection/Endorsement of DNA. Letter of No Objection/Endorsement is available; Letter of No Objection/Endorsement is under discussion or available; Letter of Approval is under discussion or available (mention what is applicable) The position of the Host Country Has the Host Country ratified/acceded to the Kyoto Protocol? with regard to the Kyoto Protocol __________NO / YES, YEAR_2005______ Has the Host Country established a CDM Designated National Authority / JI Designated Focal Point? __________NO / YES, YEAR__2005_____ VV.METHODOLOGY AND ADDITIONALITY ESTIMATE OF GREENHOUSE Annual (if varies annually, provide schedule): GASES ABATED/ Up to and including 2012: 50,305 tCO2-equivalent CO2 SEQUESTERED Up to a period of 10 years: 503,050 tCO2-equivalent (2012 being the first year) In metric tons of CO2-equivalent, June 5, 2010 187 please attach calculations Up to a period of 7 years: 352,138 tCO2-equivalent (2012 being the first year) BASELINE SCENARIO CDM/JI projects must result in This project will result in reduction of GHG emissions due to clean energy GHG emissions being lower than generation with solar PV technology. “business-as-usualâ€? in the Host Country. At the PIN stage questions to be answered are at least: ï‚· Which emissions are CO2 being reduced by the proposed CDM/JI project? ï‚· What would the future look like without the proposed CDM/JI In case the project is not implemented, more fossil fuel plants will be built project? creating more greenhouse gases. Furthermore, the electricity deficit will continue unabated. About ¼ - ½ page ADDITIONALITY Please explain which additionality (i) There is no regulation in Pakistan covering such a project. Government is arguments apply to the project: providing an incentive by waiving income tax. However, no one else has (i) there is no regulation or put up a solar plant of this scale. Welt Konnect is the first company to take incentive scheme in place such an initiative. covering the project (ii) A 50MW solar PV plant is a new technology in Pakistan. There are no trained resources available. Foreign experts will be needed for the design, (ii) the project is financially weak installation as well as training of local resources. or not the least cost option (iii) Due to political instability as well as very fragile law and order situation (iii) country risk, new technology country risk is very high. It is extremely difficult to bring in FDI and foreign for country, other barriers resources into the country. (iv) other SECTOR BACKGROUND Pakistan‟s grid is predominantly fossil fuel intensive. Due to an average deficit Please describe the laws, of 3,000 - 4,000 MW load-shedding has become a regular feature of a common regulations, policies and man‟s life. This situation forces planners to turn once again to “quick fixâ€? strategies of the Host Country thermal generation. As an example, there are 19 rental thermal power stations that are of central relevance to of a total capacity of 2,734 MW at different stages of development. the proposed project, as well as any other major trends in the The grid in Pakistan is predominantly thermal and over 65% comprises gas and relevant sector. oil based generation. Heavily subsidized gas has virtually run out and is not Please in particular explain if the available for power generation forcing all forthcoming projects to be set up project is running under a public based on oil (with coal being designated as the fuel of choice in the longer incentive scheme (e.g. term). preferential tariffs, grants, Official Development Assistance) or is required by law. If the project is already in operation, please describe if CDM/JI revenues were June 5, 2010 188 considered in project planning. METHODOLOGY ACM0002 – Consolidated baseline methodology for grid-connected Please choose from the following electricity generation from renewable sources options: For CDM projects: (i) project is covered by an existing Approved CDM Methodology or Approved CDM Small-Scale Methodology (ii) project needs a new methodology (iii) project needs modification of existing Approved CDM Methodology For JI projects: (iv) project will use a baseline and monitoring plan in accordance with Appendix B of the JI Guidelines and further JISC guidance (V) project will use Approved CDM or CDM Small-Scale Methodology WW. FINANCE TOTAL CAPITAL COST ESTIMATE (PRE-OPERATIONAL) Development costs US$ 1 million (Feasibility studies, legal fees, etc.) Capital cost US$ 180,000,000 Land ___ US$ million Other costs (please specify) June 5, 2010 189 SOURCES OF FINANCE TO BE SOUGHT OR ALREADY IDENTIFIED Equity 25% Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Long-term 75% Name of the organizations, status of financing agreements and finance (in US$ million) Debt – Short term Name of the organizations, status N/A of financing agreements and finance (in US$ million) Carbon finance advance N/A 60 payments sought from the World Bank carbon funds. (US$ million and a brief clarification, not more than 5 lines) SOURCES OF CARBON FINANCE Name of carbon financiers other TBD than any of the World Bank carbon funds that your are contacting (if any) INDICATIVE CER/ERU/VER 61 PRICE PER tCO2e US $10 Price is subject to negotiation. Please indicate VER or CER 62 preference if known. 60 Advance payment subject to appropriate guarantees may be considered. 61 Please also use this figure as the carbon price in the PIN Financial Analysis Model (cell C94). 62 The World Bank Carbon Finance Unit encourages the seller to make an informed decision based on sufficientunderstanding of the relative risks and price trade-offs of selling VERs vs. CERs. In VER contracts, buyers assume all carbon-specific risks described above, and payment is made once the ERs are verified by the UN- accredited verifier. In CER/ERU contracts, the seller usually assumes a larger component - if not all – of the carbon risks. In such contracts, payment is typically being made upon delivery of the CER/ERU. For more information about Pricing and Risk, see “Risk and Pricing in CDM/JI Market, and Implications on Bank Pricing Guidelines for Emission Reductionsâ€?. June 5, 2010 190 TOTAL EMISSION REDUCTION PURCHASE AGREEMENT (ERPA) VALUE A period until 2012 (end of the first US $503,050 commitment period) A period of 10 years US $5,030,500 A period of 7 years US $3,521,380 Please provide a financial analysis for the proposed CDM/JI activity, including the forecast financial internal rate of return for the project with and without the Emission Reduction revenues. Provide the financial rate of return at the Emission Reduction price indicated in section “Indicative CER/ERU/VER Priceâ€?. DO NOT assume any up-front payment from the Carbon Finance Unit at the World Bank in the financial analysis that includes World Bank carbon revenue stream. Provide a spreadsheet to support these calculations. The PIN Financial Analysis Model available at www.carbonfinance.org is recommended. XX. EXPECTED ENVIRONMENTAL AND SOCIAL BENEFITS LOCAL BENEFITS Environment: E.g. impacts on local air, water and other pollution. ï‚· Reduced carbon emissions in the national grid and replacement of carbon intensive thermal generation; ï‚· The project not only reduces or replaces equivalent thermal generation with all the associated environmental benefits but it also promotes an overall environmental well being since the project will help to avoid all associated pollution caused through extraction, processing, storage and transportation of conventional fuels required for thermal generation. Development of solar potential in Pakistan: ï‚· There is tremendous solar potential with year around sunshine in Pakistan. This project will stimulate private investment to develop more large scale solar projects. Saving foreign exchange and reduced cost of electricity: ï‚· Foreign exchange required to import oil to service an equivalent thermal generating plant will be saved; GLOBAL BENEFITS There will be reduction in GHG emissions through replacement of fossil fuel generated electricity as well as much reduced transportation of oil needed for Describe if other global benefits June 5, 2010 191 than greenhouse gas emission fossil fuel plants. reductions can be attributed to the project. SOCIO-ECONOMIC ASPECTS What social and economic effects can be attributed to the project Economic benefits and which would not have occurred in a comparable ï‚· Greater local employment opportunities during construction (100-200 situation without that project? persons) and during operations. Indicate the communities and the number of people that will benefit ï‚· Spin off benefits and stimulation of local economy through creation of from this project. business opportunities at different stages of project implementation to provide goods and services for the project both during construction and About ¼ page operations; ï‚· Reduction of poverty in an economically depressed region with very little industry and high unemployment. What are the possible direct effects (e.g. employment creation, provision of capital 400-500 direct jobs are expected to be created during the construction phase required, foreign exchange and another 100-150 during operations. effects)? About ¼ page What are the possible other effects (e.g. training/education Opportunity for improved skill set of local inhabitants through training and associated with the introduction capacity building for employment in the project contributing to growing technical of new processes, technologies advancement. and products and/or the effects of a project on other industries)? About ¼ page ENVIRONMENTAL STRATEGY/ PRIORITIES OF THE HOST COUNTRY The National Environmental Policy of Government of Pakistan states: A brief description of the project‟s“The government would promote energy efficiency and renewable sources of consistency with the energy in order to achieve self reliance in energy supplies and as a means to environmental strategy and sustainable development.â€? This project support the stated objective of the priorities of the Host Country policy. About ¼ page June 5, 2010 192 June 5, 2010 193 ANNEX I - Technologies 1. Renewables 1a Biomass 1b. Biogas 1c. Bagasse 1d. Wind 1e. Hydro 1f. Geothermal 1g. Photovoltaic 1h. Solar Thermal 2. Fossil Fuel Switch 3. Energy Efficiency 3a. Cement Efficiency Improvement 3b. Construction material 3c. District heating 3d. Steel Gas Recovery 3e. Other Energy Efficiency 4. Waste Management 4a. Landfill Gas recovery/utilization 4b. Composting 4c. Recycling 4d. Biodigestor 4e. Wastewater Management 5. Coalmine/Coalbed Methane 6. Oil and Gas Sector 6a. Flared Gas Reduction 6b. Reduction of technical losses in distribution system 7. N2O removal 8. HFC23 Destruction 9. SF6 Recovery 10. Transportation 9a. Fuel switch 9b. Modal switch 11. Others June 5, 2010 194