Document of The World Bank Report No: ICR00004130 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-80920, IBRD-75290, IBRD-75300 AND TF-90719) ON A LOAN IN THE AMOUNT OF US$300.00 MILLION AND A GLOBAL ENVIRONMENT FACILITY GRANT IN THE AMOUNT OF US$13.26 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A CHINA ENERGY EFFICIENCY FINANCING PROJECT June 28, 2017 Energy and Extractives Global Practice East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective: December 31, 2016) Currency Unit = Chinese Yuan (CNY) US$1.00 = CNY 6.94 FISCAL YEAR July 1 – June 30 ABBREVIATIONS AND ACRONYMS AF Additional Financing G20 Group of Twenty AFD l’Agence française de GDP Gross Domestic Product développement (French GEF Global Environment Development Agency) Facility APEC Asia-Pacific Economic GEO Global Environment Cooperation Objective CBRC China Banking GHG Greenhouse Gas Regulatory Commission GoC Government of China CHEEF China Energy Efficiency ICR Implementation Financing Project Completion and Results CHUEE China Utility-based Report Energy Efficiency IFC International Finance Project Corporation CPS Country Partnership KfW Kreditanstalt für Strategy Wiederaufbau DDG Deputy Director General M&E Monitoring and EC Law Energy Conservation Evaluation Law MoF Ministry of Finance EE Energy Efficiency NDRC National Development EIRR Economic Internal Rate and Reform Commission of Return NECC National Energy EMC Energy Management Conservation Center Company OM Operational Manual EMCA Energy Management PAD Project Appraisal Company Association Document EPC Energy Performance PDO Project Development Contract Objective ESCO Energy Services PFI Participating Financial Company Intermediary EXIM Export-Import Bank of PMO Project Management China Office FIRR Financial Internal Rate RE Renewable Energy of Return TA Technical Assistance FYP Five-Year Plan ii Senior Global Practice Director: Riccardo Puliti Sector Manager: Jie Tang Project Team Leader: Xiaodong Wang ICR Team Leader: Jonathan Sinton ii PEOPLE’S REPUBLIC OF CHINA China Energy Efficiency Financing Project Table of Contents A. Basic Information ....................................................................................................................... v  B. Key Dates ................................................................................................................................... v  C. Ratings Summary ....................................................................................................................... v  D. Sector and Theme Codes........................................................................................................... vi  E. Bank Staff ................................................................................................................................. vii  F. Results Framework Analysis .................................................................................................... vii  G. Ratings of Project Performance in ISRs .................................................................................. xii  1. Project Context, Development and Global Environment Objectives Design ...................... 1  1.1 Context at Appraisal ................................................................................................................. 1  1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) .............. 4  1.3 Original Global Environment Objectives (GEO) and Key Indicators (as approved) ............... 4  1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification ........................................................................................................................ 4  1.5 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification ........................................................................................................................ 5  1.6 Main Beneficiaries .................................................................................................................... 7  1.7 Original Components (as approved) ......................................................................................... 8  1.8 Revised Components .............................................................................................................. 10  1.9 Other significant changes ........................................................................................................ 11  2. Key Factors Affecting Implementation and Outcomes ....................................................... 12  2.1 Project Preparation, Design and Quality at Entry ................................................................... 12  2.2 Implementation ....................................................................................................................... 16  2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization ........................ 17  2.4 Safeguard and Fiduciary Compliance ..................................................................................... 19  2.5 Post-completion Operation/Next Phase .................................................................................. 20  3. Assessment of Outcomes......................................................................................................... 21  3.1 Relevance of Objectives, Design and Implementation ........................................................... 21  3.2 Achievement of Project Development Objectives and Global Environment Objectives ....... 22  3.3 Efficiency ................................................................................................................................ 27  3.4 Justification of Overall Outcome and Global Environment Outcome Rating ........................ 29  3.5 Overarching Themes, Other Outcomes and Impacts .............................................................. 30  4. Assessment of Risk to Development Outcome and Global Environment Outcome ......... 31  5. Assessment of Bank and Borrower Performance ................................................................ 31  5.1 Bank Performance ................................................................................................................... 31  5.2 Borrower Performance ............................................................................................................ 33  6. Lessons Learned ...................................................................................................................... 34  7. Comments on Issues Raised by Borrower, Implementing Agencies and Cofinancier ..... 36  Annex 1. Project Costs and Financing ...................................................................................... 37  Annex 2. Outputs by Component .............................................................................................. 39  Annex 3. Economic and Financial Analysis.............................................................................. 53  iii Annex 4. Bank Lending and Implementation Support/Supervision Processes ..................... 59  Annex 5. Stakeholder Workshop ............................................................................................... 61  Annex 6. Summary of Borrower's ICR and Comments on Draft ICR .................................. 63  Annex 7. List of Supporting Documents ................................................................................... 69  Map. China Provincial Boundaries ........................................................................................... 70  iv DATA SHEET A. Basic Information China Energy Country: China Project Name: Efficiency Financing IBRD-75290, IBRD- P084874, P098916, Project ID: L/C/TF Number(s): 75300, IBRD-80920, TF- P123239 90719 ICR Date: 06/28/2017 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: FIL Borrower: CHINA IBRD US$200.00 IBRD US$300.00 Original Total million, GEF US$13.50 Disbursed Amount: million, GEF US$13.40 Commitment: million million Environmental Category: B Focal Area: C Implementing Agencies: National Energy Conservation Center (NECC), National Development and Reform Commission (NDRC), the Export-Import Bank of China (EXIM), and the China Huaxia Bank (Huaxia) Cofinanciers and Other External Partners: None B. Key Dates China Energy Efficiency Financing - P084874 Revised/Actual Process Date Process Original Date Date(s) Concept Review: 04/04/2006 Effectiveness: 10/07/2008 10/07/2008 Appraisal: 06/25/2007 Restructuring(s): 03/12/2013 Approval: 05/27/2008 Midterm Review: 03/30/2012 03/27/2012 Closing: 12/31/2013 12/31/2016 China Energy Efficiency Financing - P098916 Revised/Actual Process Date Process Original Date Date(s) Concept Review: 04/04/2006 Effectiveness: 07/11/2008 07/11/2008 Appraisal: 06/25/2007 Restructuring(s): 03/12/2013 03/12/2013 Approval: 05/27/2008 Mid-term Review: 12/31/2010 03/27/2012 Closing: 12/31/2013 12/31/2016 C. Ratings Summary C.1 Performance Rating by ICR Outcomes Satisfactory GEO Outcomes Satisfactory Risk to Development Outcome Low or Negligible Risk to GEO Outcome Low or Negligible Bank Performance Satisfactory v Borrower Performance Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry Satisfactory Government: Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance Performance C.3 Quality at Entry and Implementation Performance Indicators China Energy Efficiency Financing - P084874 Implementation QAG Assessments (if Indicators Rating: Performance any) Potential Problem Project at No Quality at Entry (QEA) None any time (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA) DO rating before Satisfactory Closing/Inactive status China Energy Efficiency Financing - P098916 Implementation QAG Assessments (if Indicators Rating: Performance any) Potential Problem Project at No Quality at Entry (QEA) None any time (Yes/No): Problem Project at any time Quality of Supervision No None (Yes/No): (QSA) GEO rating before Satisfactory Closing/Inactive Status D. Sector and Theme Codes China Energy Efficiency Financing - P084874 Original Actual Sector Code (as % of total Bank financing) Energy and Extractives Other Energy and Extractives 100 100 Theme Code (as % of total Bank financing) Environment and Natural Resource Management Climate change 100 100 Mitigation 100 100 vi China Energy Efficiency Financing - P098916 Original Actual Sector Code (as % of total Bank financing) Energy and Extractives Other Energy and Extractives 100 100 Public Administration Central Government (Central Agencies) 27 27 Financial Sector Banking Institutions 55 55 Energy and Extractives Other Energy and Extractives 18 18 Theme Code (as % of total Bank financing) Environment and Natural Resource Management Climate change 100 67 Mitigation 100 67 Environmental policies and institutions 33 E. Bank Staff China Energy Efficiency Financing - P084874 Positions At ICR At Approval Vice President: Victoria Kwakwa James W. Adams Country Director: Bert Hofman David R. Dollar Practice Manager/Manager: Jie Tang Junhui Wu Project Team Leader: Xiaodong Wang, Yun Wu Leiping Wang ICR Team Leader: Jonathan Edwards Sinton ICR Primary Author: Jonathan Edwards Sinton China Energy Efficiency Financing - P098916 Positions At ICR At Approval Vice President: Victoria Kwakwa James W. Adams Country Director: Bert Hofman David R. Dollar Practice Manager/Manager: Jie Tang Junhui Wu Project Team Leader: Xiaodong Wang, Yun Wu Leiping Wang ICR Team Leader: Jonathan Sinton ICR Primary Author: Jonathan Sinton F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The original project development objective (PDO) of the project was to assist the Borrower to improve energy efficiency of selected medium and large industrial enterprises, and to reduce their adverse environmental impact on climate. vii Revised Project Development Objectives (as approved by original approving authority) The revised PDO was to improve the energy efficiency of selected energy end-users in key energy- consuming sectors, thereby reducing their adverse environmental impacts on climate. Global Environment Objectives (from Project Appraisal Document) The global environment objective (GEO) was to assist the Borrower to improve energy efficiency of selected medium and large industrial enterprises, and to reduce their adverse environmental impact on climate. Revised Global Environment Objectives (as approved by original approving authority) The revised GEO was to improve energy efficiency of selected energy end-users in key energy- consuming sectors, thereby reducing their adverse environmental impacts on climate. (a) PDO Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years PDO Indicator Cumulative amount of incremental EE investments supported by the project 1: (US$ million) Value (quantitative or 0 900 1,328 1,427 qualitative) Date achieved 28-May-2008 31-Dec-2013 31-Dec-2016 31-Dec-2016 The target outcome has been exceeded. The completion value represents 107% of the Comments target value. PDO Indicator Associated annual energy savings capacity (million tons of coal equivalent per year) 2: Value (quantitative or 0 2.07 2.66 2.67 qualitative) Date achieved 28-May-2008 31-Dec-2013 31-Dec-2016 31-Dec-2016 The target outcome has been exceeded. The completion value represents just over Comments 100% of the target value. The indicator is calculated based on the original methodology, i.e. using co-efficient of 2.44 CO2 tons/ton of coal equivalent. PDO Indicator Associated CO2 emission reduction capacity (million tons of CO2/year) 3: Value (quantitative or 0 5.05 6.49 6.51 Qualitative) Date achieved 28-May-2008 31-Dec-2013 31-Dec-2016 31-Dec-2016 The target outcome has been exceeded. The completion value represents just over Comments 100% of the target value. The indicator is calculated based on the original methodology, that is, using co-efficient of 2.44 CO2 tons/ton of coal equivalent. viii Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years PDO Indicator Cumulative amount of EE lending to ESCOs and building projects (US$ million) 4: Value (quantitative or 0 n.a. 60 105 Qualitative) Date achieved 28-May-2008 — 31-Dec-2016 31-Dec-2016 The target outcome has been exceeded. The completion value represents 175% Comments achievement of the target value. Beneficiaries: Project beneficiaries (Number) Value (quantitative or 0 n.a. 50 52 Qualitative) Date achieved 28-May-2008 — 31-Dec-2016 31-Dec-2016 The target outcome has been achieved. The completion value represents 104% of the Comments target value. (b) GEO Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years GDO Indicator: Associated CO2 emission reduction capacity (million tons of CO2) Value (quantitative or 0 5.05 6.49 6.51 Qualitative) Date achieved 28-May-2008 31-Dec-2013 31-Dec-2016 31-Dec-2016 (Same as PDO Indicator 3.) The target outcome has been exceeded. The completion value represents just over Comments 100% of the target value. The indicator is calculated based on the original methodology, i.e. using co-efficient of 2.44 CO2 tons/ton of coal equivalent. (c) Intermediate Outcome Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years Component A EE financing demand of projects in the project pipeline (US$ million) Indicator 1: Value (quantitative or 0 150 150 500 Qualitative) Date achieved 28-May-2008 31-Dec-2010 31-Dec-2016 31-Dec-2016 ix Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years Comments The target outcome has been exceeded, with 330% of the target achieved. Component A EE investment preparation procedures and financing modalities piloted Indicator 2: Value 1-2 pilot projects 1-2 pilot projects 2 pilot projects (quantitative or n.a. completed completed completed Qualitative) Date achieved 28-May-2008 31-Dec-2011 31-Dec-2016 31-Dec-2016 Comments The first two pilot projects were successfully completed. Component A EE investment monitoring and evaluation procedures developed Indicator 3: Value (quantitative or n.a. Final draft Final draft Final draft developed Qualitative) Date achieved 28-May-2008 31-Dec-2012 31-Dec-2016 31-Dec-2016 The target outcome has been achieved. The final draft was established during project Comments implementation. Component B Cumulative amount of EE lending of PFI (US$ million) Indicator 1: Value (quantitative or 0 400 700 721 qualitative) Date achieved 28-May-2008 31-Dec-2013 31-Dec-2016 31-Dec-2016 The target outcome has been exceeded. The completion value represents 103% Comments achievement of the target values. Component B Cumulative amount of EE lending to ESCOs and building projects (US$ million) Indicator 2: Comments Same as PDO Indicator 4. Component B Associated annual energy savings capacity (million tons of coal equivalent per year) Indicator 3: Comments Same as PDO Indicator 2. Component B Associated CO2 emission reduction capacity (million tons of CO2/year) Indicator 4: Comments Same as the PDO Indicator 3. Component C Establishment and functional operation of NECC Indicator 1: Value NECC formed and NECC formed and NECC formed and (quantitative or none staffed staffed staffed qualitative) Date achieved 28-May-2008 31-Dec-2011 — 31-Dec-2016 The target outcome has been achieved. NECC was formed and staffed on 30 Comments September, 2012. Component C NECC business plan and initial work program developed Indicator 2: x Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or documents) Target Years Value Final plan and work (quantitative or none Final Final program developed Qualitative) Date achieved 28-May-2008 31-Dec-2010 — 31-Dec-2016 The target outcome has been achieved. The NECC business plan and initial work Comments program were completed in 2010. Component C Mid-term review of 11th FYP programs conducted and recommendations made. Indicator 3: Necessary actions taken to enhance results. Value Midterm review (quantitative or not done Midterm review Midterm review conducted Qualitative) Date achieved 28-May-2008 31-Dec-2010 — 31-Dec-2016 Comments The target outcome has been achieved. The midterm review was carried out in 2013. Component C Project targets and delivery schedule met Indicator 4: Value Midterm review (quantitative or not done Midterm review Midterm review conducted Qualitative) Date achieved 28-May-2008 31-Dec-2011 — 31-Dec-2016 Comments The target outcome has been achieved. The midterm review was carried out in 2013. xi G. Ratings of Project Performance in ISRs - Actual Disbursements Date ISR (US$, millions) No. DO GEO IP Archived IBRD GEF 1 12/02/2008 S S S 0.00 0.00 2 06/21/2010 S S S 49.68 0.88 3 06/27/2011 S HS S 94.58 1.71 4 04/09/2012 S S S 121.89 2.18 5 12/23/2012 S S S 176.08 3.77 6 06/22/2013 S S S 176.08 4.06 7 12/21/2013 S S MS 177.79 5.14 8 06/24/2014 S S MS 197.79 5.95 9 12/19/2014 S S MS 206.84 6.25 10 06/17/2015 MS MS MS 233.52 7.19 11 12/16/2015 S S MS 286.43 8.15 12 06/26/2016 MS MS MS 299.75 9.71 13 12/18/2016 S S S 299.75 12.33 xii H. Restructuring (if any) Amount Disbursed at ISR Ratings at Board Approved Restructuring in Reason for Restructuring Restructuring USD millions Restructuring & Key Date(s) PDO GEO Changes Made DO GEO IP Project1 Project 2 Change Change Amended to be consistent with the Additional Financing (AF) approved in October 2011. broadening scope to include building EE and ESCOs in line 03/12/2013 Y S S 176.08 with government priorities), extending closing date in line with AF, as well as additional changes to ensure adequate implementati on of the project. Amended to be consistent with AF approved in October 2011. broadening scope to include building EE and ESCOs in line 03/12/2013 Y S S 4.06 with government priorities), extending closing date in line with AF, as well as additional changes to ensure adequate implementati on of the project. xiii I. Disbursement Profile P084874 (IBRD Loan) P098916 (GEF Grant) xiv 1. Project Context, Development and Global Environment Objectives Design 1.1 Context at Appraisal Country Context 1. At project appraisal, China was the second largest energy user and emitter of greenhouse gases (GHGs) in the world and energy demand was continuing to grow strongly. Energy consumption in China had increased 6.0 percent annually between 1990 and 2007—more than three times faster than the world’s average annual growth, rising from 990 million tons of standard coal equivalent (Mtce)1 in 1990 to 2,650 Mtce in 2007. Despite the high growth, China’s per capita energy consumption was still less than one-fifth of the average for the member countries of the Organization for Economic Cooperation and Development. If left unchecked, China’s energy consumption, primarily met by coal, would accelerate the country’s significant deterioration of local air quality and the increase of GHG emissions. Improving energy efficiency (EE) was one of the keys to sustaining China’s economic growth with reduced energy needs and lessened local and global environmental impacts. 2. China’s EE at the time lagged far behind the world’s most efficient economies, especially in manufacturing industries. Its energy-intensive manufacturing industries accounted for about 50 percent of total final energy consumption, operated at significantly higher levels of energy intensity (energy use per unit of physical output) than international best practices. The significant potential for improving EE and reducing GHG emissions was largely untapped in these industries. Sectoral and Institutional Context 3. The Government of China (GoC) had stepped up its efforts to improve EE. In November 2004, the NDRC issued the nation’s first Medium and Long Term Energy Conservation Plan (2005 to 2010 and 2020), which highlighted ten energy conservation programs targeting the country’s major energy consuming sectors. In the nation’s 11th Five-Year Plan (FYP) (2006– 2010) for Economic and Social Development, endorsed by the People’s Congress in March 2006, the GoC pledged to reduce the energy intensity of gross domestic product (GDP) by 20 percent from 2005 to 2010, which was estimated to result in avoided energy consumption of over 560 Mtce annually by 2010. The NDRC launched the 1000 Large Industrial Enterprises Energy Conservation Action Plan in April 2006, targeting the top 1,008 largest industrial energy consumers, which accounted for approximately 30 percent of China’s total primary energy consumption. The Government efforts also included policy initiatives to foster technology development and deployment and various fiscal incentives to improve EE. 4. The estimated energy conservation investments needed to achieve the 20 percent EE target of the 11th FYP surpassed US$50 billion—most of them in industrial sectors. Although Chinese experts agreed that the majority of the identified industrial energy conservation investments were financially viable, most of the concerned enterprises would rather have invested in business expansion than energy conservation. The domestic banking sector had not stepped in 1 Since China’s main source of energy is coal, aggregate energy statistics are reported in terms of standard coal equivalent (tons of coal equivalent [tce]). 1 tce = 0.7 tons of oil equivalent, or 29.31 gigajoules (low heat). 1 to provide the required financing either, especially for medium- and large-size energy conservation investment projects. In 2006, the first year of the 11th FYP, the energy intensity of GDP did not decline as planned. This increased the urgency to accelerate Government efforts to promote industrial energy conservation investments. 5. Existing industrial energy conservation financing mechanisms in China until then had mainly benefited relatively small projects. The World Bank’s First and Second China Energy Conservation Projects, funded by the IBRD and the Global Environment Facility (GEF), were credited for the development of China’s energy services company (ESCO) industry. The energy management companies (EMCs), which are the Chinese equivalent of ESCOs, supported by these two projects made US$280 million worth of energy conservation investments in 2006, many of them in the industrial sector. However, few of the EMC investments exceeded US$5 million. Another ongoing project, the International Finance Corporation (IFC)/GEF China Utility- based Energy Efficiency Project (CHUEE), also supported small-scale industrial energy conservation investments. It promoted the installation of more energy-efficient equipment with commercial bank financing, backed by a guarantee facility. 6. There was a large financing gap for medium- and large-size energy conservation investments in the industrial sector, which normally cost US$5 million to US$25 million per project. Given the economic and financial attractiveness of such projects, the GoC had gradually eliminated public funds earmarked for industrial energy conservation project financing since late 1990s, expecting Chinese enterprises to invest their own resources and banks to build energy conservation lending business lines. However, this expectation did not materialize. Three key barriers impeded the development of the lending market for medium and large-size industrial energy conservation investments, despite its large potential. They included: (a) Perceived high technical and financial risks of energy conservation investments among industrial enterprises. Compared with small industrial energy conservation projects, which often involve simple replacements or upgrades of equipment and have very short payback periods (one to two years), medium- and large-size projects typically are technically more complex, require longer payback periods, and can impose costly business interruptions. These lead to the perception that efficiency projects are technically risky and financially unattractive compared to capacity expansion investments. This is compounded by a lack of familiarity with the range of efficiency technologies and processes, investment best practices, and financial benefits. (b) Perceived high financial risks of industrial energy conservation lending among Chinese banks. Interest in developing and implementing industrial energy conservation projects was further dampened by the lack of available debt financing for such projects. Chinese banks considered lending for energy conservation projects to be risky, in part for the reasons mentioned above. Additionally, compared to production expansion projects, energy conservation projects usually do not directly generate additional revenues, as typically expected by lending agencies, but rather contribute to a reduction in energy expenditures. The risk perception among Chinese banks was compounded by their unfamiliarity with industrial energy conservation practices, and their weak capacity to properly assess the risks and benefits of EE 2 investments. The perceived high risk along with the initial cost of developing the internal capacity for proper evaluation and processing of energy conservation lending resulted in a lack of institutional focus on developing energy conservation business lines by Chinese banks. (c) Insufficient institutional capacity, especially at the national level, to address the pressing needs of scaling up EE investments. In the wake of the rapid expansion of energy-intensive industries in the decade leading up to the project’s initiation and the increased decentralization of decision making, the Government’s capability to effectively implement its EE policies and programs had declined considerably. Given the size and large share of energy-intensive industries in China’s economy, as well as the widespread inefficient practices in place at most industrial facilities, policy and regulatory interventions needed to be strengthened to encourage industrial enterprises to undertake EE investments. 7. Rising energy intensity spurred the GoC to redouble its efforts to promote EE. The sharp increase in coal consumption after 2001, driven by a surge in demand for power generation and energy-intensive commodities such as steel and cement, had increased the energy intensity of the economy, reversing the downward trend that characterized the period from 1980 to 2000. This heightened the urgency for Government intervention to scale up EE investments, and led to intensified Government focus on energy conservation during the 11th FYP (2006–2010). Tapping the EE potential in existing industrial stock was essential to meet the ambitious EE objectives of the 11th FYP and required a two-pronged approach, focusing on (a) the development and implementation of viable business models through the domestic banking sector for industrial energy conservation financing; and (b) strengthening the implementation of existing policies and regulations for promoting energy conservation investments. Rationale for Bank Involvement 8. The project was requested by the NDRC and the Ministry of Finance (MoF), which regarded the World Bank as an important partner in pursuing innovations in EE. The GoC considered the project as an important follow-up to the GEF/IBRD-funded First and Second China Energy Conservation Projects which successfully introduced the energy performance contracting mechanism through EMCs to support small commercially viable energy conservation projects. The IFC/GEF CHUEE Project, then under implementation, also focused on promoting small-scale energy conservation investments through a credit-enhancing facility. This project complemented and reinforced the ongoing World Bank/IFC projects. It focused on promoting energy conservation activities in China, through development of a market for investments in medium- and large-size industrial energy conservation projects, often referred to as a ‘goldmine’ of energy savings by Chinese energy conservation experts because of the significant potential for energy savings. 9. The World Bank was uniquely positioned to provide the GoC with this support, given the its close working relationship with the GoC during the previous two decades, its successful experience in integrating technical assistance (TA) and lending operations with the GoC’s policy agenda, and its successful support to innovative EE financing in several countries in the preceding several years. The project drew on the World Bank’s experience in mobilizing commercial financing through onlending operations in many countries, and sought to extend this to the arena 3 of EE, demonstrating the potential to use public funds to mobilize much larger amounts of commercial financing—crucial to enable China to achieve its ambitious goals for clean energy. 10. In addition, the project objectives contributed directly to the World Bank’s Country Partnership Strategy (CPS) at appraisal. This strategy supports greener growth as one of its strategic themes, and accelerating energy conservation and investment in EE as a key outcome to pursue. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 11. The original project development objective (PDO) of the project was to assist the borrower to improve EE of selected2 medium and large industrial enterprises, and to reduce their adverse environmental impact on climate. The original key indicators for both the PDO and the Global Environment Objective (GEO) are shown in Table 1.3 1.3 Original Global Environment Objectives (GEO) and Key Indicators (as approved) 12. The original GEO of the project was the same as the PDO, that is, to assist the Recipient to improve EE of selected medium and large industrial enterprises, and to reduce their adverse environmental impact on climate. 1.4 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 13. The revised PDO of the project, as approved by the World Bank's Board of Executive Directors on October 27, 2011 at the time that AF4 for the project was approved, was to improve energy efficiency of selected energy end-users in key energy-consuming sectors, thereby reducing their adverse environmental impacts on climate. The reason for this slight modification to the PDO was to reflect the new Government policies and priorities embodied in the borrower’s 12th FYP (2011–2015). The key indicators for both PDO and GEO were revised upwards to reflect the additional US$428 million made available by the AF (Table 1). 14. The revised PDO dropped the mention of ‘medium and large industrial enterprises’. At the time of appraisal of the original loan, a priority EE program was the ‘Top 1,000 Enterprises Program’, which required the very largest energy consuming industrial and power plants to set targets for reducing energy intensity. The China Energy Efficiency Financing Project (CHEEF I) was meant to be aligned with this focus on the largest energy users, which undertook investment programs to meet their targets. At the time of approval of the AF during the 12th FYP period, the program had been expanded to become the ‘10,000 Enterprises Program’, under which more than 16,000 enterprises were covered, necessarily including smaller ones. In addition, the restructuring 2 The term ‘selected’ in the original and revised PDOs and GEOs was meant to indicate enterprises that hosted subprojects that met the project’s specific eligibility criteria, as defined in the OMs, as well as the Participating Financial Intermediaries (PFIs) commercial lending criteria. The selection was based first on consideration of the merits of potential investments; there was no a priori selection of enterprises. 3 The original target values took account of the likelihood that progress in implementation would become faster as the project progressed, as the capabilities of the PFIs grew over the course of the project. 4 The AF for this project (P123239) augmented EXIM’s allocation by US$100 million. 4 of CHEEF I was meant to also include ESCOs, many of which are small enterprises, as well as building EE projects. This change in wording of the PDO introduced the necessary flexibility for the project to finance EE projects in this wider population of potential beneficiaries. 15. Subsequent to approval of the AF in 2011, a restructuring was approved in March 2013, with the intent to ensure consistency among all components of the fully blended project. At that time, it was noted that the unit investment per tce/year of energy savings capacity in industrial EE projects had risen significantly above the CNY 3,000 per tce/year assumed at appraisal and CNY 4,000 per tce/year) assumed at AF. Over the course of the project, the economic slowdown and structural shifts in the economy led to shutting down of much capacity in energy- intensive industries, seriously affecting deal origination of the PFIs. In addition, much of the low- hanging fruit had been harvested, leaving only more-expensive investment projects available to the project. 16. Moreover, it was assumed that about 20 percent of the portfolio supported by the AF would go for building EE, which tends to have much higher unit investments than industrial projects. Thus, while the target for investment was raised by a factor of 1.48, the target for energy savings was raised by a smaller factor, 1.29. At the early stage of project implementation, subprojects did indeed have average unit investment costs of around CNY 3,000, but in the later stages of the project unit investment costs of CNY 6,000 to CNY 8,000 were more typical. This impacted project performance, but the lack of relatively more-expensive building EE projects meant that the portfolio had a higher-than-expected share of relatively less-expensive industrial EE, meaning that, other things being equal, it required less investment to meet the energy savings target. In the event, the investment objective was overfulfilled, facilitating the meeting of the energy savings target. 17. A new PDO key indicator was added to reflect the expansion of the scope by the AF to cover ESCOs and building EE. 1.5 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification 1. The revised GEO of the project was the same as the revised PDO, that is, to improve energy efficiency of selected energy end-users in key energy-consuming sectors, thereby reducing their adverse environmental impacts on climate. 5 Table 1. Original and Revised PDO and GEO Key Indicators Baseline Indicators Target Values Actual 2006 Year 5 (original Year 8 (revised end End of Year 1 Year 2 Year 3 Year 4 end targets) targets) Project PDO Key Indicators Cumulative amount of EE investments supported by the project 0 60 180 380 600 900 1,328 1,427 (US$, million) Associated annual energy savings 0 0 0.21 0.62 1.31 2.07 2.66 2.67 capacity (Mtce per year) Cumulative amount of EE lending to ESCOs and building projects (US$, 0 n.a. n.a. n.a. n.a. n.a. 60 105 million) Project beneficiaries (Number) 0 n.a. n.a. n.a. n.a. n.a. 50 52 PDO and GEO Key Indicator Associated CO2 emission reduction 0 0 0.51 1.52 3.20 5.05 6.49 6.51 capacity (Mt of CO2 per year) 6 1.6 Main Beneficiaries 18. The primary project beneficiaries, as clearly identified in the objectives and components detailed in the Project Appraisal Document (PAD),5 were: (a) The banking sector, including the two PFIs (Export-Import Bank of China [EXIM] and China Huaxia Bank [Huaxia]) that were financial intermediaries for CHEEF I and the PFI (Minsheng Bank [Minsheng]) that was the financial intermediary for CHEEF II,6 which would adopt new approaches and structures to open up new markets for their lending products, and which would benefit from training and capacity building programs for managers and staff (of both genders) in headquarters and local branches, as well as other banks that would participate in national workshops to learn about subprojects financed by the PFIs, EE business financing products and technologies, and guidelines for assessing and developing EE subprojects; and (b) The enterprises that hosted the EE projects financed by the loan. 19. Additional beneficiaries included: (a) Government agencies, including the NDRC, that adopted new policies and regulations concerning EE informed by or based largely on project outputs; (b) Technical organizations, including the National Energy Conservation Center (NECC) (which housed the Project Management Office [PMO]), which strengthened capability to design and deliver the support needed by the Government to promulgate and manage the evolution of effective EE policies, and by regulated entities to comply with them; and (c) The general public that would benefit from reduced pollutant emissions resulting from the investments financed by the project. 20. During project preparation, EXIM and Huaxia were selected as potential PFIs from among six Chinese banks screened. Subsequently, the World Bank performed its financial due diligence of Huaxia in accordance with the established eligibility criteria and confirmed its selection as a PFI. In the absence of financial statements prepared and audited in accordance with accounting and auditing principles acceptable to the World Bank, EXIM undertook agreed-upon interim measures to assist the World Bank in evaluating its financial performance for the year ending December 31, 2006. EXIM also developed a time-bound action plan to address accounting and management weaknesses identified by the World Bank due diligence team. This plan was reviewed by the World Bank and regarded as satisfactory, and EXIM agreed to implement the plan. Consequently, EXIM’s participation in the project was confirmed during appraisal. 5 See pp. 4-5 of the PAD, Report No. 38641-CN, 2008. 6 Minsheng, as the PFI for CHEEF II (P113766), utilized a separate loan for onlending, as evaluated in a separate Implementation Completion and Results Report (ICR) (ICR4116). Minsheng benefitted from the GEF-financed TA portion of CHEEF I; see paragraph 52 below. 7 1.7 Original Components (as approved) 21. This was an integrated IBRD/GEF-funded project designed to help remove the three principal barriers impeding investments in medium- and large-size industrial energy conservation projects. The TA activities financed by the GEF grant were intended to address the knowledge, institutional, and capacity-building needs of the banking sector, to mitigate the risk concerns of enterprises, and to strengthen governmental supervision of industrial energy conservation. These efforts were accompanied by an energy conservation financial intermediary lending program, which was to demonstrate viable mechanisms for financing medium- and large-size industrial energy conservation investments, and to provide direct support to the Government’s energy conservation priorities during the 11th FYP period. 22. Both the GoC’s Medium and Long Term Energy Conservation Plan and a technical study carried out as part of project preparation identified key energy-intensive industrial subsectors and energy conservation project types with significant potential for EE improvements and attractive financial returns. Energy-intensive industrial sectors included iron and steel, chemicals and petrochemicals, and construction materials (mainly cement). The types of energy conservation projects reviewed and recommended included (a) adoption of energy-saving industrial technologies such as more efficient industrial boilers, kilns, and heat exchange systems; (b) recovery and utilization of by-product gas, waste heat, and pressure; (c) installation of highly efficient mechanical and electrical equipment, including motors, pumps, heating, and ventilation equipment; and (d) industrial system optimization. While the PFIs decided which particular energy conservation subprojects to finance, subject to the eligibility criteria detailed in the respective project OMs developed jointly with the World Bank, they were expected to focus on the industrial subsectors and energy conservation subproject types mentioned above. Component A: Promotion of Energy Efficiency Financing (estimated total cost: US$18.7 million, including US$9.9 million of GEF cofinancing and remainder financed by the GoC) 23. The proposed activities were to address key barriers to developing energy conservation financing businesses in the domestic banking sector, primarily for medium- and large-size industrial energy conservation investments. The activities comprised: (a) Assistance to the PFIs to support. This included (i) business startup, including creation, organization, staffing, and initial business plan of the energy conservation lending business unit (or team); (ii) capacity building and training, including support for the development of necessary financial instruments, procedures, and the creation of an adequate knowledge base to evaluate and extend EE loans; (iii) marketing and development of an energy conservation subproject pipeline; (iv) support for due diligence of eligible EE subloans, including financial, technical, social, and environmental assessments; and (v) development of energy conservation-related financing instruments and risk management tools. Under this component, a performance-based GEF grant of US$2.55 million was allocated to the PFIs, at 0.43 percent of the volume of their eligible energy conservation lending under the project. This grant was to finance eligible TA mentioned above. 8 (b) Assistance to other banks. This included assistance in (i) business startup; (ii) capacity building; and (iii) due diligence on EE subprojects. This assistance was intended to be extended to two additional commercial banks, to be selected in the second year of project implementation. These two banks were to lend their own funds to eligible industrial energy conservation subprojects, amplifying the impact of the proposed project and demonstrating the commercial attractiveness of EE lending. (c) Assistance to the overall banking sector. This was to include a series of national workshops to present successful case studies of subprojects carried out by the PFIs in the first one or two years and to introduce energy conservation technologies and new financial products. (d) Assistance to energy conservation investment project demonstration. This was to support the preparation and implementation of two to three industrial energy conservation projects in sectors with large replication potential, but with significant project development difficulties. The objective was to demonstrate effective business models and institutional arrangements for the preparation and financing of energy conservation projects. It was to focus primarily on pre-investment activities, such as feasibility studies, due diligence, development of new financing mechanisms, and institutional arrangements. Component B: Energy Conservation Investment Lending (estimated total cost: US$571.0 million, of which US$300 million financed by the IBRD loan, US$100 million financed by the PFIs, and the remainder equity financing by beneficiary enterprises) 24. This component was to consist of an energy conservation lending program of US$571 million over five years, including US$400 million in debt financing and US$171 of equity financing by beneficiary enterprises. 25. A US$200 million IBRD loan was onlent by the GoC to two PFIs: US$100 million to EXIM and US$100 million to Huaxia. The PFIs in turn lent the funds to industrial enterprises and/or ESCOs for energy conservation investment subprojects. Their lending rates were to be determined based on market conditions and were meant to adequately cover the financial and operating costs and provide for a reasonable profit margin for the PFIs. The PFIs were to lend in the same currency denomination in which they borrowed their allocation of the IBRD loan and thus pass all the foreign exchange risk to borrowing enterprises. The PFIs also agreed to lend, from their own resources, an additional amount equivalent to their respective IBRD loan allocation for EE investments. The subproject beneficiary enterprises were expected to contribute about 30 percent of project costs, a requirement by EXIM and Huaxia, amounting to US$171 million. 26. The staff of the PFIs’ energy conservation business team/unit were to be trained to identify potential carbon financing candidates from their subproject pipelines. However, no GEF assistance was provided to support the preparation of subprojects that would benefit from the sale of CO2 emissions reduction credits. For eligible subprojects that applied for carbon financing from carbon funds managed by the World Bank, the World Bank was to review the due diligence documentation to ensure conformity with the agreed procedures detailed in the OMs before the completion of the transaction. In the end, this was not done due to lack of demand. 9 Component C: National Policy Support and Capacity Building (estimated total cost: US$2.8 million, covered by GEF financing) 27. This component was to strengthen the Government’s capabilities to implement industrial EE policies and programs, through: (a) Assistance to ensure that the NECC became operational and fully functional, through support for organizational start-up and strategic planning—the main responsibility of NECC, approved for establishment by the State Council in August 2006, was to support the implementation of national energy conservation policies and programs; and (b) Support to the implementation of priority national energy conservation programs under the 11th FYP—this was to include mainly a midterm review (2008) of implementation activities to identify problems, make recommendations, and assist in implementing remedial measures. Component D: Project Implementation Support, Monitoring and Reporting (estimated total cost: US$1.1 million, of which US$0.8 million of GEF cofinancing and the remainder financed by the GoC) 28. Because of the innovative character, complexity, and scale of the project, consultants were to be recruited to provide project implementation support, including: (a) Assistance in the coordination of TA activities to the banks and the Government, as well as organizing project monitoring, evaluation, and reporting activities; and (b) Assistance to support the independent verification of energy conservation lending for the allocation of the performance-based GEF grant and to monitor energy savings performance of subprojects financed by the PFIs. 1.8 Revised Components 29. The AF approved in October 2011 of US$100 million augmented the loan to EXIM for Component B to a total of US$200 million. At the same time, EXIM committed to raise its cofinancing of Component B by US$200 million, and cofunding by beneficiary enterprises was correspondingly raised by US$128 million. The overall target for EE investment for Component B thereby rose by US$428 million, to a total of US$999 million. 30. The AF incorporated a PDO modified from the original CHEEF loan (see section 1.4), based on the new Government policies and priorities of the 12th FYP. In addition, the project scope was expanded by: (a) Piloting lending to ESCOs, which would provide EE services to end-users under performance-based contracts, and broadening the range of sub-borrowers from large- and medium-size industrial enterprises to energy end-users of all sizes and to ESCOs; (b) Expanding the target market segments from the industrial to the building sector; 10 (c) Increasing the leverage ratio of the IBRD loan to EXIM Bank contribution from 1:1 in CHEEF to 1:2 in the AF; and (d) Revising existing PDO indicator targets upwards in view of the expanded investments, and adding two new PDO-level indicators to reflect the addition of ESCOs and the buildings sector and to count direct beneficiary enterprises. 31. The AF loan closing date was set as December 31, 2016. 32. Subsequently, in March 2013, the Board approved a restructuring of CHEEF I, including the two loans under CHEEF I (Loan No. 7529-CN and Loan No. 7530-CN) and the associated GEF grant (TF 090719), to be consistent with the AF in the following areas: (a) Revised PDO (b) Expanded project scope and subloan beneficiaries (c) Expanded TA activities to EXIM (Subcomponent A.1 of the project) financed by the GEF grant (d) Increased procurement thresholds for the IBRD loans (e) The triggering of the OP 4.12 (Involuntary Resettlement) in connection with project activities under Loan 7529-CN, related with EXIM (f) Extended closing date of December 31, 2016 33. Additional changes, also instituted in March 2013 to ensure adequate implementation of the project, included: (a) Expanded TA activities to benefit the NDRC and the NECC (Component C of the project), financed by the GEF grant to reflect the new priorities of the Government; (b) Revised time period related to the delivery of interim unaudited financial reports to be consistent with the AF; (c) Revised time period related to the reporting of the performance-based grant in the GEF Grant Agreement; (d) Increased operating costs for the PMO in the GEF Grant Agreement; and (e) Adding a new definition covering training expenditures. 1.9 Other significant changes 34. In June 2010, the Board approved CHEEF II (IBRD79350). This US$100 million loan financed an onlending facility, similar to that of CHEEF I, with Minsheng as the PFI, and US$0.47 of the GEF grant was allocated to Minsheng under Component A of CHEEF I (corresponding to 11 Component B of CHEEF II), and thus became the beneficiary of the requirement to assist ‘other banks’ besides the two PFIs originally included in CHEEF I.7 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of Background Analysis 35. The project design was informed by a review of EE financing experience in Brazil, China, and India, prepared under a TA project of the World Bank/United Nations Foundation- United Nations Environment Program. 8 This identified three principal causes of operational failures in EE financing: (a) ineffective local institutional delivery mechanisms; (b) inadequate focus on building the technical capacity for assessing EE projects; and (c) lack of sustained effort and follow through, especially adjustment of institutional mechanisms in response to market changes or operational inefficiencies. Recommendations from the study were incorporated in the project through several steps. First, the PFIs and their business practices were assessed, and a comprehensive study was conducted on market potential of major EE technologies in China’s energy-intensive sectors. Second, the project included TA and knowledge management programs to strengthen the PFIs’ capacity to select and to evaluate energy conservation projects. Third, the selection of energy conservation subprojects was based on well-defined criteria to meet the PDO, while flexibility was introduced to allow the PFIs to adapt to the specific circumstances and changing needs of their clients. Finally, the project built on the over decade-long experience of the World Bank Group and the GEF working with China on EE studies and operations. 36. Project design was also informed by lessons learned from the World Bank’s lines of credit in China and other countries. These showed the following: (a) Lack of borrower accountability and weak management capacity of financial intermediaries hamper project implementation and jeopardize successful achievement of PDOs. Most previous failed financial intermediation operations in China were implemented by Government agencies that lacked institutional and operational capacity and were compensated through a management fee. (b) Failure to assess demand appropriately and to develop bankable subprojects at early stages of project preparation slowed and even stalled project implementation. A technical study carried out during CHEEF I preparation showed there to be a large and growing number of energy-intensive industrial enterprises in China, for which EE investments presented a financially viable opportunity. The surge in energy prices in prior years further improved those projects’ financial attractiveness. 7 The performance of Minsheng’s component of the GEF grant-funded activities is evaluated in this ICR and not in the separate ICR for CHEEF II IICR-4116). 8 Robert Taylor, Chandrasekar Govindarajalu, Jeremy Levin, Anke S. Meyer, and William A. Ward. 2005. Financing Energy Efficiency: Lessons from Brazil, China, India, and Beyond, Washington DC: The World Bank. 12 Assessment of Project Design 37. The PDO and GEO were well-formulated, and in line with national development goals, including improving the EE of industrial sectors and reducing emissions of local pollutants and GHGs. They were also in line with the CPS then in effect (Report No. 35435). The scope allowed for an appropriate level of ambition without being unrealistically broad, and is specific enough for meaningful evaluation of performance. 38. The components of the project were appropriate, including not just financing for subproject investments themselves, but also considerable resources for the advisory and capacity-building work that has proven necessary in all countries to make effective use of available financing for EE. The inclusion of a policy component, by which newly developed national policies and regulations for EE could be informed directly by the experience in implementation of the loan, was a well-chosen means of ensuring wider application and sustainability of the lessons generated by the project. 39. The project design considered the lessons identified in the background analysis to create a framework that served well during project implementation. For instance, in contrast to previous onlending projects, PFIs under CHEEF I were large, policy and commercial banks with established, and sound financial operational capacity. They bore the financial risks and benefits of lending. They established dedicated units with mandates and accountability to develop EE financing business lines. This enabled the project to draw on the extensive industrial investment financing knowledge and skills of the PFIs, complemented by GEF-financed TA to build necessary expertise and capacity for evaluation and processing of lending for EE. The organization of the project, with a focus on supporting the capacity not just of the PFIs themselves but also of an independent PMO, was a good choice to achieve the capacity and institution goals of the project. 40. The design included incentives for good performance. Part of the GEF support was linked to the PFIs’ performance in building and developing their EE lending portfolios, to ensure that the intermediaries were held accountable and were rewarded for good performance in the form of additional support to strengthen their capacity. 41. Another important feature of the project design was support for building up of subproject pipelines. Experience in many countries has shown that the existence of potential EE investments with high rates of return is usually not sufficient by itself to attract commercial financing. The project design therefore included elements to help the PFIs to develop a robust pipeline of subprojects and to work with Government counterparts to launch programs to bring industry, banks, and service providers together to enhance interest in EE investments and develop bankable subprojects. 42. At restructuring, careful attention was paid to changes in circumstances, and appropriate adjustments were made to ensure that the design continued to serve achievement of the revised PDO and GEO, and that these continued to be aligned with national development goals and the CPS then in effect (Report No. 67566-CN). The slight broadening of the scope, beyond industrial enterprises to include buildings and ESCOs, was justified by the evolution of China’s EE strategy to gradually raise the priority of activity in these sectors. 13 Adequacy of Government Commitment 43. The GoC evinced strong support for this project at the time of project preparation and appraisal. It participated in the selection of PFIs, and in establishment and strengthening of the PMO. It maintained a high level of commitment throughout the project, and was in constant communication with the World Bank team. The GoC ensured that the policy-oriented elements of the project’s TA component were aligned with and contributed directly to development of national EE policies, regulations, and practices. Assessment of Risk at Time of Appraisal 44. At appraisal, the overall risk rating was Moderate and adequate risk mitigation measures were identified. The most significant risks included weak implementation capability of the GoC, slow development of the subproject pipeline, and slow pace in establishing the NECC (the PMO) owing to budget and staff constraints (Table 2). These three risks were all addressed, particularly through the project’s Component C, which provided TA and helped to build capacity. The project’s mitigation efforts were aided by the strong Government commitment shown from the earliest stages of the project, and that continued throughout the project, driven by a strategic focus from the top leadership of the GoC. 14 Table 2. Assessment of Project Risks and Mitigation Measures Rating at Adequacy of Mitigation Risks at Appraisal Mitigation Measures Actual Risks Appraisal Measures Risks to PDO/GEO Commitment to improve EE was one of the highest priorities of the 11th FYP, Low As risk did not materialize, reaffirmed by officials at the highest Government commitment mitigation was not necessary. Weakened Government levels. to EE in industry remained Project activities helped to commitment to EE in high; commitment to EE in strengthen Government to industry The GoC set stringent technical other sectors increased. implement policy in support of its guidelines and standards to prevent Modest EE goals. expansion of inefficient industrial facilities. TA and capacity building enabled Weaker industrial economy PFIs to overcome weaker demand, reduced demand for and continue to find new financing of industrial EE. opportunities. Risks to components PFIs already developed solid subproject The project aided PFIs to conduct pipelines. assessments in EE market PFIs maintained good Slow subproject pipeline TA provided to the PFIs for business segments, and to develop internal Modest project pipelines development development. incentive mechanisms to reward throughout. Disbursement of part of GEF grant linked staff and branches that lent for EE to EE onlending by PFIs. investments. PFIs quickly built up The project aided PFIs to develop Slow buildup of PFIs’ TA provided to PFIs for business startup, skilled focal units for EE, skills in appraising EE capacity to appraise and new product development, and capacity Low and steadily built up investments, to design innovative process subproject loans building early in project. capabilities of other financial products, and to train departments and branches. relevant departments and branches. The NECC experienced Strong leadership assumed by the NDRC interruption in its growth, Through the project, the NECC Slow pace in establishing in creating the NECC, and pressing need during replacement of its became the leading center for the NECC due to budget of the Government to strengthen Modest first head, but overall grew technical support, international and staffing difficulties implementation capacity for EE programs into a highly capable exchanges, and development of EE under the 11th FYP. institution for technical technology platforms and software. support of EE. 15 2.2 Implementation Partnership Arrangements 45. As part of the project design process, other multilateral and bilateral EE projects in China were reviewed. In addition, the project coordinated with the IFC/GEF CHUEE Project, and projects financed by other agencies, such as l’Agence française de développement (French Development Agency, AFD) and Kreditanstalt für Wiederaufbau (KfW), which also had EE credit line projects with the PFIs. On TA and policy support, the project coordinated with the Energy Foundation, which provided complementary policy support to the NDRC. The PMO, NECC, was designated to manage all of the NDRC’s EE international projects, and so became a natural point for coordination. 46. The link to the AFD project proved fruitful. AFD financing to Huaxia totaling EUR 60 million for the period 2008–2020 (expected to reach EUR 100 million with recycling of repaid loan funds), for instance, was quite complementary. The AFD project supported both EE subprojects and, particularly in later stages, renewable energy (RE) subprojects. The years-long, country-wide training program supported by the GEF component provided through the World Bank project greatly strengthened Huaxia’s staff capability, enabling the PFI to make better use of the AFD funds than it would have otherwise. The World Bank-funded training provided a platform that fostered ongoing exchanges among Huaxia staff in different branches, helping to overcome the dispersion of institutional memory and capacity that is a normal result of regular staff reassignments within the bank. 47. Soon after CHEEF was approved, KfW decided to also finance onlending for EE through EXIM. The loan of EUR 41.8 million was approved at the end of 2008 and closed in 2014. Because of the preparatory work that had been done for the World Bank project, the KfW project took only three months to prepare, providing a good example of the leverage that this program has had. Institutional and Implementation Arrangements 48. The proposed project was originally expected to be implemented over five years. Through the restructuring in 2013, the period of performance was extended to eight years, to give enough time to incorporate and to implement the activities expanded through the AF, which was approved in 2011. An important aspect of the restructuring was to revise the end targets, to take account of the rising unit investment required for energy savings, thus ensuring that the project design was more realistic. 49. A Steering Committee provided overall strategic and policy guidance to the project activities, while implementation was undertaken by the PMO. The Steering Committee was chaired by the NDRC, and comprised representatives from both the MoF (International Department) and the NDRC (Resource Conservation and Environmental Protection Department, Department of Foreign Capital Utilization and Overseas Investment). The Steering Committee’s attentiveness to the project, and engagement with the PMO and PFIs, were an important element of project oversight and were an important factor in the positive outcomes of the project. 16 50. The CHEEF I PMO was initially established as an expansion to the PMO for an existing project, the ongoing World Bank/GEF-funded Second China Energy Conservation Project. That PMO had successfully coordinated activities for the World Bank-financed First China Energy Conservation Project. The PMO’s technical capabilities and human resources were considerably strengthened as a result of CHEEF I project activities; not only did it provide support to the PFIs for capacity building, but the PMO undertook policy development for government, and became an important technical resource for other financial institutions in China. 51. The PFIs responsible for the implementation of EE lending, EXIM, and Huaxia were the first financing institutions in China to collaborate with the World Bank for onlending of IBRD loan and counterpart funds to sub-borrowers for EE projects. As the first such project in China, it took time for the banks to become familiar with the World Bank’s project management requirements, including project financial management and disbursement processes. The World Bank provided training and support in this regard, and the PFIs in turn conducted internal training to larger numbers of staff. Each of the PFIs established a central unit responsible for implementation of the project. These EE units have grown and transformed, preparing both banks to expand their activities into green financing more broadly (see paragraph 70). 52. Minsheng, the PFI of CHEEF II, participated in Subcomponent A.2 of the project. The original design of the project envisioned that one or two other banks in China would benefit directly through assistance in (a) business startup; (b) capacity building; and (c) due diligence on EE subprojects. One such bank was selected—Minsheng. Under the terms of the US$100 million CHEEF II loan project, Minsheng was also allocated a portion of the GEF grant (US$0.47 million). Although Minsheng’s lending was entirely separate from CHEEF I, it also benefitted from the support provided by the PMO to the CHEEF I PFIs, included under Subcomponent D.2, monitoring of energy savings performance of subprojects financed by the PFIs. Midterm Review 53. A midterm review was conducted during the mission of March 2012. The mission found the loan component of the program to be progressing well, with positive development of mechanisms at EXIM and Huaxia to pursue EE lending, but implementation of the GEF-financed components to be lagging somewhat. The terms of the restructuring (which was approved in March 2013) were discussed, with a view to ensuring concordance between all elements of the project. This was needed in particular to accord with the terms of the AF, approved in 2011. A time-bound action plan was agreed on to ensure continued good implementation. These steps were subsequently carried out. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design 54. The indicators identified were well suited to tracking progress toward the PDO and GEO. One of the indicators captured not just the IBRD loan funds, but also the cofounding that went toward EE, encapsulating direct mobilization and providing an important quantitative measure of success. Alongside this, the measurement of energy savings and CO2 reductions directly attributable to the financed projects also provided a good measure of the direct impact of 17 the project. For the AF, an additional indicator was added to cover lending for both ESCO and building EE projects. This gave some needed flexibility in mode of attainment, as ESCO projects can (and in the case of this project) were implemented at industrial enterprises. 55. Capacity building is much more challenging to measure in a way that gives an objective measure of its impact, and it is only really possible to measure outputs that are aligned with outcomes. The project had several of these focused, for instance, on establishment of the NECC, and on development of policies and procedures. Such indicators are useful alongside a narrative of how outcomes were used. M&E Implementation 56. The NDRC, through the PMO, was responsible for the M&E system, which comprised (a) regular monitoring of performance indicators; (b) provision of annual progress reports (annually in initial stages of the project, then semiannually after approval of the AF); and (c) a midterm review of implementation progress. The PMO was responsible for overall M&E of implementation progress, including the collection of project performance information and reporting on the impact and results of the project. The PMO developed a M&E plan during the first year of implementation, and a member of the PMO was assigned to collect information and maintain databases to monitor the implementation performance of all the project components.9 57. The PDO and GEO indicators were straightforward and easy to monitor. The PFIs provided information to the PMO, which also tracked indicators relating to indicators for which it was responsible, primarily intermediate results indicators relating to capacity building. 58. For activities implemented by the PFIs, the project team within each PFI was responsible for collecting information with the assistance and quality control of the PMO, and for reporting to the World Bank through the PMO. The PFIs contracted independent third parties to monitor and validate their energy conservation-related lending disbursements. 59. Indicators were calculated in line with the original project design. The calculations of annual energy savings capacity (tce per year) resulting from EE subprojects financed by the PFIs was performed in line with the PAD. The annual CO2 emissions reductions capacity (PDO and GEO indicator) were based on these energy savings at an emission factor of 2.44 t CO2/tce. EE investments in subprojects were the total of debt financing from the IBRD loan and the PFIs own resources, as well as the funding provided by the host (beneficiary) enterprises. M&E Utilization 60. The M&E results were used by the PMOs and the PFIs to measure their progress, and provided the basis for adjustments to their respective implementation plans to achieve the project’s objectives. The PFIs and the PMO had the responsibility for collection of the data on the indicators, which were reported to the GoC and the World Bank in reports that were annual initially and semiannual for the remainder of the project. The measured progress was a focal point 9 The GEF requirement for tracking tools applies to projects endorsed after December 2010, and as such does not apply to project, which was approved in 2008. 18 of discussion during the World Bank’s implementation support missions, and indicators were used as diagnostic tools for identifying areas where emerging issues might require attention. The indicators were the basis of the Satisfactory rating of the project that was important to the decision to proceed with the approval of AF for CHEEF I, as well as with approval of CHEEF II. The strong performance on the PDO indicators was also important in showing success of the onlending approach for green financing more generally, and thus for approval of the new World Bank- financed Program for Results operation, the ‘Innovative Financing for Air Pollution Control in Jing-Jin-Ji’ Program, which will support clean energy and environmental protection in the Beijing- Tianjin-Hebei region through lending of US$500 million. 2.4 Safeguard and Fiduciary Compliance Environmental Safeguards Compliance 61. The project was classified as Category B according to OP 4.01 (Environmental Assessment), and limited adverse environmental impacts were envisaged and encountered. Due to the nature of the subprojects, natural habitats, cultural resources, pest management, and forest safeguards policies were not triggered. The Environmental Assessment Framework was developed and incorporated into the OM of the PFIs. All the PFIs paid close attention to environmental safeguards and followed the requirements of the OM for their subprojects in terms of compliance verification during the loan appraisal stage and field supervision during the implementation stages. As a prerequisite for the loan appraisal, all subprojects under the loan were required to provide necessary environmental safeguards documents and approval from local environmental authorities according to OM requirements for full environmental compliance. The PFIs established routine site supervision practice to inspect progress of subprojects during construction and operation, in which environmental performance was part of the supervision. The overall environmental safeguards implementation is rated Satisfactory for this project. Social Safeguards Compliance 62. No resettlement and were expected or encountered during project implementation, therefore social safeguards policies (OP 4.12 [Involuntary Resettlement] and OP 4.10 [Indigenous Peoples]) were not triggered during the preparation of the project. During implementation of the first phase of CHEEF I, in accordance with the PFIs’ OMs, all subprojects were within the existing enterprises premises of beneficiary enterprises with no new land acquisition. When the AF was approved in 2011, a resettlement policy framework and procedures was incorporated into EXIM’s OM for subprojects involving land acquisition. However, none of EXIM’s subprojects required land acquisition. It was discovered, however, that one subproject financed by Huaxia had involved land acquisition. Although inspection by the World Bank revealed that local and national regulations had been complied with, the failure of the PFI to obtain prior review by the World Bank resulted in the subproject being eliminated from the project. Steps were subsequently taken to strengthen safeguards oversight by the Huaxia, including amending the OM to ensure proper oversight. Subsequently, Huaxia proposed to finance one other subproject that required land acquisition. In this case, proper oversight procedures were followed, due diligence showed compliance with applicable regulations, and the subproject was supported under the project. The overall social safeguards implementation is rated Moderately Satisfactory for this project. 19 Fiduciary Compliance 63. Overall, financial management and procurement for this project are rated Moderately Satisfactory. Minor issues were encountered and resolved in the early stages in implementation by the PFIs of the loan portion of the project. Some ineligible expenditures were found, and qualified audit opinions were issued for EXIM in 2008 and for Huaxia in 2010 and 2011 owing to a lack of supervision and guidance to the bank’s branches, as well as to weakness in prior- and post-credit control. However, the two banks paid considerable attention to the issues raised. Efficient and effective remedial actions were undertaken according to the World Bank’s and the auditor’s recommendations, including optimizing credit control procedures, strengthening field supervision and recalling the problematic onlent funds and replacing them in the CHEEF I portfolio with other eligible expenditures. 64. Since that time, the PFIs exhibited an adequate project financial management system that provided, with reasonable assurance, accurate and timely information that the loan was being used for the intended purposes. The project accounting and financial reporting were in line with the relevant regulations issued by the MoF and with the requirements specified in the Loan Agreement. No further significant financial management issues were noted by the World Bank and the auditors. In addition, the withdrawal procedures and arrangements for flow of funds were appropriate, and the World Bank loans were fully disbursed. 65. The GEF-funded portion of the project, which involved expenditures by the PMO for TA and capacity building, had an adequate project financial management system that provided, with reasonable assurance, accurate and timely information that the grant was being used for the intended purposes. The PMO’s project accounting and financial reporting were in line with the relevant regulations issued by the MoF and with the requirements specified in the Grant Agreement. No significant financial management issues were noted throughout the project implementation, and all financial management-related weaknesses raised during project supervision were resolved in a timely fashion. The project audit reports all had unqualified audit opinions. In addition, the withdrawal procedures and arrangements for flow of funds were appropriate. The grant proceeds were disbursed to the project on time. 2.5 Post-completion Operation/Next Phase 66. The subprojects financed at beneficiary enterprises (that is, the sub-borrowers of the PFIs that hosted the subprojects) have been incorporated into the enterprise’s day-to-day operation, and will continue to deliver energy savings over the lifetimes of the subprojects. 67. The participating banks have significantly increased their interest, capacity, and confidence in handling EE financing, and have mainstreamed EE financing in their business. EXIM had no EE business line at all at the beginning of the project. Now, using an EE financing product launched in 2013 based on experience with CHEEF I, EXIM has financed CNY 19.3 billion (about US$2.8 billion) in loans with its own funds. 68. The EE units created by the two PFIs under this project have grown and transformed, preparing them to take advantage of opportunities in green financing more broadly. This has been, in part, a response to changing market circumstances; the market for the large industrial EE 20 subprojects financed by CHEEF I has shrunk, while and the market for RE projects has grown. Instead of being solely focused on efficiency, the PFIs’ EE units are now more broadly centers for green finance, that is, lending for clean energy and environmental protection projects. EXIM recently issued CNY 1 billion (US$145 million) of green bonds. Huaxia’s top management is highly committed to green financing, and the green credit business now accounts for 7 percent of its entire business. They have established a CNY 5 billion (US$725 million) Blue Sky and Clear Water Fund in the Jing-Jin-Ji Region to provide debt and equity financing to green investment. Based on the experience of this project, Huaxia is establishing a dedicated Green Finance Center to scale up green lending business under the World Bank-financed ‘Innovative Financing for Air Pollution Control in Jing-Jin-Ji’ Program for Results. 69. The GEF grant portion of CHEEF produced outputs that have underpinned newly promulgated EE policies, bolstered the capacity of technical agencies to support implementation, and improved the capacity of regulated energy-using enterprises to comply. In particular, the capacity-building activities of the NECC, which hosted the PMO, has greatly contributed to improving the national and local energy conservation center system. In addition to the project’s support for implementation of priority EE programs of the 12th FYP, it also made important contributions to the development of the 13th FYP. Many of the policy recommendations flowing from this project have been adopted into the policies and regulations that will provide the framework for EE investments over the medium term. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 70. The relevance of the PDO and GEO are rated High. They were consistent with the Government’s priorities set out in the 12th and 13th FYPs, which set targets for improving EE by sector and region and which emphasized the need to develop market mechanisms to promote EE investment. The objectives are also consistent with the World Bank’s CPS (FY13–FY16), which has supporting greener growth as one of its strategic themes, and ‘accelerating energy conservation and investment in EE’ as a key outcome to pursue. The objectives are also supported by the GEF 5 strategy in the climate change focal area objective 2 (promote market transformation for EE in industry and the buildings sector). The objectives also contribute to China’s Intended Nationally Determined Contributions as submitted to the Conference of the Parties, which include goals to (a) lower carbon intensity of GDP by 60–65 percent below the 2005 level by 2030, and (b) reduce CO2 emissions per unit of GDP by 40–45 percent below the 2005 level by 2020. As noted above, the project activities also had synergies with onlending projects for clean energy that were financed by AFD and KfW. 71. The relevance of project design and implementation are rated Substantial. The project design was based firmly on relevant experience up to the time of appraisal, was targeted at key barriers to scaling up debt financing of EE projects, and adopted innovative approaches to foster needed changes in organizations and institutions. The performance indicators were well-suited to measure outputs and outcomes. The implementing arrangements were appropriate and effective. 72. The main issues expected at the design stage and encountered in implementation that led to delays in implementation were related to (a) building capacity in the PFIs and the 21 PMO, and (b) building up a pipeline of suitable subprojects. Based on experience with previous projects, this was anticipated and addressed through the capacity-building activities of the project. This is described in Table 2. 73. Issues encountered during the project that were not foreseen at the design stage were dealt with appropriately. For instance, the allocation of a portion of the GEF grant for performance-based funding of TA proved difficult to execute in practice. The PFIs found that using the incentives as originally intended—to reward staff and units that contributed to achieving the EE lending goals—was worthy, but that utilizing grant funds presented administrative challenges. The PMO and PFIs resolved this by using their own funds to provide incentives, which in effect leveraged the GEF funds. The grant funds thus released were used to augment the capacity building activities that proved so important to the outcomes of the project. 74. An important issue which affected the project was the rising unit investment cost of energy savings compared to what/when. The higher unit investment cost of energy savings was a result of evolving market conditions, not the result of deficiency in design or execution of the project. The ability of EXIM and Huaxia to overcome this obstacle and still meet targets demonstrates a high degree of capability and persistence. EXIM and Huaxia took a long-term view, and utilized this project to develop capabilities necessary for them to undertake a broader green financing business, encompassing RE and pollution mitigation businesses as well as the EE business specifically supported by CHEEF I. 3.2 Achievement of Project Development Objectives and Global Environment Objectives 75. The achievement of the PDO and the GEO are rated High. The project successfully scaled up EE investments, and the targets for the PDO and GEO indicators, which were based on project-financed lending—were exceeded (Table 3). All IBRD loan funds were disbursed, and the target for both PFI financing and beneficiary funding of subprojects was slightly exceeded (Table 3), leading to a leverage ratio of IBRD loan funds of 1:3.4. Table 3. Project Financing of EE Subprojects Actual Funding (US$, millions) EXIM Huaxia End Targets Performance IBRD loan funds 200 100 300 300 PFI cofinancing 307 114 421 400 Subtotal PFI EE lending 507 214 721 700 Beneficiary funding 515 191 706 628 Total EE investment 1,022 405 1,427 1,328 76. With cumulative annual energy savings of 2.67 Mtce per year and associated CO2 emissions savings of 6.51 Mt of CO2 per year, the project achieved just over 100 percent of its end targets for these indicators. This is approximately equivalent to avoiding the annual emissions of nearly 2 GW of coal-fired power plants. The project met targets despite the rising cost of unit energy savings in EE investments over the course of the project. Nation-wide, as a result of the strong push for EE, investments with low costs, quick paybacks, and relatively easy technical features have mostly been harvested. As a result, the project—and the wider market— have seen a sharp rise in investment costs per tce of energy savings. At restructuring, this was considered in adjusting the targets. Unit investment costs for industrial EE projects rose more than 22 expected, and at the same time the anticipated investments in the more-expensive buildings sector (assumed to be 20 percent of the AF portfolio) were not made. This circumstance, combined with the exceedance of the target for overall EE investment, led to achievement of the revised PDO Targets 2 and 3. 77. The subprojects financed ranged from small to large, and fell within the range of sectors and technologies targeted by national policies. The subprojects were an average total investment size of US$34 million, and ranged from US$5 million to US$134 million. They were for a range of heavy industrial sectors and power and heat generation and distribution. Ten of Huaxia’s 17 subprojects, and 65 percent of investments, were in the cement and power and heat sectors. For EXIM, the iron and steel industry received 63 percent of investment, and cement 15 percent, collectively representing 16 out of 41 subprojects. Technologies ranged from well-known process modifications, like capturing of waste heat and gases for power generation and other utilization, to more advanced projects like process optimization. However, the intended expansion of the scope of lending through the AF to include building EE did not materialize, despite efforts to do so. The barriers to engaging in building energy retrofits are formidable. In this sector there are, for instance, split incentives between developers, owners, operators and tenants, and the small typical size of building EE projects leads to difficulty in aggregating them into the kinds of large lending packages handled by the PFIs. Nevertheless, the PFIs were able to find sufficient volume of projects in industrial sectors to meet the project targets. More details on subprojects financed by the project are in annex 2. 78. Other targets were exceeded. The end target was slightly exceeded in the case of direct beneficiaries of projects (including both industrial enterprises and ESCOs), and was exceeded by 75 percent in the case of ESCO and building lending—standing at US$105 million compared to the US$60 million end-of-project target. 79. The weighted rating for PDO and GEO outcomes is Satisfactory. At the time of restructuring, achievement of both the PDO and GEO were rated Satisfactory. The same was true at the time the project closed. The weighted rating, based on project funds disbursed before and after the project restructuring, is therefore also Satisfactory (Table 4). Table 4. Split Evaluation: Weighted PDO and GEO Outcomes of CHEEF I Against Original Against Revised Item Overall PDO/GEO PDO/GEO 1 Rating Satisfactory Satisfactory — 2 Rating value 5 5 — At restructuring (March Time of rating at project close — 2013) 3 Weighta 31% 69% — 4 Weighted value 1.55 3.45 5 5 Final rating — — Satisfactory Note: a. Percentage of project funds disbursed before or after PDO change. 80. This achievement of the PDO was accompanied by longer-term and additional important outcomes of project. The project substantially increased the participating PFIs’ capacity to identify and to appraise EE investments, and strengthened their commitment to mainstreaming EE lending as an important business lines through a learning-by-doing process. Since start of implementation, the project has continued to demonstrate project sustainability and 23 mainstreaming impacts on the participating banks. Not only the Beijing-based headquarters of the PFIs, but their provincial and municipal branches, where loans are originated, had improved markedly in capacity. 81. This project was the first to demonstrate that commercial financing of a line of credit line through domestic banks dedicated to EE can be successful in China. The results prove the concept, and have had impact on the GoC’s policy making and on EE market development. The NDRC is considering establishing a similar credit line to leverage Government funds, replacing its past method of providing award funds to EE projects undertaken with commercial funds, an ex post subsidy model that was no longer considered sustainable or effective. 82. Even before the end of the project, the PFIs were already using their own capital to finance more EE projects, and to enter new areas of clean energy financing. Both banks started with no experience with EE projects. Through the project, EXIM developed EE lending as a major business line with its own funding in 2013, financing EE loans of CNY 19.3 billion (US$2.8 billion) with its own funds. At the project’s end, Huaxia was scaling up its green lending business through a dedicated Green Finance Center and implementing the Bank’s new Program for Results operation to finance RE and EE investments in the Jing-Jin-Ji Region. Green credit business now accounts for 7 percent of its entire business at Huaxia, and its Blue Sky Clear Water Fund that finances green projects totals CNY 5 billion. The project thus helped the PFIs to develop capacities that give them the flexibility to take advantage of opportunities in green financing. 83. Despite the relatively small size of the loan compared to the overall lending portfolios of the two PFIs, the project was successful in leading them to create effective units and tools and financing products to take advantage of the market for EE lending—a market that they had previously ignored. The approach succeeded by combining a dedicated fund with a program of TA and capacity building, and by simultaneously bringing to bear the commitment of the PFIs’ high-level leaders and an increasingly capable PMO that was responsive to a very motivated Government agency. The marrying of a GEF grant to the IBRD loan was essential to achieve this. Table 5 shows how the grant funds were allocated, and the end-of-project status of the intermediate results indicators linked to the grant-funded activities.10 The GEF funds were nearly all disbursed, and all targets were met. 10 The GEF grant also provided resources for Minsheng, the PFI of CHEEF II, a loan project designed along similar lines to CHEEF II, and which is the subject of a separate report, ICR-4116. The results of the GEF grant proceeds allocated to Minsheng are treated in this report. 24 Table 5. GEF Grant-funded Activities: Disbursements and Results Performance- NDRC/NECC/ Implementation EXIM Huaxia Minsheng Total based grant PMO Allocated (US$, millions) 1.875 1.875 0.47 2.55 6.73 13.5 Allocated performance-based grant 1.86 0.69 2.55 (US$, millions) Total allocated (US$, millions) 3.735 2.565 0.47 6.73 13.5 Disbursed (US$, millions) 3.72 2.50 0.45 6.73 13.4 Indicators Actual Target EE M&V procedures developed Final (enterprise, project-based) Final report EE demand in pipeline (US$, 500 150 millions) NECC established and operational Established and staffed in 2012 Established and staffed NECC business plan and initial work Completed in 2010 Final program developed Final evaluation of 11th FYP Final evaluation of 11th FYP conducted, and conducted, recommendations to the Made important contributions to the 12th and 13th FYPs recommendations to the 12th and 13th FYPs provided 12th FYP provided 25 84. The GEF funding supported the PFIs to raise their capacity and confidence to undertake EE financing and bolstered their commitment to mainstream EE lending. These included: (a) Extensive training and study tours for PFI staff in headquarters and branches across the PFIs’ system, particularly the staff responsible for risk assessment; (b) Business development to identify deals through market promotion workshops and alliance with industry associations; (c) Market studies in specific sectors such as the building sector and ESCO market analysis; (d) Creation of innovative financial products such as project-based lending and asset- based securitization; and (e) Capacity building for technical, environment, social, and procurement due diligence review. 85. The results of the project’s investments and activities were numerous. The overall achievements are summarized in the following sections. Additional details of the activities and outputs supported are presented in annex 3. (a) Supported national priority EE policies. Project activities made significant contributions to the implementation of 12th FYP and development of 13th FYP. Outputs strongly influenced EE policies, and the recommendations made in many of the policy studies were adopted into policies and regulations promulgated by the Government. This was well beyond the scope of supporting the 11th FYP priorities, as envisioned at appraisal. (b) Built capacity of the PMO (NECC) and allied organizations. Through the project, the NECC has become a leading center for technical support. Project activities supported strengthening of capacity of the NECC and local Energy Conservation Centers, international exchanges (for example, support to Group of Twenty [G20] EE activities, Asia-Pacific Economic Cooperation [APEC] EE task force), and development of EE technology platform and software. (c) Built capacity of the three PFIs (EXIM, Huaxia, and Minsheng). The project supported building of capabilities to perform energy, environmental and social due diligence, held training courses, and supported study tours abroad and domestically. (d) Helped PFIs understand new market segments and develop new products. The project aided market (project pipeline) development, undertook EE market and financing studies in new market segments, and developed innovative financial products for these segments. (e) Developed EE financing policies and mechanisms. Methods to use NDRC/MoF funds to leverage commercial EE financing were explored, banking sector policies for 26 green financing were studied, enterprise green bond guidelines were developed, and an EE financing platform was established. These experiences hold valuable lessons not only for China, but also for other countries that are seeking financing models to scale-up EE investments. (f) Provided assistance to the China Banking Regulatory Commission (CBRC), the banking sector regulator, to develop green financing policies that incentivize banks to mainstream EE financing. The project also financed a series of studies, for example, how to use public funds to leverage commercial financing, green bond guidelines, and design of financing platforms, as well as workshops to provide assistance to the banking sector. 3.3 Efficiency 86. Project efficiency is rated High overall. All project activities have been fully completed, and the designed performance indicators are fully met. 87. Economic and financial analysis support a rating of High. For Component B, financing of EE subprojects, analysis of a representative sample of EE investment subprojects suggests a weighted average internal rate of return of at least 35 percent in economic terms (including the benefits of carbon dioxide emissions reductions valued according to World Bank guidelines as detailed in annex 3), and 15 percent in financial terms, with an associated payback period of 5.9 years. These estimates are conservative based on available data and associated assumptions as described in the following sections, and demonstrate that the project achieved its intended objectives at a high level of efficiency, similar to what was expected at appraisal. Indicators at appraisal and completion are summarized in Table 6. Annex 3 provides details including associated assumptions and methodology. Table 6. Economic and Financial Analysis of CHEEF I Subprojects 4 Sample 9 Subprojects Subprojects Parameter Unit at at Appraisal Completion Total lending investment in subprojects US$, millions 48 505 Average unit investment cost of annual US$/(tce/year) 379 792 energy savings Average emissions intensity of energy tCO2/tce 2.46 3.02 savings Financial Internal Rate of Return (FIRR) %/year 22 16 (including tax) Payback period (including tax) years 3.9 5.9 Economic Internal Rate of Return (EIRR) (including CO2 benefit, excluding local %/year 40 35 pollutants) 88. Financial and economic analysis is not possible for the other project components, which concerned TA, training and policy support. Review of the project makes clear that these soft components were crucial to enabling the PFIs to carry forward the subproject investments financed by this project, as well as projects financed by others (for example, AFD and KfW). 27 Additionally, these other components enabled the PFIs to become active in the larger arena of green financing more quickly and at larger scale than they otherwise would have done. 89. The policy support activities informed, and in some cases led directly to national and local policies and regulations that were promulgated, and helped to shape implantation of the 12th FYP and the design of the 13th FYP. The project’s capacity-building activities helped to strengthen capacity to support and carry out the policy and regulatory changes. These are described in detail in the PMO’s ICR, a summary of which is in annex 6. Of particular importance were the following: (a) For the 12th FYP, CHEEF I supported: (i) Development of the priority EE retrofit program, priority EE technology demonstration program, and national action plan for implementation of the 12th FYP strategy; (ii) EE assessment of greenfield investments (CHEEF-supported studies were adopted as regulations and standards); (iii) Design of the online energy consumption monitoring platform that has been adopted by the Government and piloted in three provinces, and nation-wide scale up of which has been approved; (iv) Development of total energy consumption cap early-warning system (now in operation), which provides alerts if and when targets are in danger of being missed; (v) Incorporation of attainment of EE targets into performance evaluation system for key Government officials; (vi) Developing and tightening of ten EE standards for appliances and industrial equipment, guidelines to implement Top Runner programs, and publication of Top Runner List of refrigerators, air conditioners, and televisions; (vii) Design of EE trading scheme; and (viii) EE measurement and verification for the Top 10,000 Enterprises Program. (b) For the 13th FYP, CHEEF I supported: (i) The Energy Consumption Revolution study, following President Xi’s call for an energy revolution through a long-term national strategy; (ii) A study on the revision of the Energy Conservation Law (EC Law) (last updated in 2005), leading to change in energy appraisal procedures for EE projects; (iii) Allocation of the 13th FYP national energy savings target among provinces and Top 10,000 Enterprises Program; 28 (iv) Development of the 13th FYP energy conservation action plan; (v) Study on alternative energy to replace decentralized coal burning for heating in rural areas; and (vi) Fiscal and financial policy recommendations to use scarce public funds to leverage commercial EE financing in the 13th FYP. (c) The project built capacity of the NECC through the following activities: (i) Support for international activities, such as Chinese leadership of the G20 EE Action Plan and the APEC EE task force, and international study tours for NDRC and NECC officials and staff; (ii) Development and promotion of Energy Management System approaches for enterprises, and an online EE technology platform for information dissemination; (iii) Preparation of industrial EE diagnosis guidelines; and (iv) Training of staff of the NECC and local Energy Conservation Centers. (d) To replicate the successful experience of EXIM and Huaxia in financing EE through credit lines across the banking sector, CHEEF I: (i) Supported the CBRC to develop and to promulgate incentive policies and guidelines to promote EE financing in the banking sector; (ii) Prepared a study on options to leverage Government funds, for example, credit lines, interest rate buy-downs, and EE funds; (iii) Supported establishment of an EE financing platform as a bridge between financiers and the enterprises and ESCOs; and (iv) Developed enterprise Green Bond guidelines. 90. Administrative efficiency is rated High based on timely and effective implementation. The extension of closing date reflected AF and an expanded scope of activities, notwithstanding initial delays and ineligible expenditures that were subsequently addressed satisfactorily. The pace of disbursement varied over the course of the project, but close supervision within the PFIs and by the PMO and World Bank teams identified issues early and led to timely actions to address any delays, and full disbursement of the IBRD loan and over 99 percent disbursement of the GEF grant were achieved within the grace period following project completion. 3.4 Justification of Overall Outcome and Global Environment Outcome Rating Rating: Satisfactory 91. The overall outcome rating is Satisfactory, based on high relevance of the project objectives, high achievement of the project objectives (efficacy) both before and after 29 restructuring, and high efficiency throughout. Although the intended expansion of lending through the AF to include EE in buildings, there was flexibility within the PDO and the GEO to achieve the end targets through EE investments in industry, and the project achieved its main intended impact of providing a platform for demonstrating the scaling up of the onlending model for financing EE. Moreover, as a result of the project, the PFIs have become prepared for and are already participating substantially in the broader green financing market that is developing in China, including RE and pollution reduction in addition to EE project financing. Thus, the rating remains Satisfactory after accounting for weighting of the rating before and after the restructuring, which took place in October 2011, when disbursement stood at 31 percent. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 92. Gender, poverty, and ethnic minorities were not identified as concerns in the PAD. The benefits of EE, however, are multiple and go beyond enhancing economic and social development, reducing pollutant emissions and improving environmental sustainability, and strengthening energy security. These can include, for instance improved comfort and health of occupants of industrial, commercial, and residential buildings. (b) Institutional Change/Strengthening 93. This project has made significant and specific contributions to China’s current package of EE policies and programs, which has evolved over many years and is unlike any other in the world. Over the course of the project, China has continued its aggressive and effective drive for improving EE, combining strong regulatory measures with market-based programs. Energy consumption is now regulated at national, provincial, and local government and large enterprise levels. The foundational framework for the regulatory system was established during the 11th FYP (2006–2010) with mandatory national, provincial, and local targets for energy intensity (energy used per unit GDP). Compliance with these targets is taken very seriously and reviewed every year through Government systems. Failure to achieve targets carries political and career consequences for the Government leaders involved. During the 12th FYP (2011–2015), nonbinding ‘guidance’ total energy consumption caps were added to new mandatory energy intensity targets. In the current 13th FYP (2016–2020), mandatory energy consumption caps at national, provincial, and local levels have been added, alongside new energy intensity targets. Provincial authorities typically place heavy emphasis on EE programs in industry as their main endeavor to ensure that targets will be met, offsetting some unpredictability in other sectors. 94. This regulatory environment and persistent attention from the highest levels of Government has generated continued demand for the EE investments. At the same time, however, the market has shifted, as the relatively large retrofit investments financed by CHEEF have dwindled, owing in part to the harvesting of existing, financially viable potential projects (and consequent smaller size and higher financial and transactions costs of remaining projects) and the rising relative attractiveness of RE (wind and solar photovoltaic power) projects. However, as a result of the project, the PFIs have become prepared for and are already participating substantially in the broader green financing market that is developing in China, including RE and pollution reduction in addition to EE project financing. 30 (c) Other Unintended Outcomes and Impacts (positive or negative) 95. The economic slowdown and decelerating demand for industrial goods that occurred during the course of the project impacted implementation, as described above, reducing the scope for deal origination for the PFIs. Moreover, the average cost of EE investments rose, as less- expensive projects were done first nation-wide. The building sector remained very difficult for the PFIs to enter, despite the efforts of the PFIs, such that all subprojects remained in the industrial sector after restructuring. Even though the building sector was not entered, the impact of the project was still highly relevant in the other sectors, and the project’s original and revised outcome targets were achieved or exceeded. 4. Assessment of Risk to Development Outcome and Global Environment Outcome Rating: Negligible to Low 96. There is a high likelihood that the PDO and GEO outcomes will be maintained, and that investment like those financed by the project will continue utilizing domestic capital. The subprojects financed by the project will continue to generate energy savings after project closing, in general for at least the next decade. Current ownership of the project by the Government is high, and the PFIs have used it as a jumping-off point to enter into the larger arena of green financing. The PFIs are maintaining and expanding the units they set up to implement CHEEF I, and are diversifying their purview to include clean energy sectors other than industrial EE. Thus, the PFIs are able to continue to assess and to finance sound EE projects in industrial sectors going forward, and to develop pipelines of clean energy projects in response to future evolution of market conditions. 97. The policy environment is also supportive for sustainability of outcomes. China continues to be dedicated to improving EE, and the adoption of energy caps in the 13th FYP will create even more demand for doing more with less—not only ensuring that new facilities built will be more energy efficient, but also providing pressure (and perhaps even a market) for energy conservation from existing facilities. The policies and regulations developed by and with input from this project will play a part in implementation of these new and more stringent goals. China’s commitment to limiting emissions of CO2 emissions to a peak at or around 2030 reinforces the environment for continuing relevance of the project outcomes. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory 98. The World Bank team worked closely with the Government to develop the project concept, which was founded both on many years of experience cooperating in the field of EE, and based on changing circumstances in China and considering lessons from other countries. The PDO and the GEO were well-defined, simple without being overly restrictive (particularly after AF/restructuring), and realistic. The M&E design was balanced, with indicators that were practical to measure and to verify, which was especially important given the participation of financing institutions not previously accustomed to this kind of oversight. The mix of quantitative and qualitative indicators was appropriate, given the project’s ambition not only to directly support 31 specific investments, but to help build capacity for future investments, although the inclusion of several intermediate outcome indicators that were merely subsets of the PDO and GEO indicators (for example, energy savings and CO2 emissions reductions from EE subprojects instead of from the whole portfolio of subprojects) was unnecessarily duplicative. The targets proved to be appropriate to the resources available for the project, and did not need to be revised, even as circumstances facing the PMO and PFIs evolved. 99. Starting a project with the intent of creating a new entity to be the PMO (NECC, an agency under the direction of the NDRC) was a risk, but one that was founded on the demonstrated long- term commitment of the GoC, and on the deep trust formed between the NDRC and the World Bank over many years of engagement. (b) Quality of Supervision Rating: Satisfactory 100. The World Bank team conducted regular supervision missions, initially annually, and then semiannually from about the time of approval of AF. It engaged frequently with the PMO and the Project Implementation Units to support their implementation, resolving issues as they arose, and seeking the attention and support of the Government as needed. Any delays in implementation were addressed with alacrity. Implementation Status and Results Reports were informative, fair and candid, and completed on time. The World Bank team was very flexible in designing the project to respond to the Government’s needs and was proactive with restructuring to adjust the project to the new environment. 101. As this was the first onlending operation for EE, fiduciary oversight was strong. In the early stages of the project, oversight by the World Bank team and auditing found several instances of eligible expenditures. The PFIs, with guidance from the World Bank team, quickly took remedial actions and the latter stages of the project saw good performance, as they built up systems and norms for monitoring and compliance. 102. Safeguards oversight was also effective. Owing to the nature of the project, environmental impacts were expected to be minor, but the PFIs, with support from World Bank safeguards specialists, established appropriate systems for monitoring of subproject performance. When an unforeseen instance of relocation was found for a subproject of Huaxia, the team took immediate action to work with the PFI to resolve the situation, and to ensure that the OM was modified to ensure proper handling of any future instances. One such instance was encountered, and inspection by the World Bank team showed that Huaxia and the subproject were in compliance. 103. This project was a platform for the World Bank to conduct EE policy dialogue with the NDRC, including on the EE priority programs for the 12th and 13th FYPs, and just-in-time policy support as needed. 104. The project also enabled the World Bank team to provide extensive support to the PFIs, particularly during the initial and final stages of project implementation, to help them build capacity for subproject origination, to broaden their understanding of new market segments, and to develop innovative financing products. 32 105. The PMO and the PFIs all reported their satisfaction with the professionalism, the expertise, and the readiness and willingness to support their implementation of the project. (c) Justification of Rating for Overall Bank Performance Rating: Satisfactory 106. Based on satisfactory performance both during design and implementation as described above, and supported by feedback from the PMO and the PFIs, the overall rating of World Bank performance is judged to be Satisfactory. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory 107. The performance of the NDRC, which remained highly engaged throughout the project, was satisfactory. It provided timely guidance and support to the PMO, and cooperated with the World Bank team to address issues of project design and implementation. It provided direction to the PMO on policy development and capacity-building activities, and ensured that outputs were designed so they could make effective contributions to the national policy making process. 108. The NDRC was attentive both to the policy support components, where the recommendations made in many policy studies were adopted into policies and regulations that were promulgated during the project, and to the EE investment components. The NDRC regularly met with the PFIs, recommended potential subprojects, and took measures to urge them to accelerate project implementation. In the case of Minsheng (CHEEF II), which did not perform as well as the two PFIs of CHEEF I, the NDRC took special care to try to incentivize improvement in performance. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 109. PMO. The performance of the PMO, which was newly established during the initial stages of the project, was Satisfactory. While a change in leadership of the PMO led to a short period of delay, the hiring of a highly capable new head through a competitive process led to even stronger performance later on. The PMO cooperated very well with the World Bank team, and was active in providing support to the PFIs, which was essential in assisting them to learn compliance with World Bank systems, and how to effectively utilize the resources available through the project, particularly the GEF funds. 110. PFIs. The performance of EXIM and Huaxia was Satisfactory overall. As is common to many projects, initial unfamiliarity with World Bank systems led to some issues that needed to be addressed. Turnover of staff in the PFIs, as is common in large commercial banks, was a constant challenge, but a number of staff, particularly at Huaxia, were allowed to remain in place and develop further expertise. Nevertheless, both EXIM and Huaxia made significant efforts to develop their dedicated teams, to provide performance incentives to staff and branches, to establish effective EE financing procedures and regulations, and to develop new financial products to implement the projects and mainstream EE financing. 33 111. The performance of Minsheng, which was the PFI for CHEEF II (a US$100 million loan for EE onlending, designed after CHEEF I) was Moderately Unsatisfactory. Turnover among team members was quite high, with six distinct teams over the course of its participation in the project. While each new team demonstrated willingness and ability, none were in place long enough to become effective. Moreover, there appeared to be issues in internal organization. One team in particular was able to affect implementation of a significant set of market research activities, but by themselves these were insufficient to make a large difference. This negatively impacted both the implementation and eventual outcome of both the CHEEF II loan project, and the activities to support the CHEEF II loan that were implemented under the GEF portion of CHEEF I. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory 112. The overall rating is Satisfactory based on the overall performance of the Government, the PMO, and the two key PFIs for this project, EXIM and Huaxia, as described above. These have shown strong ownership of the project results, and have demonstrated their intent to carry the lessons and capacities resulting from this project into their future work. The remaining PFI, Minsheng, affected a very small share of the GEF grant (just over 3 percent), and its impact on the overall rating is thus correspondingly small. 6. Lessons Learned 113. The project yielded a number of important lessons: (a) PFIs’ commitment and internal organization are essential factors in the success of EE lending. There is no single ingredient to this; rather, commitment is exhibited in a number of areas, including management commitment, formation of and long-term support for dedicated teams, provision of incentives to staff, and flexibility and innovation in developing and adapting financial products. (b) TA has a high payoff. The PFIs found the TAs to be very important in several ways, from generating knowledge about unfamiliar market segments, to becoming aware of new market opportunities, to designing new products to take advantage of them. Even learning how to work with World Bank financial management and safeguards systems paid off, and helped the PFIs adapt more quickly to China’s evolving banking regulatory environment. While initially seen as an onerous requirement, training in World Bank systems prepared PFI staff to handle new, more stringent national regulations in these areas. Units with staff so trained found that these staff were frequently ‘poached’ by other units that needed such capabilities. (c) Generating sufficient deal flows has not been easy. The economic slowdown hit energy-intensive manufacturing industries, which were the original target of the project, particularly hard. Additionally, as EE projects have been undertaken nationwide, and as the number of large industrial enterprises has shrunk owing to consolidation, low-hanging fruit, in the form of discrete, large retrofit projects affecting single processes or even single pieces of major equipment have mostly been harvested. Great potential still lies in systemic retrofits, but these tend to be technically 34 complex and difficult to evaluate. The PFIs, with support from the PMO and the World Bank team, continually adjusted the approach to implementation to adapt to the changing market. (d) Balance sheet financing remains the preferred model for bank lending. Encouraging participating banks to undertake project-based financing and expand support to small and medium enterprises and ESCOs, which may be technically capable and have strong projects but weak balance sheets, was and remains a major challenge. The project addressed this, particularly in training of staff in units responsible for project risk evaluation, but it remains a challenge throughout the banking system. Other aspects of the project also helped to institutionalize project- based financing as an alternative to traditional approaches, including business development to identify potential deals through market promotion workshops and alliances with industry associations, market studies of targeted sectors, and creation of new financial products such as project-based lending and asset-based securitization. (e) Building EE remains an extremely tough market segment for financing institutions to lend to. Despite allocation of significant resources after the restructuring opened up the building sector, in addition to industry, to eligibility for IBRD loan financing, the PFIs were unable to find any building EE projects suitable for financing, whether single subprojects, or packages of subprojects. The potential remains very large, and continued innovation is needed in this sector. (f) Flexibility in project design is required. This proved especially true for the GEF components. As economic and market conditions evolve over the course of a years- long project, it is important to leave room to change and to adapt capacity building and policy studies as national priorities shift. At the project design stage, it was not possible to envision all the required policy studies and TA activities. During implementation, the project team made adjustments and adaptation to meet the Government’s changing priorities, which were also reflected in the World Bank’s dialogue with China. (g) Timing of implementation can lead to challenges, requiring flexibility to respond. In the early years of the project, the industrial economy was quite strong, and many technically and financially EE projects were available. This was when the PMO and the PFIs were building capacity and learning to utilize the new financing instrument provided by the project. By the time that they were well-practiced in its use and ready to scale up, in the latter stages of the project, softening energy prices and demand for industrial products had reduced the pool of eligible projects, at the same time that the gradual devaluation of the CNY rendered the U.S. dollar-denominated loans offered through the project less attractive. Additionally, the market demand for financing of RE projects—which also reduce CO2 emissions—was on the rise. Introducing flexibility in scope for implementation in future projects is needed to adapt to Government’s emerging priorities and changes in the economic and technical environment. This also highlights the importance of capacity building; the skills of the EE units in the PFIs were significantly strengthened in the early years of the 35 project, so they were able to continue to identify and finance industrial EE investments even in the more challenging environment. (h) Long-term, programmatic engagement has substantial impact. This project was founded on long-term dialogue with government, and resulted in a program that combined multiple activities. The World Bank was able to respond with the blended resources needed (GEF grant plus IBRD lending) needed simultaneously to maintain policy dialogue, to carry out TA, and to finance investments. At the same time, the programmatic approach runs the risk of becoming a piecemeal approach; in this project, the fragmentation of policy study contracts weakened strategic focus. The programmatic approach also requires intensive supervision from the World Bank team. (i) Individuals matter. To the extent that the project was achieved its goals in a cost- effective manner, it owes much to the competent project management teams, with contributions from world-class international and Chinese experts. 7. Comments on Issues Raised by Borrower, Implementing Agencies and Cofinancier 114. No comments were received on the ICR from the borrower, the PMO, the PFIs, or the GEF. 36 Annex 1. Project Costs and Financing (a) Project Cost by Component (in US$, millions equivalent) China Energy Efficiency Financing and Additional Financing - P084874 and P123239 Appraisal Estimate Actual/Latest Estimate Percentage of Components (US$, millions) (US$, millions) Appraisal Component A: Promotion of EE 8.8 8.8 100 Financing Component B: Energy Conservation 999.0 1,417.9b 142 Investment Lending Component C: National Policy Support 0.0 0.0 and Capacity Building Component D: Project Implementation 0.3 0.3 100 Support, Monitoring and Reporting Total Financing Required 1,008.1 1,427.0 142 China Energy Efficiency Financing - P098916 Appraisal Estimate Actual/Latest Estimate Percentage of Components (US$, millions) (US$, millions) Appraisal Component A: Promotion of EE 9.9 6.7 67 Financing* Component B: Energy Conservation 0.0 0.0 Investment Lending Component C: National Policy Support 2.8 5.9 221 and Capacity Buildinga Component D: Project Implementation 0.8 0.8 100 Support, Monitoring and Reporting Total Financing Required 13.5 13.4 99 Grand Total 1,021.6 1,440.4 141 a Funds originally allocated to performance-based grants under Component A were reallocated to policy support and capacity building under Component C. b The AF of investments was mainly in the form of equity investments by host enterprises, per Table (b) below. 37 (b) Financing P084874 & P123239 - China Energy Efficiency Financing & AF Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (US$, (US$, millions) Appraisal millions) Borrower 6.3 6.3 100 International Bank for Reconstruction 300.0 300.0 100 and Development Loan Borrowing Country's Participating 402.8 416.8 103 Financial Intermediaries Sub-borrowers (Industrial Enterprises) 299.0 703.9 235 Total 1,008.1 1,427.0 142 P098916 - China Energy Efficiency Financing: GEF Grant Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (US$, (US$, millions) Appraisal millions) GEF 13.5 13.4 99 Total 13.5 13.4 99 38 Annex 2. Outputs by Component 1. The outputs of this project were numerous, and are covered in detail in the Borrowers’ ICRs. The following sections provide a brief overview of some of the major outputs, without repeating material in the body of the ICR. Component A. Promotion of Energy Efficiency Financing 2. This component removed key barriers to developing energy conservation financing businesses in the domestic banking sector primarily for medium and large-size industrial energy conservation investments, expanded under the AF to include the buildings sector and ESCOs. 3. Huaxia’s program, for instance, included a number of studies that were crucial to helping it understand unfamiliar market segments (Table 2.1). Notable among these was a series concerned with energy performance contracts (EPCs) and the ESCOs that carry them out. This business is central to scaling up the EE business, and helped build awareness and capability in the one of the commercial banks that will provide much-needed financing. Notably, this project also supported policy development in this arena, a complementary development necessary to build a healthy environment for this segment of the EE business to thrive. 4. The program also encompassed setting up a dedicated EE unit, and holding 30 training sessions at branches around the country, attended by over 2,000 staff during the course of the project ( 39 6. Table 2.2). A number of the trainings served multiple purposes, supporting not-only the World Bank project, but also providing training to staff implementing an AFD-financed project that initially supported lending to EE projects, but later turned toward RE projects, as the market for the former slowed and for the latter accelerated. This is a prime example of how the project’s impact was felt beyond the limits of the lending directly supported by CHEEF I. 7. EXIM’s shares of expenditures on its corresponding program are show in Figure 2.1. For EXIM, perhaps the most important use of the grant funds was to develop and improve its management system for handling EE projects. 8. As a measure of the confidence gained through this project, both EXIM and Huaxia applied to become implementing agencies of the Green Climate Fund in 2016. Some of Huaxia’s GEF- funded activities supported preparation of the World Bank’s Program for Results operation to reduce air pollution through deployment of clean energy in the Jing-Jin-Ji region by building a robust pipeline in the target and neighboring regions, and by preparing an OM and independent third party verification protocols. 40 Table 2.1. Huaxia: GEF-supported Research Activities Topic Date Details Opportunities in Developing the Energy Conservation and Environment Protection Oct. 2015 Industry 1. Status quo and barriers to developing EE industry in Beijing, Tianjin and Hebei (Jing-Jin-Ji [JJJ] region) Research on Financial Support for the 2. Policy support, integrated market mechanism and safeguard measures for development of EE Synergetic Development of Energy Dec. 2014 industry in JJJ region Efficiency Industry in Jing-Jin-Ji Region 3. Expanding investment portfolio and boosting financial product innovation for typical clients in EE industry 1. Current regulatory system on asset securitization and future development trend Analysis and Promotion of Asset 2. Improving awareness and capacity for EPC asset securitization through various business models June 2014 Securitization of EPC Projects 3. Strengthening the financial support to ESCO industry through asset securitization 4. Research on current situation of EE industry 1. Recent market dynamics of low-carbon financial products and derivatives 2. Designing and testing low-carbon financial products compliant with regulatory requirement; Development and Promotion of Financial March improving and promoting such products to build low-carbon brand Products for Low-Carbon Projects 2013 3. Trainings for Hua Xia staff on banking peer moves, low carbon product features, and risk management, with reference to bank operations, market situation and policy changes 1. Improving capacity and understanding of iron & steel industry: status, relevant EE technologies, Industrial Analysis and Promotion Dec. 2010 energy saving potential, and economic benefits 2. Disseminating energy saving technologies to iron & steel industry through green lending 41 Table 2.2. Huaxia: GEF-supported Capacity-building Activities Year No. Province Department Trainees Trainers or Topic Credit Examination Center (headquarters & branches), Corporate 1 National 72 First training class for AFD project Banking Dept (branches) Credit Examination Center (headquarters & branches), Corporate PMO, Energy Research Institute, NDRC, 2 Beijing 94 Banking Dept (branches) Energy Management Company Association 2009 Corporate Banking Dept, subsidiary operation units (Shijiazhuang 3 Hebei 98 National Energy Administration, Hebei DRC branch), regional Credit Examination Center Shandong Economic and Information Corporate Banking Dept, subsidiary operation units (Jinan & 4 Shandong 75 Technology Commission EITC), Shandong Qingdao branches), regional Credit Examination Center Finance Bureau, Shandong industry experts Corporate Banking Dept, subsidiary operation units (Xi’an Shaanxi DRC, Shaanxi Xinglong Cogeneration 5 Shaanxi 66 branch), regional Credit Examination Center Co. Ltd. Credit Examination Center (headquarters & branches), Corporate 6 National 75 Second training class for AFD project Banking Dept (branches) Corporate Banking Dept, subsidiary operation units (Wuhan 7 Hubei 70 Prof. Liu Miao branch), regional Credit Examination Center Corporate Banking Dept, subsidiary operation units (Taiyuan 8 Shanxi 131 Shandong EITC, Shanxi DRC 2010 branch), regional Credit Examination Center Corporate Banking Dept, subsidiary operation units (Nanjing, Jiangsu EITC, Jiangsu ERI; Energy and 9 Jiangsu Wuxi, Suzhou & Changzhou branch), regional Credit 145 Environment School, Southeast University Examination Center Credit Examination Center (headquarters & branches), Corporate 10 Sichuan 60 Experts from AFD Beijing Office Banking Dept (branches) Corporate Banking Dept, subsidiary operation units (Chongqing 11 Chongqing 107 Chongqing EITC branch), regional Credit Examination Center Fujian DRC, Finance Bureau, and Environment Corporate Banking Dept, subsidiary operation units (Fuzhou, 12 Fujian 73 Protection Bureau; experts from key industrial Quanzhou & Xiamen branch), regional Credit Examination Center sectors 13 Regional Promotional activity for Jiangsu key clients 40 Key clients of Huaxia Corporate Banking Dept and Credit Examination Dept 14 National 72 Third training class for AFD project (headquarters, branches) 2011 Corporate Banking Dept of Changsha branch, regional Credit 15 Hunan 70 Hunan DRC Examination Center, and branch’s subsidiary operation units. Guangxi DRC, Finance Bureau, and Corporate Banking Dept, subsidiary operation units (Guangxi 16 Guangxi 70 Environment Protection Bureau; experts from branch), regional Credit Examination Center key industries Corporate Banking Dept, subsidiary operation units (Guangzhou, Fujian DRC, Finance Bureau, and Environment 17 Guangdong 51 Dongguan & Foshan branch), regional Credit Examination Center Protection Bureau; experts from key industries 42 Year No. Province Department Trainees Trainers or Topic 18 Shenzhen 60 ERI, EMCA Tianjin Environment Protection Bureau, Tianjin Corporate Banking Dept, subsidiary operation units (Tianjin 19 Tianjin 60 Industry & Information Technology Committee branch), regional Credit Examination Center (IITC) Corporate Banking Dept, subsidiary operation units (Shenyang 20 Liaoning 80 Shenyang DRC; Shenyang IITC branch), regional Credit Examination Center Corporate Banking Dept, subsidiary operation units (Changchun 21 Jilin 40 Jilin Environment Protection Bureau, Jilin IITC 2012 branch), regional Credit Examination Center ERI, experts from Chinese Research Academy 22 Chongqing Headquarters, and Credit Examination Center at branch level 70 of Environmental Sciences Training under AFD Energy Efficiency and Renewable Energy 23 Lijiang 70 ERI Program 24 Changsha Headquarters 50 Corporate Banking Dept, Huaxia headquarters Shijia- 25 Headquarters and Corporate Banking Dept at branch level 70 Corporate Banking Dept zhuang Corporate Banking Dept, subsidiary operation units (Shanghai 2013 26 Shanghai 90 Shanghai DRC, EMCA Shanghai branch), regional Credit Examination Center Corporate Banking Dept, Huaxia headquarters; Corporate Banking Dept and Marketing Dept at branch level, and 2014 27 Beijing 113 Prof. Haipeng NIU, Renmin University; key sub-branches experts, Hengtai Securities Corporate Banking Dept and Marketing Dept at branch level, and Training on green lending business throughout 2015 28 Beijing 100 key sub-branches Huaxia 29 Zhengzhou Corporate Banking Dept at branch level, and key sub-branches 50 Training on PforR program and CHEEF 2016 30 Beijing Corporate Banking Dept at branch level, and key sub-branches 120 Green lending business Total 2,342 43 Figure 2.1. EXIM’s Expenditures of GEF Grant Funds 9. The PFI of CHEEF II (Loan No. 79350, P113766), Minsheng, was the recipient of assistance similar to EXIM and Huaxia. This component strengthened the capacity of Minsheng in: (a) identifying and appraising subprojects and conducting due diligence on subloan beneficiaries; (b) developing credit and risk management processes for EE investments; (c) managing the social and environmental impacts of the Project and its future EE lending portfolio; (d) developing a low-carbon lending business; and (e) exploring the application of the Equator Principles in its lending practices. In the course of this, Minsheng commissioned research reports (Table 2.3) for use in the foregoing activities. The activities were financed by Minsheng with its own resources at US$0.8 million and by GoC from the GEF grant (US$0.47 million) under the on- going World Bank financed CHEEF. 44 Table 2.3. Minsheng: GEF-supported Research Activities Topic Implementing Organization Recent developments in the ESCO industry and new areas of China Standards Research Institute & ESCO services. Lurong (Beijing) Investment Consortium Review of recent studies, reports and industry and market Zhongguancun New Century data on solar, wind, energy service and energy conservation Photovoltaic Tech Alliance industries Appraisal of current status and trends of EE in the iron and Metallurgy Industry Design Institute steel industry Introduction and application of the Equator Principles in Beijing Weilaifangzhou Consulting Chinese commercial banks Appraisal of current status and trends of EE in the Beijing Zero-Carbon Times nonferrous metals sector Management Appraisal on current status and trend of the gas flaring Dehuitongli (Beijing) Oil Tech Services reduction in the oil and gas industry sector Set up projects management information system（MIS） Procurement, finance, documents and Project achievement Beijing Yingkangda Tech dissemination Research and Study in China commercial banks’ risk portfolio analysis and prevention management in green Beijing North Shibo Investment credit Component B: Energy Conservation Investment Lending 10. This component led to investments in 41 subprojects financed by the two PFIs. Funding for these included not only investment lending but also equity investments by beneficiary enterprises. Subprojects financed by Huaxia and EXIM are listed in Table 2.4 and Table 2.5. These represent the direct impact of the project’s demonstration of the credit line for EE projects, leveraging public funds (IBRD loan) with both commercial financing (from the PFIs) and equity from the beneficiary enterprises. 45 Table 2.4. Subproject Loan Disbursements by Huaxia Investment CO2 Reduction No. Subproject Owner Subproject Category (CNY (10,000 10,000) tons/year) Technical renovation, chemical 1 15,360 17.1 manufacturing processes China Haohua Chemical 2 Energy system optimization 8,357 15.9 (Group) Corporation Technical renovation, chemical 3 46,200 26.4 manufacturing processes Power generation with waste heat 4 11,639 8.8 from cement production line Power generation with waste heat 5 6,693 4.6 China United Cement from cement production line Corporation Power generation with waste heat 6 6,123 4.1 from cement production line Power generation with waste heat 7 6,207 3.9 from cement production line China United Cement Power generation with waste heat 8 7,225 6.3 Lunan from cement production line Sinoma Cement Power generation with waste heat 9 10,830 14.9 Corporation from cement production line Fujian Xinhai Power generation with recovered 10 12,000 9.8 Metallurgy. gas from steel production line Wuxi Xielian 11 Heat supply network construction 43,300 45.4 Thermoelectricity Weihai Blue Star Glass Power generation with waste heat 12 6,607 3.7 Holding from glass production line Power generation with waste heat 13 Taibo Changjiang Glass 4,573 2.0 from glass production line Utilization of waste heat from Beijing Taiyanggong 14 recirculating cooling system in 11,200 4.6 Gas & Thermopower thermal power plant Tangshan Sanyou 15 Combined heat and power 43,500 17.8 Thermal Power Tianji Coal Chemical Denitrification and dedusting 16 14,000 4.4 Group renovation Chifeng Fulong Thermal 17 Hot water boiler heating 51,386 16.8 Power Total 305,20 206.4 46 Table 2.5. Subprojects Loan Disbursement by EXIM CO2 Reduction Investment No. Subproject Owner Subproject Category (10,000 (10,000 yuan) tons/year) 1 Linglong Chemical Waste gas power generation 12,016 14.54 2 Hubei Huaxin Cement waste heat power generation 31,616 26.45 CDQ, heating furnace, steam 3 Wuhan Iron and Steel 35,600 26.96 utilization 4 Luquan Dingxin Cement Cement waste heat Recovery 6,065 8.28 5 Henan Billions Co., Gas waste power generation 3,500 3.83 Henan Jiyuan Iron and 6 Gas waste power generation 5,399 15.08 Steel Shandong Shiheng Iron 7 Gas waste power generation 26,636 29.55 and Steel 8 projects in furnace heat 8 Nanjing Iron and Steel recovery, waste recovery and 40,726 23.9 device Optimization 9 Valin Steel CDQ and TRT 27,235 20.1 TISCO 10 Sintering waste 22,815 16.69 Stainless 11 Tianjin Iron and Steel Coal injection process 15,980 29.46 12 Henan Zhonglian Glass Waste heat Recovery 7,153 5.49 13 Chengdu Taibo Waste heat Recovery 5,437 4 Energy saving and waste heat 14 Anhui Fangxing Glass 14,150 5.86 power generation 15 Lafarge Cement Waste heat recovery 31,150 17.6 Qinghai Qiaotou 16 Energy optimization 15,000 16.1 Aluminum Industry 17 Chengming Paper Energy saving optimization 26,264 13.49 CDQ waste heat power 18 Handan Iron and Steel 38,098 18.57 generation 19 Handan Iron and Steel Gas-steam CCPP 92,164 60.97 Qingtongxia Aluminum 20 Electrolyzers save electricity 17,942 11.04 Industry Energy optimization in steel 21 Wuyang Iron and Steel 22,000 13.46 mills State Grid Energy 22 Power optimization 50,786 20.85 Service Co., Ltd 23 Valin Steel Waste gas power generation 42,687 37.86 24 Benxi Iron and Steel CCPP 71,100 25.08 Total 661,519 523.5 11. Huaxia’s subprojects were located in most regions of the country, with nearly a third of the nation’s provinces represented (Figure 2.2). By far the largest amount went for investment in power and heat sector projects, such as utilization of waste heat and construction of heating networks, followed by chemicals and cement (Table 2.6). 47 Figure 2.2. Locations of Subprojects Financed by Huaxia (Share of Total Financing) 4% 河北省 3% 15% 河南省 Henan 吉林省 Jilin 16% 山 东 Shandong 13% 内蒙古 Inner Mogolia 5% 广 东 Guangdong 3% 福建 Fujian 8% 江 苏 Jiangsu 13% 北京 Beijing 20% 山西 Shanxi Table 2.6. Industrial Subsectors of EE Subprojects Financed by Huaxia CO2 Investmen Total IBRD Counterpart Energy Reductio t per Unit No. of Sub- Investment Funds Funds Savings Industry n (10,000 of Energy Projects (10,000 (10,000 (10,000 (10,000 tons/year Saving yuan) dollars) yuan) tce/year) ) (yuan /tce) Chemical 3 69,917 1,003 15,045 24.3 59.3 2,877 Cement 6 48,717 3,245 3,945 17.4 42.5 2,794 Iron & 1 12,000 660 4,200 4.0 9.8 3,000 Steel Electricit 4 149,386 4,450 38,517 34.7 84.7 4,303 y Glass 2 11,179 637 2,400 2.3 5.6 4,804 Coal 1 14,000 578 5,800 1.8 4.4 7,778 Total 17 305,200 10,573 69,907 84.6 206.4 3,608 12. The locations of subprojects finance by EXIM were also spread across all regions of the country (Figure 2.3). In terms of the portfolio, however the financing of projects was heavily weighted toward the nonferrous metals industry (Figure 2.4), distantly followed by chemicals and electric power generation. 48 Figure 2.3. Locations of Subprojects Financed by EXIM Figure 2.4. Industrial Subsectors of EE Subprojects Financed by EXIM (share of total financing) 49 Component C: National Policy Support and Capacity Building 13. This component strengthened national government capabilities to implement national energy-efficiency policies and programs. Establish and build capacity of NECC 14. This component helped to establish the NECC in 2010, which then became home to the PMO. It then proceeded to gain capacity continuously throughout the period of the project. It successfully executed its responsibilities for providing support to the PFIs in executing their duties under the project. NECC’s capacity was supported through the following activities: (a) support to international exchanges such as G20 EE action plan and APEC EE Task Force, and international study tours for NDRC and NECC; (b) promotion of Energy Management System and EE technology platform; (c) industrial EE diagnosis guidelines; and (d) training provided to NECC and local Energy Conservation Centers. Support for priority EE policies 15. GEF funding has made significant contributions to the implementation of the EE program for the 12th FYP and development of the EE priority programs for the 13th FYP. The policy recommendations from the studies have been translated into many policies and regulations. 16. For the 12th FYP, the project supported: (a) development of the 12th FYP priority EE retrofit program, priority EE technology demonstration program, and 12th FYP EE implementation action plan; (b) EE assessment for green field investments, where the results from the project supported studies became regulations and standards; (c) design of the online energy monitoring platform, which has been adopted by the government and piloted in three provinces, and the scale-up program to nationwide has been approved; (d) total energy consumption cap warning system, which has been put into operation; (e) the government performance evaluation system incorporating EE as a criterion; (f) the improved EE standards and the Top Runner program has resulted in developing and tightening 10 EE standards for appliance and industrial equipment, and government guidelines to implement EE Top Runner Programs and government’s publishing Top Runner List of fridges, air conditioners, and televisions. To continue this effort, implementation details on the program and Top Runner lists of other key equipment and appliances are being future developed; 50 (g) design of EE trading scheme; and (h) EE measurement and verification for the 10,000 priority enterprises. 17. The project has also played an important role in supporting the more recent high-level government priorities and the development of priority EE programs for the 13th FYP: (a) Energy Consumption Revolution study, following President Xi Jinping’s call for an energy revolution through designing a long term strategy at the national level; (b) study on the revision of EC Law, leading to change in energy appraisal procedures for EE projects; (c) allocation of the 13th FYP EE target to provinces and the priority 10,000 enterprises; (d) development of the 13th FYP energy conservation action plan; (e) study on alternative energy to replace decentralized coal burning for heating in countryside; and (f) fiscal and financial policy recommendations on how to use government funds to leverage EE financing in the 13th FYP, guiding government’s design for a more market based mechanism to support EE investments with government budget. Developing EE financing policies 18. To enable replication across the baking sector the successful experience of EXIM and Huaxia Bank with the credit line model, which leverages limited government funds, the GEF funding was also used for: (a) support to the CBRC to develop incentive policies and guidelines to promote EE financing in the banking sector; (b) study of various options using the government budget such as replicating the credit line model, interest rate buy-down, establishing an EE Fund, and so on; (c) support the establishment of an EE financing platform as a bridge between the financiers and the enterprises/ESCOs; and (d) development of enterprise Green Bonds guidelines. Component D: Project Implementation Support, Monitoring and Reporting 19. This component, carried out by the PMO, mostly involved the recruitment of consultants and limited incremental operating cost, such as office rental, basic equipment, utilities and travel, and so on. Due to the innovative character, scale and complexity of the project, GEF support was proposed to assist the government in project implementation support, and M&E. The funds were used for assistance in the coordination of TA activities to the banks and the government, as well as organizing project monitoring, evaluation, and reporting activities. 51 20. The funds also paid for assistance to support the independent verification of energy conservation lending for the allocation of the performance-based GEF grant and to monitor energy savings performance of subprojects financed by the PFIs. These capabilities were essential building blocks for the banks to undertake their entry into green financing, and enabled them to innovate and provide new products for this growing market. 52 Annex 3. Economic and Financial Analysis 1. Project efficiency is rated as High, based on high efficiency of a representative sample of EE investment subprojects, and high implementation efficiency as detailed below. Key indicators are summarized in Table 3.1 below. Analysis at project appraisal 2. According to the PAD, the project was built on the premise that the expected type of EE subprojects would be economically justified if they were financially viable. The PAD noted that most such investments are economically justified, especially at high energy prices, which were expected to prevail in the medium term. In China, where coal is the dominant fuel, the economic justification would be even stronger because of the significant environmental benefits expected from EE investments. Analyses conducted during project preparation, as outlined below, validated the conclusion that typical subprojects would both be financially viable, and have economic returns exceeding financial returns. For this reason, the PFIs were required to analyze and confirm that selected subprojects were financially viable without necessarily further analyzing expected economic impacts. 3. A preliminary study for CHEEF found that investments in 56 technologies across the iron and steel, chemical, and cement industries had a median FIRR of 27 percent, and a median payback period of 3.3 years. Eight of the technologies had payback periods longer than eight years. To be eligible for financing, subprojects would have to demonstrate a payback period of less than 10 years, based on the cash flow benefits derived from associated energy savings. 4. Further economic and financial analyses were carried out on four representative subprojects, which were part of the first batch of subprojects envisaged for financing under the proposed project. These subprojects included two to recover and utilize waste heat for power generation, one to upgrade fans and pumps, and one to revamp a production line in a petrochemical complex. The financial impacts of the subprojects were analyzed based on the financial benefits, derived mainly from energy savings, and the investment costs and incremental operating costs. Key assumptions are set out in Table 3.1. The analysis at appraisal, excluding income tax, showed that these four subprojects would have an aggregate financial internal rates of return (FIRR) of 28 (ranging from 11 to 48) percent and corresponding payback period of 2.9 (1.6 to 7.0) years thus demonstrating their financial viability.11 The return rates exceed the 8 percent weighted average cost of capital assumed for a typical medium to large commercial enterprise in China. The analysis showed the aggregate EIRR would be 34 (ranging from 13 to 63) percent, accounting environmental benefits from reduced emissions with conservative assumed values of US$4,978 per ton (t) of particulates, $218/t sulfur dioxide (SO2), and US$10/t carbon dioxide (CO2). These rates exceed the 12 percent economic discount rate normally applied to Bank projects in China at 11 Analysis at appraisal calculated a median payback period of 2.7 years based on gross cash inflow (excluding operation costs). The value of 2.9 years is a recalculation using net cash flow, to be consistent with the stated FIRR. Assuming tax of 25 percent, the FIRR would be 22 (ranging from 7.4 to 37) percent and payback period 3.9 (2.2 to 9.6) years. Analysis at appraisal also included a scenario of carbon financing, which made the projects more attractive. As no project received carbon finance, that scenario is not reported here. 53 the time of appraisal, thus demonstrating high economic efficiency.12 Accounting for CO2 alone, but using an updated value of the social cost of carbon starting at US$30/t in 2015, produces similarly high economic rates of return of 40 (16 to 77) percent. 5. The total investment for the four hypothetical subprojects analyzed was CNY344 million (US$48 million), equivalent to 8.1 percent of the original estimated US$593.6 million total project finance, or 5.3 percent of the cumulative US$900 million incremental EE investments expected to be supported by the project, including investments resulting from promotion activities with AF. Equivalent energy savings and emissions reductions were assumed to apply pro rata to other subprojects and investments supported by the project, to derive the original target results of US$900 million investments with annual energy savings of 2.07 Mtce, and annual emissions reductions of 5.05 million tons of carbon dioxide (Mt CO2). With AF, the revised target results were for US$1,328 million investments with annual energy savings of 2.66 Mtce, and annual emissions reductions of 6.49 Mt CO2.13 Neither the AF project paper (2011) nor the restructuring paper (2013) included further economic or financial analysis. Analysis during implementation 6. The project OM required PFIs to evaluate individual subprojects prior to approving onlending according to a set framework. The framework aimed to ensure, among other things, that the subprojects would be technically feasible, reliable and efficient, in particular, contributing to the improvements in EE and realization of energy savings. To this end, the framework required sub-borrowing enterprises to provide data, including a baseline of quantities and average prices for all forms of energy consumed annually for the most recent two years, and forecast of output production and energy spending (both quantity and price for each energy type) under the first ten years of project implementation, with accompanying assumptions. 7. All 41 financed subprojects are of a similar type to those analyzed at appraisal. All else being equal, this would imply that all subprojects would have economic benefits that exceed financial returns, consistent with the analysis at appraisal. Analysis at completion 8. The borrower’s ICR provides investment size, energy savings and emissions reductions for the 41 financed subprojects (17 by EXIM Bank and 24 by Huaxia Bank). For the purposes of evaluation at completion a representative sample of 9 subprojects have been selected. The sample selection covers the range of industrial sectors, size of investments, and cost per unit of energy 12 Applying the 2016 guidance note ‘Discounting Costs and Benefits in Economic Analysis of World Bank Projects’, suggests a 12 percent social discount rate for China remains appropriate in 2017 based on World Bank China Country Economist estimates that GPD will grow at an average annual rate of 6 percent for the foreseeable future. 13 The PAD economic and financial analysis extrapolated the analysis to a lower figure of $571 million investments (70 percent debt, and 30 percent equity financing in the first five years of project implementation) with overall annual energy savings of 1.5 Mtce, and annual emissions reductions of 3.6 Mt CO2. 54 savings found among the 41 subprojects (Figure 3.1). The sample also includes five subprojects from EXIM Bank and four from Huaxia.14 9. Together, these nine subprojects involve a total of US$505 million investment, representing 35 percent of final total US$1,427 million investments supported by the project, and 23 percent of total energy savings supported by the project. Inclusion in the sample of the largest subproject (EXIM No. 19 Handan Iron and Steel), which also happens to be the least cost-effective (US$1,354/(tce/year)), makes the sample appear less cost-effective than the project as a whole, and thus renders these results conservative. 10. The analysis at completion takes the final reported values of investment amount, energy savings and emissions reductions, and combines these with the cash flows expected according to the feasibility report for the sampled subprojects, to derive internal rates of return and payback periods. Where the feasibility reports have gaps, ambiguities or variations in methodology, the analysis presented in this ICR makes simple, consistent assumptions to allow comparison. Some feasibility reports included sensitivity of findings to key variables, such as fuel prices. Table 3.1 presents key indicators from the feasibility reports aggregated across the sampled subprojects, and the associated assumptions. 11. The analysis suggests an aggregate internal rate of return of at least 35 percent in economic terms (including CO2 emissions reductions valued at US$30/t in 2015 rising to US$65/t in 2040, in accordance with 2015 World Bank guidance), or 16 percent in financial terms (including tax) with a payback period of 5.9 years (Table 3.2). These values are broadly on par with those expectations at appraisal, demonstrating economic and financial viability. The economic rate of return would be higher still including the benefits of reducing local pollutants, which are excluded here for simplicity given that local environmental impacts are not part of the PDO, and that data on local pollutants is not consistently available for subprojects. 12. Extrapolation at completion for remaining subprojects is not attempted due to the complexity of accounting for diverse types of subprojects. However, based on known parameters, the results are likely to be in the same order of magnitude. 13. In summary, the subprojects’ designs are in line with the project’s intended objectives and, despite the higher unit cost of energy savings, represent a high level of efficiency, similar to what was expected for hypothetical subprojects at appraisal. Implementation efficiency 14. Implementation efficiency is rated high based on timely and effective implementation. The extension of closing date reflected AF and an expanded scope of activities, notwithstanding initial 14 A fifth Huaxia subproject was intended to be included in the analysis sample at completion, however insufficient data was available for the original selection (No. 2 Siping Haohua, for which no feasibility report was available) and for a proposed alternative (No. 16 Qinghai Qiaotou, the feasibility report of which did not include financial indicators). 55 delays and ineligible expenditures that were subsequently addressed satisfactorily, as described in Section 2.4. Figure 3.1. Subproject Investment and Energy Savings (Appraisal Prototypes and Actual Subprojects) 56 Table 3.1. Input Values and Results for Analyses of 4 Hypothetical Subprojects at Appraisal, and a Sample of 9 Subprojects at Implementation 4 Subprojects at 9 Subprojects at Row Parameter Unit Appraisal Completion Assumptions 1 Exchange rate15 CNY/$ 7.15 6.15 to 6.95 2 Electricity tariff (excluding tax)16 CNY/kWh 0.378 to 0.560 0.256 to 0.585 3 Value-added tax (VAT) for electricity and coal % 17 17 4 CO2 emissions factor for electricity generation g/GWh 869.5 Various 5 Unit value of CO2 emissions avoided (updated)17 $/t 30 23 to 59 6 Effective subproject lifetime from first year of operation years 20 20 7 Social discount rate12 %/year 12 12 Subproject data 8 Total lending investment $ million 48 505 9 Annual energy savings from first year of operation ktce/year 127 638 10 Average annual net financial benefits to implementing entity (cash flows)18 $ million 17 79 11 Average unit investment cost of annual energy savings ([1]/[7]) $/(tce/year) 379 792 12 Annual CO2 emissions avoided from first year of operation kt CO2/year 313 1,925 13 Average emissions intensity of energy savings ([8]/[7]) t CO2/tce 2.46 3.02 14 Average annual economic value of avoided CO2 emissions $ million 11 50 Economic and Financial Analysis Results19 15 FIRR (including tax) %/year 22 (7 to 37) 16 (9 to 52) 16 Payback period (including tax) years 3.9 (2.2 to 9.6) 5.9 (2.4 to 9.4) 17 EIRR (including CO2 benefit at updated value, excluding local pollutants) %/year 40 (16 to 77) 35 (22 to 93) 18 Economic net present value (excluding CO2 benefit, with social discount rate) $ million 46 (-0.8 to 24) 131 (-2 to 78) 19 Marginal abatement cost (-[18]/([6]x[12])) $/t CO2 -7 (-12 to 1) -3 (-15 to 1) CNY = Chinese Yuan 15 Analysis at completion uses actual average annual historic exchange rates from 2014 to 2016 as indicated on page i, and 6.89 CNY/US$ for 2017 onward. 16 For appraisal, feed-in tariff is 0.378 CNY/kWh and industry consumption tariff is 0.560 CNY/kWh. 17 World Bank 2015 guidelines recommend US$30/t in 2015 rising to US$65/t in 2040 as a base case social cost of CO2. This is applied with incremental annual values for (re-)analysis of the two effective subprojects’ feasibility, for the assumed operation period of 20 years. Re-analysis of the three hypothetical subprojects from appraisal uses a fixed value of US$30/t, for simplicity. The results are nevertheless comparable. 18 Net cash flows include benefits from energy savings and costs of operation and maintenance. Average annual net cash flows are inferred from the subproject investment divided by the reported payback period for each subproject. 19 Appraisal values of FIRR and payback period are based on net cash flows (including operation and maintenance costs) and assume tax of 25 percent. Completion values are based on data and methodologies in the feasibility reports of sampled subprojects, which vary across subprojects. For some subprojects, average annual net cash flow was inferred from the payback periods reported in the feasibility reports. 57 US$ = United States Dollar tce = metric ton of coal equivalent. Table 3.2. Details of 9 Subprojects Sampled for Analysis at Completion Out of 41 Total Subprojects Energy CO2 FIRR Investment Emissions Unit cost of PBP Subproject savings emissions EIRR (incl. Enterprise Name intensity energy savings (incl. No. (Mtce/ saving (Mt (%) tax) CNY US$ (tCO2/tce) (US$/(tce/year)) tax) Year year) CO2/year) (%) m m Henan Jiyuan Iron EXIM 6 54 9 2012 0.062 0.151 2.44 138 93 31 3.2 and Steel Qinghai Qiaotou EXIM 16 Aluminum 150 23 2011 0.066 0.161 2.44 352 72 52 2.7 Industry EXIM 17 Chenming Paper 263 38 2009 0.058 0.135 2.33 664 24 9 9.3 Handan Iron and EXIM 19 922 146 2012 0.108 0.610 5.65 1,354 36 16 5.9 Steel Benxi Iron and EXIM 24 711 113 2015 0.091 0.251 2.75 1,239 24 12 8.0 Steel Dezhou Shihua Huaxia 3 Chemical Co. Ltd. 462 68 2009 0.108 0.264 2.44 626 25 9 9.2 (subsidiary) Sinoma Hengda Cement Huaxia 9 108 16 2008 0.061 0.149 2.44 255 76 40 2.5 Corporation Ltd. (subsidiary) Weihai Blue Star Huaxia 12 Glass Holding Co. 66 11 2013 0.015 0.037 2.47 716 30 27 4.7 Ltd. Chifeng Fulong Huaxia 17 Thermal Power 514 82 2015 0.069 0.168 2.43 1,185 22 9 9.4 Co. Ltd. Aggregate for sample 9 3,250 505 - 0.638 1.925 3.02 792 35 16 5.9 subprojects Aggregate for all 41 1,32 9,667 - 2.670 6.510 2.44 497 n.a. n.a. n.a. subprojects 8 Sample as share of all 41 38% 34% - 24% 30% 124% 159% - - - subprojects 58 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Leiping Wang Senior Energy Specialist GEE09 Task Team Leader Ashok Sarkar Senior Energy Specialist GEE05 Energy Efficiency Bernard Baratz Consultant GEEDR Consultant Haixia Li Senior Financial Management Specialist GGO20 Financial Management Mei Wang Senior Counsel LEGAM Lawyer Nancy Chen Senior Financial Sector Spec. GFM08 Financial Sector Nuyi Tao Senior Carbon Finance Specialist GCCFM Carbon Finance Robert P. Taylor Consultant GEE03 Energy Efficiency Xiaowei Guo Senior Procurement Specialist GGOGI Procurement Ximing Peng Senior Energy Specialist GEE09 Technical Cristina Hernandez Program Assistant GEE02 Assistant Dan Xie Program Assistant EACCF Assistant Supervision/ICR Xiaodong Wang Senior Energy Specialist GEE09 TTL Yun Wu Energy Specialist GEE09 co-TTL Fang Zhang Senior Financial Management Specialist GGO20 Financial Management Feng Liu Senior Energy Specialist GEE03 Technical Haixia Li Senior Financial Management Specialist GGO20 Financial Management Mei Wang Senior Counsel LEGAM Lawyer Nancy Chen Senior Financial Sector Specialist GFM08 Financial Sector Nuyi Tao Senior Carbon Finance Specialist GCCFM Carbon Finance Xiaowei Guo Senior Procurement Specialist GGOGI Procurement Zheng Liu Procurement Specialist GGO08 Procurement Ximing Peng Senior Energy Specialist GEE09 Technical Jonathan Edwards Sinton Senior Energy Specialist GEE05 ICR Author Alan David Lee Energy Specialist GEE09 ICR Team Takayuki Doi Senior Power Engineer GEE09 ICR Team Shanshan Ye Team Assistant EACCF Assistant Cristina Hernandez Program Assistant GEE02 Assistant Tianxiu Kang Program Assistant EACCF Assistant Dan Xie Program Assistant EACCF Assistant 59 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle US$, Thousands (including travel No. of staff weeks and consultant costs) Lending 128.25 (travel) 77.10 (consultants) Total: 49.56 205.35 Supervision/ICR 96.14 (travel) 100.15 (consultants) Total: 80.21 196.29 60 Annex 5. Stakeholder Workshop 1. A knowledge exchange workshop was held in Xiamen, Fujian Province on November 7, 2016 (agenda below). It was a joint workshop of CHEEF I and II, and was attended by NDRC, NECC, CBRC, the PMO, the three participating banks (EXIM, Huaxia and Minsheng), and selected grantees for strategic policy studies for developing the 13th FYP (2016-2020), improving the fiscal and taxation policies for EE using public funds, and replacing decentralized coal boilers. 2. During the workshop, key success factors and lessons learned from the project implementation were summarized and shared. Moreover, the participating banks exchanged their experience in deal origination, innovative financing products, and banks’ internal organization and incentives. The participants also shared thoughts on the trends and future focus of EE financing in China. 3. As pointed out by the NDRC representative, the CHEEF program was China’s first experiment with financing EE through a credit line offered through domestic banks. The results proved successful, and the experience learned has been very valuable to the government’s policy making and to the national market for EE market. NDRC is contemplating rolling out a similar credit line with government funds to scale up EE financing. 4. NDRC proposed to organize a high-level project closing workshop will be organized in 2017 to publicize the project impacts and further disseminate the experiences and lessons learned to a broader audience. 61 Table 5.1. CHEEF Program Knowledge Exchange Workshop Agenda Xiamen, Fujian, China, November 7, 2016 Topic Presenter(S) I. Opening Remarks Moderator: Xu Zhiqiang, Deputy Director General, NECC CHEEF Program: Contributions to China’s Energy Efficiency Zhao Huaiyong, Director, NDRC Program in the 12th and 13th FYP Green Financing: Ecological Dividend Ye Yanfei, Deputy Director General CBRC GEF funding to support China’s EE policy and build capacity Tian Min, Deputy Director, MoF CHEEF Program: Contributions to China’s Green Finance and Wang Xiaodong, Task Team Leader for Energy Efficiency Programs CHEEF I, World Bank II. CHEEF Program: Progress, Success Experience, and Lessons Learned Moderator: Wu Yun, Co-Task Team Leader for CHEEF I, World Bank NECC/NDRC/PMO Zhang Yunpeng, PMO Director Support to 13th FYP: Energy conservation action plan Chinese academy of social sciences Support to 12th FYP: fiscal and taxation policies Central University of Finance and Economics EXIM Bank Zhang Ying, Deputy General Manager, EXIM Zhang Yunmiao, Deputy General Manager, Hua Xia Bank Hua Xia Bank Minsheng Bank Minsheng representative III. Knowledge Exchange – Bank’s Internal Organization and Deal Origination Moderator: Ministry of Finance and China Banking Regulatory Commission  What is the successful experience?  What are the lessons learned?  What can be done differently? All participants  What are the financial products that are better tailored to the market?  What are the future trends and innovative ideas IV. Knowledge Exchange––Enabling Environment for Scaled up EE Moderator: Jiang Jinghao, Deputy Director, NDRC  What is the successful experience?  What are the lessons learned?  What are the incentive policies to promote EE financing? All participants  What are government’s plan to use public funds to leverage commercial financing for EE? V. Next Steps Moderator: Todd Johnson, Task Team Leader for CHEEF II, World Bank  How to more widely disseminate the knowledge from the CHEEF program  How to further scale up EE in China and All participants internationally  Suggestions on the next steps VI. Closing Remarks Xu Zhiqiang, Deputy Director General, NECC Closing Remarks Wang Xiaodong, Task Team Leader for CHEEF I, World Bank 62 Annex 6. Summary of Borrower's ICR and Comments on Draft ICR 1. The PMO, EXIM and Huaxia each prepared substantial ICRs. The full reports and annexes are available in WBDocs. The following excerpts of the three Borrower ICRs preserve the wording the original reports with edits for brevity, focusing on passages concerning their evaluation of the project outcomes and lessons. Material presented above in the body of the report is not repeated here Summary of PMO’s ICR Project Achievement Promotion of the FYP 2. The project promoted the implementation of energy conservation policies through top- down design and planning. It strongly supported the fulfillment of the EE objectives stated in the 12th FYP (2011-2015). In fact, between 2011 and the end of 2015, energy intensity of GDP fell by 18.2 percent, which exceeded the target of 16 percent for the FYP. 3. The Project focused on the following aspects: putting the plan into practice, carrying out the energy conservation projects, improving the supervision and management system of energy conservation, exploring the marketization of energy conservation mechanism and helping the government with their performance evaluation on energy conservation. 4. The project also supported the 12th FYP with researches about its energy conservation implementation programs, major energy conservation renovation projects, and major energy conservation demonstration projects. An important contribution was made in implementing the 12th FYP, and exceeding the binding objectives and tasks. 5. Meanwhile, in view of China's local evaluation management issues such as lacking of standards, the Project supported the introduction of the national management of fixed asset investment projects, EE assessment and review. It played an important supporting role on promoting the effective assessment and control of energy excessive consumption. 6. In addition, the Project supported the researches about online monitoring of key energy users, transaction on energy conservation, government EE performance management, and marketization of energy conservation management. The government's modern energy conservation management capacity was highly enhanced. Contribution to the medium and long-term strategy 7. As China is speeding up the construction of ecological civilization and is comprehensively promoting the energy production and consumption revolution, the positions and roles of energy conservation and EE become more vital at the following aspects: reducing pollutant emissions from the source area, slowing down the GHG emissions, improving energy security, cultivating new economic growth. The Project researches focused on decomposition and implementation of the 13th Five-Year energy conservation target and the practicing of major action plans. It offered a decision supporter for introduction relevant policies. 63 8. At the same time, to mitigate the smog problem, the Project carried out research on reducing coal consumptions in Beijing-Tianjin-Hebei region, and the substitution and clean actions. It became an important reference of promoting the integration of efficient green development in this region. 9. Furthermore, for the long-term strategy and mechanism of energy conservation, the Project carried out researches on energy consumption revolution strategy, EC Law revision, and EE leading action plan. It supported China to develop "Energy Production and Consumption Revolution Strategy (2016-2030) " and “the long-term energy conservation strategic objectives and roadmap”. It also built a solid research foundation to promote the legalization of energy conservation constantly. Development of energy conservation infrastructure and working mechanism 10. The Project has been continuously strengthening the abilities of energy conservation supervision and management, technical services, information dissemination and other basic work, which is the key to implement the energy-saving objectives and tasks and to ensure the relevant laws and regulations have been implemented effectively. 11. The Project pointed at the weakness of energy-saving management foundation in China, and the lack of professionals. It supported the NECC to edit an energy-saving monitoring manual, establish a public service information platform and an energy utilize report platform system of key users, project review management information system and contract energy management platform, and so on. And it started a study on establishing China's independent energy auditor system, which is a decision-making reference for strengthening the grass-roots energy conservation management and professional training. 12. At the meanwhile, the Project actively promoted international EE exchanging and cooperation, supported the research and implementation of G20 Energy Efficiency Lead Programme (EELP), Top 10 energy-saving technologies and best practices ("Double Best Top Ten") and other activities. It provided important support for promoting global EE cooperation and China as a leading role. 13. Besides, during the implementation of programs, the Project also organized a large number of publicity, training, exchange activities, covering energy-saving monitoring and management, technical services, best practice exchanges, international experience sharing, and so on. These activities enhanced China’s EE in various fields and helped China increasing its impact in the world. The allocation of resources and the improvement of the energy conservation financing policy model innovation 14. Financial policy is the most effective tool for enterprises to constantly saving energy and improving EE under the market mechanism conditions. The Project was aimed at the highlight obstacles and weak links in the field of China energy conservation financing. And supported researches and activities such as government funds for lending, green bonds for enterprise and the construction of EE financing service platform, which provided a positive reference for China to improve the green credit, green fund and other related policies. 64 15. In addition, supporting the onlending bank to carry out energy-saving loan business played a leading role model on continuously expand the scale of banking energy-saving financing and enhanced the level of green financial services. Project experience and advice 16. The following are key facts to note for similar projects:  The incentive mechanism of the bank's management system and a professional team are important factors in EE investments.  The proper planning of technical assessment is critical, especially when using external expert resources.  Under the conditions of economic slowdown and the increase of energy saving costs per unit, it’s hard to maintain a lot of EE investments.  Medium and small enterprises are struggling with EE investments. The onlending model can effectively enhance the capacity of financial institutions. However, it is difficult to solve the high cost problem of financing. This model could be applied to the 13th edition of the FYP to establish a market-oriented energy-saving mechanism during the early stage. Evaluation of the World Bank 17. The World Bank team has professional management skills, a lot of knowledge, and they are all hard-workers. They gave us great suggestions to help us improve the implementation of the project and to ensure the results of the Chinese energy-saving financing project were put into effect. The China PMO, NDRC, and project researchers of the project have all gained a great experience from this team. The overall evaluation of the work of the World Bank team is very satisfying. Sustainability of the Project 18. The project (a) promoted China to strengthen energy conservation continuously and improved EE significantly, (b) ensured that the key energy conservation projects continually play their roles, (c) supported major energy-saving systems and policies to be improved constantly, (d) enhanced the decision supporting capacity and the level of China's energy-saving center system, and (e) promoted international EE cooperation and global EE progress. Summary of EXIM’s ICR Project Achievement 19. The EXIM developed a large number of projects, which were widely distributed throughout the country. Twenty-three projects were completed in the phase I. The projects selected earlier were mainly waste-heat and residual-gas power generation projects within the steel and the cement industry. At a later period, waste heat power generation projects, power optimization projects 65 within the glass-building industry were also included. These projects covered different investment capacities. The successful financing of these projects created a good demonstration effect. This project added financial products and expanded financial channels. The details are given in Annex 2. Energy-saving and emission-reduction results 20. According to the results of the project implemented by the EXIM, the World Bank's EE financing project in China promoted the implementation of the project, which led the EIBC to use foreign capital for energy-saving and emission reduction projects and new mechanisms. Promote energy-saving emission reduction has made a positive demonstration. The detailed results are shown in the Table 6.1. Table 6.1. Results of EXIM’s EE financing No. Index Data Unit 1 Total investment 66.15 100 million yuan 2 Approved onlending fund 2.78 100 million US dollars 3 Disbursement 2.13 100 million US dollars 4 EXIM approved issuance 20.03 100 million yuan 5 EXIM matched Loan 18.51 100 million yuan 6 Enterprise investment 31.58 100 million yuan 7 Energy saving amount 197 10,000 tons standard coal 8 CO2 emission reduction 523 10,000 tons CO2 Successful Experience 21. The EXIM established a complete system of project reporting, auditing and inspection in line with the World Bank’s operation requirements. It smoothly facilitated the implementation and management of this project. Through the project implementation and management, the EXIM’s branch offices in China accumulated extensive experience in energy saving projects and finance business developments. The branch offices could innovate and develop new projects and a management mechanism. In addition, it could ensure the rapid development of the project at the local branches and the effective management at the head office. 22. The EXIM has launched a series of training and capacity-building programs by utilizing GEF grants so as to expand business scope, enrich the organization and establish robust management system. Particularly, using domestic and international contract and systematic research makes a full preparation for the development of green credit products. 23. Certain obstacles occurred during the project implementation due to differences in the understanding of several provisions between implementation institutions and the World Bank’s interpretation. However, in-depth communication and learning through the project solved these problems. At the same time, this became a solid foundation for the additional finance. Evaluation of the World Bank team 24. The World Bank, as the leading international financial institution, supported the development of energy saving service industries and created a new mechanism for the contract of energy management services. It effectively promoted the development of energy saving and 66 emission reduction in China. These activities were conducted in a sustainable manner. Based on the experiences from this project and the World Bank’s management mechanism, the EXIM will be able to carry out larger scale projects and make greater contributions for China’s energy saving and emission reduction. Summary of Huaxia’s ICR Project Achievement 25. Under the global background of climate change, the project is the first large-scale and systematic green intermediary lending business in China. It not only brought the internationally advanced financing concepts and green lending system to Chinese commercial banks, but also broadened their visions in credit lending range. In addition, it created a new trend of China to include energy conservation into its medium and long term of social and economic development planning. The most prominent part is that the participating banks widely improved their capability in product development, internal regulation, business management and risk assessment. The project demonstrated a positive effect and boosted public awareness to participate in energy saving. It also contributed to the realization of national target and the tackling of global climate change. The details are given in Annex 2. Use of GEF Grant 26. Huaxia bank kept on analyzing and trying to solve one problem after another in the process of implementing CHEEF, accumulating experience and making progress step by step. Meanwhile, it also realized that the improvement of its internal condition and capacity became a key factor for the success of project implementation and business transition. Therefore, Huaxia bank fully utilized the GEF grant to support several research. For a solid foundation of business development, it organized 30 times of training participated by 2,342 members of its staff in various forms. The details of the research and trainings are summarized in Table 2.1 and 67 28. Table 2.2. Significance of the Project 29. The project ushered Chinese commercial banks into green lending field through means of on-lent funds and TA with advanced experience originated from international financial organizations and foreign governments. By introducing internationally advanced technologies and concepts, commercial banks could effectively improve their business capability, the internal control, their products, and their expertise in greening lending. Moreover, this business model urged commercial banks to take efforts to understand relevant technologies and energy saving market, improve their own systems, and enhance their capacities in business operation through practice. As a result, green lending was fostered into a mature core business in the commercial banks. This promoted the continuous growth and sustainable development of Chinese energy saving industry. Lessons learned Sluggish move at the initial stage leading to chance missing at the most rapid period for EE renovation growth 30. As the project was the first on-lent credit facility supported by international financial institution, Huaxia lacked the understanding and capacity at the initial stage. Therefore, the project implementation pace at the initial stage turned out to be slow. This led to missing the chance at the end of the 11th edition of the FYP and the beginning of the 12th edition of the FYP when EE renovation had the most rapid growth and was the most cost-effective. Narrow investment scope leading to certain difficulty in implementation 31. The investment scope of the project was originally limited to industrial sector. Although it was expanded to all types of EE projects at later stage, this became another factor of the sluggish move at the initial stage. Therefore, the investment area in future program designing should be expanded to some extent as long as it is in line with a specific program objective. Summary of Minsheng’s ICR 32. With the GEF grant support, eight advisory programs were successfully completed as scheduled. These programs covered various areas such as energy saving service, RE, iron and steel, oil and gas, and nonferrous metals industry. The programs also included the Equator Principles, green financing, and information management. The implementation of those topics played a key role in the bank’s management enhancement and employees’ skill promotion. The topics of research reports commissioned by Minsheng under this project are in Table 2.3. 33. China Minsheng Banking Corp. Ltd. (Minsheng) utilized its entire US$472,000 allocation of GEF funds. All the expenses were made in compliance with WB procurement requirements. To ensure the quality of sub-projects, Minsheng hired professional procurement and financing staff. Minsheng also invited industry professionals to oversee the production of sub-project deliverables. In addition, Minsheng established a framework to enhance process management. 68 Annex 7. List of Supporting Documents  Project Appraisal Document, 38641-CN, 2008  Implementation Status and Results Reports, Sequence 1-13, 2012-2016  Aides Memoire, Implementation Support Missions, May 2016 and October 2016  Loan Agreements, Loans No. 7529-CN and 7530-CN, 2008  GEF Grant Agreement TF090719, 2008  Project Agreement, Loans No. 7529-CN and 7530-CN and GEF Grant No. TF090719, 2008  Additional Financing Project Paper 64561-CN, 2011  Restructuring Paper, Loans No. 7529-CN and 7530-CN and GEF Grant No. TF090719, 2008, 74654-CN, 2013  Amendments to Project Agreement, Loans No. 7529-CN and 7530-CN and GEF Grant No. TF090719, 2013  Amendments to Project Agreement, Loans No. 7529-CN and 7530-CN and GEF Grant Agreement, GEF Grant No. TF090719, 2013  Borrower Implementation Completion and Results Reports: o Project Management Office o Hua Xia Bank o EXIM Bank  Presentation: China Energy Efficiency Financing Program, Xiaodong Wang, November 2016 69 Map. China Provincial Boundaries 70