Document of The World Bank FOR OFFICIAL USE ONLY Report No: RES23301 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF HYDROCHLOROFLUOROCARBON (HCFC) PHASE-OUT PROJECT (ODSIII) GRANT APRIL 26, 2013 TO THE HASHEMITE KINGDOM OF JORDAN JUNE 7, 2016 ENVIRONMENT AND NATURAL RESOURCES MIDDLE EAST AND NORTH AFRICA This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Page 1 of 14 ABBREVIATIONS AND ACRONYMS AC Air-Conditioning CAS Country Assistance Strategy CD Country Director CPF Country Partnership Framework CS Consultancy Services EA Environmental Assessment EE Energy Efficiency EER Energy Efficiency Ratio HCFC Hydrochlorofluorocarbon IOC Incremental Operating Costs ISR Implementation Status Report MEC Middle East Complex for Engineering, Electronics and Heavy Industries PLC MOPIC Ministry of Planning and International Cooperation MLF Multilateral Fund for the Implementation of the Montreal Protocol MP Montreal Protocol MT Metric tons MTR Mid-Term Review NOU National Ozone Unit ODP Ozone Depleting Potential ODS Ozone Depleting Substance PDO Project Development Objective PMU Project Management Unit R-22 HCFC-22 R-410A HFC-410A SGA Sub-Grant Agreement TF Trust Fund TRG Training UNIDO United Nations Industrial Development Organization USD U.S. Dollars YR Year Regional Vice President: Hafez M. H. Ghanem Country Director: Ferid Belhaj Senior Global Practice Director: Paula Caballero Practice Manager/Manager: Benoit Blarel Task Team Leader: Tracy Hart Page 2 of 14 HASHEMITE KINGDOM OF JORDAN HYDROCHLOROFLUOROCARBON (HCFC) PHASE-OUT PROJECT (ODS III) CONTENTS A. SUMMARY 5 B. PROJECT STATUS 6 C. PROPOSED CHANGES 6 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 10 Page 3 of 14 DATA SHEET Jordan Jordan Ozone Depleting Substances HCFC Phase-Out Project (ODS3) (P127702) MIDDLE EAST AND NORTH AFRICA Environment & Natural Resources Report RES23301 No: Basic Information Project ID: P127702 Lending Instrument: Specific Investment Loan Hafez M. H. Regional Vice President: Original EA Category: Partial Assessment (B) Ghanem Country Director: Ferid Belhaj Current EA Category: Partial Assessment (B) Senior Global Practice Paula Caballero Original Approval Date: 26-Apr-2013 Director: Practice Manager/Manager: Benoit Paul Blarel Current Closing Date: 30-Jun-2019 Team Leader(s): Tracy Hart Borrower: Ministry of Planning and International Cooperation Responsible Ministry of Environment Agency: Restructuring Type Form Type: Full Restructuring Decision CD Decision Paper Authority: Restructuring Level: Level 2 Financing ( as of 09-Feb-2016 ) Key Dates Ln Effectivene Original Revised Project Status Approval Date Signing Date /Cr/TF ss Date Closing Date Closing Date 19-May-201 P127702 TF-13968 Effective 19-May-2013 19-May-2013 30-Jun-2019 30-Jun-2019 3 Disbursements (in Millions) Cur Ln Canc Undis- % Dis- Project Status ren Original Revised Disbursed /Cr/TF elled bursed bursed cy P127702 TF-13968 Effective US 2.78 2.78 0.00 0.75 2.04 27 Page 4 of 14 D Policy Waivers Does the project depart from the CAS/CPF in content or in other significant Yes [ ] No [ X ] respects? Does the project require any policy waiver(s)? Yes [ ] No [ X ] A. Summary of Proposed Changes The World Bank and Montreal Protocol (MP) Multilateral Fund (MLF) have undertaken due diligence with the Hashemite Kingdom of Jordan to drop one of the three private sector enterprises from Component One. The Bank has received a management letter from the Ministry of Planning and International Cooperation (MOPIC) in Jordan to request this restructuring, and has confirmed that the private sector enterprise is highly unlikely to exit from bankruptcy. The cancellation involves the balance of MEC approved-funds (a total $1,360,850) from Categories 1 and 2, of $1,294,597 and $25,000 respectively. The team proposes a level two restructuring which will : (a) reallocate funds between categories, (b) revise component costs to reflect the cancellation, (c) revise the Category 2 definition to include “Goods�; and (d) revise select key and intermediate indicators and targets to reflect the exit of the firm and subsequent cancellation and better reflect the project's impact and progress towards achievement of objectives. Change in Implementing Agency Yes [ ] No[ X ] Change in Project's Development Objectives Yes [ ] No[ X ] Change in Results Framework Yes [X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No[ X ] Change of EA category Yes [ ] No[ X ] Other Changes to Safeguards Yes [ ] No[ X ] Change in Legal Covenants Yes [ ] No[ X ] Change in Loan Closing Date(s) Yes [ ] No[ X ] Cancellations Proposed Yes [ X ] No [ ] Change to Financing Plan Yes [ X ] No [ ] Change in Disbursement Arrangements Yes [ ] No[ X ] Reallocation between Disbursement Categories Yes [ X ] No [ ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No[ X ] Change in Financial Management Yes [ ] No[ X ] Change in Procurement Yes [ ] No[ X ] Change in Implementation Schedule Yes [ ] No[ X ] Other Change(s) Yes [ ] No[ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No[ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No[ X ] Page 5 of 14 Appraisal Summary Change in Social Analysis Yes [ ] No[ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No[ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No[ X ] B. Project Status The recently concluded Mid Term Review (MTR) confirmed the relevance of the Project Development Objective (PDO) and key objectives, design and implementation of the project, as well as the efficient use of project resources. According to the National Ozone Unit’s (NOU’s) verified consumption data as well as its country program report to the Multilateral Fund (MLF) Secretariat, Jordan has successfully met its 2014 Montreal Protocol phase-out obligations. Component 3 is progressing well, however, Components 1 and 2 have been delayed. Two of the three sub-projects are in the procurement stage after sub-grant agreement (SGA) signing in 2014, in February and September respectively. The third subproject will be canceled due to the financial challenges faced by the beneficiary enterprise, the Middle East Complex for Engineering, Electronics and Heavy Industries PLC (MEC). Despite the bankruptcy of MEC, the project is progressing satisfactorily and on its way towards meeting its development objective ahead of time. The latest Implementation Status and Results Report (ISR) rates the progress towards the development objectives as satisfactory while the implementation progress is rated Moderately Unsatisfactory due to the impact of the exit of the 3rd firm on Components 1 and 2 and its related indicators. The bankruptcy and closure of this firm hastens Jordan's compliance with the goal of reducing HCFC consumption, thus in fulfilling its Montreal Protocol and Multilateral Fund obligations and provisions, by reducing HCFC consumption by that firm to zero through cessation of firm operations. C. Proposed Changes Development Objectives/Results Project Development Objective Original PDO (no change) The project development objective is to support Jordan in its overall efforts to meet its first Montreal Protocol HCFC phase-out obligations between 2013 and 2017, and to strengthen the capacity of responsible government entities to continue to effectively implement the Montreal Protocol. Change in Results Framework Explanation: With regards to PDO Level Results Indicators: (i) Target values of Indicator One - Reduction of HCFC, are based on the HCFC phase-out agreement between Jordan and the ExCom, thus this description will be included in the revised framework. The End Target value will be corrected to 66.4 ODP tons/year (replacing the current value of 74.4 ODP), consistent with the Jordan-ExCom agreement to gradually decrease consumption. The responsibility for data collection will be revised to exclude the Bank, given that it was agreed during implementation that UNIDO, the Lead Agency of the Jordan HPMP will be responsible. (ii) Avoided emission of tons of CO2 equivalent. Indicator Two target values will be adjusted downwards given that the grant of one of three enterprises, MEC in Component 1 will be canceled. The unit of measure, tCO2e, as a specific type of tons/year measurement, will replace the word “Text�, and a Page 6 of 14 description will be added to explain the calculation which is derived from the targeted Energy Efficiency Ratio (EER) improvement of new AC appliances compared to the baseline EER. With regards to Intermediate Results Indicators: (i) Number of subproject agreements signed. The original project envisioned the conversion of three remaining AC manufacturers in Jordan that were eligible for MLF funding. However, MEC, the largest of the three became insolvent and is not in a position to participate in the project. Therefore the end target value has been decreased to 2. The revised target values are: YR1: 0, YR2: 1, YR3: 2, YR4: 2, YR5: 2. (ii) Cumulative HCFC-22 consumption phased out in the AC sector. The indicator was originally devised as the phase-out to be achieved by the three beneficiary enterprises. It is proposed to rename the indicator “Cumulative HCFC-22 consumption phased out by AC manufacturers�. In addition, the end target value will be reduced from 7.8 ODP tons to 1.43 ODP tons, given that MEC is no longer part of the project. The baseline remains zero and the revised target values are: YR1: 0, YR2: 0, YR3: 0, YR4: 1.1, YR5: 1.43; and (iii) Implementation of key policies and regulations for HCFC-22 phase-out. As the key policy on HCFC-22 envisioned was a one-time ban on the manufacturing and importing of HCFC-22 based air-conditioning (AC), it is proposed to add “once� for the frequency of the data source as well as an additional description to explain that Jordan committed to the MLF that it would institute the ban. Financing Cancellations Explanation: MEC was not able to meet the milestones agreed upon with the May 2015 mission and MoEnv after a protracted period of waiting for MEC to seek investors and return to operation. Consequently, the Government sent the Bank a letter on June 7, 2016 requesting cancellation of one of the private sector enterprises in Component One. The Multilateral Fund (MLF) requested that the Bank return the total US$1,360,850 that it had approved specific to MEC. The remaining grant amount should be US$1,422,299. Cur Cancelled Proposed Value Date Current Amount (in Ln/Cr/TF Status renc Amount (in Amount (in of currency) y currency) currency) Cancellation Reason for Cancellation: Grantee’s Request for Country Reasons US TF-13968-001 Disbursing 2,783,149.00 1,360,850.00 1,422,299.00 14-Jun-2017 D Change to Financing Plan Explanation: The Bank reported the probable cancellation to the 75th ExCom in November 2015. The Multilateral Fund (MLF) requested that the Bank return the total US$1,360,850 that it had approved. Of this US $1,335,850 was from Category 1 and $25,000 was from Category 2. The remaining grant amount should be US$1,422,299.00. Source(s) At Approval Current (from AUS) Proposed BORR 0.00 0.00 0.00 MPIN 2,783,149.00 2,783,149.00 1,422,299.00 Page 7 of 14 Total 2,783,149.00 2,783,149.00 1,422,299.00 Reallocations Explanation: The proposed reallocation of US$40,000 from Category 2 to Category 1 will further support sub-grant implementation and has been approved by the Multilateral Fund (MLF) of the Montreal Protocol (MP). In addition, Category 2 is updated to include goods, so that procurement of recovery and recycling equipment, vacuum pumps, and tools are allowed, as also approved by the MP. Category 2 now reads, "Consultant Services, Training, Goods, and Incremental Operating Costs under Component 2 of the Project�. Pend Current ing Actual Ln/ Curr Cat. Category of Com Disbursement % Allocation Disburse Allocation Cr/TF ency No. Expenditur Mit (Type Total) ments e ment s Pro Current Proposed Current posed TF-13 Sub-grants 968-0 USD 1 to Benef. 1,923,850.00 235,992.70 0.00 628,000.00 100.00 100.00 01 Entreprises CS, TRG,Goods, 2 417,300.00 21,614.94 0.00 352,300.00 100.00 100.00 IOC under Comp. 2 CS, TRG, IOC, RC 3 441,999.00 188,082.65 0.00 441,999.00 100.00 100.00 under Comp. 3 Total: 2,783,149.00 445,690.29 0.00 1,422,299.00 Disbursement Estimates Change in Disbursement Estimates Explanation: Disbursement changes have been made to reflect actual amounts to date as well as to take into account cancelled funds and effects on total disbursements. Fiscal Year Current (USD) Proposed (USD) 2013 410,000.00 300,000.00 2014 1,030,000.00 102,802.83 2015 800,000.00 155,837.57 2016 270,000.00 187,049.27 2017 200,000.00 380,000.00 2018 73,149.00 296,539.90 Page 8 of 14 Total 2,783,149.00 1,422,229.57 Components Change to Components and Cost Explanation: The components have not been changed; but costs have been reallocated per the explanations in the finance section of the Restructuring Paper. Current Component Proposed Current Cost Proposed Action Name Component Name (US$M) Cost (US$M) Technical Assistance, Policy and AC Sector Plan 0.41 0.35 Revised Management Investment in HCFC 1.92 0.63 Revised Consumption Reductions Institutional Strengthening 0.44 0.44 No Change Total: 2.77 1.42 Page 9 of 14 Annex 1: Results Framework and Monitoring Jordan Ozone Depleting Substances HCFC Phase-Out Project Project Restructuring Status: DRAFT (ODS3) (P127702) Stage: Team Leader(s) Tracy Hart Requesting Unit: MNC02 Created by: Tracy Hart on 13-Apr-2016 : Product Montreal Protocol Responsible Unit: GEN05 Modified by: Tracy Hart on 13-Jun-2016 Line: Country: Jordan Approval FY: 2013 MIDDLE EAST AND Lending Region: Specific Investment Loan NORTH AFRICA Instrument: Global Environmental Objectives Global Environmental Objective (from Project Appraisal Document): The project development objective is to support Jordan in its overall efforts to meet its first Montreal Protocol HCFC phase-out obligations between 2013 and 2017, and to strengthen the capacity of responsible government entities to continue to effectively implement the Montreal Protocol. Results Core sector indicators are considered: Yes Results reporting level: Global Environmental Objective Indicators Indicator Unit of Status Core Baseline Actual(Current) End Target Name Measure Revised Reduction of Tons/year Value 83.00 59.72 66.40 HCFC Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 Comment 1.End target is 1.This change in end target is being reduced from made in order to be consistent with 74.70 to 66.40 the Jordan-ExCom agreement. Page 10 of 14 tons/year. 2. This change is being made given 2. The that it was agreed during responsibility implementation that UNIDO, the for data Lead Agency of the Jordan HPMP, collection has will be responsible. been revised to exclude the Bank. Revised Avoided Tons/year Value 0 0 2,371 emission of Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 tons of CO2 equivalent Comment 1.The Unit of 1.The unit of measure is now more from measure is specific. transition to changed from 2.The target value now reflects the new “Text� to exit of the firm and subsequent technology at “Tons/year� cancellation. the two 2. The target is A description has been added to beneficiary reduced from explain the calculation, which is enterprises 28,147 to 2,371 derived from the targeted Energy tons/year. Efficiency Ratio (EER) improvement of new AC appliances as compared to the baseline EER. No Montreal Percentage Value 0.00 100.00 100.00 Change Protocol and Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 MLF obligations Comment and provisions are implemented and fulfilled Page 11 of 14 Intermediate Results Indicators Indicator Unit of Status Core Baseline Actual(Current) End Target Name Measure Revised Number of Text Value 0 2 2 subproject Date 15-Feb-2013 21-Apr-2016 31-Dec-2018 agreement contracts Comment Number of This change reflects exit of the 3rd signed with subprojects has firm and subsequent cancellation. AC been reduced manufacturer from 3 to 2. s Revised Cumulative Tons/year Value 0 0 1.43 HCFC-22 Date 15-Feb-2013 21-Apr-2016 31-Jan-2019 consumption phased out in Comment Phase out This change reflects exit of the 3rd the AC reduced from firm and subsequent cancellation. Manufacturer 7.8 to 1.43. s Revised Implementati Text Value no HCFC-22 HCFC policy Ban on use of HCFC-22 policy in on of key policy reforms on track manufacturing AC and ban on policies and imports of HCFC-22 based AC units regulations Date 31-Jan-2013 21-Apr-2016 31-Jan-2019 for HCFC-22 phase-out Comment Frequency of There was no description / indicator data source is definition column in the Results changed to Framework at the time of the PAD. ‘Once’ and the description added to reflect Jordan’s commitment to the MLF to ban Page 12 of 14 the production and import of HCFC-22 based air-conditioning by 31 Dec. 2016. Revised Completion Percentage Value 0.00 70.00 100.00 of technical Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 assistance activities and Comment The description There was no description / indicator satisfactory is now defined definition column in the Results sector plan as “Includes Framework at the time of the PAD. management deliverables planned in annual work plan (TA, workshops & training and reporting).� Revised Compliance Percentage Value 0.00 100.00 100.00 with project Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 reporting requirements Comment The description There was no description / indicator is now defined definition column in the Results as “Reporting Framework at the time of the PAD. requirements at the project level of both the MLF and the WB� Revised Institutional Text Value No or Jordan current HCFC import quota and policy underdeveloped with 2016 measures for measures to international Page 13 of 14 ozone control new MP obligations, protection ODS phase-out as supported by introduced requirements TA activities and/or and Sector Plan strengthened management. Date 26-Apr-2013 21-Apr-2016 31-Dec-2018 Comment The description There was no description / indicator is now defined definition column in the Results as “Policy Framework at the time of the PAD. measures (regulations, bylaws, decrees, quotas, etc.) and institutional measures (MOUs, partnerships, interagency focal points).� Page 14 of 14