PROJECT APPRAISAL DOCUMENT ON A PROPOSED CLEAN TECHNOLOGY

154 Pages·2014·2.71 MB·English

by  World Bank

Document of
The World Bank

FOR OFFICIAL USE ONLY

Report No: {ReportNo}

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CLEAN TECHNOLOGY FUND (CTF) GUARANTEE
IN THE AMOUNT OF US$25 MILLION

AND A

PROPOSED GRANT FROM THE GLOBAL ENVIRONMENTAL FACILITY (GEF) TRUST
FUND
IN THE AMOUNT OF US$18 MILLION EQUIVALENT

TO INDIA

FOR

INDIA: PARTIAL RISK SHARING FACILITY for ENERGY EFFICIENCY (PRSF)
PROJECT

{PROJECT DATE}

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.

1
CURRENCY EQUIVALENTS

(Exchange Rate Effective {Date})

Currency Unit = Indian Rupees
INR 60 = US$1
US$ = SDR 1

FISCAL YEAR
April 1 – March 31

ABBREVIATIONS AND ACRONYMS

BEE Bureau of Energy Efficiency
CA Chartered accountant
CAAA Controller of Aid Audit and Accounts
CAG Controller and Auditor General
CAGR Compounded Average Growth Rate
CO Carbon dioxide
2
CPS Country Partnership Strategy
CTF Clean Technology Fund
DCs Designated consumers
ECA Energy Conservation Act, 2001
ECBC Energy Conservation Building Code
EDD Environmental Due Diligence
EE Energy efficiency
EESL Energy Efficiency Services Limited
EEFP Energy Efficiency Financing Platform
EIRR Economic internal rate of return
EPI Energy Performance Index
ERMF Environmental Risk Management Framework
ESCOs Energy Service Companies
ESPC Energy Savings Performance Contract
FEEED Framework for Energy Efficient Economic Development
FI Financial Institution
FLCTD Facility for Low Carbon Technology Deployment
FY Fiscal year
GAAP Governance Accountability and Action Plan
GDP Gross Domestic Product
GEF Global Environment Facility
GHGs Greenhouse gases
GL General Ledger
GoI Government of India
GW Gigawatt
GWh Gigawatt hour
2
IBRD International Bank for Reconstruction and Development
IDA International Development Association
IFC International Finance Corporation
IFR Interim Financial Reports
IREDA Indian Renewable Energy Development Agency
IRR Internal rate of return
ISDS Integrated Safeguard Data Sheet
kWh Kilowatt-hours
LED Light Emitting Diodes
M&V Monitoring and Verification
MoF Ministry of Finance
MoP Ministry of Power
MSMEs Micro, Small & Medium Enterprises
mtoe Million tons of oil equivalent
NAPCC National Action Plan on Climate Change (India)
NCB National Competitive Bidding
NMEEE National Mission on Enhanced Energy Efficiency
NPV Net Present Value
PAT Perform, Achieve and Trade
PFS Project Financial Statements
PRGFEE Partial Risk Guarantee Fund for Energy Efficiency
RBI Reserve Bank of India
REC Rural Electrification Corporation
SBI State Bank of India
SIDBI Small Industries Development Bank of India

Regional Vice President: Philippe H. Le Houerou
Country Director: Onno Ruhl
Sector Director: John Henry Stein
Sector Manager: Julia Bucknall
Guarantee Manager: Pankaj Gupta
Task Team Leaders: Ashok Sarkar, Ashish Khanna
3
INDIA

Partial Risk Sharing Facility for Energy Efficiency

TABLE OF CONTENTS

Page
I. STRATEGIC CONTEXT ...............................................................................................10
A. Country Context .......................................................................................................... 10
B. Sectoral and Institutional Context ............................................................................... 10
C. Higher Level Objectives to which the Project Contributes ........................................ 12
II. PROJECT DEVELOPMENT OBJECTIVES ..............................................................14
A. PDO............................................................................................................................. 14
B. Project Beneficiaries ................................................................................................... 14
C. PDO Level Results Indicators ..................................................................................... 15
III. PROJECT DESCRIPTION ............................................................................................15
A. Project Components .................................................................................................... 15
B. Project Financing ........................................................................................................ 18
Financing Instrument ........................................................................................................ 18
Project Cost and Financing ............................................................................................... 19
C. Lessons Learned and Reflected in the Project Design ................................................ 21
IV. IMPLEMENTATION .....................................................................................................22
A. Institutional and Implementation Arrangements ........................................................ 22
B. Results Monitoring and Evaluation ............................................................................ 25
C. Sustainability............................................................................................................... 25
V. KEY RISKS AND MITIGATION MEASURES ..........................................................26
A. Risk Ratings Summary Table ..................................................................................... 26
B. Overall Risk Rating Explanation ................................................................................ 26
VI. APPRAISAL SUMMARY ..............................................................................................27
A. Economic and Financial Analyses .............................................................................. 27
B. Technical ..................................................................................................................... 27
C. Financial Management ................................................................................................ 28
4
D. Procurement ................................................................................................................ 29
E. Social (including Safeguards) ..................................................................................... 30
F. Environment (including Safeguards) .......................................................................... 30
Annex 1: Results Framework and Monitoring .........................................................................32
Annex 2: Detailed Project Description .......................................................................................36
Country Context ................................................................................................................ 36
Sectoral and Institutional Context ..................................................................................... 37
Higher Level Objectives to which the Project Contributes .............................................. 41
Annex 3: Implementation Arrangements ..................................................................................60
Annex 4: Operational Risk Assessment Framework (ORAF) .................................................88
Annex 5: Implementation Support Plan ....................................................................................96
Annex 6: CTF Guarantee ..........................................................................................................100
Annex 7: Economic and Financial Analyses ............................................................................106
Annex 8: Clean Technology Fund ............................................................................................133
Annex 9: Governance Accountability and Action Plan (GAAP) ...........................................148

5
PAD DATA SHEET
India
Partial Risk Sharing Facility for Energy Efficiency (PRSF)
PROJECT APPRAISAL DOCUMENT
.
South Asia Region
Energy

Basic Information
Date: Sectors: Energy Efficiency in Heat and Power (100%)
Country Director: Onno Ruhl Themes: Climate Change (80%), Infrastructure Services for Private
Sector Development (20%)
Sector Manager/Director: Julia Bucknall / John H. Stein EA Category: Guarantee
Project ID: P128921 / P132620
Financing Instrument: Grant and Guarantee
Team Leaders: Ashok Sarkar,
Ashish Khanna
Does the project include any CDD component? No
Joint IFC: No

Borrower of GEF Grant: SIDBI
CTF Guarantee Beneficiary: SIDBI as Facility Manager
Responsible Agency: Small Industries Development Bank of India (SIDBI), Energy Efficiency Services Limited (EESL)
Contact: N K Maini Title: CMD, SIDBI
Saurabh Kumar MD, EESL
Telephone Email:

Project Implementation Period: Start Date: September 01, 2014 End Date: September 1, 2021
Expected Effectiveness Date:
September 01, 2014
Expected Closing Date: September
1, 2021

Project Financing Data(US$M)
[ ] Loan [ x ] Grant [ ] Other
[ ] Credit [ x ] Guarantee
For Loans/Credits/Others
6
Total Project Cost : Total Bank

43 Financing : 43
Total Cofinancing: Financing Gap: 0
135

Proposed Terms:
 The CTF Guarantee to India will be provided in US$ with a guarantee fee of 0.10 percent per annum on the annual committed CTF
Guarantee amount and a 20-year availability period.
.
Financing Source Amount(US$M)
BORROWER/RECIPIENT 0
IBRD 0
IDA: New 0
IDA: Recommitted 0
Clean Technology Fund Guarantee 25
GEF 18
Total Project Cost 43
Others (Private sector) (partially guaranteed) 135
Financing Gap 0
Total Program Cost1 141
.
Expected Disbursements (in USD Million)
Fiscal Year 1 2 3 4 5 6 7 8 9
Annual 14 7 12 10 0 0 0 0 0
Cumulative 14 21 33 43 43 43 43 43 43
.
Project Development Objective(s)

The Project development objective is to assist India in achieving energy savings by (a) mobilizing commercial financing using risk
sharing mechanisms through GEF and CTF support; and (b) catalyzing ESCO-implemented energy efficiency projects. The project will
accomplish this by (a) leveraging project funds to encourage private sector investment in energy efficiency projects and (b) providing
complementary technical assistance and capacity building to stakeholders in India’s energy efficiency market.

.
Components
Component Name Cost (USD Millions)
Risk-Sharing Facility for Energy Efficiency 37
Technical Assistance and Capacity Building 6

Compliance
Policy
Does the project depart from the CPS in content or in other significant respects? Yes [ ] No X
.

1 Total of private capital mobilized of US$135 million and Technical Assistance of US$6 million
7
Does the project require any exceptions from Bank policies? Yes [ ] No X
Have these been approved by Bank management? Yes [ ] No []
Is approval for any policy exception sought from the Board? Yes [ ] No X
Does the project meet the Regional criteria for readiness for implementation? Yes [ x ] No []
.
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waters OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X
.
Legal Covenants
Name Recurrent Due Date Frequency

Description of Covenant
GEF Grant: Standard legal provisions to ensure that the Recipient operates and manages the Facility in a manner consistent with the
Bank’s fiduciary, trust fund, and energy efficiency requirements and best practices.

CTF Guarantee: Appropriate representations, warranties and covenants standard to guarantee operations of this nature.
.
Team Composition
Bank Staff
Name Title Specialization Unit UPI
Ashish Khanna Lead Energy Specialist Co-Task Team Leader SASDE 288695
Ashok Sarkar Senior Energy Specialist Co-Task Team Leader SASDE 293754
Kristin Mayer Energy Economist Team Member SASDE 421810
Kanv Garg Energy Analyst Team Member SASDE 418967
Sanjukta Roy Project Economist Team Member SASDE 372232
Jukka-Pekka Strand Infrastructure Finance Specialist Guarantee Specialist TWIFS 333239
Shanker Lal Senior Procurement Specialist Procurement Specialist SARPS 235050
Addepalli Sita Ramakrishna Senior Environmental Specialist Environmental Specialist SASDI 235788
Surbhi Dhingra Singh Social Development Specialist Social Specialist SASDS 415441
Sameena Dost Senior Counsel Legal LEGES 246615
Junxue Chu Senior Finance Officer Financial Management CTRLN 153387
Manoj Jain Lead Financial Management Specialist Financial Management SARFM 219261
8
Neil Pravin Ashar Senior Counsel Guarantee Lawyer LEGSO 374581
Vikram Raghavan Lead Counsel Country /GEF Lawyer LEGES
Victor Mosoti Senior Counsel Environmental Lawyer LEGEN
Mark Walker Chief Counsel Legal Advisor LEGSO
Neha Dhoundiyal Financial Management Specialist Financial Management SARFM 346388
Ramola Bhuyan Financial Management Specialist Financial Management SARFM
Deepali Uppal Program Assistant Coordination SASDO 301315
Nitika Surie Program Assistant Coordination SASDE 251951
Minerva Espinosa-Apurada Program Assistant Coordination SASDE
Peer Reviewers
Xiaodong Wang Senior Energy Specialist Peer Reviewer EASCS
Jeremy Levin Senior Energy Specialist Peer Reviewer CSBO2, IFC
Alan Townsend Senior Energy Specialist Peer Reviewer EASWE

Non-Bank Staff
Name Title Office Phone City
Sonalal Datta Financial Sector Expert [phone] New Delhi
.
Locations
Country First Administrative Location Plan Actu Comments
Division ned al

9
I. STRATEGIC CONTEXT
A. Country Context
1. India’s continued economic growth and rapid urbanization has led to dramatic increase in
primary energy demand. A projected increase in primary energy supply and electricity
generation by up to four and six times their current levels, respectively, will provide all
households with ‘lifeline’ electricity consumption by 2031 and sustain economic growth at 8
percent.2 Energy and peak load deficits were 9 and 11 percent, respectively, in 2012.

2. Adopting increased levels of energy efficiency (EE) is necessary not only to manage
energy demand, but also to enhance energy security and address local and global environmental
concerns. India has substantial untapped energy efficiency potential across various sectors.
Recent studies have identified many energy efficiency investment opportunities throughout the
economy that would yield high financial returns with short payback periods.3

B. Sectoral and Institutional Context
3. India’s Energy Efficiency Potential: The GoI estimates that its overall EE market has an
investment potential of US$9.77 billion and could save up to 183.5 billion kilowatt hours (kWh)
and 148.6 million tons of CO in only five years.4 Over 25 percent of these estimated savings are
2
expected to be achieved in the industrial sector. Much of this potential lies within micro, small
and medium enterprises (MSMEs)5, as they comprise more than 80 percent of the country’s
industrial enterprises and lag behind larger industry benchmarks in technology modernization
and other energy efficiency measures.6 Buildings sector can reduce an average of almost 20
percent of current energy usage through energy efficiency measures. Over 70% of the buildings’
stock, proposed to be built by 2030, is yet to be developed in India.

4. Regulatory Mandates and Policy Initiatives: The GoI has recently enacted a variety of
regulatory mandates and policy initiatives to tap energy savings opportunities under its National
Mission for Enhanced Energy Efficiency (NMEEE). NMEEE aims to address inefficient usage
of energy in the country by setting mandatory energy saving targets in industries, stimulating
funding for ESCOs, and engaging in market transformation by introducing energy efficient
appliances and introducing various different EE financing instruments. More details are provided
in Annexure 2. By far the largest of these NMEEE initiatives is the Perform, Achieve and Trade
(PAT) scheme, a globally unique program that has mandated energy-intensity targets for the
country’s most energy-intensive industrial sectors.

2 Government of India Integrated Energy Policy (2006). ‘Lifeline’ electricity consumption is 30 kWh per household per month.
These figures are equivalent to an installed capacity between 320 and 332 GW.
3 Planning Commission 2006 estimates.
4 World Resources Institute. “Powering Up: The Investment Potential of Energy Service Companies in India.”, 2009
5 The Government of India has enacted the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which
defines the micro, small and medium enterprises and their sizes.
6 World Bank. “Energy Intensive Sectors of the Indian Economy: Path to Low Carbon Development.”, 2011
10