Pakistan: Energy Efficiency Investment Program - Tranche 1

Sovereign Project | 42051-023

Summary

On 13 August 2009, the Government of Pakistan entered into a Framework Financing Agreement with ADB to implement MFF 0031. On 22 September 2009, ADB approved financing for up to $780 million for MFF 0031, and up to $85 million for Tranche 1. Tranche 1 includes the National Compact Fluorescent Lamp (CFL) Project under Loans 2552 and 8246, and the Investment Program Management Support Project under Loan 2553. Loan 8246 was declared effective on 9 July 2010, and Loans 2552 and 2553 were declared effective on 30 August 2010.

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Project Name Energy Efficiency Investment Program - Tranche 1
Project Number 42051-023
Country Pakistan
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2552-PAK: MFF - Energy Efficiency Investment Program - Project 1 formerly MFF- Sustainable Energy Efficiency Investment (PFR 1)
Ordinary capital resources US$ 30.00 million
Loan 2553-PAK: MFF - Energy Efficiency Investment Program - Project 1 formerly MFF- Sustainable Energy Efficiency Investment (PFR 1)
Asian Development Fund US$ 20.00 million
Loan 8246-PAK: MFF - Energy Efficiency Investment Program - Project 1 formerly MFF- Sustainable Energy Efficiency Investment (PFR 1)
Agence Francaise de Developpement US$ 25.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Partnerships
Private sector development
Sector / Subsector

Energy - Energy efficiency and conservation

Gender Equity and Mainstreaming Some gender elements
Description

On 13 August 2009, the Government of Pakistan entered into a Framework Financing Agreement with ADB to implement MFF 0031. On 22 September 2009, ADB approved financing for up to $780 million for MFF 0031, and up to $85 million for Tranche 1. Tranche 1 includes the National Compact Fluorescent Lamp (CFL) Project under Loans 2552 and 8246, and the Investment Program Management Support Project under Loan 2553. Loan 8246 was declared effective on 9 July 2010, and Loans 2552 and 2553 were declared effective on 30 August 2010.

The National CFL Project will replace about 30 million incandescent bulbs in the residential sector with efficient, high-quality CFLs. ADB approved financing of up to $40 million from its ordinary capital resources (Loan 2552), and $25 million equivalent from Agence Francaise de Developpment (AFD, Loan 8246) for the bulk procurement and public awareness campaign for door-to-door CFL delivery to registered household customers in their license areas. The Government is contributing $20 million. In August 2014, $10 million under Loan 2552 were cancelled as surplus loan proceeds.

The Investment Program Implementation and Management Support Project will help the Government manage the Investment Program, and execute projects under each tranche. It will help with policy and institutional reform, safeguard management, gender mainstreaming, financing controls, monitoring, evaluation, results reporting, and design and due diligence for future tranches. ADB approved financing of up to $20 million from ADB's Special Funds resources (Loan 2553). The Government is contributing $5 million.

Project Rationale and Linkage to Country/Regional Strategy

The energy gap is now one of Pakistan's most serious binding constraints to growth and jobs. It results from the rapid increase in demand and high wastage of energy, and is one of the main causes of the current economic crisis. Pakistan's dependency on oil imports results from the suboptimal energy supply mix that is a consequence of poor planning. The economy is susceptible to fuel price volatility.

Pakistan uses 15% more energy than India and 25% more than the Philippines (for each dollar of gross domestic product). Energy wastage is a high cost to the economy, businesses, and consumers; its reduction requires major and immediate shifts in policies, investment, and consumption patterns.

In 2009, the power deficit reached 5,000 megawatts (MW), and natural gas supply to industries was cut during the 4 winter months. People and businesses in many parts of Pakistan are experiencing power outages and rationing lasting more than 12 hours a day. Factory closures are causing social unrest.

Energy efficiency represents the least-cost and quickest low-carbon solution to bridge the energy gap. It cuts the high dependence on oil imports and avoids investment in expensive and inefficient rental power generation based on fossil fuels. It ultimately strengthens energy security, contributes to the environment, creates jobs, and improves industrial competitiveness. Energy efficiency is now a strategic priority for the Government.

Pakistan's total energy savings potential, through the application of clean and efficient technology, is estimated at 11.16 million tons of oil equivalent (493,304 terajoules [TJ]), or 18% of primary energy use (FY 2008). This corresponds to a 51% reduction in net oil imports. In FY 2008, the oil import bill was $12 billion. Savings in electricity and gas resulting from well thought out energy efficiency investments correspond to additional generation capacity of about 6,770 MW.

Energy efficiency investments can be most effective when the policy, regulatory, and pricing regime is right. Energy tariffs have historically been low in Pakistan. As such, customers have not had much of an incentive to invest in efficient technology, nor shift consumption patterns. While electricity production costs tripled from FY 2003 to FY2007, tariffs were not adjusted to cover this increase. Since FY 2007, tariffs increased by an average of 20% and will continue doing so until reaching cost-recovery by FY 2011. As tariffs increase, so does awareness of energy efficiency and incentives to acquire new, less energy-consuming technology.

Impact Energy efficiency promoted in Pakistan
Project Outcome
Description of Outcome Inefficient, substandard incandescent bulbs phased out of the market
Progress Toward Outcome During the review missions in Sep 2014 and Feb 2015, ADB urged MoWP to fully establish the PMO so that procurement for the lamp waste management facility and other planned contracts to be financed under L2553 could start.
Implementation Progress
Description of Project Outputs

CFLs introduced in the local market

Increased consumer awareness on energy efficient lighting products

Lamp waste collection and recycling demonstration facility established

Energy efficiency and climate change mainstreamed in national development strategy

Status of Implementation Progress (Outputs, Activities, and Issues)

Ongoing. Original target date moved due to delayed procurement, pre-shipment CFL inspections, and CFL media campaign; and unavailability of incandescent lamps to be replaced. As of 15 Jan 2015, 87% of CFLs have been distributed to households.

CFL media campaign commenced on 10 December 2013.

Target revised to 2017. Procurement to commence after the new PMO is on board.

Target still feasible but with revised schedule.

Target still feasible but with revised schedule.

Geographical Location Countrywide
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects Based on the IEE (Supplementary Appendix I of the RRP), the National CFL Project (Loan 2552/L8246) is Category B. A key environmental risk is lamp waste accumulation. To avoid this risk, the Program Management Support Project (Loan 2553) provides for a lamp waste management facility. In general, there are no potential significant adverse environmental impacts that warrant specific environmental monitoring.
Involuntary Resettlement The Tranche 1 projects neither entail land acquisition nor economic or physical resettlement.
Indigenous Peoples The Tranche 1 projects will not affect indigenous peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design

To support the investment program preparation and the Roadmap preparation, the Government established the Energy Efficiency and Conservation Consultative Group (EECCG) chaired by the Planning Commission and comprising Secretaries of EAD, Ministries of Finance, Water and Power, Petroleum and Natural Resources, Environment, Industries, the National Energy Conservation Center, PEPCO, power and gas utilities, Pakistan Standards and Quality Control Authority, Hydrocarbon Development Institute, Pakistan Council for Industrial and Scientific Research, and development partners. EECCG provided strategic guidance into the program design and later in implementation to ensure the effectiveness and sustainability of the project's outcome.

The Pakistan EEIP Baseline Domestic Lighting Survey was conducted to support the design of the National CFL Project. The survey aimed to determine the existing patterns of lighting device use and lighting habits across different electricity consumption tiers in the residential sector of the country, and to ensure the eligibility of the program for Clean Development Mechanism. The survey involved 3,253 domestic customers in 58 major areas (districts, tehsils, 53 town committees, and cities) across the eight distribution companies (DISCOs), and the Karachi Electric Supply Company (KESC). The survey sample was distributed using pro-rated domestic customer distribution patterns of the nine utilities across each electricity consumption tier. The details on the survey methodology and results are in the PPTA Consultants' Final Report.

During Project Implementation EECCG will continue its strategic guidance role. The Ministry of Water and Power and PMU are coordinating with other stakeholders during implementation.
Business Opportunities
Consulting Services International and national consultants to be recruited following ADB's Guidelines on the Use of Consultants, using the quality- and cost-based selection method. The consultants would (i) manage the Investment Program, (ii) conduct feasibility studies for subsequent tranches, (iii) help with implementation and M&E for the National CFL Project, (iv) help comply with post-PDD CDM requirements, and (v) support capacity development. Three individual consultants (Energy Efficiency Expert, Auditor/Validator, and Logistics Expert) were engaged to help implement the National CFL Project.
Procurement Goods and works to be procured following ADB's Procurement Guidelines, and in consultation with Agence Francaise Developpment (for contracts jointly financed by AFD). The CFLs were procured through ICB (goods) using ADB's one-stage, one-envelope bidding procedure. The CFL communication campaign was procured through NCB (goods). The lamp waste management facility will be procured through ICB (design, supply, and install). Shopping will be used to purchase goods less than $100,000.
Responsible ADB Officer Joonho Hwang
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
Ministry of Water & PowerMr. Shahid Rafisecretary@mowp.gov.pkA Block, Pak Sectt. Islamabad
Planning CommissionN/AInfrastructure Wing
Islamabad
Pakistan
Timetable
Concept Clearance 27 Apr 2009
Fact Finding 28 Apr 2009 to 15 May 2009
MRM 08 Jun 2009
Approval 30 Sep 2009
Last Review Mission -
PDS Creation Date 26 Nov 2009
Last PDS Update 24 Mar 2015

Loan 2552-PAK

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
22 Sep 2009 29 Apr 2010 30 Aug 2010 31 Jul 2012 30 Jun 2014 05 May 2015
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 55.00 Cumulative Contract Awards
ADB 30.00 22 Sep 2009 26.77 0.00 99%
Counterpart 25.00 Cumulative Disbursements
Cofinancing 0.00 22 Sep 2009 27.02 0.00 100%

Loan 2553-PAK

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
22 Sep 2009 29 Apr 2010 30 Aug 2010 31 Mar 2017 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 20.00 Cumulative Contract Awards
ADB 20.00 22 Sep 2009 1.28 0.00 7%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 22 Sep 2009 0.77 0.00 4%

Loan 8246-PAK

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
30 Sep 2009 09 Jul 2010 09 Jul 2010 31 Dec 2014 - 01 Jun 2015
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 25.00 Cumulative Contract Awards
ADB 0.00 30 Sep 2009 0.00 16.57 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 25.00 30 Sep 2009 0.00 16.57 100%

Safeguard Documents

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Evaluation Documents

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