Key Dates. Global Development Objectives. Components. Overall Ratings. Implementation Status and Key Decisions

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1 Public Disclosure Authorized EAST ASIA AND PACIFIC Thailand Environment & Natural Resources Global Practice Montreal Protocol Investment Project Financing FY 2014 Seq No: 8 ARCHIVED on 14-Jun-2018 ISR31396 Implementing Agencies: Ministry of Finance, Department of Industrial Works Public Disclosure Authorized Key Dates Key Project Dates Bank Approval Date:07-Apr-2014 Planned Mid Term Review Date:17-Feb-2017 Original Closing Date:31-Dec-2018 Global Development Objectives Effectiveness Date:13-Nov-2014 Actual Mid-Term Review Date:13-Feb-2017 Revised Closing Date:31-Dec-2018 Public Disclosure Authorized Global Environmental Objective (from Project Appraisal Document) The project development objective is to reduce HCFC consumption in the air-conditioning and foam sectors in order to contribute tothailand s efforts to meet its HCFC consumption phase-out obligations under the first phase of the program ( ). Has the Global Environmental Objective been changed since Board Approval of the Project Objective? No Components Public Disclosure Authorized Name Investment in HCFC Consumption Reduction:(Cost $21.04 M) Technical Assistance:(Cost $0.63 M) Project Management:(Cost $1.38 M) Institutional Strengthening:(Cost $0.87 M) Overall Ratings Name Previous Rating Current Rating Progress towards achievement of GEO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Moderate Moderate Implementation Status and Key Decisions 6/14/2018 Page 1 of 11

2 The project has already exceeded its HCFC consumption phase-out targets, including Thailand s 2018 obligation under the Montreal Protocol (MP). Verified consumption (imports) in 2016 was 589 ODP tons (ozone depleting potential), well below the 2018 target of 788 ODP tons or equivalent to 27.5% of the baseline against the target of 15% of the baseline level. The Ministry of Industry recently issued decrees to (a) ban the manufacture of HCFC-22 air-conditioners with cooling capacity of up to 50,000 BTU/hr for the domestic market and (b) ban the use of HCFC-141b for making polyurethane foam products (except spray foam). These decrees will help ensure the sustainability of the reductions achieved to date. The Department of Public Works issued a decision in July 2017 to allow installation in high-rise buildings of R32 air conditioners with cooling capacity up to 50,000 BTU/hr (previously restricted due to the mild flammability of the refrigerant HFC-32). While demand for project financing of a/c conversions has been strong, demand in the foam sector has been weaker than expected because most of the affected HCFC users have converted to low- or zero-odp substances without financial assistance from the project. Project costs and financing will be adjusted accordingly. While this affects some intermediate targets in terms of their attribution to project investments, it does not jeopardize achievement of the overall project objectives. Technical assistance (TA) activities have also progressed slowly than expected, but a plan has been agreed to ensure that priority TA activities are carried out before project completion. 6/14/2018 Page 2 of 11

3 6/14/2018 Page 3 of 11

4 Risks Systematic Operations Risk-rating Tool 6/14/2018 Page 4 of 11

5 PHINDGEOTBL Risk Category Rating at Approval Previous Rating Current Rating Political and Governance -- Low Low Macroeconomic -- Low Low Sector Strategies and Policies -- Low Low Technical Design of Project or Program -- Moderate Moderate Institutional Capacity for Implementation and Sustainability -- Moderate Moderate Fiduciary -- Moderate Moderate Environment and Social -- Moderate Moderate Stakeholders -- Moderate Moderate Other Overall -- Moderate Moderate Results Global Environmental Objective Indicators Reduction in HCFC consumption from foam and a/c sectors(text, Custom) Value ODP ton ODP ton 209 ODP Ton Overall The maximum allowance consumption in 2014 is ODP tons (which is the baseline level for Thailand). The 2016 HCFC consumption verification indicates that the consumption in 2016 is ODP tons. This represents a reduction of ODP tons from the baseline level. This reduction achieved from the direct phase-out of ODP tons from completion of eleven A/C sub-projects and sixteen foam sub-projects. The balance of ODP tons is achieved from policies and regulations (TA component). Given that the policies to the ban the use of HCFC- 22 in the manufacturing of A/C equipment apply to local manufacturers that are eligible for assistance from this project and multinational companies whose combined HCFC-22 consumption is much larger than the amount consumed by the local companies. Hence, the policy and TA component of this project is critical to the achievement of the overall phase-out target. The current reduction of 338 ODP tons exceeds both the Montreal Protocol (MP) consumption (import) target for Thailand as well as the related, project-specific conversion and phase-out targets. The MP target for is 835 ODP tons, or 90% of the MP baseline of 928 ODP tons. The 2018 (and end-of-project) target is 788 ODP tons, or 85% of the baseline. Although this only reflects a reduction of 140 ODP tons, the project target of 209 ODP tons is the amount of actual usage converted to both help achieve the MP target starting from the higher, actual baseline in 2012 (1,155 ODP tons) along with additional reduction from policy and regulatory measures, and to help affected sectors adapt to the reduced supply. The 2016 HCFC consumption verification indicates that Thailand s consumption in 2016 was 589 ODP tons (338 tons below the MP baseline). This reduction was achieved through the direct conversion of 106 ODP tons from eleven A/C subprojects and sixteen foam subprojects. The balance of 232 ODP tons was achieved from policy and regulatory measures (TA component). Given that the policies to the ban the use of HCFC-22 in the manufacturing of A/C equipment apply to local manufacturers that are eligible for assistance from this project and 6/14/2018 Page 5 of 11

6 multinational companies whose combined HCFC-22 consumption is much larger than the amount consumed by the local companies. Hence, the policy and TA component of this project is critical to the achievement of the overall phase-out target. Intermediate Results Indicators Timely issuance and enforcement of annual HCFC import quotas (Yes/No, Custom) Value Y Y Y Y Date 31-Jan Sep Sep Jan-2018 Annual HCFC import quotas were issued in a timely manner. The quotas for 2017 was issued on November 16, According to the 2015 and 2016 HCFC consumption verification reports, actual imports of HCFCs in those years were well within the quotas issued and within the MP ceiling of ODP tons (10% of the baseline level). Timely Article 7 data submission (Yes/No, Custom) Value Y Y Y Y Date 30-Sep Sep Sep Sep-2018 The 2016 HCFC consumption verification report are used for preparation of the 2016 Article 7 data for Thailand. The data was submitted to the Ozone Secretariat by on 12 July 2017, ahead of the submission deadline of 30 September HCFC-22 consumption reduction in the air-conditioning sector (Text, Custom) Value 57 ODP tons ODP Ton ODP Ton 57 ODP Ton 6/14/2018 Page 6 of 11

7 The actual reduction of ODP tons is the result of the completion of production line conversions at 11 A/C manufacturers. GHG emission reduction from replacement of baseline refrigerant with low/lower GWP alternative in the air-conditioning sector (Text, Custom) Value ,622,649 tco2 eq/yr 1,622,649 tco2 eq/yr 1,232,535 tco2 eq/year GHG emission reduction is calculated based on the assumption that the full charge of baseline refrigerant (HCFC-22 with GWP of 1810) and new refrigerant (HFC-32 with GWP of 675) will be released to the atmosphere at end of life of a/c equipment. GHG emission reduction is a combination of using lower GWP refrigerant as a replacement of HCFC-22 and the fact that the charge size of HFC-32 is only 60% of the baseline refrigerant. Successful conversion of beneficiaries in A/C sector (Number, Custom) Value AC manufacturers have already completed their conversions to HFC-32. They have stopped using HCFC-22 in the manufacturing of a/c. Given one of the twelve eligible a/c enterprises, decided to stop manufacturing a/c with cooling capacity lower than 50,000 BTU/hr and decided not to seek any funding from the project, it is certain that the target of 12 successful conversions will not be met. 6/14/2018 Page 7 of 11

8 HCFC-141b consumption reduction in the foam sector (Text, Custom) Value 0 ODP tons ODP Ton ODP Ton 152 ODP ton The actual HCFC-141b consumption reduction is contributed by completion of 16 major foam enterprise conversions. GHG emission reduction from replacement of baseline foam blowing agent with low/lower GWP alternative in the foam sector (Text, Custom) Value 0 tco2 eq/yr 232,865 tco2 eq/year 232,865 tco2 eq/year 740,499 TCO2 eq/yr There are 16 enterprises completing their conversions. Out of these 16 enterprises, 7 enterprises converted to cyclopentane and 9 converted to a reduced HFC-245fa formulation. The latter results in the phase-out of ODP tons of HCFC-141b and those 7 enterprises adopting cyclopentane have a combined HCFC-141b phase-out of ODP tons. Replacing HCFC-141b (GWP 725) to cyclopentane (GWP 4) results in climate benefit equivalent to 213,181 tco2 per year. Additional climate benefit of 19,685 tco2 per year arises from replacing HCFC-141b with 50% HFC-245fa reduced formulation. Total climate benefit is equivalent to 232,865 tco2 per year. GHG emission reduction is contributed by the change of a blowing agent from HCFC-141b, which has a GWP of 725 (relative to CO2), to cyclopentane which has a GWP of 4. The GWP of the 50% HFC-245fa reduced formulation is 515. Annual Work Programs for Submission to the ExCom (Number, Custom) Value The work program was submitted during an implementation support mission in September /14/2018 Page 8 of 11

9 Number of system houses offering lower-gwp pre-blended formulation technologies (Number, Custom) Value At present, there are four system houses supplying lower-gwp (HFC-245fa) pre-blended formulation to small foam enterprises. These system houses include IRPC, South City, Dow Chemical, and BIT. Verification Reports on Annual HCFC Consumption (Number, Custom) Value Date 20-Aug Sep Sep Dec-2017 To date, four verification reports covering HCFC consumption in 2013, 2014, 2015 and 2016 have already been submitted to the ExCom. The 2017 HCFC verification consumption report is under preparation to be submitted to the Bank in July /14/2018 Page 9 of 11

10 Regulations and standards supporting HCFC phaseout (Text, Custom) Value No regulations banning the use of HCFCs Revised standards and regulations for the A/C sector completed. Revised standards and regulations for the A/C sector completed. Completion of revised standards and regulations for the A/C sector Achieved. The Department of Industrial Works (DIW) has already issued two ministerial notifications effective from 1st July 2017: (i) the ban on the use of HCFC-22 for manufacturing air-conditioners (A/C) with cooling capacity of 50,000 BTU/hr (14.5 kw) and lower for the domestic market; and (ii) the ban on the use of HCFC-141b and polyol pre-blended with HCFC-141b for manufacturing of all polyurethane foam products except spray foam. The building code has already been revised to allow installation of a/c systems using HFC-32 with cooling capacity up to 50,000 BTU/hr in high-rise buildings. Overall While the project implementation progress has already surpassed the target for the overall reduction of HCFC consumption, limited participation of small foam enterprises and the decision of one eligible a/c manufacture to stop using HCFC-22 without seeking funding from the project would result in a project shortfall in achieving four intermediate results indicators: (i) HCFC-22 consumption reduction in the air-conditioning sector; successful conversion of all 12 beneficiaries in A/C sector; HCFC-141b consumption reduction in the foam sector; and GHG emission reduction from replacement of baseline foam blowing agent with low/lower GWP alternative in the foam sector. However, this does not directly affect achievement of the project-level objective of reducing HCFC consumption per Montreal Protocol obligations, and project costs and financing was adjusted to reallocate the fund to TA activities for the sustainable of the HCFC phaseout in Thailand. Restructuring of the project to cancel part of fund as per agreement with ExCom and reallocate fund from sub-grant category to TA is completed. Data on Financial Performance Disbursements (by loan) Project Loan/Credit/TF Status Currency Original Revised Cancelled Disbursed Undisbursed Disbursed P TF Effective USD % Key Dates (by loan) Project Loan/Credit/TF Status Approval Date Signing Date Effectiveness Date Orig. Closing Date Rev. Closing Date P TF Effective 13-Nov Nov Nov Dec Dec /14/2018 Page 10 of 11

11 Cumulative Disbursements Restructuring History Level 2 Approved on 08-Jun-2018 Related Project(s) There are no related projects. 6/14/2018 Page 11 of 11