Guangdong Energy Efficiency and Environment Improvement Investment Program - Tranche 2

Project Management. Strong government ownership was critical to the successful implementation of the project. Creative and practical implementation arrangements ensured the investment program was soundly managed. Under the multitranche financing facility, a distinctive financial intermediary modality was adopted, and a third party was selected to conduct energy savings measurement and verification for each subproject. Furthermore, the executing agency issued and updated management handbooks for the investment program on procurement, financial management and energy savings measurement and verification that ensured the smooth and sustainable project implementation. _x005F_x000D__x005F_x000D_Financial intermediary. The financial intermediary loan modality was proved an effective mechanism to support implementation of energy efficiency projects. Evaluations of the financial viability of the candidate subborrowers were conducted independently by the Guangdong Finance Trust Company to assess the financial status of each subproject. The project's revolving funding mechanism is operational, and proceeds from the loan repayments of earlier subborrowers are being rolled over to provide loans for more new subborrowers that meet the eligibility criteria. The relending of subloan funds that have been repaid with interest will allow compound growth in the energy savings produced by the project during the ADB loan repayment grace period. _x005F_x000D__x005F_x000D_Energy saving estimates. The actual energy savings achieved by the tranche 2 project are much higher than anticipated at appraisal. More accurate methods of estimating energy saving should have been used. The key is to establish an accurate baseline and design a customized measurement and verification method to verify energy savings achieved from the outset. It is also important to use the same methodology for pre- and post-project energy saving calculations. _x005F_x000D__x005F_x000D_Measurement and verification. Third-party measurement and verification agencies ensured accurate assessment of energy savings and emissions reduction for subproject, which enabled the energy efficiency benefits and achievement of the overall project to be accurately calculated.