The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) REPORT NO.: RES37499 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF CARBON ASSET DEVELOPMENT FUND - METHANE RECOVERY FROM WASTE MGMT PROJECT APPROVED ON OCTOBER 7, 2015 TO LAND BANK OF THE PHILIPPINES ENVIRONMENT & NATURAL RESOURCES EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Mara K. Warwick Senior Global Practice Director: Karin Erika Kemper Practice Manager/Manager: Christophe Crepin Task Team Leader: Katelijn Van den Berg The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) ABBREVIATIONS AND ACRONYMS CADF Carbon Asset Development Fund CER Certified Emission Reduction ER Emission Reduction ERPA Emission Reduction Purchase Agreement The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID Financing Instrument P152805 Investment Project Financing Original EA Category Current EA Category Not Required (C) Not Required (C) Approval Date Current Closing Date 07-Oct-2015 30-Jun-2019 Organizations Borrower Responsible Agency The Land Bank of Philippines The Land Bank of the Philippines Financing (in USD Million) FIN_SUMM_PUB_TBL SUMMARY Total Project Cost 0 Total Financing 0 Financing Gap 0 DETAILS -NewFin3 The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) Project Development Objective (PDO) Original PDO The objective of the Project is to assist Land Bank of the Philippines (LBP) with the development of carbon assets for purchase by the Carbon Partnership Facility (CPF). OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-19049 12-Oct-2015 28-Oct-2015 28-Oct-2015 30-Jun-2019 .41 .26 .15 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No Note to Task Teams: End of system generated content, document is editable from here. The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) A. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Carbon Asset Development Fund (CADF) of the Carbon Partnership Facility (CPF) made available grant funds to support Land Bank of the Philippines in the development of carbon assets for purchase by the CPF under the CPF “Methane Recovery from Waste Management Project” (P115080), which is implemented by Land Bank of the Philippines. 2. The objective of the CPF Methane Recovery from Waste Management Project is to reduce greenhouse gas emissions from participating landfills and piggery farms through introduction of low Greenhouse Gas emitting waste management technologies. The CADF Grant supports: (i) Capacity Building and Technical Support; (ii) Marketing and Communication; and (iii) Sub-Project Inclusion, Monitoring, and Verification of the landfill gas equipment for the participating landfills and the biodigesters for the participating piggery farms. The Emission Reductions (ERs) achieved by the farms and landfills are then purchased by the CPF’s buyer participants (contributors to the CPF Carbon Fund) through the agreed and signed Emission Reduction Purchase Agreements (ERPAs). The Closing Date of the accompanying CPF Methane Recovery Project is June 30, 2022. 3. Implementation. The current disbursement of the Grant is 64 percent. The inclusion of the 3 landfills (including a stand- alone landfill) and 24 piggery farms into the Methane Recovery Project has been completed. A milestone for the project was reached with the first payment for Certified Emission Reductions (CERs) from the Marcela and Biotech piggery farms. The first delivery of vintage CERs from the stand-alone Clean Development Mechanism (CDM) landfill was another milestone. To date, 369,285 ERs in tons of CO2 equivalent have been achieved from the landfill and piggery Program of Activities (POAs), with the landfills delivering substantially more emission reductions than the piggery farms. 4. Emission Reductions and objectives. As of December 31, 2018, the stand-alone landfill was able to generate a total of 341,798 ERs among which 228,801 Certified ERs have been delivered. The remaining 106,160 CERs for 2018 have been submitted to UNFCCC and are scheduled for delivery pending the processing of the authorized signatory change on the part of the landfill entity. The other two landfills have generated 142,113 ERs and the verification process is still ongoing. As of December 31, 2018, the Piggery Program POA delivered 21,088 vintage CERs or 5.00% of the ERPA commitment for the reporting year ending 2015. Pending verification, the program has realized an additional 20,274 ERs in 2018. 5. Specifically, the piggery farms are underdelivering. Key reasons for this lower delivery are: (i) the CER delivery period ended up being shorter than originally estimated (3 years rather than 6 years); (ii) a lower and smaller number of pig farms were included in the POA than originally foreseen; (iii) some farms have a lower methane gas production than envisaged and there were delays in the construction of the biogas digestors; and (iv) the procurement of the automatic monitoring equipment for the recording of the emissions reductions at the farms failed after two bidding attempts and is now replaced by manual monitoring. 6. Due to the lower emission reductions than anticipated for the piggery farms, a review of the detailed emission reduction calculation is ongoing and will be the basis to discuss adjustment of the ERPA with the CPF buyer participants. After agreement with the buyer participants, the subsequent adjustment of the targets and grant amounts in the ERPAs will automatically improve the CADF project’s achievement of outcome indicators because the indicator targets are based on compliance with the delivery schedule of the signed ERPAs. Amendment of the ERPAs is expected to be effectuated by September 30, 2019. The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) B. Rationale for restructuring 7. Several key activities under the CADF grant are still required to support the emission reductions of the farms and landfills and their delivery of CERs: (a) Support to farms for manual monitoring of emission reductions in line with agreed protocols after the purchase and installation of the automatic monitoring equipment was not feasible due to insufficient interest of suppliers. This increases the importance of the extension of the closing date to finance the consultants who will continue to support the farms in the manual monitoring of the Emission Reductions and to ensure that final emission reductions can take place after final ERPA issuance. (b) Assistance to the farms in finalization of the Environmental and Social Management Plans and further monitoring of the mitigation measures is still required, and CADF grant extension is needed to ensure continued financing of these activities, as well as the third-party auditor undertaking the renewal of the crediting period for both programs; (c) Technical assessment of biogas digestor systems of the registered project and lessons learned to increase the delivery of the certified emission reductions from the piggery farms and landfills under the program. 8. To properly implement these activities and support the implementation and compliance requirement monitoring of the accompanying Methane Recovery Project, an extension of the Closing Date of the CADF Grant until April 30, 2021 will be required (total extension of 22 months). This extension is still within the available Trust Fund period as per the Administration Agreement with the donors. In addition, the restructuring will include a minor reallocation of grant proceeds. Although implementation is currently lagging and therefore rated as MU, the PDO still remains achievable. The performance of the grant recipient is satisfactory on the basis of the following: (i) an action plan has been agreed, including an acceptable updated procurement plan and workplan to ensure completion of project activities and required support to the accompanying Methane Recovery Project during the proposed extension of the implementation period; (ii) there are no outstanding audits and Interim Financial Reports; and (iii) following the adjustments of the ERPAs based on agreements with Carbon Fund buyers, the CADF project’s achievement of outcome indicators will automatically improve, because the indicator targets are based on compliance with the delivery schedule of the signed ERPAs . The funds required for the World Bank’s continued supervision and implementation support for the extended CADF grant period are also Trust Fund financed. The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) I. DESCRIPTION OF PROPOSED CHANGES C. Description of proposed changes 9. To properly implement the remaining activities under the CADF grant and support monitoring of emission reductions, compliance, and technical assessments for improvement of performance of the carbon assets developed under the accompanying Methane Recovery Project, an extension of the Closing Date until April 30, 2021 is proposed together with a minor reallocation of grant proceeds as per the Reallocation Table below. Due to the extension of the Closing Date and the reallocation, this also causes accompanying revisions to the disbursement estimates and component costs. This is the first and final proposed extension of the Closing Date. Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. A. SUMMARY OF CHANGES Changed Not Changed Components and Cost ✔ Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Disbursement Estimates ✔ Implementing Agency ✔ Project's Development Objectives ✔ Results Framework ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Component 1: Capacity building Component 1: Capacity 0.07 Revised 0.10 and technical support building and technical support Component 2: Marketing and Component 2: Marketing and 0.11 Revised 0.07 communication communication Component 3: Subproject Component 3: Subproject inclusion, monitoring and 0.21 Revised inclusion, monitoring and 0.22 verification verification Component 4: Project Component 4: Project management (reporting and 0.01 No Change management (reporting and 0.01 audit) audit) TOTAL 0.40 0.40 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-19049 Effective 30-Jun-2019 30-Apr-2021 30-Aug-2021 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) The World Bank Carbon Asset Development - Methane Recovery from Waste Mgmt Project (P152805) Current Proposed TF-19049-001 | Currency: USD iLap Category Sequence No: 1A Current Expenditure Category: GD,NON-CS,CS,TR&WS,OC - PIGGERY POA 221,007.00 47,365.86 285,573.00 100.00 100.00 iLap Category Sequence No: 1B Current Expenditure Category: GD,NON-CS,CS,TR&WS,OC- LANDFILL POA 55,917.00 360.17 54,016.00 100.00 100.00 iLap Category Sequence No: 1C Current Expenditure Category: GD,NON-CS,CS,TR&WS,OC-EXCL CAT.1A&B 133,076.00 15,373.52 70,411.00 100.00 100.00 Total 410,000.00 63,099.55 410,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2016 0.00 200,000.00 2017 0.00 50,000.00 2018 0.00 0.00 2019 0.00 20,000.00 2020 0.00 140,000.00 Note to Task Teams: End of system generated content, document is editable from here.