Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) Report Number : ICRR0020266 1. Project Data Project ID Project Name P106424 MX Efficient lighting and appliances Country Practice Area(Lead) Mexico Energy & Extractives L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) IBRD-79960 30-Jun-2014 905,562,200.10 Bank Approval Date Closing Date (Actual) 23-Nov-2010 30-Jun-2014 IBRD/IDA (USD) Grants (USD) Original Commitment 250,625,000.00 0.00 Revised Commitment 250,625,000.00 0.00 Actual 250,625,000.00 0.00 Sector(s) Energy efficiency in Heat and Power(100%) Theme(s) Climate change(67%):Other social development(33%) Prepared by Reviewed by ICR Review Coordinator Group Ranga Rajan Krishnamani Peter Nigel Freeman Christopher David Nelson IEGSD (Unit 4) PHPROJECTDATATBL Project ID Project Name P120654 MX GEF Efficient lighting and appliances ( P120654 ) Country Practice Area(Lead) Mexico Energy & Extractives L/C/TF Number(s) Closing Date (Original) Total Project Cost (USD) TF-98062,TF-98465 30-Jun-2014 192,118,600.10 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) Bank Approval Date Closing Date (Actual) 23-Nov-2010 30-Jul-2015 IBRD/IDA (USD) Grants (USD) Original Commitment 0.00 57,118,600.00 Revised Commitment 0.00 56,949,977.01 Actual 0.00 56,949,977.01 Sector(s) Public administration- Energy and mining(30%):Energy efficiency in Heat and Power(70%) Theme(s) Other social development(33%):Climate change(67%) 2. Project Objectives and Components a. Objectives The Project Development Objectives (PDOs) as stated in the Loan Agreement (Schedule 1, page 6) was: “To promote the Borrower’s efficient use of energy and to mitigate climate change by increasing the use of energy efficient technologies at the residential level.” The PDO as stated in the Project Appraisal Document (PAD, page 9) was similar: “To increase Mexico’s efficient use of energy promoting an increasing use of efficient technologies at the residential level and to support its efforts to mitigate climate change.” The Global environmental objectives of the project were to support efforts to mitigate climate change by expanding the use of energy-efficient equipment and services. This assessment is based on the objectives as stated in the Loan Agreement. b. Were the project objectives/key associated outcome targets revised during implementation? No c. Components Component 1. Replacement of Incandescent Bulbs (IBs) with Compact Fluorescent Lamps (CFLs) in the Low-income Residential Sector. Appraisal estimate US$70.00 million. Actual cost US$120.01 million. This component financed the replacement of 45 million IBs with CFLs in 15 million low-income urban and rural households over a three year period. (CFLs are a proven energy efficient technology as they consume only one fifth of the electricity of IBs for the same lighting services). The replacement program included purchase and installation of new CFLs and collection and disposal of replaced IBs. Component 2. Incentives to encourage the replacement of old, inefficient Refrigerators and Air Conditioners (ACs) in the Residential Sector. Appraisal estimate US$602.99 million. Actual cost US$848.38 million. This component provided two types of incentives for replacing approximately 1.7 million old refrigerators and ACs over a four year period. This component had two sub- components. (I) Financing of vouchers for qualifying low-income consumers. Vouchers as instant rebates were provided to low-income consumers for replacing old and inefficient refrigerators and ACs with energy-efficient ones. The voucher amount was fixed and tied to the income level of eligible consumers based on their electricity consumption. (ii) Financing a credit line for the National Financial Institution (the Spanish acronym, NAFIN). Credits at favorable interest rates were Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) provided to low-income and other qualifying consumers by a National Financial Institution (the Spanish acronym - NAFIN) for replacing inefficient residential appliances with energy-efficient appliances. A related Guarantee Facility from the government protected NAFIN from credit defaults by consumers. Component 3. Technical Assistance and Institutional Strengthening. Appraisal estimate US$4.82 million. Actual cost US$4.82 million. This component aimed at the institutional strengthening of the Energy Secretariat (the Spanish acronym - SENER). Sub- component activities included: (i) Strengthening the CFL replacement program (including, promoting CFL recycling centers, supporting studies, consultations with manufacturers and retail stores for designing the replacement program and developing a policy framework for gradually phasing out IBs). (ii) Developing energy efficiency standards and programs (including studies aimed at harmonizing energy efficiency standards of Mexico with standards of USA, Canada and countries of Central America, developing energy efficiency standards for appliances, certification of energy efficient processes in industries and training local banks on energy efficiency). (iii) Studies pertaining to demand side management and energy efficiency interventions in the electricity transmission and distribution sub-sectors. (iv) Information and awareness campaigns for removing key barriers to energy efficiency. (v) Monitoring and Evaluation activities. (vi) Training and capacity building of the implementing agencies. d. Comments on Project Cost, Financing, Borrower Contribution, and Dates Project Cost. Appraisal estimate US$710.09 million. Actual cost US$973.84 million. The difference between the actual project cost and appraisal estimate was met through a combination of factors, including a loan from the Clean Technology Fund (CTF), Global Environment Facility (GEF) Trust fund and increased counterpart funding. Project Financing. The project was financed by an IBRD loan, CTF loan for scaling up of the government’s energy efficiency program and a grant from the GEF Trust Fund for capitalizing the Guarantee Facility within the National Financial Institution against default payments and for financing technical assistance activities. IBRD loan: Appraisal estimate US$250.62 million. Amount disbursed US$250.62 million. CTF loan: Appraisal estimate US$50.00 million. Amount disbursed US$50.00 million. GEF Grant: Appraisal estimate US$7.12 million. At closure, US$150,000 of the GEF Trust Fund was cancelled, mainly due to the appreciation of the US$ with respect to Mexican Peso during the last year of implementation. There was parallel financing from the German Development Bank (the German acronym – KfW ) for the credit line established under component 2 of the project and for activities associated with Green House Gas (GHG) emissions from the refrigerator replacement program through the Montreal Protocol Multilateral Fund. Borrower contribution. Appraisal estimate US$229.70 million. Their contribution was significantly more than planned at US$602.62 million. There was also a contribution from the local beneficiaries. Appraisal estimate US$176.00 million. Actual contribution US$95.64 million. Dates. The project was restructured five times. The first restructuring on August 25, 2011 removed the Energy Efficiency Trust Fund (FTE) as one of the signatories on the “CFL” Implementation Agreement and added a remedy in the Legal Agreement to ensure that the transfer of funds from FTE to the CFL Administrator was in accordance with the Operational Manual. The second restructuring on July 31, 2012 reallocated funds from component one activities to component two activities.The third restructuring on March 4, 2013 further reallocated funds from component one activities to component two activities. The fourth restructuring on June 24, 2014 extended the project closing date by 12 months for completing ongoing technical assistance activities, which had faced initial delays due to administrative issues associated with disbursing GEF resources and staff changes at the federal level. The fifth restructuring on June 29, 2015 extended the project closing date by a month for completing the public awareness campaign for promoting energy efficiency. The project closed about thirteen months behind schedule on July 30, 2015. 3. Relevance of Objectives & Design a. Relevance of Objectives As a major producer and exporter of oil, the energy sector was of strategic importance to Mexico's economy. In the years before appraisal, there was a steady decline in oil production from a high of 3.4 million barrels per day in 2004 to 2.6 million barrels per day in 2009. At appraisal, about 80% of Mexico’s installed power generation capacity was through non-renewable fossil fuels (mainly crude oil) and renewable energy sources (such as hydropower, geothermal and wind energy) accounted for only 3.3% of the total capacity. Further, residential energy consumption was growing faster than the Gross Domestic Product (GDP) growth due to a combination of factors, including population growth and increased penetration rate of energy-consuming technologies. Given these factors, enhancing energy efficiency in the residential sector was important for the long run sustainability of the energy sector. Alongside this, since the energy sector contributed to over 60% of Mexico’s Green House Emissions (GHE’s), the project development objectives were highly relevant to the Government’s climate Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) change agenda of reducing GHG emissions. The government had taken a series of steps towards promoting energy efficiency in the years before appraisal. The Renewable energy law was enacted in 2009. The Government’s Energy Sector Program (the Spanish acronym- PROSENER) for the 2007-2012 period had three goals. (i) Balancing and diversifying primary energy sources and reducing the share of nonrenewable energy sources. (ii) Promoting efficient energy uses through energy savings. (iii) Promoting energy efficiency through conservation measures in the residential sector. The National Climate Change Strategy (the Spanish acronym -ENACC) issued in 2007, articulated the country’s climate change agenda and set medium and long term goals for climate change adaptation and mitigation measures (while adaptation measures aim at lessening the adverse impacts of climate change, mitigation measures aims at limiting climate change through specific actions aimed at reducing GHG emissions). The strategy included setting a special Trust Fund - The Electricity Energy Savings Trust Fund (the Spanish acronym- FIDE) to help finance energy transition from hydrocarbons to renewable energy. The strategy was given operational content through the Government’s Special Climate Change Program issued in August 2009 (the Spanish acronym - PECC). The PECC identified a range of climate change interventions at the sectoral and sub-sectoral levels, quantified the potential impact and costs of each intervention and set emission-reduction goals of between 14 and 28 Megatons of Carbon Dioxide Equivalent (MtCo2e) by 2012 and long term goal of reducing GHG by 50% in 2050 relative to the 2000 baseline. The project development objectives were also relevant to two major nationwide programs: (I) "Sustainable Light" program intending to phase out all IBs and replacing it with CFLs. and (ii) "Replace your old appliance for a new one" program which provided different financial incentives for consumers for replacing refrigerators or air conditioners that were at least ten years old. The project development objectives were consistent with the World Bank’s Country Partnership Strategy (CPS) for the 2008-2013 period. Of the five pillars of the CPS, the project addressed two pillars, namely competitiveness and environmental sustainability. At appraisal, the Bank’s publication, Low-Carbon Development for Mexico, issued in 2010, highlighted the need for managing the growth in electricity demand through energy efficiency measures in the end-use sectors (such as air-conditioning, refrigerators and lighting). The theme four of the Bank’s current CPS for the 2014-2019 period highlighted the importance of promoting green and inclusive growth through energy efficiency measures and promoting low carbon development for the country. The project development objectives were consistent with the Global Environmental Facility (GEF) Climate Change Focal Area, in particular with the GFE Operational Programs 5 (Energy Efficiency) and 4 (Promoting Energy Efficiency in Residential and Commercial Buildings). Rating High b. Relevance of Design The project development objectives were clear and the results framework linked the intermediate and final outcomes. And the intended outcomes were measurable. While component one activities (distribution of CFLs for replacing IBs in low-income sectors of the population) in conjunction with Component two activities (providing vouchers as instant rebates and providing credit at favorable interest rates) for replacing appliances can be expected to contribute to increased market penetration of efficient appliances in low income households and this in turn can be expected to contribute to energy efficiency and to the GEF objective of reducing Green House Gas emissions. Given that one of the key barriers for energy efficiency was the high transactions cost associated with energy efficiency, the design included aspects such as financing the distribution of CFLs to low income households and providing vouchers for low-income consumers to replace inefficient appliances and also provided for a guarantee facility from the government to protect NAFIN from credit defaults by consumers.The design included a communication campaign that presented to the consumers the energy savings associated with the household appliances targeted in this project. Rating High 4. Achievement of Objectives (Efficacy) PHREVISEDTBL Objective 1 Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) Objective To promote the Borrower’s efficient use of energy and to mitigate climate change by increasing the use of energy efficient technologies at the residential level. Rationale Outputs. • 45.8 million IBs were replaced with CFLs. This exceeded the target of 45 million. • 1.88 million appliances (refrigerators and air conditioners) were replaced as compared to the target of 1.70 million. • Eight studies were completed as targeted. The studies included, assessment of Energy Efficiency potential in schools, hospitals and hotels, estimation of market share of Light Emitting Diodes (LEDs) in Mexico, creation of recycling centers for CFLs, impact on old imported appliances, implementation of more than 30 evaluations in cities using the Tool for Rapid Assessment of City Energy (TRACE) tool throughout the country and project impact evaluation. • 20 people were trained to enhance the technical skills of workers in charge of the refrigerant gases capture process as targeted. • A sustained promotional program using the National Communications media - including through the popular national 'telenovela" programs was conducted, to build awareness of the importance of energy savings in remote, low income communities, including in the indigenous communities. This promotional campaign was complemented by household to household consumer visits by the appliance suppliers, explaining the benefits of more efficient refrigerators and ACs, the financing terms for their purchase and the benefits that would be realized in terms of lower energy consumption and monthly bills. • The diagnostic studies were completed under the project as targeted. These studies provide the basis for extending the government's energy efficiency program into new areas, such as health, hotel and public education sectors of the economy. Outcomes. • Total energy savings from replacing IBs with CFLs was 9,242 Gigawatt hours (GWh) as compared to the target of 10,000 GWh. Energy savings were computed as the difference between average power consumption from CFLs and the average power consumption of the replaced IBs. • Accumulated Carbon Dioxide Emissions reductions (including those associated with capture of refrigerant gases) amounted to 5,074 (in thousands of tons of CO2) as compared to the target of 5,140. This represented about 99% of the target. (Avoided emissions were obtained by multiplying energy savings times the emission factor of the Mexican grid). An Impact Evaluation was also conducted through phone interviews with a sample population to assess the impact of the program. The methodology entailed comparing the outcomes between a “treatment” group (beneficiaries who had replaced old refrigerators and air conditioners) with a “control” group (a randomly selected comparison group which did not receive the intervention). The assumptions of the impact evaluation were sound. The sample population included 400 beneficiaries and 300 non-beneficiaries. The main conclusions of the survey were: • About 47% of the beneficiaries reported that CFL light was brighter as compared to IB bulbs. 25% reported that the quality of light increased with CFLs and 22% reported that that CFLs lasted longer than an IB. • About 87% of the respondents expressed satisfaction with the refrigeration replacement program. 41% of survey respondents reported that the program should be extended to other appliances (such as irons, blenders and washing machines) and other models of refrigerators. • About 94% of the respondents expressed satisfaction with the air conditioning replacement program. • Nine out of 10 survey respondents declared their intention to participate in other energy efficiency programs. The intention to participate in other energy efficiency programs was pronounced in more educated households. Rating Substantial Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) 5. Efficiency Economic Analysis. An economic analysis was conducted for investments in residential appliances components of the project both at appraisal and at closure. These components accounted for 99% of the total project cost. The economic benefits were assumed to come from energy-savings through substituting more efficient CFLs and global environmental benefits associated with reductions in GHG emissions. Other project benefits such as associated with avoiding investments in new power generation infrastructure, reduced fuel consumption for power generation, reduction in consumer’s electricity bills through adopting CFLs, enhancement of energy security were identified but not factored in the economic analysis. The Net Present Value (NPV) at closure was US$1.62 billion at a 6% discount rate as compared to the NPV of US$ of 0.86 billion at appraisal. (The World Bank technical guidance note on discount rates of January 16th recommended a discount rate double the figure of the real GDP growth during the project period. Since Real GDP per capita growth rates in Mexico was on average around 1.9% during the project period, a discount rate of 6% was used). The higher NPV at closure was due to factors including, higher amount of CFLs distributed, increased lifetime of the CFL bulbs (seven years) as compared to the earlier estimates (three years) and higher energy savings. The average ex post Economic Internal Rate of Return (EIRR) was 62% as compared to the average ex ante EIRR of 57%, due to higher due to higher than originally estimated energy savings from the replaced CFL bulbs. Financial Analysis. The financial analysis was conducted for the National Financial Institution (NAFIN) which was to administer the line of credit for providing credit at favorable interest rates to qualifying consumers for replacing appliances. The net financial benefits for NAFIN came from the interest payments received from loans to customers. The original calculation assumed that an average loan of US$104 would be issued per appliance. However, the average loan amount was higher at US$260. This led to increased benefit for NAFIN in terms of increased revenues. The Financial Internal Rate of Return was 9.01% at closure as compared to the FIRR of 7.40% at appraisal. Administrative and Operational Issues. The procurement approach used whereby the awarded contractor was responsible for not only suppling CFLs but also for distributing them through major retail stores and collecting and disposing the replaced IBs, allowed bidders to benefit from economies of scale and therefore make more efficient use of IBRD resources. There were time overruns and the project closed 13 months beyond the originally scheduled closing date on account of the delays associated with completion of technical assistance activities. Efficiency Rating Substantial a. If available, enter the Economic Rate of Return (ERR) and/or Financial Rate of Return (FRR) at appraisal and the re-estimated value at evaluation: Rate Available? Point value (%) *Coverage/Scope (%) 99.00 Appraisal  57.00 Not Applicable 99.00 ICR Estimate  62.00 Not Applicable * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome The project development objectives were highly relevant to the country strategy and Bank strategy for Mexico. Relevance of design was rated as High. Efficacy was rated as Substantial. The outcomes were largely realized. Efficiency was rated as Substantial. a. Outcome Rating Satisfactory Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) 7. Rationale for Risk to Development Outcome Rating The government remains highly committed to energy efficiency as evidenced by the expansion of the appliance replacement program and lightning program in rural areas of Mexico, measures aimed at phasing out IBs completely and measures aimed at updating the country’s energy efficiency standards. The government also remains committed to the climate change agenda as demonstrated by the specific undertakings in international forums in December 2015 and having an effective monitoring program to measure progress in reducing GHG emissions. The diagnostics performed under the auspices of this project also helped in identifying priority areas for energy savings and paved the way for a new investment program -which was negotiated for a new US$100 million IBRD loan. This program aims at reducing energy consumption in selected municipalities by increasing their capacity to prepare, finance and implement energy efficiency investments in these municipalities. a. Risk to Development Outcome Rating Negligible 8. Assessment of Bank Performance a. Quality-at-Entry The project was based on the lessons from a prior GEF financed project High Efficiency Lightning (GEF-ILUMEX) pilot program in Mexico during the 1990s which included promotional sale of high efficiency CFLs in Mexico. The preparation team mobilized additional funds from the Clean Technology Fund (CTF) and this aided in scaling up of the Government’s energy efficiency program. The design incorporated features for addressing key barriers to energy efficiency investments (discussed in section 3b). Several risks were identified at appraisal, including substantial risk associated with the insufficient experience of the implementing agency responsible for the CFL component of the project with Bank procurement procedures. Various risk mitigation measures were incorporated (including procurement training component for the implementing agency responsible for the CFL component) and overall project risk was rated as Moderate. Appropriate measures were taken at appraisal for compliance with M&E (discussed in section 10) and safeguards and fiduciary issues (discussed in section 11). Quality-at-Entry Rating Satisfactory b. Quality of supervision Eight supervision missions were undertaken over a five year period. Although there were three changes in task team leaders during implementation, the presence of procurement, financial management and environmental specialists in the country office provided continuity and additional support for Bank supervision. The supervision team was pro-active role with the government in regard to the extension of the project closing date for completion of ongoing technical assistance activities. Following the recommendations of the Mid Term Review, the supervision team used a single methodology for reporting energy savings and this aided in M&E implementation (discussed in section 10). The team provided support for compliance with fiduciary and safeguard issues (discussed in section 11). Quality of Supervision Rating Satisfactory Overall Bank Performance Rating Satisfactory 9. Assessment of Borrower Performance a. Government Performance While the Mexican government was the borrower for the IBRD loan, the borrower for the Clean Trust Fund (CTF) loan was NAFIN, one of Mexico’s national development banks. The Government was strongly committed to the project development objective of energy efficiency Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) and mitigating climate change effects associated with GHG emissions,as evidenced by the concrete steps taken even prior to appraisal (such as, as preparing a national strategy, enacting legislation to providing an enabling environment and establishing a special trust fund tor facilitating efficient energy uses). The government’s by way of counterpart funding was more than planned at appraisal. During implementation, the government commitment to energy efficiency was demonstrated by the legislation for phasing out IBs completely by 2014. As a financial intermediary, NAFIN was effective in providing concessional funds for the government’s energy efficiency programs. Government Performance Rating Satisfactory b. Implementing Agency Performance The Energy Secretariat (SENER) was responsible for overall oversight of the program which involved the following implementing agencies. An independent trust Fund (FIDE) was responsible for the CFL replacement program (Component One activity). The National Development Bank (NAFIN), the Federal Electricity Commission (the Spanish acronym- CFE) and FIDE were responsible for implementing the household appliance program and the Directorate of Research, Technological Department and Environment under the Energy Secretariat was responsible for the institutional strengthening component of the project. FIDE had past experience in implementing energy savings investments in different regions of Mexico. Despite the delays associated with project effectiveness, disbursements proceeded quickly once the project became effective in late 2011. NAFIN maintained close partnership with the other implementing agencies in the appliance program and these agencies maintained close relationships with consumers in different regions of Mexico. The large procurement contract – for the supply of CFLs to replace the IBs - elicited international interest from six suppliers and this resulted in a lower unit replacement cost to the consumer than estimated at appraisal. Implementing Agency Performance Rating Satisfactory Overall Borrower Performance Rating Satisfactory 10. M&E Design, Implementation, & Utilization a. M&E Design The key outcome indicators – the accumulated amount of energy saved (measured in Gigawatt hour (GWh) ) and the accumulated Carbon Dioxide (CO2) emission reduction (measured in thousands of tons of CO2) and the key intermediate outcome indicators – the number of IBs replaced by CFLs, the number of appliances replaced, the number of studies completed and the number of staff trained – were appropriate. b. M&E Implementation The Energy Secretariat (SENER), the Trust Fund for Electricity Savings (FIDE), the Mexican Development Bank (NAFIN) and the National Commission for Efficient Use of Energy (CONUEE) were responsible for M&E implementation. Energy savings data was collected regularly and closely monitored during implementation (ICR, page 11). Following the recommendations of the Mid Term Review, a single methodology was used for reporting energy savings from actual data (rather than the estimations used at appraisal). This methodology took into account reductions from the capture of refrigerant gases, which were not included in the original results framework. An Impact Evaluation was also conducted to estimate the total impact of the program. The methodology entailed comparing the outcomes between a “treatment” group (beneficiaries who had replaced the appliances) with a “control” group (a randomly selected comparison group which did not receive the intervention). Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) c. M&E Utilization The M&E indicators used in the current project – aggregate amount of energy saved and emissions avoided – continue to be used for monitoring energy savings after the project closed (ICR, page 13). M&E Quality Rating Substantial 11. Other Issues a. Safeguards The project was classified as a Category B project. Two safeguard policies were triggered: Environmental Assessment (OP/BP 4.01) and Indigenous Peoples (OP/BP 4.10). Environmental Safeguards. At appraisal, two main environmental concerns were identified: (i) proper disposal of old Incandescent Bulbs (IBs). (ii) the disposal of old refrigerators and air conditioners. An Environmental Management Plan (EMP) which defined in details the actions to be taken that was consistent with Mexican Environmental legislation and with Bank environmental safeguard policies was prepared in consultation with stakeholders and publicly disclosed, at appraisal. The disposal of the IBs was the direct responsibility of the CFL supplier and the ICR (page 12) notes that the disposal of the IBs was managed effectively in a controlled landfill that was operating properly in Irapuato, Mexico. Regarding disposal of refrigerators and air conditioners, the recovery of refrigerant gases and recycling of materials was achieved in more than 100 recycling centers all over the country and in July 2015, a study was completed as a first step in preparing a national strategy for the recycling of CFLs, which would include, inter alia, recommended steps for the safe and environmentally sound disposal of harmful substances, such as mercury (ICR, page 12). Indigenous People. At appraisal a Social Assessment was undertaken in the project targeted areas for the CFL program. The beneficiaries of this component included different low income social groups, including indigenous peoples. Since specific beneficiaries in the indigenous communities were not known at appraisal, an Indigenous Peoples Planning Framework (IPPF) was prepared at appraisal in consultation with indigenous people’s leadership. The ICR (page 11) notes that there were no adverse social impacts during implementation. b. Fiduciary Compliance Financial Management. An assessment of the Financial Management undertaken at appraisal concluded that the financial management risk was substantial as the implementing agencies had almost no experience in implementing Bank financed projects. Several risk mitigation measures were incorporated at appraisal, including two full supervision missions per year to look into the operation of the controls systems and desk reviews of annual audit reports. During implementation, although there were frequent delays in submission of financial management reports, the ICR (page 12) notes that the financial management performance was deemed to be adequate. The ICR however provides no details on the quality of the audits. Procurement. Of the two implementing agencies, the Energy Secretariat (SENER) had previous experience in Bank financed projects and FIDE had a trained staff with previous experience in the use of IBRD resources. An assessment of the implementing agencies was conducted at appraisal and a procurement plan was prepared for addressing procurement issues. The ICR (page 12) notes that procurement management was deemed to be satisfactory. Under the procurement management arrangements for the distribution of CFLs, the awarded contractor was responsible not only for supplying new CFLs but also for distributing them through major retail stores and collecting and disposing the old IBs. This arrangement allowed the bidders to benefit from economies of scale and thereby make more efficient of IBRD resources. c. Unintended impacts (Positive or Negative) --- Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) d. Other --- 12. Ratings Reason for Ratings ICR IEG Disagreements/Comment Outcome Satisfactory Satisfactory --- Risk to Development Outcome Negligible Negligible --- Bank Performance Satisfactory Satisfactory --- Borrower Performance Satisfactory Satisfactory --- Quality of ICR Substantial --- Note When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons The ICR (pages 24-26) draws six lessons from implementing this project. The four main lessons are as follows (1) Strong government commitment can considerably improve prospects for achieving the project development objective. In the case of this project, even before project preparation, Mexico had already developed a national strategy which laid the groundwork for implementing energy efficiency and climate change investment program and had taken the essential policy and institutional steps to achieve program goals. (2) A full package of Bank financing instruments at design can aid in successful implementation. In the case of this project, the design included a combination of features including financial, institutional and proportional instruments for addressing barriers to adopting energy efficiency measures. The design incorporated incentives to low income households through concessional financing. (3) Promotional campaigns can be effective in National Energy Efficiency Programs. An active and sustained promotional program in building awareness of the importance of energy savings using the national communications media in conjunction with household to household consumer visits by appliance suppliers proved to be effective in bringing about a change in the way Mexico’s population consumed energy. (4) Innovative procurement strategy can aid in making more efficient use of IBRD resources. In the case of this project, the awarded contractor was responsible not only for supplying CFLs but also for distributing them through major retail stores, collecting and disposing the replaced IBs. This approach allowed bidders to benefit from economies of scale. 14. Assessment Recommended? No 15. Comments on Quality of ICR The ICR is concise and provides good quality evidence. It is internally consistent and consistent with the guidelines. It discusses in detail the methodology followed for monitoring and evaluation. The ICR could have provided more discussion about the promotion campaign that was carried during the course of this project. The description of financial management provided in the ICR is sparse and the ICR could have provided more details on the quality of the audits. Independent Evaluation Group (IEG) Implementation Completion Report (ICR) Review MX Efficient lighting and appliances (P106424) a. Quality of ICR Rating Substantial