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					                                           PROJECT COVER SHEET

COUNTRY:         Kazakhstan                                    IMPLEMENTING AGENCY:              UNDP


PROJECT TITLE:            Terminal Umbrella Project - Conversion from CFC-11 to Water-based Technology in the
                          Manufacture of Rigid Polyurethane Foam for thermal insulation in Kazakhstan

SECTOR                                               : Foam
SUB-SECTOR                                           : Rigid Foam
ODS USE IN SECTOR (1998)                             : 150 ODP tons
ODS USE AT ENTERPRISES (1998)                        : 104.9 ODP tons
PROJECT IMPACT (ODP to be eliminated)                : 104.9 ODP tons
PROJECT DURATION                                     : 3 years
TOTAL PROJECT COST                                           IMP               Customers
     Incremental Capital Cost                        : US $ 225,000              950,000
     Contingency (10% of net ICC)                    : US $ 22,500                94,125
     Incremental Operating Cost                      : US $    N/A.              416,079
     Total Project Cost                              : US $ 247,500            1,460,204
LOCAL OWNERSHIP                                      : 100 %
EXPORT COMPONENT                                     :0%
REQUESTED GRANT                                      : US $247,500 (IMP) and $821,365 (customers)
GRANT-EFFECTIVENESS                                  : US $ 7.83/kg ODP/y *
AGENCY SUPPORT COSTS                                 : US$ 85,509
TOTAL COST TO GEF                                    : US$ 1,154,374
STATUS COUNTERPART FUNDING                           : Letters of Commitment pending
MONITORING MILESTONES                                : Included in document
NATIONAL COORDINATING AGENCY                         : National Ecology Center for Sustainable Development of the
                                                       Republic of Kazakhstan, Ministry of Environment



                                                PROJECT SUMMARY

IMP, a Kazakhstan polyurethane systems house, will convert its systems to CFC-free systems along with fourteen (14) of
its customers. These enterprises used 104.9 t CFC-11 in 1998 to manufacture rigid foam for insulation applications. The
production is to be converted to a ―permanent technology‖—water based formulations. The enterprises will replace
existing low- pressure dispensers by high-pressure ones (29 dispensers = $740,000) and coating applicators for each
dispenser ($210,000). IMP will install storage/transfer systems ($60,000) and blending equipment ($60,000) as well as
testing equipment ($10,000). Other costs include trials ($10,000) and technology transfer to IMP ($20,000) and to the
sprayfoam contractors ($45,000). Incremental operating costs of $416,079 will be incurred, but are not eligible under GEF.




Prepared by: Mary Courtney/Bert Veenendaal                                     Date: August - December 1999
Reviewed by: Dr. Hubert Creyf                                                  Date: December 24, 1999




* As per established MLF policy, the Cost Effectiveness applies only to the customers, not to the systems supplier.


                                                                              Original/18 December 1999
                      PROJECT OF THE GOVERNMENT OF KAZAKHSTAN

               TERMINAL UMBRELLA PROJECT - CONVERSION FROM CFC-11
                TO WATER- BASED TECHNOLOGY IN THE MANUFACTURE OF
         RIGID POLYURETHANE FOAM FOR THERMAL INSULATION IN KAZAKHSTAN


1.        PROJECT OBJECTIVE

The objective of this project is (i) to phase out the use of CFCs in the manufacture of polyurethane foam
for thermal insulation in Kazakhstan and (ii) to make the necessary technology employed and systems
needed, locally commercially available to affordable prices.


2.        SECTOR BACKGROUND

          GENERAL

Kazakhstan ratified the Montreal Protocol 26 August 1998 and became a Party on 24 November 1998.
The preparation of a Country Program to ensure the fulfillment of its obligations as a Party to the Vienna
Convention and to the Montreal Protocol, is practically finalized. The program will conform with the
requirements for technical assistance and funding from the Global Environmental Facility (GEF).

Currently Kazakhstan consumes about 1305 ODP t/y of ozone depleting substances. The foam sector
accounts for 150 t/y (11.5 %). From this about 105 t (70 %) is used for thermal insulation and 45 t (30 %)
for comfort applications. The dominant thermal application is the use of rigid PU spray foam. Here is
lesser use in the manufacture of simple commercial refrigeration appliances. The dominant comfort
application is the use of flexible PU slabstock foam in the manufacture of furniture and bedding.

The Government of Kazakhstan is considering several measures to comply with its obligations under the
Montreal Protocol phase-out schedule, such as:

         Import restrictions
         Collection of more accurate information on ODS use—the current information is incomplete
         An incentive and disincentive policy to encouraging the use of ODS-free technologies. The
          preparation of technical support and investment programs with GEF funding is considered
          one most effective incentives.

     FOAMS FOR THERMAL INSULATION APPLICATIONS

As mentioned, the dominant use of foams for thermal insulation is in spray foam applications with lesser
use in the manufacture of simple commercial refrigeration appliances such as display cabinets. Recently,
the production of laminated foam panels for cold storage has also been considered—an application that
was so far addressed through the insulation of existing storage facilities through spray foam.

Most of the spray foam is used for pipe insulation, due to the large oil industry, the emphasis on central
heating systems and the ambient temperature extremes in different seasons.

Based on a lack of technical proficiency and ability to invest, the equipment used is most often low-priced
spray foam equipment (Russian or self made) and based on imported systems (Russia, Germany).


RPF – Final 2                                  215                                        12/24/99
Recently, an agreement with Russia has been signed that will not allow the export of systems and
equipment containing, or made for the purpose of processing, CFCs. This may promote increased use of
CFC-free—mostly HCFC-141b based—systems but could also lead to the import of CFCs or CFC-
containing systems from India or China. It will certainly not lead to the use of non-ODP systems, as these
are much higher in costs. The manufacture of local systems from imported (Russia, China, India,
Germany) base-chemicals could mitigate this price penalty and is therefore seen as crucial in a complete
elimination of ODS in the foam sector.


3.       PARTICIPATING ENTERPRISES BACKGROUND

         3.1    IMP

IMP (Insulation Materials Production Inc.) is a 100% Kazakhstan owned enterprise. The principal
business activities of the enterprise include:

        Manufacture/sales of PU systems for spray foam and pour-in-place (PIP) applications
        Manufacture/sales of PU pipe coating systems

The company is also developing a production of panels and rigid/flexible/block foam. As this business
segment is not contributing to the current baseline production, it has not been included in the investment
part of the project. Technical support to assure that these systems will operate on non-ODS technologies
is, however, foreseen. The systems manufacturing business is operational and intends as the only facility
in Kazakhstan to develop CFC-free systems. Note that currently, CFC-free systems are available only
through import, are very expensive and virtually completely based on HCFC-141b. IMP policy is to
develop water-based systems at cost-effective prices.

Systems use for 1999 included 20 t CFC-11 purchased to mix with systems and 10 t of imported systems
containing about 2 t CFC-11.

         3.2    SPRAY/PIP FOAM MANUFACTURERS

There are fourteen rigid foam manufacturers participating in the project. Except one, they all produce
spray foam. Background information on each company is presented in the following table. Information
on baseline equipment and chemical consumption is presented in Annex 1. All participants are 100%
Kazakhstan owned and are either founded before 1995, or have evolved from a predecessor company
established prior to 1995.

     COMPANY                          FOUNDED                 EMPLOYEES           PRODUCTS
AIDMAR                              1982 as the trust             4     Roof, pipe and general
                                   Almatyingstroy‖.                     construction insulation
                                    Privatized 1996
ALMATA ENG & CONSTR             1982 as the trust ―Alma-           9       Pipe insulation
                              Ataingstroi‖. Privatized 1998
ALMATYINGSTROY                  1982 as the trust ―Alma-           25      Pipe insulation for power plants
                              tyingstroi‖. Privatized 1995
ALMAZ                                February 1995                 8       Inside insulation of buildings for
                                                                           cold storage, roof/pipe insulation
CHIMSTROL                           1959 as the trust              85      General construction, pipe
                             ―Chemkenstroi‖. Privatized in                 Installation/insulation
                             1992; Limited Partnership (LP)



RPF – Final 2                                   315                                          12/24/99
                                          in 1998
CHOLODINVEST                               1992                      16       Spray foam contractor
GLOBUS                                     1993                       2       Spray foam contractor
LIK CORPORATION                            1991                     150       Pipe insulation, manufacture of
                                                                              refrigerated display cabinets
MONTAZHNIK                            1972 as the trust             300       Construction, central heating
                                      ―Montagselstroi‖                         Systems and contract
                                     Privatized in 1993.                       Maintenance – spray foam
OLIMP                                     May 1995                   5        Spray foam contractor
SHEBER                                      1992                     8        Pipe insulation
SIM                                     January 1995                 8        Largest spray foam contractor in
                                                                              Kazakhstan
SPRETSREMONT                  1986 as the trust ―Spetsremont‖.       55       Spray foam contractor and
                                      Privatized 1996                         general repair shop for industrial
                                                                              activities
TRADEMARKET                                1993                      5        Spray foam contractor

The founding dates indicated in the table show the establishment of the predecessor government-run
organizations, as well as the dates of privatization for those enterprises, which are successors of
previously state-owned (―trust‖) enterprises.


4.       PROJECT DESCRIPTION

This project will eliminate the use of CFCs in the manufacture of polyurethane foam at fourteen foam
manufacturers (See Annex-1) with the support of their local systems supplier, IMP. The average annual
use per participating manufacturer is less than 10 t. It has been shown in projects in other countries that
small enterprises are most cost-effectively addressed as part of a group project, centered on their systems
supplier, who provides technology transfer for the individual enterprises. The main reasons that an
umbrella approach involving a local system house will be more cost-effective are as follows:

        Support by international technology providers would incur larger costs for fees and travel;
        International technology providers may incur language and cultural challenges;
        PU systems are currently mostly imported in Kazakhstan. Conversion to a non-ODS system
         would cause a large increase in operating costs, which are not covered under GEF policy. In such
         a case, most enterprises would elect to convert initially to the most economic option available,
         HCFC-141b. However, GEF strongly discourages the use of interim technologies. Local
         production of non-ODS systems would significantly reduce the costs and make their use feasible;
        A local system house is in itself eligible for technical and financial assistance to phase-out the use
         of CFCs but may hesitate as long as it does not have information when and how its customers will
         convert. By tying this to the conversion of its customers, such support can be provided much
         more effective.

Therefore, inclusion of a local systems supplier is an essential part of the success of this project.

IMP:

IMP will develop, with the assistance of a UNDP/UNOPS Process Expert, water based formulations for
its rigid foam application customers, and will, after successful conversion, offer only CFC-free
formulations. IMP-related investments include additional storage and premixing facilities. In addition, a
K-value tester to measure insulation properties in-situ is foreseen, so that the required thickness of the


RPF – Final 2                                     415                                          12/24/99
product can be determined. The project also includes costs for trials and technology transfer for IMP as
well as (by IMP) to the local spray foam manufacturers.

Enterprises:

Existing equipment has been identified for participating enterprises. All of the participating enterprises
have currently low-pressure, self-made or low-priced Russian, equipment. The low-pressure dispensers
are proposed to be replaced by high-pressure dispensers in order to maintain insulation values to the
extent possible. In order to maintain reasonable aging properties of the finished product, one-component
spray coating equipment will be used to coat the finished spray foam. A breakdown of budget per
enterprise is included in Annex-2 and Annex-4, Table D. Participating enterprises will be provided with
a letter of commitment that has to be signed to assure eligibility in the program (ref. Annex-5).

Replacement equipment will be purchased as part of a combined procurement effort to assure the lowest
possible prices. After completion of equipment installation, technicians will return to conduct production
trials. After a phase in time (approx. 3 months) during which the enterprises can deplete CFC inventories
and destroy replaced equipment, certification visits will be arranged.

Incremental operating costs related to higher systems costs will be incurred. An estimate of these
increased costs is provided in Annex-3 (general) and Annex-4D (individual), although it should be noted
that no funding is requested to cover incremental operating expenses.


5.      TECHNOLOGY OVERVIEW AND SELECTION

        5.1        OVERVIEW

ODS phaseout technologies for rigid PU foams in thermal insulation applications are:

     CLASSIFICATION                         LIQUID TECHNOLOGY                     GAS TECHNOLOGY
     LOW ODP TECHNOLOGIES                   HCFC-141b                             HCFC-22
     (―INTERIM‖)                            HCFC-141b/HCFC-22
     NON-ODS TECHNOLOGIES                   (CYCLO)PENTANE, WATER,                HFC-134a
     (―PERMANENT‖)                          LIQUID HFCs (-365,-245fa)

The selection of the alternative technology is governed by the following considerations:

        a)     Proven application and reasonable maturity of the technology
        b)     Cost effective conversion, in view of one-time as well as recurrent costs
        c)     Local availability of the substitute, at acceptable pricing
        d)     Support from the local systems suppliers
        e)     Critical properties to be maintained in the end product
        f)     Meeting established standards on environment and safety

HCFC-141b has an ODP of 0.11. Its application is proven, mature, relatively cost-effective and systems
that fit the enterprise’s applications are locally available. HCFC-141b can, however, be destabilizing in
higher concentrations, being a strong solvent, which would lead to the need to increase the foam density.
As an interim option, its application is discouraged under GEF policy.




RPF – Final 2                                     515                                        12/24/99
HCFC-22 has an ODP of 0.05 and is under ambient conditions a gas. It is not suitable for spray foam
applications. As an interim option, its use is discouraged under GEF policy.

HCFC-141b/HCFC-22 blends can reduce the solvent effect of HCFC-141b alone and therefore allow
lower densities while maintaining acceptable insulation values. The blends are, however, not available in
Kazakhstan or neighboring countries. On-site multi-component blending would significantly increase the
one-time project costs. In addition, the technology is not proven for spray foam applications. Being an
interim option, the same restrictions as for HCFC-141b would apply.

HYDROCARBONS are a preferred solution only when feasible from a safety and cost effectiveness
standpoint. The relatively high investments for safety costs tend to limit pentane use to relatively large
CFC users, which makes the option not applicable for this group project. In addition, the use of pentane
is limited to those enterprises whose facilities can be adapted to meet safety requirements, and can be
relied on to maintain safe operations. The use of hydrocarbons in spray foam applications is not suitable.

WATER-BASED systems are more expensive (up to 50%) than other CFC-free technologies due to
reductions in insulation value (requiring larger thickness) and lower cell stability (requiring higher
densities). Water-based formulations tend to be most applicable in relatively less critical applications,
such as in-situ foams and thermoware. Water based formulations are currently only available by
importation, resulting in high operational costs.

LIQUID HFCs do not currently meet requirements on maturity and availability. Trials show that systems
based on these permanent options would be feasible in spray foam applications.

HFC-134a is under ambient conditions a gas. It is not offered in the applicable regional area as a
premixed system and would require an on-site premixer. It is not proven for spray foam applications. It is
also less energy efficient, and expensive compared to most other technologies.

        5.2      SELECTION

Based on the above discussion, the use of water based systems is the only currently feasible, permanent
option for the rigid foam applications (thermal) that can be recommended. The system house as well as
the foam-manufacturers did accept this selection.

        5.3      IMPACT ON PRODUCTION PROCESS
IMP:

Additional storage tanks and transfer systems, as well as blending equipment and related transfer systems will
be necessary. IMP will also require testing equipment in order to assist its customers in converting to the new
technologies while maintaining to the extent possible the product performance.

Enterprises:

In water blown foams, increased polyol viscosity poses a mixing problem with the current low-pressure
air operated mixing heads. High-pressure dispensing equipment will be required to accommodate this
change. High-pressure equipment will also result in smaller cell structure, thus helping to maintain the
insulating properties of the products to the extent possible. Ratios between material components (polyol,
isocyanate) will change, necessitating a change in fixed gear ratio, or preferably a switch to variable ratio
dispensing equipment. Changes in reactivity and system viscosity will alter the spraying behavior, and
will require extensive trials to ensure proper processing and finished insulation quality.



RPF – Final 2                                    615                                          12/24/99
The CO2 created in the water blown foams has a higher permeability than CFC-11. The foams will have
poor aging properties compared to CFC-11 based foams. The surface of the foam may be covered with
an elastomeric skin, to provide better aging properties to the water blown spray foam. It is proposed
providing one component spray units for each dispenser to spray a one-component elastomeric layer on
the top of the sprayed foam to reduce CO2’s permeability.

The enterprises will experience higher operating expenses, due to the need to apply thicker coatings to
achieve the desired insulating properties. This increases the use of systems, hence, increases the costs.


6.0     PROJECT COSTS

        6.1     CALCULATION OF INCREMENTAL CAPITAL COST

The total actual investment costs are US$ 247,500 for IMP and US$ 1,044,125 for the customers. This
includes a 10% contingency on the net incremental capital costs, with an appropriate deduction for lack of
baseline equipment where necessary. Details of incremental capital costs are provided in Annex-2.
Deductions and contingency costs per enterprise are reflected in the Table in Annex 4D.

        6.2     CALCULATION OF INCREMENTAL OPERATING COST

Incremental Operating Costs are estimated at US$ 416,079 for the customers included in the project for a
2 year operation (NPV @ 10%). The calculation is explained in Annex-3. These costs are calculated for
illustrative purposes only. They are not eligible for coverage by a grant under GEF guidelines.

        6.3     COST EFFECTIVENESS (CE)

Cost-effectiveness for the project is US$ 9.87/kg ODP. This is calculated in Annex-4. The calculation is
based on the eligible costs for the customers (incremental capital costs). The capital costs for the supplier
do not factor in to the cost effectiveness, as it is a supplier of chemical components, not a consumer.

        6.4     PROPOSED GEF GRANT

The proposed grant request is for US$ 821,365 for the customers and $247,500 for IMP. The grant is
based on the incremental capital costs and provision for contingencies for the systems supplier, and on the
maximum allowable grant for the enterprises based on total ODP phased out, category threshold and
special allowances for terminal umbrella projects. Individual grants per enterprise are detailed in Annex
4D. For a terminal umbrella project, the allowable cost-effectiveness per enterprise is up to 200% of the
category threshold, although the overall cost effectiveness still must meet the category threshold. The
grant requested for the enterprises is, in this case, limited to the maximum allowable for the ODS phased
out and the category threshold. During implementation, the grant will be apportioned by the implementing
agency in coordination with the enterprises and according to the guidelines of the Fund. The eligible GEF
grant when applying these MLF-based stipulations will therefore be:

                Maximum Grant, Customers:                          US$ 821,365
                Capital Costs, IMP:                                US$ 225,000
                Contingency for IMP(10% on ICCs):                  US$    22,500
                Subtotal:                                          US$ 1,068,865
                Executing Agency Fee (8% of subtotal):             US$      85,509
                Grant Total:                                       US$ 1,154,374



RPF – Final 2                                   715                                         12/24/99
   However, MLF would in projects like these allow the use of HCFC-141b and not insist on a non-ODS
   technology. It is therefore requested that the GEF consider funding this project at a higher level than the
   threshold allows, preferably at the level of the eligible project costs for the enterprises. The project
   would have been much less expensive in the event the enterprises had been allowed to convert to an
   interim substance (HCFC-141b). Please note also that this conversion, despite all possible cost-mitigation,
   will incur significantly higher incremental operating costs, which will be borne by the enterprises
   themselves, without reimbursement, per GEF rules. If consideration would be given allowing funding of
   all eligible capital costs for the enterprises, this would mean US$ 1,044,125, instead of US$ 821,365 in
   recognition of the effort to convert to a non-ODS solution.


   7.      PROJECT IMPLEMENTATION AND MONITORING

   UNOPS, on behalf of UNDP, will oversee the implementation of this project and provide technical
   support. Implementation is expected as follows:

                   Activity                                                Quarter
                                             1   2      3   4    5     6    7    8     9    10    11    12   14
GEF Project approval                         X
Submit Project doc. for signature            X
Project document signature                       X
Equipment specification verification             X X
Equipment procurement                                       X   X
Installation/retrofitting of equipment                                X     X
Training                                                                    X    X    X
Testing and trials                                                                    X     X
Production Start-up                                                                         X
Phase-In                                                                                    X    X      X
Project completed                                                                                       X
Completion report                                                                                            X


   MILESTONES FOR PROJECT MONITORING

                                         TASK                                              MONTH*
        (a) Project document submitted to beneficiary                                         3
        (b) Project document signature                                                        4
        (c) Bids prepared and requested                                                       6
        (d) Contracts Awarded                                                                12
        (e) Equipment Delivered                                                              21
        (f) Training Testing and Trial Runs                                                  27
        (g) Commissioning                                                                    36
        (h) Submission of project completion report                                          42
            * as measured from project approval




   RPF – Final 2                                  815                                        12/24/99
8.      PROJECT IMPACT

This project will eliminate the use of 104.9 t ODP at baseline conditions. The project employs
commercially available and environmentally acceptable technology. Annex 6 details any special
environmental requirements.


9.      ANNEXES

Annex-1:        Enterprise Baseline Data
Annex-2:        Calculation of Incremental Capital Costs
Annex-3:        Calculation of Incremental Operating Costs
Annex-4:        Calculation of Cost Effectiveness
Annex-5:        Company Letter of Commitment
Annex-6:        Environmental Assessment
Annex-7:        Technical Review




RPF – Final 2                                915                               12/24/99
                                  ANNEX 1
                          ENTERPRISE BASELINE DATA

      COMPANY      EQUIPMENT           SYSTEM CFC-11  ACTION     DISPOSAL PLAN
                                         (t/y) (t/y) PROPOSED
IMP                   3 tanks,           N/A.  N/A.   additional       N/A.
                2 preblenders, testing                 blending
                     equipment                        equipment
AIDMAR             Spray LPDs (4)         60    12    Replace 4      Destroy 4
ALMATA ENG &    Self-made Spray LPD       20     4    Replace 1      Destroy 1
CONSTR.
ALMATYINGSTRY        Spray LPD             20      4     Replace 1   Destroy 1
ALMAZ              Spray LPDs (5)          60     12     Replace 4   Destroy 4
                  (four functioning)
CHIMSTROI          Spray LPDs (2)          80     16     Replace 2   Destroy 2
CHOLODINVEST    Pena-9M Spray LPDs         90    10.4    Replace 4   Destroy 4
                          (4)
GLOBUS          Pena-9M Spray LPD          12     1.5    Replace 1   Destroy 1
LIK CORP.            Spray LPD             10      2     Replace 2   Destroy 1
                Hand pour for display
                       cabinets
MONTAZHNIK       Pena-90 Spray LPD         15     3      Replace 1   Destroy 1
                          (1)
OLIMP           Pena-90 Spray LPDs         10     2      Replace 1   Destroy 1
                          (2)
SHEBER             Spray LPDs (2)           20     4     Replace 2   Destroy 2
SIM               Kress Spray LPD          150    30     Replace 2   Destroy 2
                    Vladimir LPD
SPETSREMONT        Spray LPDs (2)          10     2      Replace 1   Destroy 1
                  (one functioning)
TRADEMARKET     Pena-90 Spray LPDs         10     2      Replace 1   Destroy 1
                (2) (one functioning)
                       TOTAL               567   104.9




RPF – Final 2                           1015                         12/24/99
                                      ANNEX 2
                     CALCULATION OF INCREMENTAL CAPITAL COSTS

             IMP: Investment Costs Summary
                                                      ( Costs in US$)
             Item                                        Unit Cost      Quantity   Sub-total


        1
       1.1   Blending Equipment, including transfer            60,000      1           60,000
       1.2   Storage Tanks, including transfer                             1           60,000
       1.3   Testing Equipment                                                         10,000
       1.4   Civil Works                                                               20,000

        2    Training and Technical Assistance
       2.1    Trials                                                                   10,000
       2.2   Technology Transfer & training for IMP                                    20,000
       2.3   Technology transfer to spray foam                                         45,000
             contractors (14)

                 CAPITAL INVESTMENT COSTS                                            225,000




RPF – Final 2                                1115                                  12/24/99
Customers: Investment Costs Summary

Customer                              Item         Quantity   Cost    Total Amount
AIDMAR                          7 kg spray HPD        4        25,000       100,000
                                 Skin Applicator      4         7,500        30,000
ALMATY ENG. &                   7 kg spray HPD        1        25,000        25,000
CONSTRUCTION                     Skin Applicator      1         7,500         7,500
ALMATYINGSTROY                  7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
ALMAZ CO.                       7 kg spray HPD        4        25,000       100,000
                                 Skin Applicator      4         7,500        30,000
CHIMSTROI                       7 kg spray HPD        4        25,000       100,000
                                 Skin Applicator      4         7,500        30,000
CHOLODINVEST                    7 kg spray HPD        4        25,000       100,000
                                 Skin Applicator      4         7,500        30,000
GLOBUS                          7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
LIK                             7 kg spray HPD        1        25,000        25,000
                                 12 kg PIP HPD        1        35,000        35,000
                                 Skin Applicator      1         7,500         7,500
MONTAZHNIK                      7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
OLIMP                           7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
SHEBER                          7 kg spray HPD        2        25,000        50,000
                                 Skin Applicator      2         7,500        15,000
SIM                             12 kg spray HPD       1        30,000        30,000
                                7 kg spray HPD        1        25,000        25,000
                                Skin Applicators      2         7,500        15,000
SPRETSREMONT                    7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
TRADEMARKET                     7 kg spray HPD        1        25,000        25,000
                                 Skin Applicator      1         7,500         7,500
TOTAL:                                                                      950,000




RPF – Final 2                         1215                            12/24/99
                                     ANNEX 3
                   CALCULATION OF INCREMENTAL OPERATING COSTS


Incremental operating costs are calculated based on the increased isocyanate usage when converting to all
water blown foam. The effective replacement ratio is 1 part CFC-11 by 1.5 parts MDI. An increase in
systems usage of 7.5% is used, based on the need for thicker coverage to get similar insulating value. The
systems price is based on actual reformulation and component prices.


Before:          104.9 t CFC-11                 @ US$ 2.50    =          262,250
After:           157.35 t MDI                   @ US$ 2.50    =          393,375
42.52 t additional systems      @ US$ 2.54      =      108,001
Incremental Operating Costs/y                                 =          239,126
2 year IOCs (NPV @ 10%)                                       =          416,079




RPF – Final 2                                 1315                                       12/24/99
                                     ANNEX 4
                ODS CONSUMPTION AND COST EFFECTIVENESS CALCULATION

A. ODS SAVINGS:

                              Average                    ODP            ODP TONS
                            Consumption
        CFC-11               104.9 MT/y                  1.0 ODP/kg       104.9 MT ODP
        Total ODP weighted savings                                    104.9 MT ODP


B. PROJECT COSTS:

                                                               IMP    Customers              TOTAL
Incremental investment costs(ICC)                           225,000     950,000            1,175,000
Contingency (10%)                                            22,500      94,125              116,625
Incremental operation costs (IOC)                                 0     416,079              416,079
Deductions                                                        0      (8,750)              (8,750)
TOTAL                                                       247,500   1,451,454            1,698,954


                                DEDUCTIONS                            AMOUNT
            Safety Costs                                                               0
            Foreign Ownership                                                          0
            Exports to non-Article 5 countries                                         0
            Baseline conditions (25% of dispenser cost – LIK)                      8,750
            Age of baseline equipment                                                  0


C. COST EFFECTIVENESS:

   Total eligible incremental project costs:                                  US$ 1,282,875
   Threshold for the sector:                                                US$ 7.83/kg ODP

   Eligible incremental MF grant: customers                                          US$821,367
                     IMP                                                                247,500

      Cost Effectiveness: (ICC)-deductions/ODP Savings: US$ 9.87/Kg ODP (Customers only)




RPF – Final 2                                  1415                                 12/24/99
D.      COST-EFFECTIVENESS AND GRANT CALCULATION PER ENTERPRISE

The following table shows the applicable costs and grant effectiveness calculated per enterprise. The following assumptions were used in
calculating the costs:
                       ICCs:                   from Annex 2
                       Contingencies:          10% of net ICC
                       IOCs:                   as calculated in Annex 3
                       Eligible Project Costs: ICC minus Deductions

       COMPANY         Technology SYSTEM     ODP           ICC       IOC     Deductions Total Project   Eligible     Grant       Grant
                                    (t/y) eliminated                            (1)        Costs      Project Costs Requested Effectiveness
                                             (t/y)                                                                     (2)
     AIDMAR              Water       60       12          143,000     45,988          0       188,988       143,000   143,000         11.92
     ALMATA ENG &        Water       20        4           35,750     15,329          0        51,079        35,750     35,750         8.94
     CONSTRUC
     ALMATYINGSTRY       Water         20          4        35,750    15,329          0        51,079        35,750    35,750          8.94
     ALMAZ               Water         60         12       143,000    45,988          0       188,988       143,000   143,000         11.92
     CHIMSTROI           Water         80         16       143,000    61,318          0       204,318       143,000   143,000          8.94
     CHOLODINVEST        Water         90        10.4      143,000    52,452          0       195,452       143,000   143,000         13.75
     GLOBUS              Water         12         1.5       35,750     7,240          0        42,990        35,750    23,490         15.66
     LIK CORP.           Water         10          2        73,375     7,665      8,750        81,755        64,625    31,320         15.66
     MONTANZHNIK         Water         15          3        35,750    11,498          0        47,248        35,750    35,750         11.92
     OLIMP               Water         10          2        35,750     7,665          0        43,415        35,750    31,320         15.66
     SHEBER              Water         20          4        71,500    15,329          0        86,829        71,500    62,640         15.66
     SIM                 Water        150         30        77,000   114,970          0       191,970        77,000    77,000          2.57
     SPETSREMONT         Water         10          2        35,750     7,665          0        43,415        35,750    31,320         15.66
     TRADEMARKET         Water         10          2        35,750     7,665          0        43,415        35,750    31,320         15.66
                                      567       104.9    1,044,125   416,101      8,750     1,460,941     1,035,375   967,660          9.22

(1) Deductions are taken as appropriate for hand mix baseline conditions (25% of the equipment cost).
(2) The grant requested is calculated as the lower of the eligible project costs, or the maximum allowable grant based on ODS phased out times
    200% of the category threshold (7.83). Since the project is a terminal umbrella, a threshold of 200% of the usual threshold is applied.




RPF – Final 2                                1515                                      12/24/99
                                    ANNEX 5
                         COMPANY LETTER OF COMMITMENT

  Agreement of Participation in project (fill in project number when known) - Group Project for
        Conversion to CFC-free Technology in the Manufacture of Polyurethane Foam


_____(company name)________, represented by _____________________ , hereby confirms
having received a copy of the CFC phaseout project, prepared on its behalf as part of a group
project and on behalf of the government of Kazakhstan by the United Nations Development
Program (UNDP).


____(company name)______________ hereby acknowledges the following:


a) It agrees that the UNDP/UNOPS will implement the project as approved by the Global
   Environmental Facility and as described in the project document, for which
   _____(company)_____ will be a beneficiary;

b) It accepts the project as proposed in the project document;

c) It will completely phase out the use of CFCs upon project completion;

d) It will use only zero-ODP technologies as stipulated;

e) It will dispose of any equipment that has been replaced under this project in compliance with
   the stipulations that have been drawn up in the project document;

f) It will provide funds for items that are included in this project but are specifically excluded
   from funding by the Global Environmental Facility (GEF) as well as for items included in the
   project and required for a successful completion but that, while eligible, exceed the available
   budget and contingencies;

g) It will allow monitoring inspections by the UNDP or designate during project implementation
   and thereafter to verify proper implementation and subsequent operation without the use of
   CFCs.


………………………….
   (date)

……………………………………………………….
   (Authorized Signature)




RPF – Final 2                                 1615                                       12/24/99
                                      ANNEX 6
                              ENVIRONMENTAL ASSESSMENT


For the water based foams, the blowing agent is carbon dioxide, which poses a negligible
additional environmental threat. Because the CO2 is from a chemical source, it contributes
(albeit by a negligible amount) to global warming.

There is currently no regulatory action required for this project.




RPF – Final 2                                   1715                              12/24/99
                    ANNEX 7
                TECHNICAL REVIEW




RPF – Final 2         1815         12/24/99