EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

48576MONGOLIA: Desert Solar Power Project

Terms of Reference for Lenders' technical and environmental adviser

1.BACKGROUND

1.1 The Desert Solar Power Project involves the development, construction and operation of a 30MW solar photovoltaic (PV) power plant (the Project) located 460km southeast of Ulaanbaatar (UB) near the city of Sainshand at the border of the Gobi desert.

1.2 Total estimated Project costs are USD 54 million. The Project will be structured as a limited-recourse independent power project (IPP) with financing from up to USD [42] million of debt and USD [12] million of equity. The borrower is Desert Solar Power One LLC (DSP) a special purpose company incorporated in Mongolia (the Borrower). DSP will be owned by the Tucher & Smith Family Office (T&S), which own MuP, a German engineering group with experience in infrastructure and real estate, including in Mongolia, and United Green Group (UGG). T&S and UGG are each a Sponsor of the Project. The European Bank for Reconstruction and Development (the "EBRD" or the "Bank") and other potential lenders (collectively the Lenders) are considering financing the Project.

1.3 The Borrower has signed a Power Purchase Agreement (PPA) with the state-owned National Power Transmission Grid (NPTG). The term of the PPA is 20 years after commissioning, with a fixed offtake price of $c16/kWh. The Project has also signed a Dispatch Agreement with the National Dispatching Centre (NDC) which will govern the dispatch regime of the plant. The PPA may be amended to include NDC as an additional counterparty to ensure consistency with the revised Energy Law.

1.4 The Project site measures approximately 714,000sqm and will be connected to one of the ends of the central grid through an existing 35/110 kV substation located 3km from the project site. The Project will be comprised of fixed mounted solar panels and will be constructed under a turnkey EPC contract with ECAP Solutions, a member of the United Green Group. The Borrower is expected to sign a long-term full O&M contract with MuPs affiliate in Mongolia. The Project is in development stage with COD targeted by [Q3 2017].

1.5The EBRD wish to appoint a consultant (the Consultant) to advise it in relation to (i) technical and (ii) environmental, health and safety and social (EHSS) aspects of the Project with the scope of work described below. A non-exhaustive list of the technical and EHSS aspects the Consultant is expected to address is in Annexes 2 (technical) and 3 (EHSS), as further described below.

2.OBJECTIVE

2.1The objectives of this assignment are for the Consultant:

to provide EBRD with a report on the technical aspects and risks of the Project and a full bankable energy yield report in order to enable EBRD to assess whether the Project Company will have the capacity to service the proposed loan;

to provide EBRD with a report on the EHSS aspects of the Project in order to enable it to assess whether the Project and the Project Company comply with the Lenders policies in this area[footnoteRef:2] (the Lenders EHSS Requirements), including compliance with relevant national legislation; it should be noted that the Lenders EHSS Requirements include compliance with applicable European Union Standards[footnoteRef:3]; [2: For EBRD these are set out in the 2014 Environmental and Social Policy and related documents (see http://www.ebrd.com/pages/research/publications/policies/environmental.shtml). Lenders EHSS Requirements also includes applicable local, national and international environmental and social laws, regulations and standards. ] [3: E.g. EU EIA, Habitats and Birds Directives]

to prepare a draft environmental and social action plan (ESAP) to address issues identified during the environmental and social appraisal. The ESAP will focus on those issues that are required to bring the operations into compliance with the Lenders EHSS Requirements;

to support EBRD in reviewing the technical and EHSS aspects of the Project documentation and negotiating and finalising the financing documentation, including the ESAP, for the Project;

to provide ongoing support to the Lenders and their other advisors until financial close;

to monitor the Project's progress from financial close to completion;

to assess and confirm the status of compliance with respect to the financial model, construction agreements, environmental and social management plans and the construction budget, and

to monitor the first two full years of operation (or more if final acceptance occurs after the end of these two years).

2.2The Consultant will be instructed to perform the tasks as described below in three phases:

Phase 1 which runs from the date EBRD instructs the Consultant to start work on a specific Project until financial close for that Project;

Phase 2 which runs from financial close for the Project until the start of commercial operations; and

Phase 3 which runs from the start of commercial operations until the later of the end of the first two full years of commercial operations and the final acceptance of the plant.

2.3Phase 2 and Phase 3 shall only be carried out by the Consultant on receipt of written confirmation from EBRD that the Lenders wish the Consultant to commence that Phase. EBRD reserves the right to suspend or terminate the services of the Consultant between the several phases without any extra costs being charged by the Consultant to the EBRDs client.

3.Phase 1 Due Diligence and Financial Close support

3.1Initial technical and EHSS due diligence report

The Consultant will visit the Project site to assess the overall suitability of the site to accommodate ongoing Project operations, review all available documentation (expected to include the Project Agreements or term sheets, irradiation report, energy yield calculation, site layout plans, outline design, technical specification, electrical system study, water usage plan, draft environmental and social impact assessment) and meet with relevant personnel from the Project Company, its shareholders and contractors, their advisors and other stakeholders, including project affected people.

The Consultant will provide a detailed report on the technical and EHSS aspects of the Project (the Initial Report) including among others all the aspects described in Annex 2 and Annex 3.. The review will help EBRD to complete its internal approval process and identify whether or not the Project has an acceptable risk profile, can meet the expected debt service requirements and complies with applicable law, best international practice and the Lenders EHSS Requirements. At the time of the review some aspects of the Project may not be finalised the Initial Report should in these cases identify key unresolved risk issues. The Consultant must address inter alia, but not limited to, the issues listed in Annexes 2 and 3.

The Project has been categorized as B by EBRD. In case the consultants team identifies any aspects of the Project that would change this categorization, then the Consultant shall discuss with the Lenders the implications of this categorisation. In addition the Consultant shall include in the Initial Report a compliance table evaluating the Project for compliance against each of the performance requirements in the Lenders EHSS Requirements (see Annex 3). The Consultant shall also update this table in Phase 2 and 3 reports.

For the avoidance of doubt, the Consultant shall provide an independent recalculation of the energy yield, based on the most representative irradiation data sets and the Project Companys inputs as critically reviewed by the Consultant. The Consultant shall conduct a survey of the electrical connection conditions and estimate the curtailment risk for the Project based on available data. As a result, the Consultant shall produce a full detailed bankable energy yield report in appendix to the Initial Report.

3.2ESAP preparation

The Consultant shall develop a comprehensive ESAP to address issues identified during the Environmental and Social appraisal of the project. The ESAP will focus on those issues that are required to bring the operations into compliance with the EBRDs requirements and will be presented and sequenced by PRs. Actions identified must be numbered, clearly defined, indicate a time frame for completion (with specific reference to those actions that must be completed before financial close if appropriate) and a responsible party specified. Further, each item must contain a description of the factors that will be used to determine when the identified action is closed/completed. The Consultant will also inform the Client about any material budget implications of ESAP items (although this information may not be required in the public domain).

The ESAP will be compact and, if needed, details will be included in sub-plans referenced in the main ESAP. The required format the ESAP is given in Annex 3.

3.3Financial close support

The Consultant will provide ongoing support to EBRD and their other advisors during the negotiation of financing documents and for the period leading up to signature of the loan agreements and financial close. This will include:

reviewing draft financing documentation to the extent they make reference to technical or EHSS matters, including commenting on appropriate limits and thresholds;

assisting EBRD in finalising the ESAP and agreeing final versions of EHSS documentation prepared by or on behalf of the Project Company, such as environmental and social impact assessment, environmental and social management and monitoring plans, the stakeholder engagement plan, the non