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EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

48576 MONGOLIA: 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 MuP’s affiliate in Mongolia. The Project is in development stage with COD targeted by [Q3 2017].

1.5 The 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

2.1 The 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 1 (the “Lenders’ EHSS Requirements”), including compliance with relevant national legislation; it

1 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.

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should be noted that the Lenders’ EHSS Requirements include compliance with applicable European Union Standards2;

• 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).

2.2 The 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.

2.3 Phase 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 EBRD’s client.

3. PHASE 1 – DUE DILIGENCE AND FINANCIAL CLOSE SUPPORT

3.1 Initial 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

2 E.g. EU EIA, Habitats and Birds Directives

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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 Company’s 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.

3.2 ESAP 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 EBRD’s 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.

3.3 Financial 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-technical summary and detailed construction and operation plans, as well as resettlement action plan, if required;

• responding to requests for advice or input on technical or EHSS matters from EBRD or its other advisers, including follow-up questions arising from the Consultant's due diligence report or successive developments on the Project; and

• reviewing on an ad-hoc basis the conditions precedent under the financing documentation to the extent these relate to technical or EHSS matters and providing a sign-off.

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The financial close support is assumed not to exceed an amount of 15 man-days equivalent in total. If additional support is necessary this will be performed and charged as additional service.

3.4 Final technical and EHSS due diligence report

Prior to financial close the Consultant will prepare a final technical and EHSS due diligence report (the “Final Report”) updating the Initial Report to reflect all new information received since its preparation. The Consultation should clearly highlight any remaining unresolved issues.

4. PHASE 2 – CONSTRUCTION MONITORING

During Phase 2, the Consultant will visit the Project site on a quarterly basis and support EBRD in monitoring the implementation of the Project in terms of time schedule, budget compliance, quality of work, the performance of Project participants and compliance with the Project Agreements and Lenders’ EHSS Requirements. This will include the following activities:

• The Consultant will review the Project Company's periodic (monthly/quarterly) construction reports and make quarterly site visits during construction and a site visit to monitor the final tests for commercial operation. The Consultant's monitoring will include a review of:

o progress against the base case schedule; compliance with contractual milestones; implications for meeting the overall target completion dates and confirmation whether or not dates and deadlines are likely to be achieved; where possible, provide quantitative measurements (i.e. "percent complete") and use GANTT charts presentation format;

o show the original budget, revised outcome, estimate and variance for each budget item, highlight any actual or expected variance in the overall Project cost and confirm whether the Project is likely to become operational within the given budget;

o adequacy of the work performance with approved design, construction supervision and control program;

o status of procurement and spare parts inventory;;

o review the adequacy of the change orders;

o impact of change orders on the overall construction budget;

o quality of work, contractor's overall management of the construction, compliance with approved design, certification and testing arrangements;

o construction arrangements and compliance with good construction practice, waste management, health and safety and labour rights compliance;

o compliance with the ESAP, Environmental and Social Management Plans (ESMPs) and other environmental and social documents; and

o where electrical interconnection works are being carried out by, or on behalf of, DSP or another third party, progress in completing those works.

• The Consultant will review the Project Company's disbursement requests and confirm achievement or otherwise of the relevant milestones in accordance with the relevant Project Agreements as well as such other technical certifications as may be required under the financing documentation.

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• The Consultant will report quarterly to EBRD on a routine basis and provide ad hoc comments and review if unexpected events occur, such as proposed variations, material non-compliances or force majeure events.

• The Consultant will review and confirm, in the form of reports, the key acceptance, completion and commercial operation tests, including acceptance of civil works and electrical works, performance testing (including PR calculation during the PR test), energisation, punch list items and final handover (confirmation of the beginning of the guarantee period as defined in the EPC contract). The Consultant will also review and advise on as-built documentation completeness, snagging and punch list items and confirm ESAP compliance up to that point.

• Following the start of commercial operations the Consultant will provide a final report (the “Completion Report”) confirming that the Project has been completed and commissioned, all the works specified in the Project Agreements have been completed in accordance with their provisions including the performance test and the Lenders’ EHSS Requirements, all relevant completion certificates have been issued and that the Consultant is not aware of any breach by the Project Company of its obligations under applicable law or the Project Agreements.

5. PHASE 3 – OPERATIONS MONITORING

Following completion of Phase 2, Phase 3 shall only be carried out by the Consultant on receipt of prior written confirmation from the Lenders.

During Phase 3 the Consultant will support EBRD in monitoring the implementation of the Project in the first 24 months after the commercial operations date. This will include the following activities:

• The Consultant will review and confirm the acceptability of the final O&M procedures, including detailed environmental and social monitoring and management plans for the operational phase. The Consultant will also monitor and confirm the completion of punch list items.

• The Consultant will review the Project Company's periodic (monthly/quarterly) operation and maintenance reports and make at least two site visits during the first year of operation and one during the second year. The Consultant's monitoring will include a review of:

o energy output, availability and curtailment, compared to project forecasts;

o compliance with the forecast operating budget;

o O&M arrangements and compliance with good international practice, health and safety and labour rights compliance;

o O&M statistics, quality control reports and any other relevant variable to determine compliance with the O&M contract;

o compliance with the ESAP, ESMPs and other environmental and social documents;

o performance and O&M of the high voltage interconnection;

o status of spare parts;

o compliance with permits; and

o review and confirm the final acceptance tests.

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• The Consultant will calculate the achieved PR during the reviewed period using the provided data by the Client.

• At the end of warranty period, the Consultant shall review all necessary reports and data associated with Final Acceptance of the Project, as defined in the Final Acceptance protocols. This include inter alia:

o Review and comment on the test report by the contractors;o Evaluate compliance with performance guarantees, interconnection adequacy;o Comment on expected deviations to technical performance assumptions contained in the pro

forma assumptions incorporated into the financial model;o Comment on technical deviations that may impact operations of the Project;o Review and assess procurement and spare inventory procedures; o Certify that the Final Acceptance, as applicable, have been achieved, including fulfilment of

Performance Ratio guarantees and transfer of equipment warranties, among others.

• The Consultant will report six-monthly to EBRD on a routine basis and provide ad hoc comments and review if unexpected events occur, such as proposed variations, material non-compliances, warranty claims or force majeure events.

6. IMPLEMENTATION ARRANGEMENTS

6.1 Required Experience

The Consultant will appoint a Team Leader who will be responsible to coordinate tasks and activities and liase with the EBRD and the Company. The Team Leader will be an engineer with at least 10 years professional experience in the engineering design and construction of PV projects. Other experts necessary for the assignment are:

o A Senior Project Engineer with minimum 10 years experience in the project management of construction of PV projects and project cost estimations with very good knowledge of the recent EPC and O&M contracts market conditions;

o Other necessary experts, such as civil, mechanical, electrical and environment engineers with minimum 5 years experience in design and operation of the main and auxiliary systems of PV projects;

o Environment, Health and Safety specialist with a minimum of 5 years experience assessing projects against EBRD and/or other IFI requirements.

o Social specialist with a minimum of 5 years experience assessing projects against EBRD and/or other IFI requirements, preferably with project experience in Mongolia and/or the region; and

o A Technical Expert with an engineering degree and with minimum 5 years’ experience in solar farm and solar energy yield assessment.

The Consultant will have to have appropriate experience acting as a technical advisor to power projects in Mongolia as a pre-requisite, and a deep demonstrable expertise in and understanding of the Mongolian grid and challenges of integrating renewable energy into the Mongolian grid.

6.2 Project assignment and fee structure

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The Consultant shall invoice EBRD for the work done on the Project. The Consultant's fees shall be structured and invoiced on the basis of a fixed fee, with separate sub-fees for the technical and the EHSS legs of the assignment, and for each of the three phases of work described above.

The Consultant's fixed fee for each phase of the Project shall be inclusive of all costs and expenses required to carry out the scope of work.

6.3 General

It is anticipated that the Consultant will be appointed contractually by EBRD but will assume the same duty of care, and report and respond equally, to any other lenders that might participate in the financing of the Project. On request the Consultant will enter into such reliance or direct engagement letter with those other lenders as they may reasonably request.

Invoices will be submitted to and paid by EBRD and the Sponsor will be obligated to reimburse EBRD for these expenses in accordance with the terms of the mandate letter between EBRD and the Sponsor.

All reports (draft and final) shall be produced in English and be made available in electronic format (in Word and Excel as well as in pdf) to EBRD and in hard copy, if requested.

All written communication between the Consultant and EBRD and the Project Company shall be in English. It is expected that most documentation will be in English and that the Project Company's staff will communicate in English. However the Consultant must also have the capacity to review documents in Mongolian and engage with counterparts, including workers engaged on the Project, in Mongolian.

7. TIMING AND DELIVERABLES

7.1 Phase 1

The Consultant will provide its key deliverables in accordance with the following schedule:

Draft Initial Report(including energy yield calculation and ESAP)

Six weeks from initiating assignment, subject to the availability of documentation.

Final Initial Report Within one week of comments from EBRD.

Draft Final Report As agreed with EBRD.

Final Report Within one week of comments from EBRD.

7.2 Phase 2

The Consultant shall provide quarterly monitoring reports within 15 days of the end of each quarter during the construction period. The final completion report shall be provided within 30 days of the start of commercial operations. The Consultant shall respond to disbursement requests within five working days of receipt. The Consultant shall respond to ad hoc requests as promptly as possible, taking account of the urgency of any such request.

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7.3 Phase 3

The Consultant shall provide semi-annual monitoring reports within 15 days of the end of each six-month period after the start of commercial operations. The Consultant shall respond to ad hoc requests as promptly as possible, taking account of the urgency of any such request.

8. PROPOSAL REQUIREMENTS

The Consultant's proposal should include the following:

• confirmation that the Consultant accepts the scope of work;

• a proposed fee structure, including separate breakdowns for the technical and the EHSS legs of the assignment, and for each of the three phases of the scope of work, as described in section 7 above;

• details of the Consultant team’s experience in respect of solar PV projects – this must include demonstrated experience in evaluating all of the major PV technologies used by leading producers, including thin film technologies, and trackers;

• details of the experience of the Consultant in the undertaking of similar roles for lenders, including relevant experience in the region;

• details of the Consultant team members’ experience in undertaking similar roles for lenders, stating areas of expertise;

• confirmation that the Consultant team will be dedicated to the assignment on a priority basis;

• confirmation that the Consultant accepts the timing and deliverables set out above;

• confirmation that the Consultant and its affiliates have no conflicts of interest in undertaking this assignment (to be detailed, if any: other relationships or instructions that the Consultant or its affiliates have with clients, the sponsors or other competing projects in relation to matters which could potentially have a material bearing on the Project); and

• a working schedule, including a statement on the Consultant's ability to work within the timing set out above.

9. GENERAL REQUIREMENTS

The Consultant shall:

• carry out its work with the highest standards of professional competence and integrity and consistent with the standard of care customary in the industry;

• provide to EBRD impartial and objective advice, not having or allowing its experts to have any conflict of interest;

• treat EBRD as its exclusive client;

• provide access at all times to the Consultant's work wherever it may be in progress or preparation. The EBRD shall have the right to comment at any time on the Consultant's performance and to request modifications in performance and in preparation of the Consultant's work;

• present all of its bills, together with a breakdown of services rendered, directly to EBRD; and

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• be responsible for maintaining all insurance related to all those employed, hired or subcontracted by the Consultant.

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ANNEX 1 – INDICATIVE LIST OF PROJECT CONTRACTS

1. Power Purchase Agreement with NPTG

2. Dispatch Agreement with the National Dispatching Centre (NDC)

3. Land lease agreement

4. EPC contract

5. Module Supply Contract

6. O&M contract

7. Management Services Agreement and Owner’s Engineer Agreement

8. Relevant permits

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ANNEX 2

NON-EXHAUSTIVE LIST OF TECHNICAL ASPECTS TO BE REVIEWED AND OPINED ON

Design and planning; overview

• Site location, geotechnical and meteorological conditions, accessibility and physical and social suitability of site and water supply, including shading analysis.

• Initial plan of solar park and existing study of irradiance conditions of the site.

• Suitability of the proposed equipment and technology employed, fundamental plant layout and design (including electrical design), foundations and methods of construction of the power plant and its support systems, security and monitoring systems.

• Proposed electrical connection and transmission to NPTG’s electrical system.

• Execution plans, calculations and design documents including the structural calculations.

• Project certification and timing according to IEC standards or equivalent.

• Any technology risks, e.g. novel or untested designs.

• Key project risks and a summary of experience and lessons learned on similar recent projects elsewhere.

Irradiance and energy yield

• Analysis of meteorological data evaluation, including determination of the most representative irradiation data sets from (i) site measurement (if available) and (ii) existing databases such as Meteonorm, PV-GIS (classic and Climate SAF), NASA (classic and SSE+HC1), Satel light, Meteotest or similar.

• Analysis of irradiation (global, horizontal and inclined irradiation).

• Plausibility check of terrain description.

• Standard test conditions impact.

• Assessment of energy losses and performance ratio calculation.

• Analysis of reference panels, if used in the irradiance study.

• Analysis of all losses until delivery point.

• Analysis of long term consideration.

• Independent uncertainty analysis (considering irradiation data, fluctuation and modelling).

• Long term energy yield projections (P99, P95, P90, P75, P50). The energy shall be predicted for 1 year (short term), 10 years (medium term) and 20 years (long term). The energy yield shall be re-calculated by the Consultant, based on the most representative irradiation data sets and the Project Company's inputs approved by the Consultant. As a result, the Consultant shall produce a full detailed bankable energy yield report as an appendix to the Initial Report.

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Panels, inverters and framework

• The conceptual design and the capability of the selected panel, inverters and framework, including foundations to meet the requirements of the Project Agreements and financing documents during the loan life.

• Adequacy of engineering and design standards and procedures of suppliers of the panels, inverters and framework and its inclination.

• Track record of proposed solar panels, inverters and frameworks in similar weather conditions. Performance guarantees, including guarantees provided by equipment manufacturers.

• Review of certificates of panels, inverter and frameworks.

• Review the selected solar modules including the manufacturing process of the modules, spare parts program, module certification, technical studies performed on the modules, technical references, engineering resources, and decommissioning procedures.

• Analysis of mounting system, its resilience to external aggressions, its suitability to the specific characteristics of the Project sites.

Electrical connection and other electrical matters

• The conceptual design and the capability of the selected electrical connection and other electrical equipment, especially for application to the solar panel and its characteristics.

• Power transmission characteristics, behaviour, operation and power evacuation of the solar park. High level analysis of likely curtailment risks.

• Compliance with the Mongolian grid code, including the solar grid code (as applicable).

• Solar park control system and the arrangements for communication between the solar park and external control and monitoring systems.

• Step-up transformer and other electro or electro-mechanical equipment forming part of the Project.

• Interface with NPTG’s electrical network and the specifications for any interconnection works or substation to be constructed, timing and cost assumptions for both construction and operation. Likely availability and outage risks for dedicated medium voltage interconnection works.

Project Agreements

• All Project Agreements, focusing on technical adequacy, consistency among the contracts, alignment with local labour laws and lender requirements, best international practice, their suitability to achieve the Project scope, requirements of the Power Purchase Agreement and cash flow projections and comparison with market standards and validation of the Project Agreement pricing.

• Specifically in relation to EPC and O&M contracts:

o conformity with good engineering and construction standards and industry practices; division of responsibilities between contractors' and the Project Company, system of checks and balances between contractors;

o Confirm the arm’s length nature of all the arrangement between the contractor and the Borrower, given the affiliate nature of the contractor and United Green.

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o proposed milestones and schedule requirements;

o commissioning arrangements, defects liability provisions, performance testing, compliance with technical requirements under the PPA acceptance criteria for solar park and acceptance protocols;

o adequacy of liquidated damages, warranties and indemnities, performance guarantees, liability caps and pricing and payment provisions and consistency with the other project contracts guarantees and liabilities; and

o Methodology for measuring the Project Plant's actual performance ratio, reliability trials, the provisional and definitive acceptance procedures (comparison with market standards).

• Specifically in relation to the Power Purchase Agreement, Dispatch Agreement and Transmission Connection Agreement:

o compliance of the Project with these agreements;

o payment terms, liquidated damages, payment adjustments and force majeure;

o performance testing and acceptance criteria for solar park;

o milestones and timing requirements; and

o reasonableness of the termination and buy-out provisions.

Revenue, CAPEX and OPEX assumptions; financial model

• Analysis of capital budget, reviewing individual line items and contingencies. Timing of payments and cashflow.

• Adequacy of proposed forecasts for revenue and capital and operating expenditure, including scenarios for degradation, curtailment, availability and scheduled & unscheduled maintenance costs. Propose realistic downside scenarios and sensitivities. Recommend appropriate reserve amounts for major maintenance.

• Technical data inputs and calculations in the financial model for accuracy, reasonableness and consistency with projection of energy production, Project Contracts and permits, including:

o Construction costs and schedule assumptions;

o Reasonableness of assumed contingency levels;

o Reasonableness of reserve accounts;

o O&M program and budget;

o Cost of connection to NPTG’s electrical system and other services;

o Assumptions for the Project availability, internal consumption and transmission losses; and

o Solar resource probability scenario analysis.

• Examine and benchmark the Project construction costs and capex assumptions against other recent solar PV projects, particularly EPC costs, to study the arm’s length nature of the construction arrangements.

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Permits

• The list and status of required licenses, permits, agreements and approvals.

• Technical aspects of key permits, including inter alia land usage permits, rights of way, electrical connection permits, generation licences and construction permits.

• Environmental permits and related conditions.

Construction arrangements

• Financial and technical capability of the EPC and O&M contractors and the panel and inverter manufacturers (production process for the modules and inverters, production history, input sourcing, degree of automation and quality control) to meet their contractual commitments during the loan tenor.

• Contractor's ability to meet deadlines set forth in the Power Purchase Agreement.

• Adequacy of the EPC contractor's engineering, design and quality control standards and procedures.

• Track record and operational experience of civil works and other key subcontractors.

• Realism of proposed project schedule and likely downsides.

• Adequacy of project supervision arrangements.

• Accessibility of the site.

• Security including security threats (threats against construction and operation teams, vandalism, theft) and impacts on timing and project costs, security measures (equipment, personnel, procedures), coordination with local police forces and authorities.

O&M arrangements

• Proposed O&M program, including routine and unscheduled maintenance.

• Staffing, start-up, training program, labour management; key staff qualifications, capability and experience.

• Spare parts inventory and availability/risk of shortage.

• EPC contractor's support, post completion technical risks.

• Length of O&M contract with respect to market standard.

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ANNEX 3

NON-EXHAUSTIVE LIST OF EHSS ASPECTS TO BE CONSIDERED

• Identify applicable Mongolian law, European Union standards and Lenders’ EHSS Requirements.

• The existing condition of the Project and its site and the baseline environmental and social conditions (including consideration of seasonal issues).

• Review of alternatives (site location, project design, technologies, transport options etc).

• The environmental and social impacts of construction and operation.

• The carbon footprint of the Project and any related carbon savings.

• The proposed labour, health and safety policies to be adopted during construction and operation, including by any contractors and sub-contractors.

• The status of foreign employees including status of work permits and residence permits.

• Economic displacement, land use acquisition, resettlement and compensations, including relevant historic land transfers/sales.

• The status of environmental permitting for the Project.

• The sufficiency of the Project Company's environmental and social impact assessment (“ESIA”) and environmental and social management plan (“ESMP”), prepared by the Company's consultants for the local permitting process, and identification of any gaps between the ESIA/ESMP and the Lenders’ EHSS Requirements.

• The proposed stakeholder engagement procedures and activities as set out in the Project’s stakeholder engagement plan (the “SEP”), together with the Project Company’s non-technical summary for the Project (the “NTS”); as necessary provide recommendations for updating the NTS and SEP to enable these documents to meet the Lenders’ EHSS Requirements. Those plans should be in substance consistent with the templates provided with this Terms of Reference.

• The Project Company’s structures and processes to manage environmental, social, labour and health and safety matters, including arrangements to ensure compliance by the Project Company's contractors and their sub-contractors, taking into account that labour rights compliance in particular is required at both the Project Company level and its contractors and their sub-contractors.

• The actions that should be undertaken to ensure the Project Company’s and the Project’s compliance with the Lenders’ EHSS Requirements, for inclusion in the ESAP.

• The use of water for the Project, associated wastewater handling and consequences on the country's water resources.

• The impacts of security threats on employees and Project assets.

• The engagement of local people (employment, consultation, communication, conflict management) consultation and information processes with stakeholders (land owners/users, local communities, NGOs, authorities, etc). Assessment of information disclosure and public consultation process appropriateness, and advice on any additional stakeholder engagement activities to ensure compliance with the Lenders’ EHSS Requirements.

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• The evaluation of any “Associated Facilities” (if applicable) as referred to under the Lenders' EHSS Requirements.

• Decommissioning/recycling of equipment/plant.

• Evaluation of social and socio-economic baseline including focus on the fragile social context of the area.

• Presence of vulnerable peoples (e.g. nomadic herders) in the area based on relevant evidence.

• Cultural heritage, archaeological and historic monuments potential impacts and mitigation measures.

• Cumulative impacts assessment with other industrial zone facilities in the vicinity.

ENVIRONMENTAL AND SOCIAL ASSESSMENT: COMPLIANCE SUMMARY TABLE

IntroductionThe Compliance Summary provides a systematic review of project compliance with the EBRD Environmental and Social Policy, as defined through the applicable Performance Requirements (PRs). Scope of compliance is all PRs applicable to non-FI projects. The review is intended to provide a baseline against which to judge future performance of projects through the annual environmental and social reporting process.

Between 2 and 10 indicators are identified for each of the applicable PRs: 1, 2, 3, 4, 5, 6, 7, 8 and 10.

GuidanceFor all PRs (Indicators with whole number references) provide a summary of overall compliance with the PR. Justification for any derogation from a PR should be summarised and supporting documents referenced.

For each indicator within a PR, please complete the 3 steps below:1. Decide whether the indicator is applicable. For Category A and B projects the

starting point is that all indicators are applicable unless the project has no significant aspects relevant to the indicator (i.e. no risks), in which case the indicator should be scored "NA" and a brief summary of the reason given. For Category C projects the starting point is all indicators are NA unless the project has a significant aspect relevant to the indicator (i.e. there is a material risk).

2. Decide whether an opinion is possible. If not (for example if the indicator will apply, but it is too early in the project) score as "NOP" and provide a brief summary of why. Where lack of opinion represents a material omission to the review refer to where this is addressed in the report and summarise any recommendations.

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3. Score the indicator as follows and provide brief justification.

ECExceeding Compliance:The project has gone beyond the expectations of EBRD’s PR requirements. EBRD should be able to use projects rated EC as a role model for positive Environmental and Social effects.

FCFully Compliant:The project is fully in compliance with EBRD’s requirements, and EU and local environmental, health and safety policies and guidelines.

PCPartial Compliance:The project is not in full compliance with EBRD’s requirements, but has systems, processes or mitigation measure in place which are working towards addressing the deficiencies.

MN

Material Non-compliance:The project is not in material compliance with EBRD’s requirements, and the systems, processes and mitigation measures in place are not working towards addressing the deficiencies.

4. Comments/Issues: Provide a brief commentary on the relevance of this requirement for the project and an explanation of the chosen score.

5. Actions Required: Where applicable, briefly describe any actions required by the client to achieve full compliance with each requirement. Where a relevant action is included in the ESAP for this project, please provide a reference to the ESAP.

6. PR Summary: Provide an overall summary against the PR, using the above compliance definitions with supporting commentary. In some cases it may be sufficient to address a PR at summary level only, depending on Stage 1 above.

Note: The Material Non-compliance score (at both Indicator and PR level) has significant implications for Project approval and requires particular care. In judging whether the measures sufficiently address deficiencies the consultant should consider in a structured way both the level of residual (post-approval) risk and the level of confidence that the Project can successfully bring the issue into compliance with the Policy through the ESAP. The table below illustrates the approach to be taken.

RiskHigh PC MN MN

Medium PC PC MNLow FC PC PC

High Medium LowConfidence

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KPI Ref. Performance Requirement Score Comments/ Issues Actions Required ESAP

Ref.

1 Assessment and Management of Environmental and Social Impacts and Issues

Summary:

1.1 Environmental and Social Assessment

1.2 Environmental and Social Management Systems

1.3 Environmental and Social Policy3

1.4 Environmental and Social Management Plan

1.5 Organisational Capacity and Commitment

1.6 Supply Chain Management

1.7 Project Monitoring and Reporting4

2 Labour and Working Conditions

Summary:

2.1 Human Resource Policies and Working Relationships

2.2 Child and Forced Labour

2.3 Non-Discrimination and Equal Opportunity

2.4 Workers Organizations

3 Where the project represents a substantial extension to the client activities, confirm that Policy and supporting management systems and plans are appropriate for the new activities.4 At appraisal stage there will be limited information. Compliance assessment should address specific plans for monitoring and reporting (against for example ESAP requirements) and also consider whether there is evidence of weak monitoring/reporting by client on other relevant projects - which may reduce confidence in future performance.

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KPI Ref. Performance Requirement Score Comments/ Issues Actions Required ESAP

Ref.

2.5 Wages, benefits, and conditions of work and accommodation

2.6 Retrenchment5

2.7 Grievance Mechanism

2.8 Non-Employee Workers

2.9 Supply Chain

2.10 Security Personnel Requirements

3Resource Efficiency and Pollution Prevention and ControlNB. Appraisal should carefully consider (and state) what regulations or standards have been applied to compliance assessment (eg EU, National, Sector Best Practice). Assessments should address consideration of the performance of alternative techniques.

Summary:

3.1 Resource Efficiency

3.2 Pollution Prevention and Control - Air emissions

3.3 Pollution Prevention and Control - Waste waters

3.4 Greenhouse Gases6

3.5 Water

3.6 Wastes

3.7 Hazardous Substances and Materials

5 Will not be applicable to many projects at appraisal stage. However evidence, within the last 3 years of client approach to retrenchment which is not compatible with the Policy should be taken into consideration.6 Particular attention should be given to client demonstration of consideration of alternatives. Projects expected annually to produce more than 25,000 tonnes of Co2 equivalent should provide an emission inventory and plans for annual reporting.

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KPI Ref. Performance Requirement Score Comments/ Issues Actions Required ESAP

Ref.

4 Health and Safety

Summary:

4.1 Occupational Health and Safety

4.2 Community Health and Safety

4.3 Infrastructure, Building, and Equipment Design and Safety

4.4 Hazardous Materials Safety

4.5 Product and Services Safety

4.6 Traffic and Road Safety

4.7 Natural Hazards

4.8 Exposure to Disease

4.9 Emergency Preparedness and Response

5 Land Acquisition, Involuntary Resettlement and Economic Displacement

Summary:

5.1 Avoid or minimise displacement

5.2 Consultation

5.3 Compensation for displaced persons

5.4 Grievance mechanism

5.5 RAP/LRP documentation

5.6 RAP/LRP implementation

5.7 Monitoring

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KPI Ref. Performance Requirement Score Comments/ Issues Actions Required ESAP

Ref.

6 Biodiversity and Living Natural Resources

Summary:

6.1 Assessment of Biodiversity and Living Natural Resources

6.2 Conservation of Biodiversity

6.3 Sustainable Management of Living Natural Resources

7 Indigenous People

Summary:

7.1 Indigenous People Assessment

7.2 Adverse Effects Avoidance and Indigenous Peoples Development Plan

7.3 Information Disclosure, Meaningful Consultation and Informed Participation

7.4 Grievance Mechanism and Prevention of Ethnically Based Discrimination

7.5 Compensation and Benefit-Sharing

7.6 Impacts/Relocation on Traditional or Customary Lands and Cultural Heritage

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KPI Ref. Performance Requirement Score Comments/ Issues Actions Required ESAP

Ref.

8 Cultural Heritage

Summary:

8.1 Assessment and Management of Impacts on Cultural Heritage

8.2 Consultation with affected communities and other stakeholders

8.3 Project use of Cultural Heritage

10 Information Disclosure and Stakeholder Engagement

Summary:

10.1 Stakeholder Engagement Plan

10.2 Operational Grievance Mechanism

Overall ComplianceNational Environmental, Social, Health and Safety Requirements

EU Environmental, Social, Health and Safety Requirements

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ENVIRONMENTAL AND SOCIAL ACTION PLAN TEMPLATE

No. ActionEnvironmental &

Social Risks(Liability/Benefits)

Requirement(Legislative,

EBRD PR, Best Practice)

Resources, Investment Needs,

ResponsibilityTimetable

Target and Evaluation Criteria

for Successful Implementation

Status

PR1 Assessment and Management of Environmental and Social Impacts and Issues

1.1 Develop and implement an EMS

Optimisation of environmental management though a formalised system. Provide resources for training and monitoring of emissions

EBRD PR1Voluntary and best practice

Own resources, external consultantsCostAssign responsibilities

20xx Develop and implement an EMSAttain ISO 14001 or equivalent certificationAnnual EHS Report to the Bank

PR2 Labour and Working Conditions

2.1

PR3 Resource Efficiency and Pollution Prevention and Control

3.1

PR4 Health and Safety

4.1

PR5 Land Acquisition, Involuntary Resettlement and Economic Displacement

5.1

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No. ActionEnvironmental &

Social Risks(Liability/Benefits)

Requirement(Legislative,

EBRD PR, Best Practice)

Resources, Investment Needs,

ResponsibilityTimetable

Target and Evaluation Criteria

for Successful Implementation

Status

PR6 Biodiversity and Living Natural Resources

6.1

PR8 Cultural Heritage

8.1

PR10 Information Disclosure and Stakeholder Engagement

10.1

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