Annex 1. IDENTIFICATION

Annex 1. IDENTIFICATION Title/Number Total cost Support to the Sustainable Energy for All (SE4All) initiative ACP/FED/024-335 EU contribution of EUR 400 000 000 from the following Regional Indicative Programmes: - Central Africa: EUR 33 000 000 - SADC: EUR 32 000 000 - West Africa: EUR 141 500 000 - ESA-IO: EUR 193 500 000 Aid method / Method of implementation Project approach - joint management with the European Investment Bank and the European Investment Fund and centralised direct management DAC-code 23010 Sector Energy policy and administrative management 2. RATIONALE Access to modern energy services is a necessary precondition to achieving development goals that extend far beyond the energy sector such as poverty eradication, access to clean water, productive uses, improve public health and education, women's empowerment and increase food production. During the last General Assembly of the United Nations, 2012 was declared International Year of Sustainable Energy for All and the UN Secretary-General, Ban Ki-moon, has launched a global initiative to achieve Sustainable Energy for All by 2030, by which all stakeholders are urged to take concrete action toward three critical objectives: (1) ensuring universal access to modern energy services; (2) doubling the share of renewable energy in the global energy mix, (3) doubling the global rate of improvement in energy efficiency. The European Union has committed to support the Sustainable Energy for All (SE4All) initiative, with a particular focus on Sub-Saharan Africa. During the EU Sustainable Energy for All Summit with the participation of EU Member States, President Barroso and the UN Secretary General Ban Ki-Moon, a key objective was set for the EU to provide access to sustainable energy services to 500 million people by 2030. This initiative is fully consistent with the EU's new development policy "Agenda for Change", which identifies energy as a key driver for inclusive growth. It is certain that the low rate of access to sustainable energy services in Sub-Saharan Africa, in particular in rural areas, is a major barrier to the achievement of the Millennium Development Goals (MDGs). The SE4All objectives are also in line with recent studies undertaken by PIDA (Programme for Infrastructure Development in Africa). 1

Given the strategic importance of energy access as a powerful lever of growth and competitiveness for Sub-Saharan Africa, the European Commission intends to allocate a total of EUR 400 000 000 to access to energy under the SE4All, as a result of the Mid Term Review of the four African Regional Indicative Programmes. Each Regional Indicative Programme will contribute to the three components proposed in the Action Fiche - the EU-Africa Infrastructure Trust Fund (ITF), the EU-European Development Finance Institutions (EDFI) Private Sector Development Facility and the Global Energy Efficiency and Renewable Energy Fund (GEEREF), as well as to audits, evaluations and visibility actions. The component(s) to be used in each region will be the most appropriate at the regional level. Furthermore, a strong political commitment from the beneficiary countries is a prerequisite for investments to be eligible for EU funds under the Sustainable Energy for All initiative. The regional funds remain allocated to the envelopes of the four African regions for the benefit of their countries. The European Commission is committed to the use of funds according to the amounts which have been reallocated to the SE4All initiative in each of the four Regional Indicative Programmes in the wake of their mid-term review. This breakdown is however conditioned by the identification, by the European Union, of countries committed towards the objectives and the principles of the SE4All initiative and the identification, in these countries, of relevant and feasible projects. If funds have not been approved for investments during the first two years of the implementation period, the allocations per region may be adjusted (after a mid-term evaluation to be carried out for this action as detailed in Section 4.5). The European Commission will play a central role in the context of the SE4All initiative and the implementation of the three above-mentioned components. The European Commission 1 will: - in coordination with EU Member States, lead the policy dialogue, support the partner countries' commitment to the much needed reforms, and monitor their implementation; - ensure that the actions financed have strong developmental objectives, are in line with the EU political framework and are consistent with the Agenda for Change; - monitor the fund allocation per region/country as described above; - prepare energy infrastructure projects resulting from the policy dialogue in coordination with the Finance Institutions, through a dedicated Technical Assistance Facility; - ensure the coherence of the actions financed with EU energy policy; - ensure coordination of planning and implementation of activities with other donors at the partner country level and ensure coordination with other donors in the framework established under SE4All; and, - ensure the visibility of the European Union in all actions financed under the components. 1 More specifically, the Directorate General for Development and Cooperation EuropeAid, in collaboration with other relevant Commission services. 2

2.1. Sector context 1.4 billion people live without access to electricity and the opportunities it provides for working, learning or operating a business. Providing them with access to modern energy services represents an immense effort. The cost for achieving universal access globally by 2030 has been estimated at USD 48 billion per year, of which about 40% would be for Sub Saharan Africa. Meanwhile, power consumption, at 124 kwh per capita per year, is only one tenth of that found elsewhere in developing countries. Almost 70% of the population is without access to electricity and more than 90% of the population rely on solid biomass for cooking. The Africa Infrastructure Country Diagnostic (AICD) estimates spending needs in the energy sector in Africa are at USD 43 billion annually to remedy the infrastructure deficit, compared to current spending levels of about USD 7 billion. In order to reach the targets, it will therefore be necessary to leverage substantial additional non-grant financing, notably loans from development banks and investment from the private sector. Many partner countries in Africa have initiated reforms in the energy sector. These reform processes need to be continued and encouraged, with the aim to increasingly engage the private sector. Continued African leadership in the process of setting priorities, and providing an institutional and legal framework conducive to private sector investments, as well as promoting good governance and transparent procurement will be essential. While Sub- Saharan Africa only contributes marginally to global CO2 emissions, short-term considerations and cost of capital may favour fossil fuel based generation that is not consistent with low carbon development. Thus, achieving the SE4All objectives represents a huge investment challenge. Two EU financial instruments, the EU-Africa Infrastructure Trust Fund and the Global Energy Efficiency and Renewable Energy Fund have already proven their ability to leverage substantial additional non-grant financing and therefore provide opportunities to unlock additional financing for sustainable energy in the short term. 2.2. Lessons learnt i) The EU Africa Infrastructure Trust Fund is built on the lessons learned from years of traditional cooperation based on EDF financing procedures. The ITF provides the means for adequate flexibility in financing infrastructure projects with limited EDF contributions, through leveraging of the grant funds with loans and private sector capital in direct consultation with the African stakeholders. Since its creation, about half of the ITF funds committed (about EUR 300 000 000) have been for energy projects. Grants of EUR 90 000 000 have resulted in actual investments with a volume of EUR 1.4 billion, mainly large hydro power plants and interconnectors. This means that a leverage factor as high as 15 has been achieved. In addition, more than EUR 60 000 000 has been contributed in grants towards projects in an earlier stage, but with a potential volume of about EUR 5 billion. This includes i.a. technical assistance, feasibility studies and support to a risk mitigation facility for geo-thermal projects. A mid-term evaluation, finalised in June 2012 has resulted in recommendations for further enhancing the impact of its operations. The Executive Committee of the ITF established a working group organised by the European Commission in April 2012, to propose the 3

necessary modifications to the ITF Agreement, both as a result of the mid-term evaluation and the changes needed in the context of a possible support to SE4All. An updated Agreement is planned to be submitted for approval at the Executive Committee in September 2012. In order to use the ITF in support of the SE4All initiative, the following modifications regarding the scope and governance will be necessary in the Agreement constituting the implementation rules of the Trust Fund: - The current focus on regional projects or projects with a regional impact to be adapted to allow for national projects in order to respond to the SE4All focus on activities at the national level; - The governance structure should allow the political objectives of the European Union to be met, in particular in the context of the SE4All initiative: more specifically, the European Commission has to be part of the technical body of the ITF the Project Financiers Group (PFG). This change will reinforce the European Commission's role in the Fund at the project preparation and assessment stage, enable Delegations and concerned line Directorates General to propose projects or contribute with their specific expertise and know-how from the start of project preparation, and thereby ensure a greater coherence with EU policy objectives; - An explicit veto right of the European Commission in the Executive Committee. ii) The proposed collaboration with the association of European Development Finance Institutions 2 is new; however, their experience from the European Financing Partners (EFP) and the Interact Climate Change Facility (ICCF) can be used to further promote private sector investments in the renewable energy sector. Both are joint initiatives of the EDFIs and the European Investment Bank (EIB) that co-finance projects in the African, Caribbean and Pacific (ACP) countries aimed at sustainable development through investments in the private sector. 3 An Operations Evaluation of the EFP, carried out by the Evaluation department of the EIB Group in 2009 found that it "has proved to be an effective and efficient instrument in strengthening co-operation among partners". The mutual reliance embedded in both the EFP and the ICCF processes is essential to making these mechanisms efficient and allow finding synergies between the various participants. The evaluation highlighted that, while sharing the common objectives of EFP, the EDFI members participate with their own institutional agendas: larger partners tend to focus on financial leverage and risk sharing, while smaller partners focus on the exchange of experience and best practices. These diverse strategic objectives are not only coherent with the objectives of the EFP, but greatly contribute to achieve them. In the new collaboration, it is important to ensure the continued active participation of both large and small partners. 2 In which 15 European bilateral development financing institutions have combined their forces and are mandated by their respective governments to foster growth in sustainable businesses, help reduce poverty and improve people's lives, and contribute to achieving the MDGs, by promoting economically, environmentally and socially sustainable development through financing and investing in profitable private sector enterprises. 3 The funding capacity of ICCF is provided by Agence Française de Développement, the European Investment Bank (EIB) and by 11 EDFI members. 4

The EDFIs have a portfolio of EUR 2 billion in the power sector (mostly electricity). The ICCF and the EFP have enabled the promoting EDFI to raise supplemental funds, thereby facilitating investments in larger projects. This is important because many energy infrastructure projects require economies of scale to be bankable. Financing from the EFP and ICCF enables broader participation by a range of Development Finance Institutions without requiring significant dedication of additional administrative resources. The pre-commitment of funds and use of due diligence from the promoting partner helps streamline processes, prevent duplication of effort, and thus increase investment efficiency. Although the Master Investment Agreement of the EFP calls for an equitable spread among instruments, most of the operations approved are loans (95%), while 5% of the portfolio is made up of equity. No guarantee operations have been used thus far, but the EU contribution may be used for this purpose. The planned new Private Sector Development Facility between the European Commission, the EDFIs and the EIB will build on lessons learnt from these joint initiatives by enabling EDFIs to take more risks and thus engage with private project developers and other private financiers in projects related to SE4All that provide additionality to their current portfolio. iii) Global Energy Efficiency and Renewable Energy Fund is a public-private partnership initiated by the European Commission, offering risk sharing and co-funding opportunities for commercial and public investors. GEEREF is dedicated to small and medium-sized projects in the renewable energy and energy efficiency sector. As investing in such projects is often too costly if done directly by development banks and other emerging market international investors, GEEREF was established in 2008 as a Fund-of-Funds, providing equity to regional funds that in turn invest into projects. The initial European Commission investment in GEEREF was a financial participation of EUR 75 000 000. GEEREF is advised by the EIB Group, while investment decisions are taken by the GEEREF Investment Committee, where one permanent and one expert member are nominated per public investor (European Commission, Germany and Norway) 4. The Investment Committee sets the investment policy and approves all investments on the basis of unanimity. In its first investments 5, GEEREF has played a catalytic role - crowding-in private capital mainly from pension funds and family offices. The total leverage effect (over the lifetime of GEEREF) has been conservatively estimated at 1 to 35 and thus, the current size of GEEREF at EUR 108 000 000 could help mobilise EUR 3.8 billion for investment projects on the ground. The first years of operation have confirmed the need for equity finance for this kind of investments, also in Sub-Saharan Africa. 4 In addition to the European Commission, Germany (EUR 24 000 000) and Norway (approximately EUR 10 000 000 have invested in GEEREF. 5 Six investments in Africa, Asia, Eastern Europe and Latin America have been approved by the Investment Committee for a total value of approximately EUR 66 000 000 that has already triggered total investments (at the level of the regional funds, excluding further leverage in individual projects) of EUR 340 000 000, entailing a leverage factor of over 5. This leverage will continue to increase over the 15-year life of GEEREF. 5

2.3. Complementary actions Support to three components proposed under this project will be complementary to actions undertaken by EU Member States and other international donors, as well as the other EU actions under SE4All such as a dedicated Technical Assistance Facility of EUR 65 000 000. The main on-going EU financing instruments and programmes for energy in Sub-Saharan Africa, in addition to those targeted by this intervention, are: - The EU-Africa Infrastructure Trust Fund has supported since its creation energy projects of regional impact (i.e. projects having a development impact on more than two Sub-Saharan African countries). - The ACP-EU Energy Facility has been the main instrument of the European Commission to support energy access projects in this geographical area. Created to implement the EU Energy Initiative (EUEI) launched in Johannesburg in 2002, the Energy Facility was endowed with a total of EUR 420 000 000 under the Intra-ACP envelopes of the 9th and the 10th European Development Fund (EDF). The Energy Facility has already co-financed 140 projects aiming at increasing access to modern energy services in rural and peri-urban areas, benefitting 15 million people, including via the development of blending projects for access. A new Call for proposals is foreseen by the end of 2012 for small and medium size access projects in rural and peri-urban areas of ACP countries. - The Thematic Programme for Environment and Natural Resources including energy (ENRTP) has financed worldwide small energy projects with an environmental objective, mainly renewable energy and energy efficiency projects. It includes a pilot phase 6 for the Africa-EU Renewable Energy Cooperation Programme (RECP). - Recently, some projects have been supported in Sub-Saharan Africa in the framework of the National Indicative Programmes (NIPs) and Regional Indicative Programmes (RIPs) etc. 2.4. Donor coordination The European Commissioner for Development is the co-leader of a task force on Country Action for Universal Energy Access that has been established under the UN initiative "Sustainable Energy for All". Within the European Commission, a coordination platform of the SE4All has been created in order to be the interface with partner countries, to prepare the EU financial package, to design the implementing modalities, to coordinate relevant European Commission services, EU Delegations and Member States, to formulate a communication strategy and also to assure the coordination with international donors. Coordination between EU Member States on energy and development issues, including for SE4All, takes place within the EU Energy Initiative (EUEI), which holds regular meetings to discuss policy, initiatives and stock-taking. At a more technical level, donor coordination will take place in the technical body of the ITF the Project Financiers Group as well as in the Investment Committees of GEEREF and EU-EDFI 6 The pilot phase amounted to EUR 5 000 000 6

Private Sector Development Facility where the discussions on what projects to finance will take place. At country-level, local coordination structures are also in place in the context of SE4All. The EU's Strategy for Africa 7 provides a comprehensive, integrated and long-term framework for the relations with the African continent. It emphasizes that Limited access to transport and communication services, water and sanitation, and energy constrains economic growth. The European Commission has therefore established an EU-Africa Partnership for Infrastructure to support and initiate programmes (Trans-African Networks) that facilitate interconnectivity at continental level for the promotion of regional integration.... The partnership works at three levels, continental, regional and country level. At continental level, dialogue takes place in the context of the Steering Committee of the EU-Africa Infrastructure Partnership, established in Addis Ababa on 25 October 2007. Coordination at regional and national levels is led by the European Commission and the African Union Commission (AUC) based on well-established and existing sectoral mechanisms. At the 4th Steering Committee of the EU-Africa Infrastructure Partnership meeting that took place on 29 March 2012, a Reference Group was set-up to ensure the coordination between the components of transport, energy, transboundary water and information and communication technology (ICT) within the Joint Africa-EU Strategy. The ITF has served also as a European platform for infrastructure projects in Sub-Saharan Africa both at a technical level (PFG) and political level (Executive Commmittee, chaired by the European Commmission). From now on, this will also be the case for energy projects at national level, complementary to the coordination to be done on the field. A better involvement of EU Delegations as well as the future Energy Hubs in the preparation of projects in the ITF as upstream as possible is important and will be achieved inter alia via European Commission participation in the PFG. The association of the EDFIs is a group of 15 bilateral European development finance institutions mandated by their governments to foster growth in sustainable private sector business. Thus, the association already entails significant coordination among donors. Six of the EDFIs have already co-invested in partnership with GEEREF in regional funds 8. 3. DESCRIPTION 3.1. Objectives The overall objective of this proposal is to contribute to poverty reduction and economic development in Sub-Saharan Africa through the mobilisation of resources for infrastructure projects in the sector of energy. The project purpose is to increase access to modern energy services, and investments in renewable energy and energy efficiency, by promoting private sector investments and 7 COM (2005) 489 8 BIO (Belgium), CDC (UK), DEG (Germany), FinnFund (Finland), FMO (the Netherlands) and IFU (Denmark). Negotiations are on-going with Proparco (France). 7

providing additional dedicated financial resources to African countries committed to meet the objectives of the Sustainable Energy for All (SE4All) initiative through: A. a new SE4All dedicated contribution to the EU-Africa Infrastructure Trust Fund (ITF), B. a new risk sharing mechanism with the European Development Finance Institutions (EDFIs), and C. a new contribution to Global Energy Efficiency and Renewable Energy Fund (GEEREF). 3.2. Expected results and main activities A. Infrastructure Trust Fund (ITF): This new SE4All dedicated contribution to the EU-Africa Infrastructure Trust Fund will allow for investments in energy projects that are crucial for reducing poverty and promoting economic development in African countries that are eligible. It will enable the provision of leveraged financing for energy access, energy efficiency and renewable energy projects of a national character. This proposal is also meant to provide an incentive to the eligible Financiers to increase their involvement in the areas of access to and distribution of energy services. Mandatory pre-conditions such as the broadening of the scope of ITF to national operations supporting SE4All and reinforcing of the European Commission's role, will allow taking into account EU priorities and giving special attention to access projects in eligible developing countries that are committed to improve their policy and regulatory framework aiming at providing attractive and enabling conditions for increased public and private investment in energy access, energy supplies, renewable energy as well as energy efficiency. The general benefits include increased collaboration between African States and European donors and development banks in the areas of improved access to modern energy services notably by poor populations, sustainable energy infrastructure development and the promotion of greener development paths. The Trust Fund contributes to the goals of the EU-Africa Partnership on Infrastructure and of the Africa-EU Energy Partnership by providing financial support by way of grants to eligible infrastructure projects alongside long-term finance made available by eligible Financiers. The provision of such grant funds will leverage additional non-grant financing from participating finance institutions. These will be funded in the case of the European Investment Bank (EIB) as a general rule from own resource lending and in exceptional cases from Investment Facility resources if they are in line with Article 3 of Annex II of the Cotonou Agreement. In order to provide for effective ownership and a streamlined operations oversight of the Trust Fund, activities and its linkages to the broader strategy for Africa are assured by the EU Africa Infrastructure Partnership Steering Committee (PSC), which issues opinions and provides orientations. The Executive Committee is the operational structure of the ITF by approving operations. Rules of Procedures and detailed criteria for the selection of projects apply according to the Implementing Rules of the ITF and a new veto right will allow the European Commission to ensure that only investments that meet the political objectives of SE4All are approved. 8

The PFG is an informal grouping of financial institutions which may present projects to the ITF's Executive Committee for approval. The European Commission may also initiate projects for possible involvement by the other PFG members. Funding priorities and scope of operations: Priority will be given to investment projects targeting an increased access to modern, affordable and sustainable energy services in eligible countries in Sub-Saharan Africa. Access projects relying on renewable energy solutions, when feasible, and energy efficiency measures are particularly welcomed and project proposals should show that renewable energy resources have been properly assessed and optimised. Nevertheless, the use of fossil fuels, when justified by sustainability reasons (e.g. hybrid systems), shall not be excluded. All technical options may be considered, e.g. renewable or hybrid solutions, mini grid, off grid, grid extension. The SE4All allocation may also support investment in generation from renewable energy sources and in energy efficiency measures provided that they bring real and measurable additional benefits to local populations. Packaging of small projects may also be considered as it can create economies of scale in management and financing. This could be done notably through projects promoted by Rural Energy Agencies and Funds. Financial intermediaries would also have an important role to play in this respect. Taking into account the political priorities of the EU, the EU commitments toward access and the technical situation according to the International Energy Agency and the Africa Infrastructure Country Diagnostic (AICD), priority will be given to projects contributing to increasing access to energy services. Therefore, most of the funds will be used for contributing to energy access projects, (subject to review in the mid-term evaluation detailed in section 4.5). A project is considered as an access project when it increases noticeably the number of people (and social and productive users) having access to energy services. Private sector is an important actor for energy investments and public-private partnerships are needed to meet the SE4All objectives. Therefore, actions, where the private sector owns and operates energy facilities (as sole operators or jointly with local authorities and communities) and actions involving public-private partnerships or other forms of private sector participation from the international to the local levels may be part of the SE4All allocation, as long as the action is justified by public project benefits in terms of impact on development, poverty reduction and production of public goods. In support of long-term loan finance, the SE4All allocation will be made available by the manager of the ITF (EIB) to energy projects in the following forms 9 : - Interest rate subsidies; - Technical assistance; - Investment Grants; and, 9 Detailed definitions available in the revised Agreement constituting the implementation rules of the Trust Fund, exact formulation to be confirmed after signature of the revised Agreement. 9

- Financial instruments such as guarantees, including loan guarantee cost financing and insurance premia, equity or quasi-equity investments or participations, and risksharing instruments. Projects may be implemented by European or local public or private entities or entities with mixed public-private capital and may be presented by Finance institutions identified by donors who make a contribution to the Trust Fund. B. EEDF (EU-European Development Finance Institutions) Private Sector Development Facility) A risk-sharing mechanism focusing on projects with a risk profile that exceeds what is normally acceptable to the EDFIs is at the core of this component. This risk-sharing mechanism will also be used to cover the more risky feasibility or early development stage of energy projects (compared to the construction phase). It is expected that such financing would be highly additional to other available funding sources and as such have a high catalytic effect. In order to give an incentive to the EDFIs to engage in projects with a higher risk profile, and thereby achieve a higher development impact, the financing provided by the EU may be subordinated to that of the EDFIs. The EU can co-finance projects in parallel with the EDFIs and the EIB by matching their funding, i.e. maximum 50% of the combined financing would come from the EU, or it could finance on its own the feasibility study or the early development stage of energy projects that have strong potential to materialise and high development impact. The European Commission will ensure that there are no overlaps with actions financed under the other components of the Action Fiche nor with actions financed under the Technical Assistance Facility set up in the context of SE4All. Foreseen financial products are long-term senior debt, subordinated debt, equity and guarantees (to be channelled via the EIB that would, after signing of a Contribution Agreement with the European Commission, manage the European Union funds in a co-financing vehicle) for projects that are directly related to one or more of the SE4All objectives. The provision of technical assistance is an important complement to the risk-sharing mechanism by helping to prepare these riskier projects and to ensure their bankability. It will complement the SE4All Technical Assistance Facility (that focuses on support to governments), by assisting with identification and elaboration of specific private sector projects through the provision of studies and other project preparation activities. Technical assistance would be provided up to a maximum of EUR 1 000 000 per project, with the EU contribution normally covering up to 75% of the technical assistance, while the remainder would be covered by the beneficiary or an EDFI member. Upon approval of the European Commission, the use of technical assistance would not be limited to projects already or intended to be presented to the risk-sharing mechanism, but may also be used for projects to be financed by an EDFI member on its own if they support the SE4All objectives. The technical assistance would indirectly leverage financing from the EDFIs, from other finance institutions and from private project promoters. The volume of technical assistance provided should remain limited to a maximum of 20% of the total financial allocation for this component. Projects under the risk-sharing mechanism could be proposed by an EDFI member that identifies a project or by the European Commission as an outcome of the policy dialogue under the SE4All initiative. The leading EDFI member would structure the financing and 10

present a financing proposal to an Investment Committee, where the European Commission will be a member holding an opt-out right. Through such opt-out possibility, the European Union will retain control over the use of its funding for each individual energy project or technical assistance contribution. Such opt-out possibility is also available to the EIB with respect to funding that it provides to this mechanism. C. Global Energy Efficiency and Renewable Energy Fund (GEEREF): The GEEREF pools public and private funds through an innovative public private partnership, offering new risk sharing and co-funding options for various investors to achieve high leverage of private capital in the areas of energy efficiency and renewable energy. The GEEREF actively engages in the creation and funding of regional sub-funds or scales up similar existing initiatives. The SE4All allocation to GEEREF will specifically promote new scalable business models for sustainable energy investments in rural and off-grid areas. In addition, the SE4All allocation will focus on even riskier projects providing access to clean energy services to poor populations in Sub-Saharan Africa. A number of off-grid and minigrid projects in Sub-Saharan Africa have been identified and will be scrutinized by the European Commission, who will retain control on the investment decisions, that are taken on the basis of unanimity by the GEEREF Investment Committee that executes, interprets and reviews GEEREF s Investment Guidelines and takes all investment and divestment decisions for the fund. The European Commission is represented on the Investment Committee by one permanent and one expert member that together hold one vote. It is also expected that this allocation will lead to increased engagement of the private sector in investment in the energy efficiency and renewable energy business. The provision of patient capital provided on a long term and subordinated return basis will bring down the cost of capital for renewable energy and energy efficiency projects/small and medium-sized enterprises (SMEs). This will improve investment conditions for private equity co-investors or senior lenders, thereby making the project/smes eligible for funding from these sources. The latter will thus have access to resources previously outside their reach. 3.3. Risks and assumptions Funds will be used in the corresponding regions, without any allocation per country. In this context: - Approvals and disbursements will be closely monitored as part of the decision making process in order to avoid overspending of funds in some regions (see section 2); - The EU Delegations of the concerned regions as well as the future Energy hubs will be closely involved; and - Close communication and coordination between donors in the regions and in the framework of the ITF will be ensured. Energy access is the key SE4All objective to support the EU goal to "provide 500 million more people with access to modern energy services". Through an active participation in the different governance structures of the three components (i.e. as voting members of the already established ITF Executive Committee and the GEEREF Investment Committee as well as of 11

the future EEDF Investment Committee) and a close monitoring of disbursements by objective, the European Commission will ensure that energy access projects in countries prone to reforms are given priority. Clear project selection criteria will be provided by the European Commission for the three components. In addition, discussions will be organized upstream with the members of the Projects Financiers Group (PFG) to inform them about the SE4All allocation and eligiblility criteria for investments. As previously explained, the European Commission will closely monitor project pipeline and approvals to ensure a balanced portfolio of projects, respecting also to the EU political objectives related to SE4All such as the increase of access and energy efficiency. For the SE4All allocation to GEEREF, focusing on riskier access projects, based on untested business models or access projects with profitability as a secondary requirement, there is a risk of mobilizing only minor amounts of private capital. Given the implicit risk of investing in untested markets in Sub-Saharan Africa, it is possible that 100% capital recovery will not be achieved from the provision of equity, guarantees and loans; however, both GEEREF and the EEDF were developed explicitly for this purpose i.e. to reduce or share risk of other investors. This is not a concern for technical assistance or grants. To mobilise private risk capital in high risk and medium risk sub-funds, the public investment in GEEREF (current investors are the European Commission, Germany and Norway) serves to accept lower returns depending on the actual risks to be covered, and thereby lift returns for the private sector towards commercial thresholds. The public investment will also serve to accept longer investment or repayment periods and to take on higher transaction costs to allow targeting of small and medium scale businesses. The co-financing mechanism foreseen in the EEDF may provide subordinate debt. 3.4. Crosscutting Issues The energy access objective of the Sustainable Energy for All will have a profound gender impact. Access to energy services will enable poor people to start business activities, particularly women, who currently are unable to work after dark will have increased opportunity for productive activities. In addition, providing light with which to study and read at night will improve children's ability to learn. Improvement in wood fuel management and increased access to modern cooking services will have positive environmental as well as health effects. The three components are expected to advance the transfer, development and deployment of clean technologies. This focus on sustainable energy solutions and energy efficiency will contribute to efforts to combat climate change, to improved energy security and economic development of the respective countries and regions. The components will also contribute to the improvement of the business climate and the creation of "green" jobs by providing seed capital, technical assistance and grants for the early stages of project development to entrepreneurs and SMEs, as well as debt, equity and guarantees to more established projects. Assisting SMEs in the energy sector poverty will help generate income and can lead to less dependence on expensive imported fuels. Projects financed under the three components should demonstrate positive impact in the attainment of the poverty reduction objectives as defined in the relevant regional or national 12

Poverty Reduction Strategy Papers. Additionally, investments should have a positive impact on the environment and contribute to sustainable development. 3.5. Stakeholders Important stakeholders will be the ministries, regulatory agencies, power utilities, rural electrification agencies of the partner countries as well as the private sector, in particular project developers, technology developer, fund managers, SMEs and finally civil society. On the strategic dialogue, key stakeholders include the African Union Commission, the Regional Economic Communities (RECs), as well as the European Commission and EU Member States active as donors and investors in the energy sector. Successful implementation of the Sustainable Energy for All initiative will require strong ownership from participating countries. Political commitment of the respective countries will be a pre-requisite for entering the programme. 4. IMPLEMENTATION ISSUES 4.1. Method of implementation A. Infrastructure Trust Fund (ITF): The method of implementation will be joint management with the European Investment Bank (EIB), in accordance with Article 29 of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th European Development Fund (EDF). The additional Sustainable Energy for All (SE4All) contribution will be channelled in the same way as for the on-going support to the ITF: the European Commission will sign a new contribution certificate to the Trust Fund, in line with the "Agreement constituting the implementation rules of the EU-Africa Infrastructure Trust Fund" signed on 23 April 2007 and as amended thereafter or, alternatively, through a Contribution Agreement. Considering the origin of the funds and the need for the European Commission to be accountable for the use of these funds, the European Commission, as the Chair of the Executive Committee, will ask the manager of the Trust Fund to create a separate sub-account for this dedicated SE4All allocation to the ITF as foreseen in the Agreement constituting the implementation rules of the Trust Fund. B. EEDF (EU-European Development Finance Institutions Private Sector Development Facility) The method of implementation will be joint management through the signature of a Standard Contribution Agreement with the EIB, in accordance with Article 29 of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th European Development Fund. The EIB will implement the action in cooperation with the 15 bilateral institutions mandated by their respective European government to operate in developing and reforming economies and which are members of the EDFI non-profit association, registered in Belgium. The Secretariat of the EDFI association will support the EIB in the management of the action. 13

The EIB is currently subject to an external review in relation to Article 29 of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th European Development Fund. In anticipation of the results of this review, the authorising officer deems that, based on the long-standing and problem free cooperation with this Organisation, the joint management mode can be proposed and a Standard Contribution Agreement for International Organisation can be signed. C. Global Energy Efficiency and Renewable Energy Fund (GEEREF): The method of implementation will be joint management. This will be done via an addendum to the existing contract (e.g. Mandate) related to GEEREF signed with the European Investment Fund (EIF), or alternatively through the signature of a new Standard Contribution Agreement with the EIF or the EIB (should the latter take on the Advisory role of the SE4All allocation to GEEREF), in accordance with Article 29 of the of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th European Development Fund. Both the EIF and the EIB are assimilated to international organisations for the purposes of Article 53d of the Financial Regulation 10. The tasks related to GEEREF are currently split within the EIB Group: - In a Mandate with reference ENV/2007/147331 (CRIS 147331, 168899 and 282314) with title "Management of a participation of the European Union in the Global Energy Efficiency and Renewable Energy Fund ("GEEREF")", the EIF received a delegation of powers from the European Commission, to subscribe to shares in the GEEREF, hold those shares in a separate trust account on behalf of the European Commission, take part in the decision-making organs of the GEEREF and monitor the progress of the GEEREF and report to the European Commission. - In the quality of sub-advisor to GEEREF (as defined in a sub-advisory agreement between the EIF and the EIB), the EIB is actively involved in the GEEREF since 2008, performing key functions by hosting the GEEREF Front Office team that develops the investment pipeline, carries out due diligence on prospective investments and manages the investment portfolio.. The EIF has successfully passed the assessment allowing delegating it certain implementation tasks of the European Commission in the joint management mode, according to the requirements of Article 29 of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th European Development Fund. Concerning the EIB and as mentioned in paragraph 4.1. B., the authorising officer deems that, based on the long-standing and problem-free cooperation with the EIB, the joint management mode can be applied and a Standard Contribution Agreement for International Organisation can be signed. D. Visibility and communication and E. Audit and evaluation: The method of implementation will be direct centralised management. The visibility, communication, audit and evaluation activities will be of a general nature covering the three components. 10 Article 43 of rules for the implementation of the Financial Regulation (OJ L 357, 31.12.2002, p. 1) 14

The change of management mode constitutes a substantial change except where the European Commission "re-centralises" or reduces the level of tasks previously delegated to the beneficiary country, international organisation or delegatee body under, respectively, decentralised, joint or indirect centralised management. 4.2. Procurement award procedures A. ITF: All contracts implementing the projects financed by the Trust Fund must be awarded and implemented in accordance with the provisions stipulated in Schedule 5 annexed to the Agreement constituting the implementation rules of the EU-Africa Infrastructure Trust Fund 11. These provisions include that the Lead or the Project Financier for each Project shall ensure that all assets and services financed either by such institution s loans or by funds made available from the Trust Fund shall be procured in a manner compliant with such institution s procurement rules and procedures, which in turn conform to internationally accepted standards open at least to all enterprises established in either an EU Member State or a member of the African, Caribbean and Pacific (ACP) Group of States and including the award of contract to the tender offering the best value for money, in compliance with the principles of transparency and equal treatment for potential contractors. All parties to the Agreement constituting the implementation rules of the Trust Fund have agreed that contracts financed by the Trust Fund shall respect internationally agreed core labour standards as specified in Article 5.2 of Schedule 5 to the Agreement, in particular the conventions related to freedom of association and bargaining, elimination of forced and compulsory labour, elimination of discrimination in respect of employment and occupation and the abolition of child labour. Bidders for contracts that are directly financed by the Trust Fund will be required to confirm in writing their adherence to these core standards. The Lead and the Project Financier shall take measures to encourage, where feasible, the widest participation of natural and legal persons of ACP States in the performance of the contracts financed by the Trust Fund. Each proposal to the Trust Fund shall contain confirmation that both the Lead Financier and the Project will apply procurement procedures which shall comply with the conditions set out in the preceding paragraphs. B. EEDF (EU-EDFI Private Sector Development Facility): All contracts implementing the action shall be awarded and implemented in accordance with the procedures and standard documents laid down and published by the EIB. In anticipation of the results of the external review, the authorising officer deems that, based on the long-standing and problem-free cooperation with the EIB and on the basis of a "presumption of conformity" that EIB's procurement rules are in accordance with the provisions laid down in Article 29 of Regulation (EC) No 215/2008 on the Financial Regulation applicable to the 10th EDF, the procurement rules of the EIB can be applied. 11 C/2007/1790 and C/2006/3127 15

C. GEEREF: All contracts implementing the action shall be awarded and implemented in accordance with the procedures and standard documents laid down and published by the EIF and/or the EIB. D. Visibility and communication and E. Audit and evaluation: All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the European Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by the Financial Regulation applicable to the 10th EDF. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in Article 20 of Annex IV of the Cotonou Agreement. 4.3. Budget and calendar Indicative budget breakdown: Component A. Additional contribution to the EU-Africa Infrastructure Trust Fund dedicated to the SE4All eligible projects B. EEDF (EU-EDFI Private Sector Amount of EU contribution (EUR) 329 000 000 50 000 000 Development Facility) C. Extension of the GEEREF 20 000 000 D. Visibility and communication 500 000 E. Audit and evaluation 500 000 Total EU contribution 400 000 000 The three components A, B and C will be financed from the following Regional Indicative Programmes that will contribute to these three components as well as to audits, evaluations and visibility actions: - Central Africa: EUR 33 000 000 - Southern African Development Community (SADC): EUR 32 000 000 - West Africa: EUR 141 500 000 - Eastern and Southern Africa-Indian Ociean (ESA-IO): EUR 193 500 000 As far as possible, the European Commission will strive towards a use of funds in line with the four Regional Indicative Programmes as detailed in Section 2. The agreements implementing the action shall be signed at the latest 31 December of the year following that in which the global financial commitment will be adopted. Failing this, the corresponding appropriations shall be cancelled. 16

The current commitment period of ITF expires by end 2015; however, in the on-going discussions on the Agreement constituting the implementation rules of the Trust Fund it is foreseen to extend the period for new commitments until end 2023, while the project implementation period is tentatively planned until end 2035. Revised Implementing Rules are foreseen by October 2012 12. The EU funding to the EEDF of (indicative) EUR 50 000 000 for support to the SE4All will tentatively cover an investment period of 60 months. The maximum tenor of funding provided would be 20 years. GEEREF was set up for a limited period of 15 years after the Initial Closing Date (6 November 2008), which may be extended twice by one year at the discretion of the Board with the consent of GEEREF A Shareholders (i.e. the public investors) representing at least 75% of the GEEREF total commitments. For all three components A, B and C, implementation will commence at signature of the implementing agreements or addendum to such on-going agreements. 4.4. Performance monitoring Technical and financial monitoring of the three components of the action will be a continuous process as part of the European Commission's responsibilities, particularly through its strengthened participation in the ITF (e.g. veto right of the European Commission on the Executive Committee and involvement from the beginning as member of the PFG), and as permanent and expert members of the GEEREF and EDFIs Investment Committees. Monitoring will also be ensured through the continued close collaboration between the European Commission, the ITF Manager and the ITF Secretariat, the GEEREF Advisor, the GEEREF Mandatee and the EDFIs Secretariat. Several of these functions are carried out by the EIB Group, which will enhance coordination. The revised Agreement constituting the implementation rules of the Trust Fund will allow for a reinforced reporting system to enable the follow-up of projects financed under the SE4All initiative. EIB will present annual reports for each initiative which include: - Annual financial statements; - A narrative and financial description of all Operations financed during the relevant financial year; - Details of all Contributions or other co-financing received during the year from Donors and the private sector. In addition to the annual reports, EIB will present an overview of the geographical distribution of the funds per country and per region and per each of the three SE4All objectives at the occasion of the GEEREF and EEDF Investment Committees meetings and ITF Executive Committee meetings for the respective components. 12 Commitment and implementation periods to be updated at that point. 17