Minister of Energy of Order

No.77 10/November/2017

On the Expression of Interest on Conducting Construction-Related Technical-Economic Feasibility Study, Construction, Ownership and Operation of “Jonouli 2” Hydro Power Plant in - and Kvemo Region On the basis of the General Administrative Code of Georgia, Paragraph 3 of Article 1 of the Decree of the Government of Georgia No.214 dated August 21, 2013 “On the Approval of the Rule of Expression of Interest on Construction-Related Technical and Economic Feasibility Study, Construction, Ownership and Operation of Power Plants in Georgia”, Subparagraph “o” of Paragraph 2 of Article 4 of the Decree of the Government of Georgia No.97 dated April 26, 2013 “On the Approval of the Charter of the Ministry of Energy of Georgia” and Letter of the Chief Specialist of Investment Department of the Ministry of Energy of Georgia, Natia Beridze, No.724-77 the following is ordered:

1. The Expression of Interest in Racha-Lechkhumi and Kvemo Svaneti Region on conducting of construction-related technical-economic feasibility study, construction, ownership and operation of “Jonouli 2” hydro power plant shall be announced. 2. Terms of the Expression of Interest on conducting construction-related technical-economic feasibility study, construction, ownership and operation of “Jonouli 2” hydro power plant in Racha-Lechkhumi and Kvemo Svaneti Region in accordance with the annex of this Order shall be approved. 3. The present Order and attached Terms of the Expression of Interest on conducting construction-related technical-economic feasibility study, construction, ownership and operation of “Jonouli 2” hydro power plant in Racha-Lechkhumi and Kvemo Svaneti Region shall be published on the official website of the Ministry: www.energy.gov.ge. 4. Legal, Investment and Energy Departments of the Ministry shall be assigned to prepare draft memorandum of understanding in accordance with the Expression of Interest announced by this Order and publish it along with the documentation stipulated by paragraph 3 of this Order. 5. This Order shall come into force as of the date of its signature.

Approved by Minister of Energy of Georgia By Order N 77, dated 10 November 2017 Annex

Terms and Conditions of the Expression of Interest on Conducting Construction-Related Technical-Economic Feasibility Study, Construction, Ownership and Operation of “Jonouli 2” Hydro Power Plant in Racha-Lechkhumi and Kvemo Svaneti Region

1. Project Description and Terms 1.1. Name: “Jonouli 2” Hydro Power Plant: 1.2. Location: Georgia, Racha-Lechkhumi and Kvemo Svaneti 1.3. Approximate Elevation: River Jonouli (950-430 m.a.s.l) 1.4. Approximate Installed Capacity: 32.00 MW 1.5. Approximate Annual Generation: 129.20 million KW\h 1.6. Approximate Investment Amount: 50,000,000.00 (fifty million) USD (Subject to financial proposal and negotiation) 1.7. Preconstruction Phase: Completion of construction-related technical-economic feasibility study of the project and preparation of environmental and social impact assessment report, as well as conduction of public hearings: not exceeding 15 months from the day of signing the memorandum of understanding. 1.8. Construction Phase: Commencement of construction of the hydro power plant based on a construction permit: not exceeding 15 months from the entry into force of the memorandum of understanding signed with the Government of Georgia for construction of the respective hydro power plant. 1.9. Construction Phase: Completion of construction and commencement of operation of the hydro power plant: not exceeding 36 months from commencement of construction based on a construction permit. 1.10. Maximum price of electricity to be sold to JSC “Electricity System Commercial Operator”: 6.0 (six point zero) US cents per 1 KW\h. 1.11. Validity period of the preconstruction security: 29 months. Amount of the preconstruction security: 160,000.00 (one hundred and sixty thousand) US Dollars. The preconstruction security shall secure the application of an interested party submitted in terms of the Expression of Interest, fulfillment of obligations within the preconstruction phase and submission of the construction security for the construction phase. The preconstruction security shall be issued by any bank licensed in Georgia or in any OECD member country. The preconstruction security amount shall not exceed 15 percent of the security issuing bank's capital. 2. Mandatory Requirements for Participation in the Expression of Interest 2.1 Legal entity interested in participating in the Expression of Interest, shall within the term defined by the present Expression of Interest, submit to the Ministry of Energy of Georgia a proposal (application) regarding the implementation of the project determined by the Expression of Interest according to the terms and conditions thereof. The Following documents/information shall be attached to the proposal: 2.1.1. Extract from the Registry of Entrepreneurs and Non-entrepreneurs (Non- commercial) Legal Entities. If an interested legal entity is registered in a foreign country, the abovementioned documentation shall be duly certified; 2.1.2. Copies of identification documents of authorized representative(s); 2.1.3. Preconstruction security stipulated by this Expression of Interest; 2.1.4. Price of electricity to be sold the JSC “Electricity System Commercial Operator” (in USD) not exceeding the price defined by this Expression of Interest; 2.1.5. Financial model of the project prepared in accordance with the terms and conditions of this Expression of Interest and based on a price of electricity to be sold to JSC “Electricity System Commercial Operator” as proposed by the interested party, which defines financial parameters corresponding to the above-mentioned price, including project planned investment cost to be borne for the implementation of the project. The financial model must be submitted both in print and electronic form (Compact Disk). 2.2 The interested party is entitled to submit the above-mentioned information/documentation through a sealed envelope.

3. Qualification Requirements 3.1. Qualification Requirements for participants of the Expression of Interest are as follows: 3.1.1. Price of electricity to be sold to JSC “Electricity System Commercial Operator” proposed by an interested party shall not exceed the maximum limit set in terms and conditions of this Expression of Interest; 3.1.2. The proposal (application) submitted to Ministry of Energy of Georgia by the participant legal entity of the Expression of Interest shall be in compliance with the “Mandatory Requirements for Participating in the Expression of Interest” defined by this Expression of Interest; 3.1.3. Parameters indicated in the financial model presented by the participant legal entity of the Expression of Interest shall be compliant and shall be based on the relevant best practice.

4. Selection of the Winner of the Expression of Interest 4.1. After the expiry of the term of this Expression of Interest, proposals submitted by participant(s) of the Expression of Interest, which meet all terms and conditions defined by this Expression of Interest, will be submitted to the Government of Georgia for the selection of the winner. 4.2. Applications that do not meet the qualification requirements and/or that were not submitted within the term defined by the Expression of Interest will not be reviewed. The Ministry will send relevant notifications to such participants on the foregoing. 4.3. The Government of Georgia determines the winner of the Expression of Interest based on the following conditions: 4.3.1. If two or more proposals in terms of the Expression of Interest are submitted to the Government of Georgia, the party proposing the lowest price of electricity to be sold to JSC “Electricity System Commercial Operator” and corresponding financial model will be announced as the winner of the Expression of Interest. 4.3.2. If two or more proposals are equally best rated, the Government of Georgia will determine additional time to those participants to present improved proposals in the part of the selection criteria. 4.3.3. If only one proposal is submitted to the Government of Georgia, the latter is entitled to announce such applicant as the winner of the Expression of Interest on the condition that this proposal meets all qualification requirements set out in this Expression of Interest. 4.4. A memorandum of understanding is signed between the Government of Georgia and the winner of the Expression of Interest for the implementation of the project. The Ministry of Energy will within 30 working days from the announcement of the winner, return the preconstruction securities to remainder of participants of the Expression of Interest.

5. Signing the Memorandum with the Winner of the Expression of Interest 5.1. The winner of the Expression of Interest shall, within 120 days from the announcement as the winner, sign the memorandum of understanding with the Government of Georgia and JSC “Electricity System Commercial Operator” regarding implementation of the project. The Ministry of Energy will elaborate standard draft of the memorandum of understanding and publish it on its official website. 5.2. Without prejudice to the terms and conditions of this Expression of Interest and by decision of the Government of Georgia, amendments may be made to the draft memorandum of understanding. 5.3. If the memorandum of understanding is not signed due to the reason attributable to the winner, the Government of Georgia is entitled to fully withdraw the preconstruction security submitted by the winner. In such event, the Government of Georgia is entitled to select a new winner and sign a memorandum of understanding with the participant who has presented the next best proposal among remainder of participants.

6. Obligations of the inner of the Expression of Interest 6.1. In addition to the terms and conditions set out in the memorandum of understanding, during the pre-construction phase the winner of the Expression of Interest shall: 6.1.1. Complete construction-related technical-economic feasibility study; 6.1.2. Prepare environmental and social impact assessment report; 6.1.3. Conduct public hearings (if so required by the legislation). 6.2. In addition to the terms and conditions set out in the memorandum of understanding the winner of the Expression of Interest during the construction phase shall: 6.2.1. Obtain relevant rights on the land plots within the construction area; 6.2.2. Obtain construction permit necessary for the implementation of the project; 6.2.3. Commence construction of the hydro power plant and conduct construction works in accordance with Georgian legislation, construction, environment protection and safety standards; 6.2.4. Complete construction and commence the operation of the hydro power plant in accordance with Georgian legislation. 6.3. The winner of the Expression of Interest, who has signed the memorandum of understanding in accordance with the terms and conditions of this Expression of Interest, shall for the first ten years of operation, starting from the date of commencement of operation of the hydro power plant, during the January, February, March, April, September, October, November, and December of each year, sell full electric output generated by the power plant to JSC “Electricity System Commercial Operator” on the basis of the guaranteed power purchase agreement. Final price of electricity shall be the price indicated in the agreement concluded between the parties in accordance with Article 6.10 of the terms and conditions of this Expression of Interest. 6.4. If, based on (a) the Feasibility Study and/or Environmental and Social Impact Assessment Report/Public Hearings, (b) the proposal submitted by the Company to the Ministry of Energy of Georgia on construction of a hydro power plant and (c) the agreement of the parties, the technical parameter(s) and/or planned investment cost indicated in the Memorandum of Understanding change, and as a result of reflection of the modified parameter(s) in the financial model, price of electricity to be sold to JSC “Electricity System Commercial Operator” equals or exceeds the price of electricity indicated in the Memorandum of Understanding concluded in accordance with this Expression of Interest (provided that the project IRR (Internal Rate of Return) indicated in the financial model shall remain unchanged), then the price of electricity to be sold to JSC “Electricity System Commercial Operator” shall remain unchanged. 6.5. If, based on (a) the Feasibility Study and/or Environmental and Social Impact Assessment Report/Public Hearings, (b) the proposal submitted by the Company to the Ministry of Energy of Georgia on construction of a hydro power plant and (c) by agreement of the parties, the technical parameter(s) and/or planned investment cost indicated in the memorandum of understanding change, and as a result of reflection of the modified parameter(s) in financial model, a price of electricity to be sold to JSC “Electricity System Commercial Operator” is less than the price determined in the respective memorandum of understanding signed in accordance with the terms and conditions of this Expression of Interest (provided that the project IRR (Internal Rate of Return) indicated in the financial model shall remain unchanged), then the price of electricity to be sold to JSC “Electricity System Commercial Operator” shall decrease accordingly and shall be fixed in financial model at the amount appeared as a result of changes of parameter(s) determined in relevant Article of Memorandum of Understanding. In such event, the parties shall conclude respective agreement on the amendment of the relevant Memorandum of Understanding in order to adjust technical parameter(s), price of electricity to be sold to JSC “Electricity System Commercial Operator” and financial model. 6.6. The winner of the Expression of Interest shall, at its own expense, prepare and submit the audit report to the Ministry within 3 months from the commencement of operation of the power plant as defined by the memorandum of understanding/agreement signed with the Government of Georgia. The audit report shall mean a written opinion issued by one of the auditors/audit companies prepared and submitted to the Ministry in accordance with the Decree of the Government of Georgia No.214 dated August 21, 2013 “On the Approval of the Rule of Expression of Interest for Construction-Related Technical and Economic Feasibility Study, Construction, Ownership and Operation of Power Plants in Georgia” and the respective memorandum of understanding concluded between the parties. 6.7. If, following commencement of operation of the power plant, due to reflection in the financial model of the documented investment cost (as approved by the audit report prepared in accordance with the present Expression of Interest) price of electricity to be sold to JSC “Electricity System Commercial Operator” equals or exceeds the price of electricity indicated in the memorandum of understanding concluded in accordance with this Expression of Interest (provided that the project IRR (Internal Rate of Return) indicated in the financial model shall remain unchanged), then the price of electricity shall remain unchanged. 6.8. If, following commencement of operation of hydro power plant, due to reflection in the financial model of the documented investment cost (as approved by the audit report prepared in accordance with the present Expression of Interest), price of electricity to be sold to JSC “Electricity System Commercial Operator” is less than the price determined in the respective memorandum of understanding signed in accordance to the terms and conditions of this Expression of Interest (provided that the project IRR (Internal Rate of Return) indicated in the financial model shall remain unchanged)remains unchanged), then the tariff of electricity to be sold to JSC “Electricity System Commercial Operator” shall decrease accordingly and shall be fixed at the amount appeared as a result of reflection of the documented investment cost. 6.9. For the avoidance of any doubts, for the purposes of paragraphs 6.4, 6.5, 6.7 and 6.8 of this Expression of Interest, the only input subject to modification in the financial model is the planned investment cost which may be replaced by the documented investment cost. All other inputs and data set out in the financial model shall remain unchanged, except for the price of electricity which may change as a result of replacement of the planned investment cost by the documented investment cost. 6.10. For the purposes of Article 6.7 or 6.8, the parties conclude respective agreement regarding the electricity price in accordance with the terms defined by the respective memorandum of understanding. 6.11. If the winner of the Expression of Interest does not prepare and/or submit the audit report to the Ministry of Energy of Georgia within the term set out in the respective memorandum of understanding and/or does not sign the agreement indicated in Article 6.10 of the present Expression of Interest and/or in other events defined by the memorandum of understanding as applicable, the winner of the Expression of the Interest loses its right to sell the electricity to JSC “Electricity System Commercial Operator” on a guaranteed basis. 6.12. The winner of the Expression of Interest, who has signed memorandum of understanding in accordance with the terms and conditions of this Expression of Interest, shall during the construction phase, within the term set out in the memorandum submit the construction security to the Ministry in favor of the Government of Georgia. The amount of the construction security is defined according to total installed capacity of a power plant and shall equal to 100,000 (one hundred thousand US Dollars) USD or its equivalent in the Euro (in accordance with the exchange rate set by the National Bank of Georgia for the day of payment) per MW. Construction security provided by the Company shall remain in force until the date falling 4 (four) months after the term of construction phase set out in the present Expression of Interest. The construction security shall be issued by any bank licensed in Georgia or in any OECD member country. The preconstruction security amount shall not exceed 15 percent of the security issuing bank's capital.

7. Special Provisions of the Expression of Interest 7.1. The Ministry of Energy of Georgia is entitled to cancel the Expression of Interest at any stage before signing the memorandum of understanding regarding the project implementation. In such event, all documents (including preconstruction securities) submitted in terms of the Expression of Interest will be returned to respective participant legal entities of the Expression of Interest. 7.2. The expenses related to the implementation of the project shall be fully borne by the winner of the Expression of Interest. 7.3. Expenses incurred by participants of the Expression of Interest/ interested legal entities, will not be reimbursed.

8. Term of Expression of Interest and Contact Information 8.1. Interested parties willing to participate in the Expression of Interest shall submit their proposals pursuant to the terms set out in the present Expression of Interest not later than , 10 December 2017, 18:00. 8.2. Proposals can be submitted during the working hours at the Ministry of Energy of Georgia (Address: 2 Sanapiro Str., 4th floor, Tbilisi, Georgia, 0105). 8.3. Proposals submitted in terms of the present Expression of Interest will be disclosed / reviewed at the Ministry of Energy of Georgia within 10 days from the expiry of the deadline of the Expression of Interest. 8.4. Participants of this Expression of Interest, who have submitted proposals to the Ministry of Energy of Georgia, are entitled to attend process of opening of proposals. Respective protocol is signed by attending participants. 8.5. Contact person for additional information:

Ms. Natia Beridze

Investment Projects Department Senior Specialist Ministry of Energy of Georgia № 2 Sanapiro Str., Tbilisi, Georgia, 0105. Mob.: +995 591 340909 Tel.: +995 32 2357833 E-mail: [email protected] Web: http://www.energy.gov.ge/