CREDIT NUMBER 7520-ET Financing Agreement (Power Sector Reform, Investment and Modernization in Ethiopia Project) between FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA and INTERNATIONAL DEVELOPMENT ASSOCIATION FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA (“Recipient”) and INTERNATIONAL DEVELOPMENT ASSOCIATION (“Association”). The Recipient and the Association hereby agree as follows: ARTICLE I — GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) apply to and form part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or in the Appendix to this Agreement. ARTICLE II — FINANCING 2.01. The Association agrees to extend to the Recipient a credit, which is deemed as Concessional Financing for purposes of the General Conditions, in an amount equivalent to three hundred and ninety-three million Special Drawing Rights (SDR 393,000,000) (variously, “Credit” and “Financing”), to assist in financing the project described in Schedule 1 to this Agreement (“Project”). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section III of Schedule 2 to this Agreement. 2.03. The Maximum Commitment Charge Rate is one-half of one percent (1/2 of 1%) per annum on the Unwithdrawn Financing Balance. 2.04. The Service Charge is three-fourths of one percent (3/4 of 1%) per annum on the Withdrawn Credit Balance. 2.05. The Payment Dates are February 1 and August 1 in each year. 2.06. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.07. The Payment Currency is Dollar. ARTICLE III — PROJECT 3.01. The Recipient declares its commitment to the objectives of the Project and the MPA Program. To this end, the Recipient shall: (a) cause Part 1 of the Project to be carried out by the Ethiopian Electric Utility (“EEU’s Respective Part of the Project”); and (b) cause Parts 2, 3 and 4 of the Project to be carried out by the -2- Ethiopian Electric Power (“EEP’s Respective Part of the Project”) (EEU and EEP collectively “Project Implementing Entities” or “PIEs”), all in accordance with the provisions of Article V of the General Conditions, Schedule 2 to this Agreement and the respective Project Agreements. ARTICLE IV — REMEDIES OF THE ASSOCIATION 4.01. The Additional Events of Suspension consist of the following: (a) a situation has arisen which makes it improbable that the MPA Program or a significant part thereof will be carried out; (b) a PIE’s Legislation has been amended, suspended, abrogated, repealed, or waived so as to affect materially and adversely the ability of the PIE to perform any of its obligations under the Project Agreement; and (c) the Recipient has taken or permitted to be taken any action which would prevent or interfere with the performance by the Program Implementing Entity of its obligations under the Project Agreement. 4.02. The Additional Event of Acceleration consists of the following: (a) the event specified in sub-paragraph (c) of Section 4.01 of this Agreement occurs and is continuing for a period of sixty (60) days after notice of the event has been given by the Association to the Recipient; and (b) the events specified in sub-paragraphs (a) and (b) of Section 4.01 of this Agreement occur. ARTICLE V — EFFECTIVENESS; TERMINATION 5.01. The Additional Conditions of Effectiveness consist of the following, namely, that the Subsidiary Agreements have been executed on behalf of the Recipient and the PIEs. 5.02. The Effectiveness Deadline is the date one hundred twenty (120) days after the Signature Date. 5.03. For purposes of Section 10.05 (b) of the General Conditions, the date on which the obligations of the Recipient under this Agreement (other than those providing for payment obligations) shall terminate is twenty (20) years after the Signature Date. -3- ARTICLE VI — REPRESENTATIVE; ADDRESSES 6.01. The Recipient’s Representative is its minister responsible for finance. 6.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient’s address is: Ministry of Finance P. O. Box 1905 Addis Ababa Federal Democratic Republic of Ethiopia; and (b) the Recipient’s Electronic Address is: Telex: Facsimile: MINFIN 21147 (251-111) 551355 6.03. For purposes of Section 11.01 of the General Conditions: (a) the Association’s address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America; and (b) the Association’s Electronic Address is: Telex: Facsimile: 248423 (MCI) 1-202-477-6391 -4- AGREED as of the Signature Date. FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA By __________________________________/s1/ Authorized Representative H.E. Semereta Sewasew Name: ____________________________/n1/ State Minister of Finance Title: _____________________________ /t1/ 07-Apr-2024 Date: ____________________________/d1/ INTERNATIONAL DEVELOPMENT ASSOCIATION By __________________________________/s1/ Authorized Representative Ousmane Dione Name: ____________________________/n1/ Country Director Title: _____________________________ /t1/ 05-Apr-2024 Date: ____________________________/d1/ d2/ -5- SCHEDULE 1 Project Description The objective of the Project is strengthen and expand the electricity network and enable renewable energy generation in Ethiopia. The Project constitutes a phase of the MPA Program, and consists of the following parts: Part 1. Distribution Network Refurbishment and Modernization 1.1. Rehabilitation of distribution networks across select towns so as improve the availability, reliability, and quality of supply; reduce technical losses; and increase infrastructure resilience. 1.2. Supporting the modernization of the Addis Ababa city distribution transformer metering system through installation of distribution transformers monitoring units so as to enhance two-way communication with central data-servers and to enable remote meter reading, remote management of energy meters, network problem identification, load profile, energy accounting and audit. 1.3. Provision of consulting services, capacity building and Project implementation support, in particular: (a) supporting preparation and implementation of Project activities; and (b) provision of technical assistance to EEU for structural and operational reforms as well as institutional capacity building. Part 2: Transmission Network Strengthening and Modernization 2.1. Strengthening the transmission network through construction of new transmission lines and substations. 2.2. Modernization of the transmission system consisting of, inter alia, system defense, system digital and system instrumentation activities. 2.3. Provision of consulting services, capacity building and Project implementation support, including: (a) supporting preparation and implementation of Project activities including support on technical designs and preparation of bidding documents and contract management; (b) technical support and capacity building for structural and operational reforms; and (c) implementation support including Project management, contract administration, procurement, monitoring, environmental and social compliance, annual audits, Training, and Operating Costs. -6- Part 3. Upstream Geothermal Site Preparation Upstream geothermal site preparation through drilling and testing of production wells and setting up a steam gathering system. Part 4: Technical Assistance and Capacity Building at PEA Provision of technical assistance and institutional capacity strengthening support to enable PEA to effectively discharge its mandates and achieve its medium-term strategic plan including provision of goods, non-consulting services, consulting services, Operating Costs and Training for the purpose. -7- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Institutional Arrangements 1. Subsidiary Agreements To facilitate the carrying out of: (a) EEU’s Respective Part of the Project, the Recipient shall make part of the proceeds of the Financing allocated from time to time to Categories (1) and (3) of the table set forth in Section III.1 of this Schedule available to the EEU (“EEU Subsidiary Financing) under a subsidiary agreement (“EEU Subsidiary Agreement”) between the Recipient and the EEU; and (b) EEP’s Respective Part of the Project, the Recipient shall make part of the proceeds of the Financing allocated from time to time to Categories (2), (4) and (5) of the table set forth in Section III.1 of this Schedule available to the EEP (“EEP Subsidiary Financing”), under a subsidiary agreement between the Recipient and the EEP ("EEP’s Subsidiary Financing”) (collectively, “Subsidiary Agreements”). 2. The Recipient shall exercise its rights under each Subsidiary Agreement in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive any Subsidiary Agreement or any of its provisions. B. Environmental and Social Standards 1. The Recipient shall, and shall cause the Project Implementing Entities to, ensure that the Project is carried out in accordance with the Environmental and Social Standards, in a manner acceptable to the Association. 2. Without limitation upon paragraph 1 above, the Recipient shall, and shall cause the PIE to, ensure that the Project is implemented in accordance with the Environmental and Social Commitment Plan (“ESCP”), in a manner acceptable to the Association. To this end, the Recipient shall, and shall cause the PIE to, ensure that: (a) the measures and actions specified in the ESCP are implemented with due diligence and efficiency, as provided in the ESCP; (b) sufficient funds are available to cover the costs of implementing the ESCP; -8- (c) policies and procedures are maintained, and qualified and experienced staff in adequate numbers are retained to implement the ESCP, as provided in the ESCP; and (d) the ESCP, or any provision thereof, is not amended, repealed, suspended or waived, except as the Association shall otherwise agree in writing, as specified in the ESCP, and ensure that the revised ESCP is disclosed promptly thereafter. 3. In case of any inconsistencies between the ESCP and the provisions of this Agreement, the provisions of this Agreement shall prevail. 4. The Recipient shall, and shall cause the PIE to, ensure that: (a) all measures necessary are taken to collect, compile, and furnish to the Association through regular reports, with the frequency specified in the ESCP, and promptly in a separate report or reports, if so requested by the Association, information on the status of compliance with the ESCP and the environmental and social instruments referred to therein, all such reports in form and substance acceptable to the Association, setting out, inter alia: (i) the status of implementation of the ESCP; (ii) conditions, if any, which interfere or threaten to interfere with the implementation of the ESCP; and (iii) corrective and preventive measures taken or required to be taken to address such conditions; and (b) the Association is promptly notified of any incident or accident related to or having an impact on the Project which has, or is likely to have, a significant adverse effect on the environment, the affected communities, the public or workers, including, explosions, spills, and any workplace accidents that result in death, serious or multiple injury, pollution, or any violent labor unrest or dispute between the Recipient or the PIE or security forces (assigned to protect the Project) and local communities, any case of sexual exploitation and abuse, sexual harassment and violence against minors, or any incidents in or related to international waterways or disputed areas, in accordance with the ESCP, the environmental and social instruments referenced therein and the Environmental and Social Standards. 5. The Recipient shall, and shall cause the PIE to, establish, publicize, maintain, and operate an accessible grievance mechanism, to receive and facilitate resolution of concerns and grievances of Project-affected people, and take all measures necessary and appropriate to resolve, or facilitate the resolution of, such concerns and grievances, in a manner acceptable to the Association. -9- 6. The Recipient shall, and shall cause the PIE to, ensure that all bidding documents and contracts for civil works under the Project include the obligation of contractors, subcontractors and supervising entities to: (a) comply with the relevant aspects of ESCP and the environmental and social instruments referred to therein; and (b) adopt and enforce codes of conduct that should be provided to and signed by all workers, detailing measures to address environmental, social, health and safety risks, and the risks of sexual exploitation and abuse, sexual harassment and violence against children, all as applicable to such civil works commissioned or carried out pursuant to said contracts. Section II. Project Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Section III. Withdrawal of the Proceeds of the Financing A. General Without limitation upon the provisions of Article II of the General Conditions and in accordance with the Disbursement and Financial Information Letter, the Recipient may withdraw the proceeds of the Financing to: (a) finance Eligible Expenditures; and (b) repay the Preparation Advance; in the amount allocated and, if applicable, up to the percentage set forth against each Category of the following table: - 10 - Amount of the Percentage of Credit Allocated Expenditures to be Category (expressed in Financed SDR) (inclusive of Taxes) (1) Goods, works, non-consulting 134,000,000 100% services, consulting services, Operating Costs and Training under Parts 1.1 and 1.3 of the Project (EEU) (2) Goods, works, non-consulting 233,100,000 100% services, consulting services, Operating Costs and Training under Parts 2.1, 2.3 and 3 of the Project (EEP) (3) Goods, works, non-consulting 4,500,000 Up to 100% of Financing services, consulting services, amount allocated to Operating Costs and Training PBCs as set out in under Part 1.2 of the Project and Schedule 4 to this subject to PBC 1a and 1b Agreement (EEU) (4) Goods, works, non-consulting 12,700,000 Up to 100% of Financing services, consulting services, amount allocated to Operating Costs and Training PBCs as set out in under Part 2.2 of the Project and Schedule 4 to this subject to PBC 2a and 2b (EEP) Agreement (5) Goods, non-consulting services, 3,700,000 100% consulting services, Operating Costs and Training under Part 4 of the Project for PEA (EEP) (6) Refund of Preparation Advance 5,000,000 Amount due pursuant to Section 2.07(b) of the General Conditions TOTAL AMOUNT 393,000,000 - 11 - B. Withdrawal Conditions; Withdrawal Period 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed SDR10,000,000 may be made for payments made prior to this date but on or after December 1, 2023, for Eligible Expenditures under Category 2; or (b) Under Categories (3) and (4): unless and until the Recipient has furnished evidence in form and substance satisfactory to the Association that: (i) Eligible Expenditures have been incurred; and (ii) the related PBCs set forth in Schedule 4 to this Agreement for which withdrawal is requested have been met and verified in accordance with the verification protocols in form and substance satisfactory to the Association. 2. Notwithstanding the provisions of Part A of this Section, withdrawals under Categories (3) and (4) shall not exceed the Financing amount allocated to the respective PBC in Schedule 4 to this Agreement. 3. Notwithstanding the provisions of paragraphs 1 and 2 of this Part B, if the Association shall determine, based on the evidence provided by the Recipient under paragraph 1 of this Part B, that any PBC has not been met or has been partially met by the date by which such PBC is set to be achieved in accordance with Schedule 4 to this Agreement, the Association may in its sole discretion, by notice to the Recipient: (a) withhold in whole or in part the amount of the Financing allocated to any such PBC; (b) disburse in whole or in part the amount of the Financing allocated to such PBC at any later time when such PBC is met; and/or (c) reallocate in whole or in part any amount of the Financing allocated to such PBC to other PBC(s) under Categories (3) or (4) or to other Categories. 4. Notwithstanding the foregoing, if the Association determines, at any time, that any portion of the amounts withdrawn by the Recipient under Categories (3) and (4) was not made in compliance with the provisions of paragraphs 1, 2 and (3) of this Part B, the Recipient shall promptly refund any such amount to the Association as the Association shall specify by notice to the Recipient. 5. The Closing Date is August 30, 2030. - 12 - SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage) * On each February 1 and August 1, 1.5625% commencing August 1, 2030, to and including February 1, 2062. *The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to renumbered Section 3.04 (b) (originally numbered Section 3.05 (b)) of the General Conditions. - 13 - SCHEDULE 4 Performance-Based Conditions (“PBCs”) Amount of the Credit Allocated PBC PBC Targets (expressed in SDR) PBC 1a: EEU has prepared and 1.1: EEU has prepared and submitted to the regulator tariff adjustment proposal(s) 1,500,000 submitted tariff adjustment and to reflect variations in parameters beyond its control, reflecting at a minimum four-year tariff trajectory changes in inflation and/ or currency exchange rate. proposals to the regulator. 1.2: EEU has submitted to the regulator the proposal for a new four-year cost 1,500,000 recovering tariff trajectory. PBC 1b: EEU prepares and 2.1: EEU has prepared and submitted to its Board of Directors a distribution 750,000 submits to its board for network development plan adoption of a distribution network development plan. 2.2: The distribution network development plan is approved by EEU Board of 750,000 Directors PBC 2a: EEP has prepared and 1.1: EEP has prepared and submitted to the regulator tariff adjustment proposal(s) 4,500,000 submitted tariff adjustment and to reflect variations in parameters beyond its control, reflecting at a four-year tariff trajectory minimum changes in inflation and/ or currency exchange rate. proposals to the regulator. 4,500,000 1.2: EEP has submitted to the regulator the proposal for a new four-year cost recovering tariff trajectory. - 14 - PBC 2b: EEP has prepared and 2.1: EEP has prepared and submitted to its Board of Directors a least cost 1,500,000 submitted to its board for generation and transmission expansion plan. adoption of a least cost generation and transmission 2.2: The least cost generation and transmission expansion plan is approved by 2,200,000 expansion plan. EEP Board of Directors. TOTAL AMOUNT 17,200,000 - 15 - APPENDIX Section I. Definitions 1. “Annual Work Plan and Budgets” means the work plans and budgets referred to in Sections I.C of Schedule 2 to the Project Agreements, as said work plans and budgets may be modified from time to time with the prior written approval of the Association. 2. “Anti-Corruption Guidelines” means, for purposes of paragraph 5 of the Appendix to the General Conditions, the “Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants”, dated October 15, 2006, and revised in January 2011 and as of July 1, 2016. 3. “Category” means a category set forth in the table in Section III.A of Schedule 2 to this Agreement. 4. “Environmental and Social Commitment Plan” or “ESCP” means the environmental and social commitment plan for the Project, dated February 12, 2024, as the same may be amended from time to time in accordance with the provisions thereof, which sets out the material measures and actions that the Recipient shall carry out or cause to be carried out to address the potential environmental and social risks and impacts of the Project, including the timeframes of the actions and measures, institutional, staffing, training, monitoring and reporting arrangements, and any environmental and social instruments to be prepared thereunder. 5. “Environmental and Social Standards” or “ESSs” means, collectively: (i) “Environmental and Social Standard 1: Assessment and Management of Environmental and Social Risks and Impacts”; (ii) “Environmental and Social Standard 2: Labor and Working Conditions”; (iii) “Environmental and Social Standard 3: Resource Efficiency and Pollution Prevention and Management”; (iv) “Environmental and Social Standard 4: Community Health and Safety”; (v) “Environmental and Social Standard 5: Land Acquisition, Restrictions on Land Use and Involuntary Resettlement”; (vi) “Environmental and Social Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources”; (vii) “Environmental and Social Standard 7: Indigenous Peoples/Sub- Saharan African Historically Underserved Traditional Local Communities”; (viii) “Environmental and Social Standard 8: Cultural Heritage”; (ix) “Environmental and Social Standard 9: Financial Intermediaries”; and (x) “Environmental and Social Standard 10: Stakeholder Engagement and Information Disclosure”; effective on October 1, 2018, as published by the Association. 6. “EEU” means the Ethiopian Electric Utility, or its successor thereto. - 16 - 7. “EEU Board of Directors” means the EEU’s board of directors established and operating pursuant to the EEU’s Legislation. 8. “EEU’s Respective Part of the Project” means Part 1 of the Project. 9. “EEU Subsidiary Agreement” means the EEU Subsidiary Agreement referred to in Section I.A.1(a) of Schedule 2 to this Agreement. 10. “EEU Subsidiary Financing” means the financing amount stipulated in the EEU Subsidiary Agreement. 11. “EEP” means the Ethiopian Electric Power, or its successor thereto. 12. “EEP Board of Directors” means the EEU’s board of directors established and operating pursuant to the EEP’s Legislation. 13. “EEP’s Respective Part of the Project” means Parts 2, 3 and 4 of the Project. 14. “EEP Subsidiary Agreement” means the EEP Subsidiary Agreement referred to in Section I.A.1(b) of Schedule 2 to this Agreement. 15. “EEP Subsidiary Financing” means the financing amount stipulated in the EEP Subsidiary Agreement. 16. “General Conditions” means the “International Development Association General Conditions for IDA Financing, Investment Project Financing”, dated December 14, 2018 (last revised on July 15, 2023), with the modifications set forth in Section II of this Appendix. 17. “MPA Program” means the multiphase programmatic approach program designed to strengthen and expand the electricity network, improve the sector financial viability, and enable renewable energy generation through private sector participation. 18. “PEA” means the Recipient’s Petroleum and Energy Authority established and operating pursuant to the Council of Minister’s Regulation Number 521/2022, or its successor thereto. 19. “Performance-based Conditions” and “PBCs” each means, the conditions set forth in the table in Schedule 4 to this Agreement and referred to in Section III.B of Schedule 2 to this Agreement. 20. “PIEs’ Legislation” means, collectively, the EEU Legislation and the EEP Legislation. - 17 - 21. “Preparation Advance” means the advance referred to in Section 2.07 (a) of the General Conditions, granted by the Association to the Recipient pursuant to the letter agreement signed on behalf of the Association on October 31, 2023, and on behalf of the Recipient on November 8, 2023. 22. “Procurement Regulations” means, for purposes of paragraph 85 of the Appendix to the General Conditions, the “World Bank Procurement Regulations for IPF Borrowers”, dated September 2023. 23. “Project Implementing Entities” means the EEU and EEP, respectively. 24. “Project Implementing Entity” or “PIE” means: (a) the Ethiopian Electric Utility established pursuant to the Ethiopian Electric Utility Establishment Council of Ministers Regulation No. 303/2013 (as amended by Regulation No. 382/2016) (“EEU Legislation”) establishing Ethiopian Electric Utility as a public enterprise under the supervision of MoWE, inter alia, to construct and maintain electric distribution networks, to administer electric distribution networks, to initiate and implement electric tariffs, and to negotiate and sign loan agreements with local and international financial sources; and (b) the Ethiopian Electric Power Establishment Council of Ministers Regulation No. 302/2013 (as amended by Regulation No. 381/2016) (“EEP Legislation”) (collectively, PIEs’ Legislation”). 25. “Signature Date” means the later of the two dates on which the Recipient and the Association signed this Agreement and such definition applies to all references to “the date of the Financing Agreement” in the General Conditions. 26. “Subsidiary Agreements” means, collectively, the EEP Subsidiary Agreement and the EEU Subsidiary Agreements. Section II. Modifications to the General Conditions The General Conditions are hereby modified as follows: 1. Section 3.04 (Interest Charge) is deleted in its entirety and the remaining Sections in Article III are renumbered accordingly, and all references to the Sections of Article III in any provision of the General Conditions are understood to be to such renumbered Sections. 2. Paragraph 66 (Interest Charge) in the Appendix is modified to read as follows: “66. “Interest Charge” means the interest charge for the purpose of Section 3.08.