OFFICIAL DOCUMENTS CREDIT NUMBER 6699-NG Financing Agreement (Power Sector Recovery Operation) between FEDERAL REPUBLIC OF NIGERIA and INTERNATIONAL DEVELOPMENT ASSOCIATION CREDIT NUMBER 6699-NG FINANCING AGREEMENT AGREEMENT dated as of the Signature Date between FEDERAL REPUBLIC OF NIGERIA ("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 five hundred forty-eight million nine hundred thousand Special Drawing Rights (SDR 548,900,000) (variously, "Credit" and "Financing"), to assist in financing: (a) the program described in Part 1 of Schedule 1 to this Agreement ("Program"); and (b) the project described in Part 2 of Schedule 1 to this Agreement ("Project") (the Program and the Project hereinafter jointly referred to as the "Operation"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. All withdrawals from the Financing Account shall be deposited by the Association into an account specified by the Recipient and acceptable to the Association. 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 The Service Charge is three-fourths of one percent (3/4 of 1%) per annum on the Withdrawn Credit Balance. 2.05. The Interest Charge is one and a quarter percent (1.25%) per annum on the Withdrawn Credit Balance. 2.06. The Payment Dates are April 1 and October I in each year. 2.07. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. -2- 2.08. The Payment Currency is Dollar. ARTICLE III - OPERATION 3.01. The Recipient declares its commitment to the objectives of the Operation. To this end, the Recipient shall: (i) carry out, and cause NERC and NBET to carry out, the Program in accordance with the provisions of Article V of the Program General Conditions; and (ii) carry out the Project in accordance with the provisions of Article V of the Project General Conditions; all in accordance with Schedule 2 to this Agreement. ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Additional Events of Suspension consist of the following, namely, that in the opinion of the Association: (a) The Electric Power Sector Reform Act 2004 has been amended, suspended, abrogated, repealed or waived so as to materially and adversely affect the ability of NERC, NBET, BPE, DISCOs and/or TCN to perform any of their respective obligations arising under this Agreement; or of the Recipient to achieve the objectives of the Operation. (b) Any other legislation, license or other legal or regulatory instrument related to the implementation of the Operation or the Implementing Entities has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the achievement of the objectives of the Operation, or the ability of the Recipient or Implementing Entities to implement the Operation. 4.02. The Additional Event of Acceleration consists of the following, namely, that the event specified in paragraph (a) or (b) of Section 4.01 of this Agreement occurs. ARTICLE V - EFFECTIVENESS; TERMINATION 5.01. The Additional Conditions of Effectiveness consist of the following, namely that the Operations Manual has been adopted in accordance with the provisions of Section I.C of Schedule 2 to this Agreement. 5.02. The Effectiveness Deadline is the date ninety (90) 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. ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. The Recipient's Representative is its federal minister in charge of finance. 6.02. For purposes of Section 11.01 of the General Conditions: (a) the Recipient's address is: Federal Ministry of Finance, Budget and National Planning Ahmadu Bello Way Central Business District Abuja, Federal Republic of Nigeria (b) the Recipient's Electronic Address is: Facsimile: 234-9-2343609 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 REPUBLIC OF NIGERIA By Authorized Representative Name: 1-!)/ Date: INTERNATIONAL DEVELOPMENT ASSOCIATION By Authorized Representative Name: Shubham Chaudhuri Title: Country Director Date: cO - 1014 -5- SCHEDULE 1 Operation Description The objectives of the Operation are to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability. The Operation consists of the Program and the Project as follows: Part 1: The Program The Program supports key financial, operational, regulatory and policy measures under the Power Sector Recovery Program (PSRP) and consists of the following activities: (a) Improving reliability of electricity supply through: (i) enforcing preparation, approval and implementation of PIPs for the DISCOs, the PIPs to include requirements of the use of management information systems, deployment of consumption meters, measures to enhance billing and collection; and (ii) establishing of business continuity arrangements for DISCOs to be applied in case of license interventions by NERC. (b) Strengthening fiscal sustainability of government funding to the power sector and the financial sustainability of DISCOs and TCN through: (i) the establishment, regular updating and execution of the PSRP Financing Plan to ensure tariff shortfalls are fully funded; (ii) semi-annual reviews of MYTOs to adjust revenue requirements of DISCOs and TCN; (iii) implementation of end-user electricity tariff adjustments; (iv) removal of new and historical tariff shortfalls from DISCOs' financial statements; and (v) enforcement of payments by DISCOs to NBET and TCN. (c) Strengthening financial and operational transparency and accountability of DISCOs through publication of audited financial statements of said companies; as well as key operational and financial data for the power sector on a quarterly basis. Part 2: The Project The Project consists of the following activities to support implementation of the Program and overall capacity building: (a) Strengthening NERC's capacity for regulatory oversight over power sector licensees in the form of technical advice, data analysis and management tools and recommendations on the basis of relevant international practice. -6- (b) Strengthening the procurement capacity, internal audit functions of NBET and enhancing its corporate resource management software. (c) Strengthening BPE's capacity for Program implementation in the fonn of technical advice and recommendations on the basis of relevant international practice. (d) Strengthening the capacity of the Recipient's Debt Management Office for assessment and management of contingent liabilities. (e) Strengthening the capacity of the FMP for oversight of Program implementation and the mandate of the gender focal point in the FMP. (f) Providing technical assistance to the PSRP Secretariat for Program implementation, monitoring and evaluation, Operating Costs of the PSRP Secretariat and verification of the achievement of the DLIs. (g) Supporting a public opinion survey on awareness about the PSRP and a public communication campaign on the PSRP. -7- SCHEDULE 2 Program Execution Section I. Implementation Arrangements A. Institutional arrangements 1.1 PSRP Finance and Policy Oversight Committee (a) The Recipient shall, no later than three (3) months after the Effective Date, establish and thereafter maintain throughout the implementation of the Operation, a PSRP Finance and Policy Oversight Committee ("OC") with functions, composition and resources satisfactory to the Association. (b) Without limitation to the provisions of sub-paragraph (a) above, the OC shall be chaired by the federal minister in charge of finance and include representatives of relevant MDAs, all as further detailed in the Operations Manual. (c) Without limitation to the provisions of sub-paragraph (a) above, the OC shall be responsible for inter alia strategic oversight of the implementation of the PSRP and the Operation, and report to the Presidency, as further specified in the Operations Manual. 1.2 PSRP Finance Technical Committee (a) The Recipient shall, no later than three (3) months after the Effective Date, establish and thereafter maintain throughout the implementation of the Operation, a PSRP Finance Technical Committee ("TC") with functions, composition and resources satisfactory to the Association. (b) Without limitation to the provisions of sub-paragraph (a) above, the TC shall be chaired by the Director General of the Budget Office and include representatives of the relevant MDAs, all as further detailed in the Operations Manual. (c) Without limitation to the provisions of sub-paragraph (a) above, the TC shall be responsible for overall monitoring of the implementation of the PSRP and the Operation, including oversight of the PSRP Financing Plan and other regulatory actions, and coordination of the PSRP Financing Plan with the MYTO reviews, all as further specified in the Operations Manual. -8- 1.3 PSRP Secretariat (a) The Recipient shall, no later than three (3) months after the Effective Date, establish and thereafter maintain throughout the implementation of the Operation, a PSRP Secretariat ("PSRP Secretariat") within the Budget Office with functions, composition and resources satisfactory to the Association. (b) Without limitation to the provisions of sub-paragraph (a) above, the PSRP Secretariat shall be headed by an Operation manager and include inter alia, specialists in financial management and procurement, all with qualification, experience and integrity, and with terms of reference acceptable to the Association, and as further defined in the Operations Manual. (c) Without limitation to sub-paragraph (a) above, the PSRP Secretariat shall be responsible for: (i) monitoring and coordinating the implementation of the Program in line with guidance from the TC; (ii) implementing the Project; and (iii) facilitating the work of the OC and the TC, including updating and monitoring the implementation of the Financing Plan. 1.4 NERC The Recipient shall cause NERC to: (i) have the overall responsibility for the implementation of the Program; and (ii) take all actions including the provision of funding, personnel and other resources necessary to enable NERC to perform its functions under the Program, as further specified in the Operations Manual. 1.5 NBET The Recipient shall cause NBET to: (i) execute the PSRP Financing Plan; and (ii) take all actions including the provision of funding, personnel and other resources necessary to enable NBET to perform its functions under the Program, as specified in the Operations Manual. B. Subsidiary Agreements (a) To facilitate the carrying out of the Program, the Recipient shall: (A) make part of the proceeds of the Financing available to the NBET to make payments in accordance with the PSRP Financing Plan under a subsidiary agreement between the Recipient and NBET; and (B) enter into a subsidiary agreement with NERC, on terms and conditions approved by the Association (each a "Subsidiary Agreement"), which shall include inter alia the following: -9- (i) the obligation ofNBET or NERC as the case shall be, to carry out the Program in accordance with this Agreement, the Program Anti-Corruption Guidelines, the DFIL and the Operations Manual; (ii) the obligation of NBET or NERC, as the case shall be, to exchange views with the Recipient and the Association with regard to the progress of the Program and the performance of its obligations under the Subsidiary Agreement; (iii) the requirement that NBET or NERC, as the case shall be, shall promptly inform the Recipient and the Association of any condition which interferes or threatens to interfere with the progress of the Program, or the performance of its obligations under the Subsidiary Agreement; and (iv) with regard to NBET, the obligation of NBET to comply with the fund flow protocol approved by the FMFBNP and satisfactory to the Association. (b) 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 either of the Subsidiary Agreements or any of their respective provisions. C. Operations Manual (a) The Recipient shall prepare and furnish to the Association for review, a manual which shall include provisions on the following matters: (i) institutional arrangements for the oversight, coordination, management of the Operation, including details on the respective roles and responsibilities of the MDAs; (ii) financial management arrangements including disbursement, funds flow and payment protocols; (iii) with regard to the Project, procurement; (iv) arrangements for preventing, detecting, reporting, investigation, remediation and otherwise addressing fraud and corruption, including compliance with the Anti-Corruption Guidelines; -10- (v) the grievance redress mechanism referred to in Section I.F of this Schedule 2; (vi) monitoring and evaluation, reporting and communication; (vii) detailed arrangements for verification of achievement of the DLIs/DLRs (including the Verification Protocol); (viii) such other administrative, financial, technical and organizational arrangements and procedures as shall be required for the Operation; and (ix) the Program Action Plan, as an annex. (b) The Recipient shall afford the Association a reasonable opportunity to exchange views with the Recipient on said manual in draft, and thereafter, shall adopt such manual, in such final form as shall have been approved by the Association ("Operations Manual"). (c) The Recipient shall ensure that the Operation is carried out in accordance with the Operations Manual; provided, however, that in case of any conflict between the provisions of the Operations Manual and the provisions of this Agreement, the provisions of this Agreement shall prevail. (d) Except as the Association shall otherwise agree, the Recipient shall not amend, abrogate or waive any provision of the Operations Manual. D. Additional Program Implementation Arrangements 1. Program Action Plan (a) The Recipient shall carry out the Program Action Plan, in accordance with the schedule set out in the said Program Action Plan, in a manner satisfactory to the Association. (b) The Recipient shall not assign, amend, abrogate, or waive, or permit to be assigned, amended, abrogated, or waived, any of the Program Action Plan provisions without the prior written agreement of the Association. 2. Independent Verification for the Program (a) No later than ninety (90) days after the Effective Date, the Recipient shall: (i) recruit an independent verification agency or independent verification agencies, as the case may be, under terms of reference(s) satisfactory to -11- the Association ("Independent Verification Agent(s)" or "IVA(s)"), to be responsible for preparing and providing verifications reports in accordance with the Verification Protocol, certifying the achievement of those DLI/DLRs indicated to be verified by such independent verification agency or agencies in the Verification Protocol; and (ii) furnish the verification reports to the Association in such scope and in such details as the Association shall request. (b) The Recipient shall ensure that the verifications are carried out and that the verification reports are prepared in compliance with the procedures set forth in the Verification Protocol. E. Additional Project Implementation Arrangements 1. Annual Work Plan and Budget for the Project (a) Each year the Recipient shall prepare a draft annual work plan and budget containing all activities and expenditures proposed to be included in the Project for the following year of Project implementation, of such scope and detail as the Association shall have reasonably requested. (b) The Recipient shall furnish to the Association, as soon as available, but in any case not later than November 30 of each year, the annual work plan and budget referred to in paragraph I above, for their review and approval; except for the annual work plan and budget for the Project for the first year of Project implementation, which shall be furnished no later than one month after the Effective Date. Only the activities included in an annual work plan and budget expressly approved by the Association (each an "Annual Work Plan and Budget") are eligible to a financing from the proceeds of the Financing. (c) The Recipient shall ensure that the Project is carried out in accordance with the Annual Work Plans and Budgets, provided, however, that in case of any conflict between the Annual Work Plan and Budget and the provisions of this Agreement, the provisions of this Agreement shall prevail. (d) Except as the Association shall otherwise agree, the Recipient shall not amend, abrogate or waive any provision of the Annual Work Plan and Budget. -12- F. Grievance Mechanism The Recipient shall maintain and publicize the availability of a grievance mechanism, in form and substance satisfactory to the Association, to hear and determine fairly and in good faith all complaints raised in relation to the Operation and take all measures necessary to implement the determinations made by such mechanism in a manner satisfactory to the Association. Section II. Excluded Activities (a) The Recipient shall ensure that the Program excludes any activities which: (i) in the opinion of the Association, are likely to have significant adverse impacts that are sensitive, diverse, or unprecedented on the environment and/or affected people or any other activities that are described in the Operations Manual; or (ii) involve any procurement of works, goods, non-consulting services, or consulting services. Section III. Program Monitoring, Reporting and Evaluation The Recipient shall furnish to the Association each Program Report not later than one month after the end of each calendar semester, covering the calendar semester. Section IV. Withdrawal of Financing Proceeds A. General 1. 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 Program Expenditures on the basis of the results ("Disbursement Linked Results" or "DLRs") achieved, as measured against specific indicators ("Disbursement Linked Indicators" or "DLIs"), in the amount allocated to Categories I to 7, with respect to the Program; and (b) finance Eligible Expenditure in the amount allocated and, if applicable, up to the percentage set forth against Category 8 with respect to the Project, all as set forth in the table in paragraph 2 of this Part A. 2. The following table specifies each category of withdrawal of the proceeds of the Financing (including the Disbursement Linked Indicators as applicable) ("Category"), the Disbursement Linked Results for each Category (as applicable), and the allocation of the amounts of the Financing to each Category: -13- Category Disbursement Linked Result (as Disbursement Calculation Amount of the (including applicable) Formula (as applicable) Financing Disbursement (expressed in SDR) Allocated Linked Indicator as (expressed in applicable) SDR) (1) Global DLI #Gl: SDR 109,779,900 NERC sets revenue requirement for TCN and DISCOs based on MYTO Minor Reviews and a MYTO Extraordinary Review DLR #GI 1: N/A SDR 14,637,320 (i) NERC completes MYTO Minor Reviews under the existing MYTO and issues new MYTOs for each DISCO and TCN, consistent with the 2020 PSRP Financing Plan; and (ii) BPE issues a notice clarifying that the allowance parameters on aggregate technical, commercial and collection (ATC&C) losses, operating expenditures (OpEx) and capital expenditure (CapEx) in the Performance Agreements are not extended beyond their current expiration date of December 31, 2021. DLR #G1.2: NERC completes N/A SDR 65,867,940 MYTO Extraordinary Review and issues new MYTO for the period 2021-2025 for each DISCO and TCN redefining allowances on CapEx, OpEx and ATC&C losses, consistent with the PIPs, effective from January 1, 2022. DLR #G1.3: NERC completes N/A SDR 14,637,320 semi- annual MYTO Minor Reviews under the existing MYTO and, if needed, issues new MYTOs for each DISCO and TCN to adjust their respective revenue -14- requirements, effective from January 1 and July 1, 2021. DLR #GI.4: NERC completes N/A SDR 14,637,320 semi-annual MYTO Minor Reviews under the existing MYTO and, if needed, issues new MYTOs for each DISCO and TCN to adjust their respective revenue requirements, effective from January 1 and July 1, 2022. (2) Global DLI #G2: SDR 124,417,220 A credible and fiscally sustainable PSRP Financing Plan is approved and executed to fully cover tariff shortfalls DLR #G2.1: The Presidency N/A SDR 21,955,980 approves the 2020 PSRP Financing Plan covering the uses and sources of funds to clear historical and fund new tariff shortfalls for 2020- 2027. DLR #G2.2: (i) FMFBNP issues Basic target: G2.2(i) is SDR 43,911,960 the 2021 PSRP Financing Plan achieved and 80% of the covering the uses and sources of estimated tariff shortfalls for funds to clear historical and fund Q1, Q2 and Q3, 2020, set new tariff shortfalls for 2021-2027, out in the 2020 PSRP consistent with the MYTO Financing Plan, are ftnded effective on January 1, 2021; according to G2.2(ii): SDR and 36,593,300 (ii) Estimated shortfalls for Q1, Q2 Stretch target: G2.2(i) is and Q3, 2020, set out in the 2020 achieved and 90 % of the PSRP Financing Plan, are funded estimated tariff shortfalls for from other sources than CBN, Q1, Q2 and Q3, 2020, set when the CBN PAF has been out in the 2020 PSRP depleted. Financing Plan, are funded according to G2.2(ii): SDR 36,593,300 plus SDR 731,866 per percentage point above 80% up to 90%. DLR #G2.3 (i): FMFBNP issues Basic target: G2.3(i) SDR 29,274,640 the 2022 PSRP Financing Plan achieved, 80% of the sum of -15- covering the uses and sources of (A) the actual tariff funds to clear historical and fund shortfalls incurred for Ql, new tariff shortfalls for 2022-2027, Q2 and Q3, 2020 not yet consistent with the MYTO funded and (B) the estimated effective on January 1, 2022; and tariff shortfalls for Q4, 2020, Q1, Q2 and Q3, 2021, set (ii) Actual tariff shortfall incurred out in the 2021 PSRP for Q1, Q2 and Q3, 2020 not yet Financing Plan, are funded funded and estimated tariff according to G2.3(ii): SDR shortfalls for Q4, 2020 and Q1, Q2 21,955,980 and Q3, 2021, set out in the 2021 Stretch target: G2.3(i) PSRP Financing Plan, are funded achieved, 100% of the sum from other sources than CBN, of (A) the actual tariff when the CBN PAF has been shortfalls incurred for Ql, depleted. Q2 and Q3, 2020 not yet funded and (B) the estimated tariff shortfalls for Q4, 2020 and Q1, Q2 and Q3, 2021, set out in the 2021 PSRP Financing Plan, are funded according to G2.3(ii): SDR 21,955,980 plus SDR 365,933 per percentage point above 80%. DLR #G2.4 (i): FMFBNP issues Basic target: G2.4(i) SDR 29,274,640 the 2023 PSRP Financing Plan achieved, 80% of the sum of covering the uses and sources of (A) the actual tariff funds to clear historical and fund shortfalls incurred for Q1, new tariff shortfalls for 2023-2027, Q2, Q3 and Q4, 2020 and consistent with the MYTO Q1, Q2 and Q3, 2021 not yet effective on January 1, 2023; and funded and (B) the estimated (ii) Actual tariff shortfall incurred tariff shortfalls for Q4, 2021, for Q1, Q2, Q3 and Q4, 2020 and Q1, Q2 and Q3, 2022, set Q1, Q2 and Q3, 2021 not yet out in the 2022 PSRP funded and estimated tariff Financing Plan, are funded shortfalls for Q4, 2021 and Q1, Q2 according to G2.4(ii): SDR and Q3, 2022, set out in the 2022 21,955,980 Financing Plan, are funded from Stretch target: G2.4(i) other sources than CBN, when the achieved, 100% of the sum CBN PAF has been depleted. of (A) the actual tariff shortfalls incurred for Q1, Q2, Q3 and Q4 2020 and Q1, Q2 and Q3, 2021 not yet funded and (B) the estimated tariff shortfalls for Q4, 2021 -16- and Q1, Q2 and Q3, 2022, set out in the 2022 PSRP Financing Plan, are funded according to G2.4(ii): SDR 21,955,980 plus SDR 365,933 per percentage point above 80%. (3) DLI #1 SDR 98,801,910 Implementation of approved PIPs is enforced DLR #1.1: NERC approves PIP for SDR 2,195,598 per PIP SDR 24,151,578 2020-24 for each DISCO. DLR #1.2: NERC issues semi- N/A SDR 24,883,444 annual monitoring reports on each DISCO's achievement of the outputs set out in its approved PIPs for 2020 and, if there are deviations, undertakes actions in accordance with the Electric Power Sector Reform Act 2004 and applicable regulations. DLR #1.3: NERC issues semi- N/A SDR 24,883,444 annual monitoring reports on each DISCO's achievement of the outputs set out in its approved PIPs for 2021 and, if there are deviations, undertakes actions in accordance with the Electric Power Sector Reform Act 2004 and applicable regulations. DLR #1.4: NERC issues semi- N/A SDR 24,883,444 annual monitoring reports on each DISCO's achievement of the outputs set out in its approved PIPs for 2022 and, if there are deviations, undertakes actions in accordance with the Electric Power Sector Reform Act 2004 and applicable regulations. -17- (4) DLI #2 SDR 21,955,980 Business continuity arrangements are implemented for DISCOs DLR #2.1: BPE establishes lists of N/A SDR 14,637,320 qualified experts to assume the transitory management of DISCO(s) in the event of license intervention by July 1, 2020. DLR #2.2: BPE appoints and N/A SDR 7,318,660 NERC approves transitory management and ensures takeover of operations of DISCO(s) subject to license intervention, or, in the absence of the need for license intervention, BPE updates the list of qualified experts that would assume transitory management of DISCOs in the event of license intervention in the future years, by January 1, 2021. (5) DLI #3 SDR 69,527,270 End-user electricity tariffs are adjusted consistent with the PSRP Financing Plan, including its measures for protection of the poor DLR #3.1: NERC issues (i) N/A SDR 25,615,310 MYTO for each DISCO adjusting end-user electricity tariffs effective in 2020 consistent with the 2020 PSRP Financing Plan while maintaining the tariff for the first residential consumption block (households consuming less than 50kWhs per month) unchanged; and (ii) order to cap the billing for the unmetered customers to be effective April 1, 2020. -18- DLR #3.2: NERC issues MYTO N/A SDR 21,955,980 for each DISCO adjusting end-user electricity tariffs effective in 2021 consistent with the 2021 PSRP Financing Plan including its measures for protection of the poor. DLR #3.3: NERC issues MYTO N/A SDR 21,955,980 for each DISCO adjusting end-user electricity tariffs effective in 2022 consistent with the 2022 PSRP Financing Plan including its measures for protection of the poor. (6) DLI #4 SDR 80,505,260 Payment discipline is enforced on DISCOs to reduce non-tariff shortfalls DLR #4.1: (i) NERC issues N/A SDR 21,955,980 MYTO for each DISCO defining the Minimum Remittance Threshold effective July 1, 2020; (ii) NERC determines 2015-19 historical tariff shortfalls for each DISCO and FMBNP approves a mechanism to remove historical tariff shortfalls and associated interest from DISCOs' books; and iii) NERC issues an Order to ensure that no new tariff shortfalls accrue in the financial records of DISCOs from 2020 and onwards. DLR #4.2: At least 80% of the N/A SDR 29,274,640 DISCOs' aggregate Ql-Q3, 2020 Minimum Payment Amount, is paid to NBET and to TCN by January 1, 2021; or, if such payments are below 80%, there is evidence of either activation of DISCOs' payment guarantees by NBET, or action by NERC in accordance with the Electric Power Sector Reform Act 2004, by January 1, 2021. -19- DLR #4.3: At least 85% of N/A SDR 14,637,320 DISCOs' aggregate Q4, 2020 and Q1-Q3, 2021 Minimum Payment Amount is paid to NBET and to TCN by January 1, 2022; or, if such payments are below 85%, there is either evidence of activation of DISCOs' payment guarantees by NBET, or action by NERC in accordance with the Electric Power Sector Reform Act 2004, by January 1, 2022. DLR #4.4: At least 90% of N/A SDR 14,637,320 DISCOs' aggregate Q4, 2021 and QI-Q3, 2022 Minimum Payment Amount is paid to NBET and to TCN by January 1, 2023; or there is evidence of either activation of DISCOs' payment guarantees, or, if such payments are below 90%, action by NERC in accordance with the Electric Power Sector Reform Act 2004, by January 1, 2023. (7) DLI #5: SDR 29,274,640 Financial and operational transparency of DISCOs is improved DLR #5.1: NERC publishes on its SDR 365,933 for publication SDR 7,318,660 website or through links to of (i) for each DISCO and DISCOs' websites: (i) 2017 and SDR 3,293,397 for 2018 IFRS compliant financial publication of(ii). statements of DISCOs; and (ii) key operational and financial data of 2019 by September 30, 2020. DLR #5.2: NERC publishes on its SDR 365,933 for publication SDR 7,318,660 website or through links to of (i) for each DISCO and DISCOs' websites: (i) 2019 IFRS SDR 3,293,397 for compliant financial statements of publication of (ii). DISCOs; and (ii) key operational and financial data of QI-Q3, 2020 on a quarterly basis, by December 31, 2020. -20- DLR #5.3: NERC publishes on its SDR 365,933 for publication SDR 7,318,660 website or through links to of (i) for each DISCO and DISCOs' websites: (i) 2020 IFRS SDR 3,293,397 for compliant financial statements of publication of(ii). DISCOs; and (ii) key operational and financial data of Q4 2020 and QI -Q3 2021 on a quarterly basis, by December 31, 2021. DLR #5.4: NERC publishes on its SDR 365,933 for publication SDR 7,318,660 website or through links to of (i) for each DISCO and DISCOs' websites: (i) 2021 IFRS SDR 3,293,397 for compliant financial statements of publication of(ii). DISCOs; and (ii) key operational and financial data of Q4 2021 and Q1-Q3 2022 on a quarterly basis, by December 31, 2022. (8) Goods, consulting N/A N/A SDR 14,637,820 services, non- consulting services, Training and Workshops, and Operating Costs under the Project TOTAL AMOUNT SDR 548,900,000 B. Withdrawal Conditions for the Program 1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) in respect of the Program, under Categories 1 through 7, until NBET and NERC shall have executed Subsidiary Agreements in accordance with Section I.B of Schedule 2; (b) on the basis of DLRs achieved prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed SDR 130,272,148 may be made on the basis of DLRs Gl.1, G.2.1, 1.1, 2.1, 3.1, 4.1 and 5.1, achieved prior to this date but after May 1, 2019; (c) for any DLR, until and unless the Recipient has furnished evidence satisfactory to the Association that said DLR has been achieved; -21- (d) for any of the DLRs 1.2, 2.2, 3.2, 4.2 and 5.2 until and unless the Recipient has furnished evidence satisfactory to the Association that DLR #G1.2 and the Basic Target of DLR #G2.2 have been fully achieved; (e) for any of the DLRs 1.3, 3.3, 4.3 and 5.3 until and unless the Recipient has furnished evidence satisfactory to the Association that DLR #Gl .3 and the Basic Target of DLR #G2.3 have been fully achieved; and (f) for any of the DLRs 1.4, 4.4 and 5.4 until and unless the Recipient has furnished evidence satisfactory to the Association that DLR #G1.4 and the Basic Target of DLR #G2.4 have been fully achieved. 2. Notwithstanding the provisions of Part B.1(c) of this Section, if any of the DLRs has not been achieved by the date by which the said DLR is set to be achieved, the Association may, by notice to the Recipient: (a) authorize the withdrawal of such lesser amount of the unwithdrawn proceeds of the Financing then allocated to said Category which, in the opinion of the Association, corresponds to the extent of achievement of said DLR, said lesser amount to be calculated in accordance with the disbursement formula for each of responding DLRs mentioned above as set out in the table in paragraph 2 of Section IV of Schedule 2 to this Agreement; (b) reallocate all or a portion of the proceeds of the Financing then allocated to said DLR to any other DLR; and/or (c) cancel all or a portion of the proceeds of the Financing then allocated to said DLR. C. Withdrawal Conditions for the Project With respect to Category (8), no withdrawal shall be made for payments made in respect of the Project prior to the Signature Date. D. Operation Withdrawal Period The Closing Date is June 30, 2023. Section V. Other Undertakings 1 . The Recipient shall ensure that the allowance parameters on aggregate technical, commercial and collection losses, operating expenditures and capital expenditures in the Performance Agreements are not extended beyond their current expiration date of December 31, 2021. -22- SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage)* On each April I and October 1: commencing October 1, 2025, to and including 1.65% April 1, 2045 commencing October 1, 2045, to and including 3.40% April 1, 2050 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.05 (b) of the General Conditions. -23- APPENDIX Section I. Definitions 1. "Annual Work Plan and Budget" means "Annual Work Plan and Budget" mean the annual work plan and budget for the Project to be prepared by the Recipient and approved by the Association pursuant to Section I.E.1 of Schedule 2 to this Agreement. 2. "Anti-Corruption Guidelines" means the Program Anti-Corruption Guidelines and/or the Project Anti-Corruption Guidelines, as applicable. 3. "BPE" mean the Bureau of Public Enterprise, which is the secretariat of the National Council of Privatization, established by the Public Enterprises (Privatization and Commercialization) Act No. 38 of 1999. 4. "Budget Office" means the Budget Office of the Federation within the FMFBNP and any successor thereto 5. "Category" means a category set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 6. "CBN" means the Central Bank of Nigeria and any successor thereto. 7. "CBN Payment Assurance Facility" or "CBN PAF" means 1,301 billion Naira facility extended by CBN to NBET to be used to pay GENCOs for supplied electricity. 8. "CY" means calendar year. 9. "Disbursement Linked Indicator" or "DLI" means in respect of a given Category, the indicator related to said Category as set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement. 10. "Disbursement Linked Result" or "DLR" means in respect of a given Category, the result under said Category as set forth in the table in Section IV.A.2 of Schedule 2 to this Agreement, on the basis of the achievement of which, the amount of the Financing allocated to said result may be withdrawn in accordance with the provisions of said Section IV. 11. "DISCOs" means the eleven distribution companies legally established and operating under Companies and Allied Matters Act 1990, the EPSRA 2004 and the licenses issued by NERC for electricity distribution and retail supply; and "DISCO" means any of the DISCOs. -24- 12. "Electric Power Sector Reform Act 2004" or "EPSRA 2004" means the Recipient's Act No 6, 2005, published in the Gazette No 77, Vol 92 on August 8, 2005, pursuant to which NBET, NERC, the DISCOs, TCN and the GENCOs were established. 13. "FMFBNP" means the Recipient's Federal Ministry of Finance, Budget and National Planning and any successor thereto responsible for finance. 14. "FMP" means the Recipient's Federal Ministry of Power or any successor thereto. 15. "GENCOs" means collectively, the power generation companies, legally established and operating under the Companies and Allied Matters Act 1990, the EPSRA 2004 and the licenses issued by NERC for electricity generation. 16. "General Conditions" means the Program General Conditions and/or the Project General Conditions, as applicable. 17. "Independent Verification Agent(s)" or "IVA(s)" means independent agency or agencies to be engaged by the Recipient for the purposes of certifying the achievement of the DLRs as referred to Section I.D.2(a) of Schedule 2 to this Agreement. 18. "Implementing Entities" mean NBET and NERC and any other entity involved in the implementation of the Program. 19. "MDA" means the Recipient's ministries, departments, and agencies involved in the implementation of the Operation, including (without limitation) NBET, NERC, Budget Office and BPE. 20. "Minimum Payment Amount" means the total amount that each DISCO should pay on the basis of NBET's and TCN's invoices to such DISCO and minimum remittance threshold, as specified in the effective MYTO. 21. "Minimum Remittance Threshold" means the percentage of NBET's invoice that each DISCO is obliged to settle in full to NBET as set out in the effective MYTO by netting off the applicable tariff shortfall. 22. "MYTO" means a multi-year tariff order of NERC, which define the revenue requirement for DISCOs and TCN, minimum remittance thresholds for DISCOs and/or tariffs for transmission, distribution and retail supply. 23. "MYTO Extraordinary Review" means a review of an effective MYTO to be conducted for the period 2021-25 for DISCOs and TCN, such review to include the energy (generation) cost, incorporation of the approved PIPs, redefining the -25- allowances for operating expenditure, capital expenditure and aggregate technical, commercial and collection losses for 2022-25 and adjusting the end-user tariff design. 24. "MYTO Minor Review" means a review of an effective MYTO in response to change(s) in a limited number of parameters as defined in NERC's Multi Year Tariff Order Methodology approved in 2007, as amended from time to time with the agreement of the Association. 25. "NBET" means the Nigerian Bulk Electricity Trading PLC, a company legally established and operating under Companies and Allied Matters Act 1990, the EPSRA 2004 and the license issued by NERC for electricity trading. 26. "NERC" means the Nigerian Electricity Regulatory Commission established under the EPSR Act 2004, or any successor thereto. 27. "Operating Costs" means the incremental expenses incurred by the PSRP Secretariat based on annual budgets approved by the Association attributable to Project implementation, management, and monitoring, including office supplies and consumables; communication costs; operation and maintenance of office vehicles; per diem and travel costs for Project staff; reasonable bank charges; and allowances and salaries of the Project's contractual staff (but excluding the salaries of the Recipient's civil servants). 28. "Operations Manual" means the manual referred to in Section I.C of Schedule 2 to this Agreement, to be adopted by the Recipient for the Operations in accordance with the provisions of said Section, as such manual may be amended from time to time with the agreement of the Association. 29. "Order" means a regulatory instruction issued by NERC to its licensees who are obliged to comply with it in line with the terms and conditions of their respective licenses. 30. "Performance Agreements" mean the agreements entered into by the Purchaser of the DISCOs and BPE detailing the conditions on which the ownership of the DISCOs will remain with the Purchasers. Notably, the conditions include the performance improvement targets proposed by the Purchasers as part of the privatization bidding process. 31. "Performance Improvement Plan" or "PIP" means the plan to be prepared by DISCOs and approved by NERC, which shall include: (i) information management systems for efficient, transparent and accountable execution of operations in commercial function; corporate planning and management of shared services; and management of incidents in electricity supply to customers; (ii) implementation of customers and network mapping supported by geographic -26- information system; and (iii) massive phased deployment of consumption meters, including a revenue protection program for largest customers. 32. "Power Sector Recovery Program" or acronym "PSRP" means the Recipient's Program approved by its Federal Executive Council on March 21, 2017, which includes policy, regulatory, operational, governance and financial interventions to be implemented by the Federal Government of Nigeria to restore the financial viability of Nigeria's power sector, improve transparency and service delivery, resolve consumer complaints, reduce losses and energy theft, and reset the Nigerian Electricity Supply Industry for future growth and any updates of such program. 33. "PSRP Finance and Policy Oversight Committee" or "OC" means the committee to be established and with the composition and functions as set out in Section I.A. 1.1 of Schedule 2 to this Agreement. 34. "PSRP Finance Technical Committee" or "TC" mean the committee to be established and with the composition and functions as set out in Section I.A.1.2 of Schedule 2 to this Agreement. 35. "PSRP Financing Plan" means the PSRP financing plan prepared and approved by the Recipient under DLR G2.1-2.4, meeting the criteria set out in the Verification Protocol and otherwise satisfactory to the Association, and to be updated at least annually, such plan to: (i) cover the estimate of the funding requirements to fully cover the new tariff shortfall for the power sector for CY 2020 to CY 2023, clear historical tariff shortfalls for CY 2015 to CY 2019, cover the interest and principal repayments of the CBN Payment Assurance Facility, and provide contingency funds to be used on a limited and exceptional basis in the event of DISCO license intervention; and (ii) identify sources of funds to fully meet the funding requirement associated with the uses of funds up to CY 2027 or until end-user electricity tariffs fully cover the revenue requirement of the power sector and historical tariff shortfalls are cleared and interest and principal payments of the CBN PAF are completed; and "2020 PSRP Financing Plan" means the PSRP Financing Plan approved for CY 2020 and indicative for CY 2021-2027 and "2021 PSRP Financing Plan", "2022 PSRP Financing Plan" and "2023 PSRP Financing Plan" shall have the equivalent meaning for such CYs and subsequent CYs. 36. "PSRP Secretariat" means the secretariat to be established within the Budget Office and with the composition and functions as set out in Section I.A. 1.3 of Schedule 2 to this Agreement. 37. "Procurement Regulations" means, for purposes of paragraph 87 of the Appendix to the General Conditions, the "World Bank Procurement Regulations for IPF Borrowers", dated July 2016, revised November 2017. -27- 38. "Program Action Plan" means the Recipient's plan dated May 21, 2020 and referred to in Section I.D.1 of Schedule 2 to this Agreement, setting out the actions that the Recipient will need to take to address gaps identified in the current fiduciary and enviromnental and social system and complaints, as such plan may be amended from time to time with the agreement of the Association. 39. "Program Anti-Corruption Guidelines" means, for purposes of paragraph 5 of the Appendix to the Program General Conditions, the Association's "Guidelines on Preventing and Combating Fraud and Corruption in Program-for-Results Financing," dated February 1, 2012, and revised July 10, 2015. 40. "Project 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. 41. "Program General Conditions" means the "International Development Association General Conditions for IDA Financing, Program-for-Results Financing", dated July 14, 2017. 42. "Project General Conditions" means the "International Development Association General Conditions for IDA Financing, Investment Project Financing", dated July 14, 2017. 43. "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. 44. "Subsidiary Agreement" mean the agreement to be entered into between the Recipient and NBET and NERC, respectively, according to Section I.B of this Schedule 2 and "Subsidiary Agreements" means both such agreements. 41. "TCN" means Transmission Company of Nigeria, a company legally established and operating under the Companies and Allied Matters Act 1990, the EPSRA 2004 and the license issued by NERC for electricity transmission, system operation and market operation. 42. "Training and Workshops" expenditures associated with Project related study tours, training courses, seminars, workshops and other training activities, not included under service providers' contracts, in accordance with the Annual Work Plans and Budgets and approved by the Association, including costs of training materials, space and equipment rental, travel, accommodation and per diem costs of trainees and trainers, trainers' fees, and other training related miscellaneous costs. -28- 43. "Verification Protocol" means the Recipient's protocol, acceptable to the Association, setting forth the means by which the achievement of DLRs will be verified under the Program, as such Verification Protocol may be amended from time to time with the prior written agreement of the Association.