$ Report No: RES00259 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE TURKEY GEOTHERMAL DEVELOPMENT PROJECT APPROVED ON NOVEMBER 1, 2016 TO TÜRKIYE KALKINMA VE YATIRIM BANKASI A.S. (TKYB) AND TÜRKIYE SINAI KALKINMA BANKASI A.S. (TSKB) WITH THE GUARANTEE OF THE REPUBLIC OF TÜRKIYE DECEMBER 2nd, 2024 Energy and Extractives Global Practice Europe And Central Asia Region Regional Vice President: Antonella Bassani Regional Director: Charles Joseph Cormier Country Director: J. Humberto Lopez Practice Manager: Stephanie Gil Task Team Leaders: Manuel Jose Millan Sanchez, Alan David Lee The World Bank Turkey Geothermal Development Project (P151739) ABBREVIATIONS AND ACRONYMS AF Additional Financing BA Beneficiary Agreement CTF Clean Technology Fund EIA Environmental Impact Assessment ESMAP Energy Sector Management Assistance Program E&S Environmental and Social FI Financial Intermediaries FiT Feed in Tariff IBRD International Bank for Reconstruction and Development IP Implementation Progress PDO Project Development Objectives RSM Risk Sharing Mechanism TA Technical Assistance TKYB Türkiye Kalkınma ve Yatırım Bankası A.Ş. TSKB Türkiye Sınai Kalkınma Bankası A.Ş. The World Bank Turkey Geothermal Development Project (P151739) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P151739 Turkey Geothermal Development Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Turkiye Approval Date Current Closing Date 01-Nov-2016 31-Dec-2027 Original EA Category Financial Intermediary Assessment (F) (PAD Approval Package-11 May 2023) Organizations Borrower Responsible Agency Turkiye Kalkinma ve Yatirim Bankasi A.S. (TKYB), Turkiye Turkiye Kalkinma ve Yatirim Bankasi A.S. (TKYB), Turkiye Sinai Sinai Kalkinma Bankasi A.S. (TSKB) Kalkinma Bankasi A.S. (TSKB) @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective The Project Development Objective is to scale up private sector investment in geothermal energy development in Turkey. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Undisbursed % Disbursed IBRD 550.00 318.63 231.38 57.93 i The World Bank Turkey Geothermal Development Project (P151739) IDA -- -- -- 0 Grants 40.15 11.03 29.12 27.48 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank Turkey Geothermal Development Project (P151739) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................6 III. PROPOSED CHANGES ................................................................................................................................................6 IV. DETAILED CHANGE(S) ...............................................................................................................................................7 The World Bank Turkey Geothermal Development Project (P151739) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Geothermal Development Project involves two components with three financing sources implemented via Türkiye’s two leading development banks serving as financial intermediaries (FIs): the Development and Investment Bank of Türkiye (‘TKYB’) and the Industrial Development Bank of Türkiye (‘TSKB’). Component 1 of the project comprises a ‘Risk Sharing Mechanism (RSM) for Resource Validation’ financed by a Clean Technology Fund (CTF) grant1, implemented by TKYB. Component 2 ‘Facility for Resource Development’ is financed by IBRD Additional Financing (AF) loans2 and an Energy Sector Management Assistance Program (ESMAP) grant.3 The Project Development Objective (PDO) is to scale up private sector investment in geothermal energy development in Türkiye. 2. This paper proposes to extend the closing date of the CTF grant (for Component 1) by 3 years, from December 30, 2024, to December 31, 2027. The extension would align the RSM implementation period with the current closing date of the IBRD loans and ESMAP grant (for Component 2). The rationale for this extension is explained below. From November 2023 and in the latest Implementation Status and Results Reports (ISR)4, overall Implementation Progress (IP) has been rated Moderately Unsatisfactory due to a period of slow implementation of both Components 1 and 2. This is attributed primarily to changes in Türkiye’s feed-in-tariff (FiT) for geothermal power, which historically provided an important incentive for developers. In June 2021, in context of macroeconomic challenges, the geothermal FiT was lowered from its previous level.5 As a result, geothermal power development significantly slowed across the country: nationally, only 78 MW new geothermal was commissioned in 2021 and 2022, down from an average of 181 MW every year since 2013. Moreover, zero MW were commissioned in 2023 and 2024 (to date). This slow-down in turn resulted in a lack of disbursements under the IBRD AF loans by both FIs. 3. A new, more favorable new FiT scheme was introduced on May 1, 2023, prompting developers to resume paused investments and start new projects.6 The pipeline of subprojects for both Components 1 and 2 has subsequently picked up. Progress towards the PDO is rated Moderately Satisfactory because target values for PDO indicators remain on track to be achieved or exceeded by project closing in 2027.7 PDO indicator actual values are mostly attributable to Component 2. However, Intermediate Results Indicators for Component 1 cannot be achieved by the current closing date. The proposed restructuring to extend the CTF grant closing date is thus necessary to facilitate achievement of the Intermediate Results Indicators for Component 1. 1 US$39.8 million CTF grant to TKYB (TF-A1532, effective Apr 2017, closing December 2024). 2 Original financing: US$250 million IBRD loans to both FIs (IBRD-86520 effective Feb 2017, closed Dec 2022, and 86530 effective Feb 2017 closed Dec 2023); Additional Financing US$300 million IBRD loans to both FIs (93190 and 93200, effective Jun 2022 closing Dec 2027). 3 US$350,000 grant from the ESMAP (TFB7276 effective Jun 2022 closing Jun 2027) executed by TKYB. 4 Implementation Status and Results Reports (ISR) dated November 7, 2023 and June 17, 2024. 5 Türkiye’s first geothermal FiT, for plants commissioned from 2011 to June 2021, provided 105 USD/MWh for 10 years, denominated in USD, with no escalation. Version 2 from June 2021 to April 2023 provided equivalent to around 72 USD/MWh for 10 years, denominated in Türkish lira with an escalation formula weighted mostly by inflation indices. 6 Version 3 of the FiT, from May 2023, provides equivalent to 102 USD/MWh for 15 years, denominated in Turkish lira with an escalation formula weighted mostly by hard currency exchange rates (USD and EUR). 7 Private capital mobilized (PDO Indicator 1) already exceeds the target value 114%. Total capital leveraged (PDO Indicator 2) is at 87% of target value. Generation capacity (PDO Indicator 3) is at 72% of target value. GHG reductions are at 90% of target value. Page 1 The World Bank Turkey Geothermal Development Project (P151739) 4. Separate to the present restructuring, the task team has conducted a supervision mission in November 2024 and defined, together with TKYB and TSKB, a course of further action to restore the performance of the project to a satisfactory rating within FY25, based on a detailed assessment of Component 2 subproject pipelines and a possible further restructuring to cancel a portion of IBRD AF loans during Q3-Q4 of FY25. Component 1: Risk Sharing Mechanism (RSM) for Resource Validation 5. Component 1, with US$39.8 million CTF grant financing, establishes a mechanism to share with private sector developers the technical and financial risks associated with early-stage drilling of wells to explore and confirm the viability of geothermal energy resources with potential to develop for electric power production or direct-use for heating. Implemented through TKYB, the component also provides Technical Assistance (TA) to strengthen TKYB’s capacity to supervise implementation of the RSM. Of the total grant, US$37 million is for the RSM while US$2.8 million is for training and operating costs. 6. The RSM has been in place since the original project financing, approved October 2016, effective April 2017, with original closing date of December 2022, subsequently extended to current December 30, 2024. The RSM is implemented through successive rounds soliciting proposals from geothermal developers to explore for and evaluate the viability of geothermal resources in Türkiye. Developers express interest against eligibility criteria, then TKYB screens them and requests a full proposal. After evaluating full proposals, TKYB invites select developers to negotiate and sign a Beneficiary Agreement (BA) with them. The BA sets out technical success criteria for a project’s exploratory wells. If the well tests fail (i.e. do not meet the success criteria), then TKYB disburses a predetermined amount of CTF grant funds to reimburse part of the exploration costs. If the success criteria are met, then no CTF grant proceeds are disbursed and instead the developer pays a modest ‘success fee’ to TKYB’s RSM account. 7. Impact for the RSM is measured by the intermediate results indicators for the RSM, with target values to: (i) support 16 drilling projects; (ii) catalyze US$78 million direct finance (i.e. full well costs borne by developers); and (iii) confirm 99.5 MW resources. The volume of direct financing catalyzed by CTF in turn contributes to PDO Indicators on private capital mobilized and total capital leveraged. 8. To date, the RSM has attracted 34 full proposals under three rounds (Round 1 closed, Round 2 and 3 ongoing), among which 6 subproject developers have signed BAs. A total of two BAs completed to date have catalyzed US$8.6 million private capital (i.e. full well costs borne by developers), of which US$5.1 million is the share covered by CTF disbursements, however both subprojects revealed unviable geothermal resources (i.e. zero MW confirmed). Three other subprojects with BAs signed are at an advanced stage and together could catalyze direct financing of US$14.2 million for 23.4 MW potential geothermal resources.8 The remaining BA is on hold along with 9 other subprojects at negotiation stage (prior to signing a BA), pending final investment decisions and Environmental Impact Assessment (EIA) decisions.9 In July 2024, given strong demand for the RSM, TKYB launched a request for expression of interest (EoI) under a fourth round, noting that BAs for this round would be contingent upon extension of the CTF grant beyond the current closing date of December 2024. This has resulted in 14 new full proposals. 9. To date a total of US$11 million of the CTF financing has been disbursed to TKYB’s designated account, including US$3.8m balance in the designated account reflecting expected payouts implied by signed BAs. Importantly, the impact of the RSM is measured not by disbursement, as for traditional investments, because RSM disbursements are contingent on the outcome of well tests that are inherently uncertain. While the RSM develops 8Estimated as the sum of full well costs of three Round 2 subprojects: GMK-Güzelyurt; Özsoy; and Üç-As. 9All 10 subprojects on hold could together mobilize an additional $57.1 million if they proceed. The remaining 19 subprojects proposed under Rounds 1, 2 and 3 withdrew for reasons such as problems with land acquisition, licensing, and high drilling costs. Page 2 The World Bank Turkey Geothermal Development Project (P151739) and updates disbursement scenarios, the nature of the RSM makes disbursement predictions difficult, as the subprojects are fully financed by private developers and how much the RSM pays out, if at all, is only known after the completion of the drilling and assessment of the wells. 10. TKYB estimate that only four additional subprojects need to proceed to BA in order to precommit the balance of CTF grant for the RSM and, once BAs completed, make substantial progress toward related results indicators. If the CTF is not extended, all existing BAs and negotiations for remaining RSM subprojects will terminate automatically by December 2024. With extension of the CTF grant to match the Project closing date of December 2027, and implementation of the 4th Round, the RSM-specific target values and related PDO target values remain reasonable, accounting for the current pipeline following the period of low FiT between 2021 and 2023, subsequently remedied by the May 2023 reform, and accounting for the inherent uncertainty of the geothermal resources being tested under the RSM. The detailed status of RSM rounds is provided in Annex A. Subcomponent 2.1: Loan Facility for Resource Development 11. This component provides funding in an amount of US$550 million to geothermal developers to support: (i) the capacity drilling stage; and (ii) the steam gathering, power plant, or direct use facility construction stage. During implementation of the original loans (effective as of February 2017), the macroeconomic situation and a very favorable feed-in tariff (FiT), resulted in timely disbursement of the original loans of US$250 million. Then, the revised FiT regime enacted in 2021 slowed down geothermal development in the country (as described in parargraphs 3-4 above). The new, more favorable FiT scheme introduced on May 1, 2023 has allowed both FIs to resume their subproject pipeline development activities under US$300 million AF loans, of which US$30 million has already been disbursed to date. The subproject pipelines of both FIs for Component 2 are assessed as sufficiently large and advanced for a substantial share of the remaining US$270 million AF loan amounts to be committed by the end of March 2025 and utilized within the closing date of the project (31 December 2027). Subcomponent 2.2: Technical Assistance for Direct-Use Applications 12. This component, with ESMAP grant financing, supports developers to demonstrate the technical and/or financial viability of proposed projects that directly use geothermal heat for end-uses such as hot water or space heating for buildings or agricultural greenhouses (rather than using geothermal heat for electric power generation). This grant supports preparation of pre-feasibility reports, business plans, market analysis and feasibility reports. Project documents provide that at least three of the developers supported under this grant shall be women owned and/or lead to encourage women’s participation as well as empowerment. The grant will at maximum support each developer covering 50 percent of the estimated cost of the proposed studies, with a limit of US$50,000 per project. The grant is implemented by TKYB, but the funds will be available to clients from both FIs, on a first-come, first- served basis. To date, no grant funds have been disbursed. The main reason was the inadequacy of the marketing activities. Therefore, TKYB and TSKB confirmed that this grant is being marketed to their potential clients and it is expected that demand for the grant will increase as the subproject pipeline development activities are now intensified. Past Restructurings 13. The Project has been restructured six times to date, four times during the original project implementation period (2017 to 2022), and twice during AF implementation (since 2022), as follows. (i) In August 2018, amendment to the CTF grant agreement to add a category (Category 3 “Operating Costs and Training”) and reallocate funds between categories to allow TKYB to cover its incremental operating costs associated with the implementation of the RSM. Page 3 The World Bank Turkey Geothermal Development Project (P151739) (ii) In January 2020, amendment of the CTF grant agreement to reallocate US$1 million from Category 1 “Payments out of the RSM under Part A of the Project” to Category 2 “Consultant’s services under Part A of the Project”, and revision of the targets for the intermediate results indicators for Components 1 (namely, number of exploration drilling projects supported, total power generation capacity confirmed, and total private capital mobilized) and Component 2 (namely, geothermal resources developed through capacity drilling, and number of capacity drilling projects) to downsize the overestimated targets based on the experience gained from the first application round under Component 1, and to expand the overachieved targets under Component 2. (iii) In February 2021, amendment to the CTF grant agreement to lower the success fee to be paid by RSM beneficiaries for successful wells from 10 percent to 5 percent of eligible incurred drilling expenditures for the first three wells and from 25 percent to 10 percent for up to two additional wells that can be added to a specific Beneficiary Agreement (BA). (iv) In September 2021, amendment to the IBRD loan agreement with TSKB to change the provisions on CO2 emission limits (replace the cap on the share of the TSKB credit line that can be allocated to subprojects with initial CO2 emissions above 583 g/kWh in the Menderes and Gediz grabens systems by a new eligibility criterion requiring subprojects in the Menderes and Gediz grabens systems to have estimated average annual net CO2 emissions below the 2018 Grid Emission Factor of 540g/kWh calculated using the predictive model developed in the World Bank Study “Characterizing the Declining CO2 emissions from Turkish Geothermal Power Plants”). (v) In December 2022, amendment to the CTF grant agreement to extend, for the first time, the CTF Grant’s Closing Date by two years, from December 31, 2022, to December 30, 2024.10 (vi) In June 2023, amendment of the CTF grant agreement to reallocate US$220,000 from the disbursement Category 1 “Payments out of the Risk Mechanism under Part A of the Project” to Category 3 “Operating Costs and Training under Part A of the Project”. 14. There are no outstanding audit reports. TKYB has submitted the entity audit report, and it is satisfactory to the Bank. Regarding the 2024 Project audit report, TKYB has engaged with the auditors who will begin auditing within the first quarter of 2025, and TKYB will submit the 2024 Project audit report to the Bank by June 30, 2025. TKYB published the 2023 Project audit report (abridged version) on its website and will publish the 2024 Project audit report within 2 months after receiving it. Rationale for Restructuring 15. CTF Grant’s Closing Date Extension. In early 2024, TKYB raised the prospect of a request to extend the CTF closing date recognizing the large pipeline of subprojects under Rounds 2 and 3 and extra time needed to achieve RSM intermediate results indicator target values accounting for the FiT-related market pause through 2023. In addition, TKYB noted strong potential for a Round 4 to reflect the market’s positive response to the newly revised FiT alongside the opportunity to use remaining available balance toward the PDO. In advance of their formal request, the Bank team confirmed that CTF endorsed a prospective extension request by email from the CTF secretariat dated May 10, 2024. Accordingly, on June 27, 2024, TKYB has requested an extension of the current closing date of the CTF grant agreement from December 30, 2024 to December 31, 2027, which would also align with the closing date of the IBRD financing. On July 24, 2024, TKYB launched a Round 4 call for proposals (based on a clear understanding that such a Round would be contingent on prospective extension of CTM), and received 17 Expressions of Interest. After evaluation, TKYB in October 2024 shortlisted all 17 and invited them to prepare full 10At the time of IBRD AF approval, in November 2021, the RSM’s original closing date (December 2022) was retained as the second round was still in progress with prospects for a third round then uncertain. In November 2022, as demand for a third round become clearer, the CTF grant was extended for the first time, by two years from December 2022 to December 2024. Page 4 The World Bank Turkey Geothermal Development Project (P151739) proposals. The Bank team evaluated the full pipeline with TKYB on November 27, 2024 and determined that the existing results targets for the RSM remain appropriate. 16. Considering that total amount of pay-out11 realized until October 2024 is US$5,066,227 under Category-1, the RSM Unit has provided a pipeline and plan to commit all remaining CTF funds (US$31,713,773 for payments out of the RSM under Category 1 of the Grant Agreement) by December 31, 2025, and to complete well drilling and testing by September 30, 2027, to close all BAs by December 31, 2027. Beneficiary Agreements will be signed by December 31, 2025 on a “first come first serve” basis within the limits of the availability of remaining CTF fund. The committed amount by BAs may not be fully utilized due to the intrinsic uncertainty of contingent commitments and the changing decisions of investors after the signature of BA. Considering this, TKYB may extend the due date for signing BAs beyond December 2025 so long as all BAs can be feasibly completed by Dec 2027, based on a project-by-project development schedule. The commitment amounts were estimated based on the most likely scenario which was identified 50% failed and 50% successfully completed for all subprojects. Given the structure of this grant, it is very likely that some CTF funding will remain undisbursed at the original Project closing date. The extension under this restructuring will allow TKYB to utilize the remaining CTF Grant amount to partially compensate beneficiaries of the remaining active subprojects in the event that their tests reveal unviable geothermal resources under RSM Rounds 2, 3 and 4, which can amount to a maximum payout potential of US$31,713,773. 17. While implementation of RSM has involved various delays and low commitments, lessons learned under the RSM have informed measures to accelerate implementation and increase participation in the RSM. These measures, which are all being undertaken by TKYB, include: (i) stronger standardization of the application documents such as business plan templates, (ii) adding a shortlisting phase through EoIs to improve the quality of applications, holding consultation workshops at the launch of each round and application workshops prior to opening the application period, (iii) increasing the RSM coverage (e.g., surface exploration costs), (iv) reducing the RSM success fee to increase interest in the RSM; prioritizing applications that are in more advanced stages of completing the environmental and social (E&S) requirements; and closer monitoring of the subprojects. 18. The requirement of the World Bank Directive for Investment Project Financing for the closing date extension have been met, namely: (i) with the restructuring, the PDO remains achievable; (ii) the performance of the Borrower is satisfactory;12 and (iii) the Borrower and the World Bank agree on actions (para. 20) that will be undertaken to complete the project. Following the restructuring, PDO will continue to be highly relevant, and the project remains of strategic importance to the Government of the Republic of Türkiye. 11Note that the pay-out differs from the disbursement amount stated in para 5, which refers to the amount withdrawn by TKYB. 12Despite the external factors causing IP rating to be at MU, the overall performance of the Borrower remains satisfactory as reflected by the Project management rating of Moderately Satisfactory in the last ISR. Page 5 The World Bank Turkey Geothermal Development Project (P151739) II. DESCRIPTION OF PROPOSED CHANGES 19. The proposed changes include (a) extension of CTF grant’s closing date under Component 1, (b) revision of results framework target dates, and (c) update of disbursement estimates. 20. CTF Grant’s Closing Date Extension. The closing date of the CTF grant will be extended from December 30, 2024, to December 31, 2027. [Note: In Section III Proposed Changes, “Loan Closing Date Extension” refers only to the Grant Closing Date Extension.] 21. Revision of results framework. The end target date of each intermediate results indicator of Component 1 is revised to reflect the new closing date of December 31, 2027. 22. Update of disbursement estimates. The extension will allow TKYB to utilize the remaining CTF Grant amount to sign and conclude Beneficiary Agreements with geothermal project developers under the RSM Rounds 2, 3 and 4, with maximum payout potential of about US$31,713,773. 23. Paris Alignment. The proposed restructuring entails no new activities nor changes to project scope; thus, a Paris Alignment assessment is not required. 24. Safeguards. The restructuring does not involve changes to project design that have impact on the Bank’s disclosed environmental and social (E&S) due diligence. Therefore, no change is to be made to the Bank's disclosed E&S documents. 25. INT investigations. No relevant INT investigations/Inspection Panel case ongoing or completed related to the Project. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Results Yes Loan Closing Date Extension Yes Disbursements Estimates Yes Implementation Schedule Yes Development Objective No Loan Cancellations No Safeguard Policies Triggered No Reallocations No ISDS No Financial Management No MFD/PCE No Procurement No Risks No Institutional Arrangement No Legal Covenants No Conditions No Implementation Modalities No Disbursements Arrangements No Page 6 The World Bank Turkey Geothermal Development Project (P151739) DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Loan Closing Original Revised Proposed Proposed Deadline Loan/Credit/Trust Status Closing Closing(s) Closing for Withdrawal Fund Applications IBRD-86520-001 Closed 31-Dec-2022 31-Dec-2022 IBRD-86530-001 Closed 31-Dec-2022 31-Dec-2023 IBRD-93190-001 Effective 31-Dec-2027 31-Dec-2027 31-Dec-2027 30-Apr-2028 IBRD-93200-001 Effective 31-Dec-2027 31-Dec-2027 31-Dec-2027 30-Apr-2028 TF-A1532-001 Effective 31-Dec-2022 30-Dec-2024 31-Dec-2027 30-Apr-2028 TF-B7276-001 Effective 30-Jun-2027 30-Jun-2027 30-Jun-2027 31-Oct-2027 DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Implementation Start Date Operation Closing Date 01-Nov-2016 31-Dec-2027 Page 7 The World Bank Turkey Geothermal Development Project (P151739) Projected Date for Full Disbursement 30-Apr-2028 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 11 May 2023) FY2017 200,000.00 30,000,000.00 30,000,000.00 FY2018 24,800,000.04 130,413,040.00 130,413,040.00 FY2019 82,200,000.00 10,140,460.00 10,140,460.00 FY2020 86,000,000.04 57,229,540.00 57,229,540.00 FY2021 52,599,999.96 500,000.00 500,000.00 FY2022 44,000,000.04 9,999,913.69 9,999,913.69 FY2023 0.00 22,125,000.00 22,125,000.00 FY2024 0.00 20,000,000.00 20,000,000.00 FY2025 0.00 100,000,000.00 47,875,000.00 FY2026 0.00 100,000,000.00 0.00 FY2027 0.00 77,000,000.00 0.00 FY2028 0.00 0.00 0.00 Page 8 The World Bank Turkey Geothermal Development Project (P151739) RESULTS COUNTRY: Turkiye Turkey Geothermal Development Project @#&OPS~Doctype~OPS^dynamics@restrannexpolicyandresult#doctemplate PDO Indicators by PDO Outcomes Private capital mobilized Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Private capital mobilized 0.00 Jun/2015 631,013,288.00 20-May-2024 631,013,288.00 13-Dec-2024 555,000,000.00 Dec/2027 (Amount(USD)) Total capital leveraged Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Total capital leveraged 0.00 Jun/2015 760,638,288.00 20-May-2024 730,638,288.00 13-Dec-2024 840,000,000.00 Dec/2027 (Amount(USD)) Increased generation capacity from geothermal resources Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Generation Capacity of Renewable 0.00 Jun/2015 277.25 20-May-2024 277.25 13-Dec-2024 383.00 Dec/2027 Energy (other than hydropower) constructed under the project (Megawatt) Revise Generation Capacity of 0.00 Jun/2015 277.25 20-May-2024 277.25 13-Dec-2024 383.00 Dec/2027 Renewable Energy constructed-Geo-thermal (Megawatt) Reduction of CO2 emissions Page 9 The World Bank Turkey Geothermal Development Project (P151739) Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Revise Estimated CO2 emission 0.00 Jun/2015 848,594.00 19-May-2024 859,067.00 13-Dec-2024 945,000.00 Dec/2027 reductions (Metric tons/year) Intermediate Results Indicators by Components Risk Sharing Mechanism for Resource Validation Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Revise Volume of direct financing 0.00 Jun/2015 8,643,288.00 18-May-2024 8,643,288.00 13-Dec-2024 78,000,000.00 Dec/2027 catalyzed by CTF financing (Amount(USD)) Revise Exploration drilling projects 0.00 Jun/2015 4.00 18-May-2024 4.00 13-Dec-2024 16.00 Dec/2027 supported under the Risk Sharing Mechanism (Number) Revise Geothermal resources (for 0.00 Jun/2015 0.00 18-May-2024 0.00 13-Dec-2024 99.50 Dec/2027 electricity and heat) confirmed through exploration drilling (Megawatt) ReviseGrievance registered related to 0.00 Jun/2015 100.00 18-May-2024 100.00 13-Dec-2024 100.00 Dec/2027 delivery of project benefits addressed within stipulated service standards for response times (Percentage) Facility for Resource Development Indicator Name Baseline Actual (Previous) Actual (Current) Closing Period Result Month/Year Result Date Result Date Result Month/Year Geothermal resources developed 0.00 Jun/2015 207.25 19-May-2024 207.25 13-Dec-2024 320.00 Dec/2027 through capacity drilling (Megawatt) Page 10 The World Bank Turkey Geothermal Development Project (P151739) Capacity for direct use applications 0.00 Oct/2021 0.00 19-May-2024 0.00 13-Dec-2024 22.00 Dec/2027 developed under the project (Megawatt) Capacity drilling projects supported 0.00 Jun/2015 7.00 19-May-2024 7.00 13-Dec-2024 12.00 Dec/2027 by the Loan Facility (Number) Portfolio at risk 90 days 0.00 Jun/2015 0.00 19-May-2024 0.00 13-Dec-2024 4.00 Dec/2027 (Percentage) Grievance registered related to 0.00 Jun/2015 100.00 19-May-2024 100.00 13-Dec-2024 100.00 Dec/2027 delivery of project benefits addressed within stipulated service standards for response times (Percentage) Women-led or women owned 0.00 Jun/2021 0.00 19-May-2024 0.00 13-Dec-2024 3.00 Dec/2027 enterprises that receive grants for feasibility assessments for direct use projects (Number) 0.00 Jun/2021 0.00 19-May-2024 0.00 13-Dec-2024 5.00 Dec/2027 Increase in percentage of women in technical and managerial positions in Comments on achieving targets Gender and CE actions and indicators were added through the AF loans, which became companies supported by the project effective on June 17, 2022. Since no new subprojects have been confirmed under the AF (Percentage) loans yet, no progress has been made on the gender or CE indicators. Participants in gender-bias training 0.00 Jun/2021 12.00 19-May-2024 12.00 13-Dec-2024 130.00 Dec/2027 from sub-project sponsors (Number) 0.00 Jun/2021 0.00 19-May-2024 0.00 13-Dec-2024 80.00 Dec/2027 Beneficiaries that receive positive feedback from citizens through use of Comments on achieving targets Gender and CE actions and indicators were added through the AF loans, which became new and effective engagement tools effective on June 17, 2022. Since no new subprojects have been confirmed under the AF (Percentage) loans yet, no progress has been made on the gender or CE indicators. 0.00 Jun/2021 0.00 20-May-2024 0.00 13-Dec-2024 80.00 Dec/2027 Beneficiaries who report that the project has established effective Comments on achieving targets Gender and CE actions and indicators were added through the AF loans, which became engagement processes effective on June 17, 2022. Since no new subprojects have been confirmed under the AF (Percentage) loans yet, no progress has been made on the gender or CE indicators. Page 11 The World Bank Turkey Geothermal Development Project (P151739) Annex A: RSM Implementation Status details The detailed status of Component 1 RSM rounds is as follows. The first round of the RSM was launched on July 5, 2018, and closed on December 31, 2022. Seven subprojects13 were shortlisted to prepare full proposals. By the time Round 1 was closed, two subprojects had signed BAs and both completed tests to determine the viability of the geothermal resource. Both subprojects revealed that the geothermal resource was unviable based on their respective BA criteria, and thus qualified for compensation of the agreed share of well costs (60 percent of the acceptable well costs) from the RSM to the beneficiaries. Total pay-out for this round was US$5.1 million. No financial commitments remain. Among the other five shortlisted subprojects, three withdrew, and two were on hold at the time of Round 1 closing due to delays with the Environmental Impact Assessment (EIA). The two subprojects on hold were transferred to and are now accounted under Round 2 (as described below). RSM Round 2, launched on January 21, 2021, comprises 16 subprojects including the two subprojects transferred from Round 1. Twelve withdrew for various reasons such as problems with land acquisition, licensing, and drilling costs. Among the remaining four, 3 have signed BAs and one is due to sign a BA soon. 14 For the three subprojects with BAs signed, completion of their tests are expected by second quarter of 2025, with a combined full well cost of US$14.2 million (assuming 2 failed wells per subproject), for 23.4 MW potential geothermal resources. RSM Round 3, launched in April 2023, had 31 developers express interest, of which 13 submitted full proposals in July 2023 following screening, facilitation, and evaluation. Five have subsequently withdrawn.15 Among the remaining eight, none have yet signed BAs. The two most advanced subprojects are working on E&S Instruments (Efendi Kuyucak and Zorlu Ağrı) with a combined full well cost of US$11.8 million. The other six (Efendi Köşk, Efendi Kozaklı, Zorlu Simav, Zorlu Nemrut, GMK Ilısu, Sanko) are on hold due to delays with Environmental Impact Assessment or pending final investment decisions. The estimated combined full well cost of the six subprojects on hold is US$39.5 million if they all proceed. RSM Round 4, launched with a Consultation Workshop held on July 26, 2024, and called for EoIs for new exploration projects with an understanding that new BAs can only be signed pending extension of the CTF grant beyond December 2024. In total, 17 EoIs have been received. The initial evaluation of the EoIs has been completed, and TKYB shortlisted and invited all applicant developers to submit their full proposals. The shortlisting was based on four main criteria which are identified as: (i) license/permits availability, (ii) EIA decision availability, (iii) having defined well locations and land use permits availability, (iv) current financial status and financial intelligence study results. All shortlisted developers attended the one-day virtual training program scheduled on October 10, 2024. 14 out of 17 applicant developers have submitted their full proposals for which RSM Unit has recently started the evaluation process. TKYB predict that only four subprojects need to proceed to BA in order to pre-commit the balance of CTF grant for the RSM. 13 The term ‘subproject’ here is broad and includes prospective developers who have expressed interest in participating in the RMS without yet signing a BA. Subprojects that have not signed a BA do not entail any financial commitment for TKYB. 14 Özsoy (BA signed in February 2023, drilling started Dec 2023), GMK Güzelyurt (BA signed in January 2024, drilling started April 2024), ÜÇ-AS (BA signed in August 2023, drilling expected to start Q4 2024); GMK Koçpınar (BA to be signed soon, currently developing environmental and social instruments with BA expected to be signed in Q4 2024 and drilling in Q4 2025). 15 One (Küçük Menderes) withdrew due to the high drilling costs, the other four (Seramed Sindirgi, Seramed Bursa, Seramed Gönen, and Seramed Eskişehir) withdrew due to investor decision changing investment priorities. The World Bank Turkey Geothermal Development Project (P151739)