OFFICIAL DOCU M ENTS Supplemental Letter ENERGY EFFICIENCY SERVICES LIMITED August 28, 2018 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America INDIA: Loan No. 8857-IN; Guarantee No. G2580-IN (Energy Efficiency Scale-Up Program) Performance Monitoring Indicators Dear Sirs and Mesdames: We refer to Section III of Schedule 2 to the Loan Agreement of even date between Energy Efficiency Services Limited ("Borrower") and the International Bank for Reconstruction and Development ("Bank"). Unless otherwise agreed with the Bank, we shall monitor and evaluate the implementation of the Project in accordance with the Performance Monitoring Indicators attached to this letter. Very truly yours, ENERGY EFFICIENCY SERVICES LIMITED By_ Authorized Representat ye Attachment - Performance Monitoring Indicators N.B. Legend: Disbursed linked indicator (DLI); Program Action Plan (PAP); Results Framework (RF) Results Framework Matrix India: Energy Efficiency Scale-Up Program Results Areas PDO/Outcome Indicators Intermediate Results Indicators indicator DLI # Unit of Baseline End Target Supported by (Key indicators to measure the achievement of (critical processes, outputs or Meas. (Year) (Year) PforR each aspect of the PDO statement) intermediate outcomes Indicators needed to achieve each aspect of the PDO) PDO Indicator l - Projected lifetime energy 1 GWh 197,900 403,400 savings from LED bulbs, LED tube lights, energy (2017) (2022) efficient ceiling fans and LED street lights sold via EESL programs PDO Indicator 2 - Avoided C02 emissions 2 MtCO2 160.7 326.8 associated with projected lifetime energy (2017) (2022) savings from LED bulbs, LED tube lights, energy efficient ceiling fans and LED street lights sold via EESL programs (see footnote for assumptions) PDO Indicator 3-Amount of commercial 3 US$ 0 $200,000,000 financing leveraged by the IBRD guarantee (2017) (2022) IR Indicator 1.0 - Direct employment 1.0 number 366 (of which 16% 500 (of which (number of jobs) created (of which women); 25% women) women) 2 (2017) (2022) Results Area 1 - IR Indicator 1.1- Number of LED bulbs 1.1 DI1 Number 216,000,000 437,000,000 Energy savings and tube lights sold via EESL program (2017) (2022) and EE market IR Indicator 1.2 - Estimated number of 1.2 Number 336 million (163 656 million transformation in beneficiaries (of which women) of LED million) (318 million) bulbs sold via EESL program3 (2017) (2022) Key assumptions for calculations: of PDO I and 2: (i) LED bulbs: energy savings per equipment per year: 130 kWh/yr per equipment (as per EESL dashboard); estimated lifetime: 7 years; (ii) LED tube lights: energy savings per equipment per year: 36 kWh/yr per equipment (as per EESL dashboard); estimated lifetime: 10 years; (iii) EE fans: energy savings per equipment per year: 93 kWh/yr per equipment (as per EESL dashboard); estimated lifetime: 10 years; and (iv) LED street lights: energy savings per equipment per year: 141 kWh/yr per equipment (as per EESL dashboard); estimated lifetime: 8 years. Grid emissions factor: 0.00081 tCO2/kWh 2 Target for the indicator is based on additional hires above the 2017 baseline. Achievement of the indicator assumes sufficient applications from eligible female candidates are received for advertised positions. The following assumptions are used to estimate the indicator: (i) an average of 3 LED bulbs per household are sold via the EESL UJALA program; (ii) the average household size data (4.7 people per household) is taken from the India's 2011 populations census; (iii) the average male-female ratio of households (940 females per 1000 males) is also taken from India's 2011 population census. Results Areas PDO/Outcome Indicators Intermediate Results Indicators Indicator DLI # Unit of Baseline End Target Supported by (Key indicators to measure the achievement of (critical processes, outputs or Meas. (Year) (Year) PforR each aspect of the PDO statement) intermediate outcomes Indicators needed to achieve each aspect of the PDO) the residential IR Indicator 1.3 - Number of energy 1.3 DLI2 number 587,795 6,408,000 sector efficient ceiling fans sold via EESL program (2017) 2022 IR Indicator 1.4 -Approval of EESL 1.4 Y/N (2017) (2022) strategy for sustainable LED market No strategy transformation in residential lighting, including set of indicators EESL will monitor and track. Results Area 2 - IR Indicator 2.1- Number of LED street DLI3 number 1,967,000 9,167,000 Energy savings lights installed under SLNP 2.1 (2017) (2022) and EE market IR Indicator 2.2 - Number of 2.2 number 500 1250 transformation in municipalities/towns/villages/gram (2017) (2022) public street panchayats4 with LED street lights lighting installed through SLNP Results Area 3- IR Indicator 3.1- EESL implementation of 3.1 DLI4 Y/N (2017) (2021) Development of the three EE AC sustainability actions sustainable approved.s business models IR Indicator 3.2- EESL approval of 3.2 DLI5 Y/N (2017) (2020) in new EE market business model for collaboration with segments private sector ESCOs in the implementation of EESL's Building EE activities Results Area 4- PDO Indicator 4- Establishment of Sustainable 4 DLI6 Y/N (2017) (2020) Institutional Development unit. The unit shall (i) have direct Strengthening for reporting to EESL's Managing Director; (ii) be sustainable EE resourced with budget and dedicated full-time scale-up qualified staff; and(iii))approed_TOR.;and (___) approved TOR.;_and 4 The gram panchayats in India are the local self-governments in the villages of the country. ' As described in Table 3 of PAD main document with the full description of DLI4, the EE AC actions to be implemented by EESL are: (i) dissemination of consumer guide on safe refrigerant replacement and disposal and of buy-back options (where available) in the packaging of EESL-procured AC; (ii) Inclusion, in EESL's bidding documents for energy efficient ACs, of request to manufacturers to report (through a reporting template) on AC refrigerant disposal and recycling, including Registered E-Waste Dismantler/Recycler's verification (or evidence) of disposal, in conformity with India's Environmental Protection Act to enable monitoring and recording of AC disposal and recycling actions by manufacturers participating in EESL bids; and (iii) conducting stakeholder consultations on safe refrigerant disposal with e-waste providers and AC stakeholders Results Areas PDO/Outcome indicators Intermediate Results Indicators Indicator DLI # Unit of Baseline End Target Supported by (Key indicators to measure the achievement of (critical processes, outputs or Meas. (Year) (Year) PforR each aspect of the PDO statement) intermediate outcomes indicators needed to achieve each aspect of the PDO) Unit delivers report on implementation of updated EHSS Manual covering all EESL programs under implementation. (See Note (1)) IR Indicator 4.1- Periodic independent 4.1 Y/N (2017) (2022) evaluations of EESL programs IR Indicator 4.2 Approval of capacity 4.2 Y/N (2017) (2020) building and training program for EE private sector to facilitate support/facilitate private sector participation in EE market segments IR Indicator 4.3 - Adoption by EESL 4.3 Y/N (2017) (2019) management of standardized procurement documents: "Guidelines", SBDs and MOU format, 2.1 Indicator Description Indicator Description Frequency Data Source Methodology for data Responsibility DLIs Name (#) collection for Data Responsibility for Scalability of Collection Data Verification Disbursement (Yes/No) PDO Projected lifetime energy savings from LED Annual EESL Dashboard Compilation of equipment EESL Indicator 1 bulbs, LED tube lights, energy efficient ceiling sold from dashboard [*see fans and LED street lights sold via EESL assumptions for calculation of programs indicator] PDO Avoided C02 emissions associated with Annual EESL Dashboard Compilation of equipment EESL Indicator 2 projected lifetime energy savings from LED sold from dashboard (*see bulbs, LED tube lights, energy efficient ceiling footnote with assumptions for fans and LED street lights sold via EESL calculation of indicator) I programs PDO Amount of commercial financing leveraged by Once EESL annual report; Compilation of information EESL Indicator 3 the IBRD guarantee] commercial lead from loan agreements signed arrangers or bonds issued Indicator Description Frequency Data Source Methodology for data Responsibility DLIs Name (#) collection for Data Responsibility for Scalability of Collection Data Verification Disbursement (Yes/No) IR Indicator Direct employment (number of jobs) created Annual EESL EESL employment records EESL 1.0 (of which women) IR Indicator Number of LED bulbs and tube lights sold via Annual EESL dashboard and Compilation from EESL EESL Independent Yes 1.1 EESL program its reporting system; dashboard and verification of verification agency EESL sales receipts EESL's reporting system for EESL dashboard, including random sampling to test reporting system's integrity to confirm quantities in dashboard IR Indicator Estimated number of beneficiaries (of which Annual Estimate, taking into account EESL 1.2 women) of LED bulbs sold via EESL program number of bulbs sold (assuming per household 3 LED bulbs sold via EESL UJALA program) and household data from India Population census IR Indicator Number of energy efficient ceiling fans sold Annual EESL dashboard and Compilation from EESL EESL Independent Yes 1.3 through EESL program its reporting system; dashboard and verification of verification agency EESL sales receipts EESL's reporting system for EESL dashboard, including random sampling to test reporting system's integrity to confirm quantities in dashboard IR Indicator Approval of EESL strategy for sustainable In year 2 EESL Board Meeting EESL Board meeting minutes, EESL 1.4 market transformation of residential lighting, and end of Notes (or signed as certified by the Company including activities associated with EESL Program document issued by Secretary (or signed roles/functions (as outlined in PAP) the relevant document issued by the At end of Program, EESL report on key strategy official(s) to whom relevant official(s) to whom indicators (listed in PAP and agreed in the decision has the decision has been approved strategy) been delegated by delegated by the Board of the Board of Directors through the Directors through adoption of a resolution); the adoption of a approved strategy; report on resolution); ELCOMA key strategy indicators and third party market data indicator Description Frequency Data Source Methodology for data Responsibility DLis Name (#) collection for Data Responsibility for Scalability of Collection Data Verification Disbursement (Yes/No) IR Indicator Number of LED street lights installed under Annual EESL Dashboard and Compilation from EESL EESL Independent Yes 2.1 SLNP EESL reporting dashboard and verification of verification agency system; sales EESL's reporting system for (IVA) receipts EESL dashboard, including random sampling to test reporting system's integrity to confirm quantities in dashboard IR indicator Number of municipalities/towns/panchayat Annual EESL contracts with EESL compiles information EESL 2.2 with LED street lights installed under SLNP Urban / Rural Local from weekly MoP report to Bodies or State Cabinet Governments/other Departments as the case may be; Weekly MoP report to Cabinet IR Indicator EESL implementation of EE AC sustainability Annual EESL Board meeting EESL submits relevant EESL Independent Not 3.1 actions minutes, as certified documentation to IVA; IVA verification agency Applicable by the Company checks EESL website; (IVA) Secretary (or signed document issued by the relevant official(s) to whom the decision has been delegated by the Board through the adoption of a resolution); EESL website; EESL documents; EESL consultations report; random sampling of EESL ACs. IR Indicator EESL approval of business model for Once EESL Board meeting EESL submits relevant EESL Independent Not 3.2 collaboration with private sector ESCOs in the minutes, as certified documents to IVA verification agency Applicable implementation of EESL Building EE activities by the Company (IVA) Secretary (or signed document issued by Indicator Description Frequency Data Source Methodology for data Responsibility DLis Name (#) collection for Data Responsibility for Scalability of Collection Data Verification Disbursement (Yes/No) the relevant official(s) to whom the decision has been delegated by the Board of Directors through the adoption of a resolution); Final report on business model PDO Establishment of Sustainable Development Annual EESL Board meeting EESL submits relevant EESL Independent Not Indicator 4 Unit, and report on implementation of updated minutes, as certified documentation to IVA verification agency Applicable EHSS Manual covering all EESL programs under by the Company (IVA) implementation. (See note (1)) Secretary (or signed document issued by the relevant official(s) to whom the decision has been delegated by the Board of Directors through the adoption of a resolution); organizational chart; staffing and scope of work as per ToRs (as per Annex VII of ESSA, and acceptable to World Bank) Report submitted to EESL management on activities of Sustainable Development Unit and implementation of EHSS Manual Indicator Description Frequency Data Source Methodology for data Responsibility DLIs Name (#) collection for Data Responsibility for Scalability of Collection Data Verification Disbursement (Yes/No) IR Indicator Periodic independent evaluations of EESL Annual Plan adopted by EESL submits relevant EESL 4.1 programs EESL Management; documents to World Bank at least 2 final independent evaluation reports IR Indicator Approval of capacity building and training Annual EESL management EESL submits documents to EESL 4.2 program for EE private sector to facilitate approval; report of World Bank support/facilitate private sector participation first training; in EE market segments IR Indicator Adoption by EESL management of standardized Once Report to EESL EESL submits document to EESL 4.3 procurement documents: "Procurement Management World Bank Guidelines", SBDs, and MOU format, recording adoption of standardized procurement documents (Guidelines, SBDs and MoU format) *Note (1): For the purpose of DLI6 and PDO Indicator 4, an EESL program is deemed "under implementation" when the following conditions are met: EESL will determine whether a project is classified as "under implementation" by March 31 of each year based on the following criteria: i. EESL has completed at least three rounds of procurement and deployment, as per the technical specifications set forth in the relevant procurement documents; or EESL has made investments of at least INR 2 billion in projects of that program, and has received management approval to continue program deployment in the subsequent year, whichever is earlier; and ii. EESL's investment projections for the subsequent financial year for the project in question is higher than the investment made during the financial year that is ending The EHSS Manual will be updated to include within 12 months of a project being deemed "under implementation.