OFFICIAL DOCUMENTS GEF GRANT NUMBER TF090429 GEF GRANT NUMBER TF058284 GEF GRANT NUMBER TF058282 Global Environment Facility Project Agreement (Sustainable Energy Financing Program) between REPUBLIC OF VANUATU and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as an Implementing Agency of the Global Environmental Facility Dated 6 0 \ , 2018 GEF GRANT NUMBER TF090429 GEF GRANT NUMBER TF058284 GEF GRANT NUMBER TF058282 GLOBAL ENVIRONMENT FACILITY PROJECT AGREEMENT AGREEMENT dated ( 8) em, 2018, entered into between: REPUBLIC OF VANUATU ("Vanuatu"); and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVLOPMENT ("World Bank"), acting as an implementing agency of the Global Environment Facility ("GEF"). WHEREAS: (A) Under a Global Environment Facility grant agreement, dated July 9, 2007, between the Republic of Fiji ("Recipient" or "Fiji") and the World Bank, as amended through June 14, 2018 ("Fiji - World Bank Grant Agreement"), the World Bank agreed to provide Fiji with a grant in the amount of two million five hundred fifty-two thousand Dollars ($2,552,000) (GEF Grant Numbers TF090429 and TFO58284) to assist in financing certain parts of a Sustainable Energy Financing Program, as defined in Schedule 1 to the Fiji - World Bank Grant Agreement ("Ongoing Program"); (B) Under a Global Environment Facility grant agreement, dated August 17, 2007, between the World Bank and Australia and New Zealand Banking Group Limited ("Fund Manager"), as amended through June 14, 2018 ("World Bank - Fund Manager Grant Agreement"), the World Bank agreed to provide the Fund Manager with a grant in the amount of five million two hundred thousand Dollars ($5,200,000) (GEF Grant Number TF058282) to assist in financing other parts of the Ongoing Program; (C) Under the Ongoing Program: (1) the Fund Manager has established a risk sharing fund ("Risk Sharing Fund") to finance partial credit guarantees issued to eligible financial institutions in Fiji's territory covering eligible loans made by these institutions for sustainable energy investments, all in accordance with the provisions of the World Bank - Fund Manager Grant Agreement; and (2) Fiji has designed criteria and terms and conditions for selecting sustainable energy investments, terms and conditions for loans for said investments and financial institutions in its territory that may participate in the Risk Sharing Fund, and has provided related technical assistance, all in accordance with the provisions of the Fiji - World Bank Grant Agreement; and (D) Vanuatu has requested that the Ongoing Program be extended to the beneficiaries of: (1) the project described in the Pacific Region Infrastructure Facility ("PRIF") Grant Agreement dated December 4, 2014 between Vanuatu and International Bank for 2 Reconstruction and Development/International Development Association, acting as administrator of PRIF for a Rural Electrification Project (PRIF Grant No. TF018003); and (2) part 1 of the project described in the Financing Agreement dated July 23, 2017 between Vanuatu and International Development Association for a Rural Electrification Project Stage II (Credit No. 6072-VU, Grant No. D1 930-VU), and referred to in two Grant Agreements of same date providing co-financing for said project, one between Vanuatu and International Development Association, acting as administrator of Scaling up Renewal Energy Program in Low Income Countries (SREP) (SREP Grant Number TFA4979), and the other between Vanuatu and International Development Association, acting as administrator of PRIF (PRIF Grant Number TFA5406) (said projects, collectively referred to as "Vanuatu Rural Electrification Projects"). WHEREAS, the World Bank is willing, on the basis, inter alia, of the foregoing, to extend the Ongoing Program to the beneficiaries described above, by further amending the Fiji - World Bank Grant Agreement and the World Bank - Fund Manager Grant Agreement and entering into a Project Agreement with Vanuatu, all on terms and conditions agreed or to be agreed with the parties to said agreements. NOW THEREFORE, Vanuatu and the World Bank hereby agree as follows: ARTICLE I -DEFINITIONS 1.01. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Appendix to this Agreement. ARTICLE II - PROGRAM; VANUATU'S PROJECT ACTIVITIES 2.01. Vanuatu declares its commitment to the objectives of the Program. To this end: (a) Vanuatu shall carry out Vanuatu's Project Activities through the Department Energy: (i) with due diligence and efficiency; (ii) in conformity with appropriate administrative, technical, financial, economic, environmental and social standards and practices; and (iii) in accordance with the provisions of the Schedule to this Agreement. (b) Vanuatu shall provide or cause to be provided, promptly as needed, the funds, facilities, services and other resources: (i) required for Vanuatu's Project Activities; and (ii) necessary or appropriate to enable Vanuatu to perform its obligations under this Agreement. ARTICLE III - TERMINATION 3.01. This Agreement and all obligations of the parties under this Agreement shall terminate when all such obligations have been fully performed. 3 ARTICLE IV - MISCELLANEOUS 4.01. Notices and Requests. Any notice (or request) pursuant to this Agreement shall be in writing. Such notice (or request) shall be deemed to have been duly given (or made) when it has been delivered by hand or by mail, telex or facsimile to the party to which such notice (or request) is directed ("Addressee"), at the address specified below for the purpose (or at such other address as the Addressee shall have designated by notice to the party giving such notice or making such request). Deliveries made by facsimile transmission shall also be confirmed by mail. The World Bank's address is: International Bank for Reconstruction and Development 1818 H Street, NW Washington, DC 20433 United States of America; and Telex: Facsimile: 248423(MCI) or 1-202-477-6391 64145 (MCI) Vanuatu's address is: Minister of Finance and Economic Management Ministry of Finance and Economic Management Private Mail Bag 9058 Port Vila Republic of Vanuatu; and Facsimile: 678-27937 4.02. Action on Behalf of Vanuatu. (a) The following representative, or any person authorized in writing by such representative for the purpose, may take any action required or permitted to be taken pursuant to this Agreement, and execute any documents required or permitted to be executed pursuant to this Agreement on behalf of Vanuatu: Minister responsible for finance and economic management ("Vanuatu's Representative"). (b) Vanuatu shall furnish to the World Bank: (i) sufficient evidence of the authority of Vanuatu's Representative; and (ii) the authenticated specimen signature of such representative. 4.03. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original. 4 4.04. Disclosure. The World Bank may disclose this Agreement and any information related to this Agreement in accordance with its policy on access to information, in effect at the time of such disclosure. AGREED at Port Vila, Republic of Vanuatu, as of the day and year first above written. REPUBLIC OF VANUATU Authorized Representative a 0-MINISTER Name: Gpa c\P k LuLC. Title: M%k Ri 4eX' qA VC C c INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT acting as an Implementing Agency of the Global Environment Facility By Authorized Representative Name: tt * C14c L eAF Title: Cow.'50ro-y 72;A reC-r0A- 5 SCHEDULE Execution of Vanuatu's Project Activities Section I. Institutional and Other Arrangements A. Institutional Arrangements 1. Prerequisites to Inclusion in the Program. Vanuatu's Project Activities shall be included in the Program only at such time as the World Bank shall have notified Vanuatu that evidence satisfactory to the World Bank has been furnished to the World Bank that the conditions specified below have been satisfied. (a) This Agreement has been duly authorized or ratified by Vanuatu and is legally binding upon Vanuatu in accordance with its terms. (b) Vanuatu has entered into an agreement with the International Bank for Reconstruction and Development and International Development Association, acting in various capacities ("IBRD/IDA"), amending several grant and financing agreements pursuant to which IBRD/IDA has agreed to provide the following grants and financing to Vanuatu for the Vanuatu Rural Electrification Projects: PRIF Grant Numbers TF018003 and TFA5406, SREP Grant No. TFA4979, IDA Credit No. 6072 and IDA Grant No. D1930, providing certain additional remedies to IBRD/IDA under said agreements ("Vanuatu - World Bank Amending Agreement"). (c) Vanuatu and Fiji have entered into an implementation agreement ("Fiji - Vanuatu Implementation Agreement"), under terms and conditions approved by the World Bank, and said agreement has been duly authorized or ratified by the Fiji and Vanuatu and is legally binding upon each such party in accordance with its terms. (d) As part of the evidence to be furnished above pursuant to this Section I.A. 1: (i) Vanuatu has furnished to the World Bank an opinion or certificate satisfactory to the World Bank of counsel satisfactory to the World Bank or of a competent official of Vanuatu, showing on behalf of Vanuatu, that this Agreement and the Fiji - Vanuatu Implementation Agreement have each been duly authorized or ratified by Vanuatu and are legally binding upon Vanuatu in accordance with their respective terms; and (ii) Fiji has furnished to the World Bank an opinion or certificate satisfactory to the World Bank of counsel satisfactory to the World Bank or of a competent official of Fiji, showing on behalf of Fiji, that the Fiji - Vanuatu Implementation Agreement has been duly authorized or ratified by Fiji and is legally binding upon Fiji in accordance with its terms. 2. Cooperation Generally with Fiji. (a) Vanuatu shall exercise its rights under the Fiji - Vanuatu Implementation Agreement in such manner as to protect the interests of Vanuatu and the World Bank and to accomplish 6 the objectives of the Program. Vanuatu shall not take or permit to be taken any action which would prevent or interfere with Fiji's obligations thereunder; and except as the World Bank shall otherwise agree, shall not assign, amend, abrogate or waive the Fiji - Vanuatu Implementation Agreement or any of its provisions. (b) Vanuatu shall: (i) cooperate fully with Fiji to enable and assist it to perform Fiji's obligations set forth in the Fiji - World Bank Grant Agreement in accordance with the provisions of said agreement; and (ii) not take or permit to be taken any action which would prevent or interfere with such performance. 3. Regional Program Manager. Vanuatu shall at all times cooperate with the Regional Program Manager and take all measures required on its part to enable the Regional Program Manager properly to assist Vanuatu in managing, monitoring and evaluating Vanuatu's Project Activities in accordance with this Agreement and the Regional Operations Manual. 4. Cooperation with the Fund Manager. Vanuatu shall: (a) cooperate fully with the Fund Manager to enable and assist it to perform the Fund Manager's obligations set forth in the World Bank - Fund Manager Grant Agreement in accordance with the provisions of said agreement; and (b) not take or permit to be taken any action which would prevent or interfere with such performance. B. Implementation Generally. Without limiting the generality of Article II of this Agreement, Vanuatu shall carry out Vanuatu's Project Activities in accordance with this Schedule 2 and the Regional Operations Manual. In the event of a conflict between this Agreement and the Regional Operations Manual, the provisions of this Agreement shall prevail. C. Implementation of Part 1(b) of the Program (RSF). 1. RSF Documentation Structure. The RSF documentation structure required for the proper implementation of the RSF is defined in Attachment I to this Schedule. Section I defines the RSF documentation for which Vanuatu, Fiji, and/or an Approved PFI is responsible; and Section II defines other RSF documentation for which the Fund Manager and/or an Approved PFI is responsible. 2. PFI Eligibility Criteria. Vanuatu shall ensure that, except as the World Bank shall otherwise agree in writing, each financial institution in its territory seeking to participate in the RSF as an Approved PFI satisfies the PFI Eligibility Criteria as set out in Attachment II to this Schedule. 3. Approved PFI List. (a) Review. Vanuatu shall review the Approved PFI List periodically (at least semi- annually) with the Regional Program Manager, Fiji and the World Bank to determine whether the financial institutions on the Approved PFI List within its territory continue to satisfy the PFI Eligibility Criteria. 7 (b) Update. Vanuatu shall promptly notify the World Bank of any proposed change in status of the Approved PFI List in accordance with the Regional Operations Manual. Vanuatu shall furnish to the World Bank for prior approval the inclusion of any new local financial institution within its territory on the Approved PFI List, and the removal of any financial institution within its territory that is at any time on the Approved PFI list but no longer satisfies the PET Eligibility Criteria. The World Bank may independently notify Vanuatu of the removal of an Approved PFI from the Approved PFI List. Vanuatu acknowledges that the Fund Manager will not issue a new Guarantee to any financial institution that has been removed by the World Bank from the Approved PFI List and may suspend issuance of new Guarantees to an Approved PFI that has failed to comply with its obligations under the Fund Manager - PFI Agreement to which it is a party. (c) Prior World Bank Approval Required. Vanuatu may not modify, amend or waive the Approved PFI List without the prior written approval of the World Bank. 4. Vanuatu - PFI Agreement. (a) Prerequisite to Approved PFI Participation in the RSF. Prior to authorizing an Approved PFI in Vanuatu's territory to be eligible to participate in the RSF, Vanuatu shall enter into a Vanuatu - PFI Agreement with such Approved PFI, which shall include the terms and conditions set forth in Attachment III to this Schedule. (b) Exercise of Vanuatu's Rights. Vanuatu shall exercise its rights under each Vanuatu - PFI Agreement in such manner as to protect the interests of Vanuatu and the World Bank and to accomplish the objectives of the Program. Except as the World Bank shall otherwise agree, Vanuatu shall not assign, amend, abrogate or waive any such agreement or any of its provisions. D. Implementation of Parts 2 and 3 of the Program. 1. Vanuatu shall prepare, with the assistance of the Regional Program Manager, and furnish to Fiji and World Bank not later than November 30 in each calendar year of implementation of Vanuatu's Project Activities, a proposed work plan for Vanuatu's Project Activities under Parts 2 and 3 of the Program to be implemented during the following calendar year. 2. Vanuatu shall, with the assistance of the Regional Program Manager, implement during such following year such work plan as shall have been agreed with Fiji and the World Bank. E. Environmental and Social Safeguards Documents. Vanuatu shall ensure that Vanuatu's Project Activities are carried out in accordance with the Environmental and Social Safeguards Documents and that each Approved PFI in its territory complies with the Environmental and Social Safeguards Documents. 8 F. Anti-Corruption. Vanuatu shall ensure that Vanuatu's Project Activities are carried out in accordance with the provisions of the Anti-Corruption Guidelines and that each Approved PFI in its territory complies with these provisions. Section H. Project Monitoring, Documentation, Reporting and Evaluation A. Monitoring. Vanuatu shall maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the World Bank, the progress of Vanuatu's Project Activities and the achievement of their objectives. B. Documents and Records. Vanuatu shall: 1. promptly furnish to the World Bank, on its request, all documents related to Vanuatu's Project Activities, in such detail as the World Bank shall reasonably request; 2. maintain records adequate to record the progress of Vanuatu's Project Activities (including their cost and the benefits to be derived from them), and furnish such records to the World Bank promptly upon its request; 3. retain all records evidencing expenditures under the Vanuatu's Project Activities until two (2) years after the closing date referred to in Section IV.B.2 of Schedule 2 to the Fiji- World Bank Grant Agreement; and 4. enable the representatives of the World Bank to examine all records referred to above in this Part B, and provide them with all such information concerning such records as they may from time to time reasonably request. C. Periodic Reports. Vanuatu shall prepare periodic reports ("Periodic Report"), in form and substance satisfactory to the World Bank, integrating the results of such monitoring and evaluation activities and setting out measures recommended to ensure the continued efficient and effective execution of Vanuatu's Project Activities, and to achieve their objectives. Each Periodic Report shall cover the period of one (1) calendar quarter, and shall be furnished to Fiji not later than two (2) weeks after the end of the period covered by such report for incorporation and forwarding by Fiji to the World Bank of the overall Project Report required of Fiji pursuant to Section II.A.1 of Schedule 2 to the Fiji - World Bank Grant Agreement. Vanuatu shall afford the World Bank a reasonable opportunity to exchange views with Vanuatu on each Periodic report, and thereafter implement its recommended measures, taking into account the World Bank's views on the matter. D. Mid-term Review. Vanuatu shall cooperate with Fiji and not later than November 1, 2020 provide it with all information relating to Vanuatu's Project Activities necessary to enable Fiji to conduct the mid-term review referred to in Section II.A.2 of Schedule 2 to the Fiji - World Bank Grant Agreement in accordance with said Section. 9 E. Completion Report. Vanuatu shall provide to Fiji not later than three (3) months after the Closing Date, for incorporation in the Completion Report referred to in Section II.A.3 of Schedule 2 to the Fiji - World Bank Grant Agreement, all such information as the World Bank and/or Fiji shall reasonably request on the execution of Vanuatu's Project Activities, the performance by Vanuatu and the World Bank of their respective obligations under this Agreement and the accomplishment of the objectives of Vanuatu's Project Activities; and measures designed to ensure the sustainability of the achievements of said activities. Section HI. Cooperation and Consultation; Visits. A. Cooperation. Vanuatu and the World Bank shall cooperate fully to assure that the objectives of Vanuatu's Project Activities will be accomplished, and to this end, throughout the implementation of these activities and for a period of ten (10) years thereafter: 1. from time to time, at the request of either of them, exchange views on Vanuatu's Project Activities and the performance of their respective obligations under this Agreement, and furnish to the other party all such information related to such matters as it shall reasonably request; and 2. promptly inform the other party of any condition which interferes with, or threatens to interfere with, such matters. B. Visits. 1. Vanuatu shall, throughout the implementation of Vanuatu's Project Activities and for a period of ten (10) years thereafter, enable the representatives of the World Bank to visit any part of its territory for purposes related to Vanuatu's Project Activities. 2. Vanuatu shall, throughout the implementation of Vanuatu's Project Activities, enable the representatives of Fiji (including the Regional Program Manager and other consultants engaged pursuant to the Fiji - World Bank Grant Agreement) and of the Fund Manager, to visit any part of its territory for purposes related to Vanuatu's Project Activities. 3. Vanuatu shall enable the representatives of the World Bank, of Fiji and of the Fund Manager: (i) to visit any facilities and sites included in Vanuatu's Project Activities; and (ii) to examine any goods in Vanuatu's territory financed out of the proceeds of GEF Grant TF Numbers TF090429 and TF058284, and any documents relevant to the performance of Vanuatu's obligations under this Agreement. 10 ATTACHMENT I to SCHEDULE RSF Documentation Structure Section I. Documents required for the RSF and for which Vanuatu, Fiji and/or an Approved PFI has certain responsibilities in accordance with this Agreement or the Fiji - World Bank Grant Agreement. 1. Fiji - World Bank Grant Agreement: the agreement between Fiji and the World Bank, as amended from time to time, setting out the terms and conditions upon which the World Bank has agreed to extend a grant to Fiji (GEF Grant TF Numbers TF090429 and TF058284) for Parts 1(b), 2 and 3 of the Program. 2. Vanuatu - World Bank Amending Agreement: the amending agreement between Vanuatu and IBRD/IDA referred to in Section I.A.1(b) of the Schedule to this Agreement. 3. Fiji - Vanuatu Implementation Agreement: the agreement between Fiji and Vanuatu, setting out the respective obligations of both parties designed to ensure the proper implementation of Vanuatu's Project Activities, and achievement of their objectives, as said agreement may be amended from time to time by the parties thereto with the prior agreement of the World Bank. 4. Regional Operations Manual: the operations manual updated by Fiji to extend the Program to Vanuatu, in accordance with the Fiji - World Bank Grant Agreement, as said manual may be further updated from time to time in accordance with the provisions of said agreement. 5. PFI Eligibility Criteria: the criteria, set out or referred to in Attachment II to this Schedule, to be satisfied by a financial institution in order to be an Approved PFI. 6. Approved PFI List: the list of local financial institutions in the Participating Pacific Island States that have been approved by the World Bank to have Covered Loans under the RSF from time to time, as said list may be revised in accordance with Section I.C.3 of the Schedule to this Agreement, the Fiji - World Bank Grant Agreement, or the World Bank - Fund Manager Grant Agreement (each an "Approved PFI"). 7. Approved Product Catalog: the catalog setting out equipment and other products acceptable to the World Bank that are investments for which a Borrower may apply to an Approved PFI for a loan, and for which an Approved PFI may apply to the Fund Manager to include the loan as a Covered Loan, as said catalog shall be updated by Fiji in accordance with the Fiji - World Bank Grant Agreement. 8. Approved Business Plan: a business plan, developed by an MSE Borrower in accordance with the Regional Operations Manual, for an investment to supply Sustainable Energy equipment or services, for which the MSE Borrower may apply to an Approved PFI for a loan, and for which an Approved PFI may apply to the Fund Manager to include the loan as a Covered Loan. 11 9. Fiji - PFI Agreement: each agreement entered into between Fiji and an Approved PFI in Fiji's territory in accordance with the Fiji - World Bank Grant Agreement, setting out certain terms and conditions upon which the Approved PFI may participate in the RSF. 10. Vanuatu - PFI Agreement: each agreement entered into between Vanuatu and an Approved PFI in Vanuatu's territory in accordance with Attachment III to this Schedule, setting out certain terms and conditions upon which the Approved PFI may participate in the RSF. 11. Covered Loan Agreement: each agreement entered into between an Approved PFI and a Borrower, in accordance with the provisions of Attachment III to this Schedule, setting out the terms and conditions on which the Approved PFI agrees to extend a Covered Loan to the Borrower for an approved investment from the Approved Product Catalog or for an Approved Business Plan. Section H. Other Documents required for the RSF and for which the Fund Manager and/or an Approved PFI has certain responsibilities in accordance with the World Bank - Fund Manazer Grant Agreement. Vanuatu is not responsible for the documents listed in this Section II. 1. World Bank - Fund Manager Grant Agreement: the agreement between the World Bank and the Fund Manager, as amended from time to time, setting out the terms and conditions upon which the World Bank has agreed to extend a grant to the Fund Manager (GEF Grant Number TFO5 8282) for Part 1(a) of the Program. 2. Fund Manager Operations Manual: the operations manual adopted and updated from time to time by the Fund Manager in accordance with the World Bank - Fund Manager Grant Agreement. 3. Fund Manager - PFI Agreement: each agreement entered into between the Fund Manager and an Approved PFI in accordance with the World Bank - Fund Manager Agreement, setting out certain terms and conditions upon which the an Approved PFI may participate in the RSF and the Fund Manager may issue Guarantee(s) to an Approved PFI. 4. RSF Coverage Application: each application submitted by an Approved PFI to the Fund Manager for a Guarantee of a Covered Loan made or to be made by the Approved PFI, in accordance with the World Bank - Fund Manager Grant Agreement. 5. Guarantee Agreement: each agreement entered into between the Fund Manager and an Approved PFI in accordance with the World Bank - Fund Manager Grant Agreement, setting out the terms and conditions on which the Fund Manager agrees to issue a Guarantee for a Covered Loan made by an Approved PFI to a Borrower. 12 ATTACHMENT II to SCHEDULE PFI Eligibility Criteria The criteria required to be satisfied in order for a financial institution to qualify as an Approved PFI include the following key requirements, in each case in form and substance satisfactory to the World Bank, and any additional eligibility criteria elaborated in the Regional Operations Manual ("PFI Eligibility Criteria"). 1. Documentation Requirement. The financial institution: (a) has adopted the Regional Operations Manual, including the Environmental and Social Safeguards Documents; (b) has adopted a suitable credit manual; (c) has entered into a Fiji - PFI Agreement with Fiji, if it is in Fiji's territory, or a Vanuatu - PFI Agreement with Vanuatu, if it is in Vanuatu's territory and is in compliance with said agreement; and (d) has entered into a Fund Manager - PFI Agreement with the Fund Manager, and is in compliance with said agreement. 2. Operational Policy and Procedures Requirement. The financial institution has satisfied all operational policy and procedures requirements set out in the Regional Operations Manual. 3. Continued Eligibility. The financial institution continues to satisfy the above eligibility criteria to the satisfaction of the World Bank. 13 ATTACHMENT III to SCHEDULE Vanuatu - PFI Agreement Vanuatu shall enter into an agreement with each Approved PFI within its territory wishing to participate in the RSF, in accordance with the procedures and on the terms and conditions set forth or referred to in the Regional Operations Manual, including the following. 1. General (a) The Approved PFI may not submit an RSF Coverage Application to the Fund Manager unless the loan for which a Guarantee is requested satisfies the Covered Loan Criteria. (b) The Approved PFI: (i) has adopted the provisions of the Regional Operations Manual, the form of RSF Coverage Application and the form of Covered Loan Agreement; and (ii) undertakes at all times to comply with the Regional Operations Manual. (c) The Approved PFI shall: (i) implement and manage the RSF with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the World Bank, including in accordance with the Anti-Corruption Guidelines and with the Environmental and Social Safeguards Documents; (ii) provide, promptly as needed, the resources required for the purpose; (iii) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the World Bank, the progress of the RSF and the achievement of its objectives; (iv) (A) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the World Bank, both in a manner adequate to reflect the operations, resources and expenditures related to the RSF; and (B) at Vanuatu's or the World Bank's request, have such financial statements audited by independent auditors acceptable to the World Bank, in accordance with consistently applied auditing standards acceptable to the World Bank, and promptly furnish the statements as so audited to Vanuatu and the World Bank; (v) enable Vanuatu and the World Bank to inspect the RSF, its operation and any relevant records and documents; and (vi) prepare and furnish to Vanuatu and the World Bank all such information as Vanuatu or the World Bank shall reasonably request relating to the foregoing. 2. Covered Loan Criteria. In order for a loan extended by the Approved PFI to be eligible as a Covered Loan, it must satisfy the following criteria, all in a manner satisfactory to the World Bank ("Covered Loan Criteria"). (a) Covered Investments. The loan proposed to qualify as a Covered Loan is extended by the Approved PFI only for one or more of the following investments, as elaborated in the Regional Operations Manual, including in the Approved Product Catalog ("Covered Investment"): (i) a solar PV system investment, covering the initial cost of the PV equipment and its installation; 14 (ii) a pico-hydro system investment, covering the cost of equipment and installation of the pico-hydro system equipment; (iii) a coconut oil investment, covering the initial cost of equipment and its installation and other components necessary to enable the use of coconut oil for energy; (iv) other renewable energy system investments, covering the cost of equipment for such system and its installation; (v) energy efficiency investments, covering the cost of energy efficiency equipment and its installation; and (vi) investments by MSE Borrowers for the supply to end users of any equipment or services referred to in sub-paragraph (a)(i) through (v) of this Section 2, based on an Approved Business Plan. (b) Eligibility as Borrower. Each applicant for a Covered Loan is: (i) an individual located in one of the Participating Pacific Island States who proposes to use the proceeds of the Covered Loan for an investment in products included in the Approved Product Catalog ("Participating Individual Borrower"); or (ii) an MSE located in one of the Participating Pacific Island States that proposes to use the proceeds of the Covered Loan for: (A) an investment in products included in the Approved Product Catalog to provide energy for use in its own business activities; or (B) an investment to supply Sustainable Energy equipment included in the Approved Product Catalog and/or related Sustainable Energy services, in either case under an Approved Business Plan, to end users ("Participating MSE Borrower"). (c) Covered Loan Agreement. Each loan proposed to qualify as a Covered Loan is extended by the Approved PFI to a Borrower under a loan agreement on terms and conditions satisfactory to the World Bank, which include the following ("Covered Loan Agreement"). (i) The loan agreement is entered into within the Commitment Period. (ii) The loan is repayable over a period not to extend beyond the Closing Date, such that no Guarantee issued for the loan would extend beyond the Closing Date. (iii) The loan is repayable at an interest rate set in accordance with the Approved PFI's credit policies that have been approved by the Vanuatu and the World Bank. (iv) The Approved PFI obtains rights adequate to protect its interests and those of Vanuatu and the World Bank, including the right to require the Borrower to: (A) carry out its Covered Investment with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the World Bank, including in accordance with the Anti-Corruption Guidelines and with the Environmental and 15 Social Safeguards Documents; (B) provide, promptly as needed, the resources required for the purpose; (C) procure the goods and services financed under the Covered Loan in accordance with the Approved Product Catalog, and in the case of a Participating MSE Borrower supplying Sustainable Energy equipment or services, with an Approved Business Plan; (D) carry out the Covered Investment in accordance with the environmental and social safeguards requirements of Vanuatu and of the ESSD including: (1) proper disposal of solar PV batteries; and (2) obtaining, prior to undertaking any low voltage transmission line arrangements for pico-hydro and new coconut oil projects, of the approval of any land owners over whose property the Borrower intends such lines to run; (E) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the World Bank, the progress of the Covered Loan and the achievement of its objectives; (F) (1) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the World Bank, both in a manner adequate to reflect the operations, resources and expenditures related to the Covered Investment; and (2) at the Approved PFI's or Vanuatu's or the World Bank's request, have such financial statements audited by independent auditors acceptable to the World Bank, in accordance with consistently applied auditing standards acceptable to the World Bank, and promptly furnish the statements as so audited to the Approved PFI, Vanuatu and the World Bank; (G) enable the Approved PFI, Vanuatu and the World Bank to inspect the Covered Investment, its operation and any relevant records and documents; and (H) prepare and furnish to the Approved PFI, Vanuatu and the World Bank all such information as the Approved PFI, Vanuatu or the World Bank shall reasonably request relating to the foregoing. (v) The Approved PFI obtains the right to suspend or terminate the right of the Borrower to use the proceeds of the Covered Loan, or declare to be immediately due and payable all or any part of the amount of the Covered Loan then withdrawn, upon the Borrower's failure to perform any of its obligations under the Covered Loan Agreement. (d) The Approved PFI undertakes to exercise its rights under each Covered Loan Agreement in such manner as to protect the interests of the Approved PFI, Vanuatu and the World Bank and to accomplish the purposes of the Covered Loan. 3. Reporting. (a) The Approved PFI shall be required to furnish to Vanuatu on a quarterly basis, copies of all RSF Coverage Applications, Guarantees, default notices and calls on Guarantees. (b) The Approved PFI shall provide Vanuatu, the Fund Manager and the World Bank with access to all records and documents related to the Covered Loans upon the request of Vanuatu, the Fund Manager or the World Bank. 16 APPENDIX Definitions Unless the context otherwise requires, the following terms in the singular form include plural and vice versa. 1. "Anti-Corruption Guidelines" means 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. 2. "Approved Business Plan" has the meaning ascribed to it in Section 1.8 of Attachment I to the Schedule to this Agreement. 3. "Approved Participating Financial Institution" or "Approved PFI" has the meaning ascribed to it in Section 1.6 of Attachment I to the Schedule to this Agreement. 4. "Approved PFI List" has the meaning ascribed to it in Section 1.6 of Attachment I to the Schedule to this Agreement. 5. "Approved Product Catalog" has the meaning ascribed to it in Section 1.7 of Attachment I to the Schedule to this Agreement 6. "Borrower" means a Participating Individual Borrower or a Participating MSE Borrower. 7. "Closing Date" has the meaning ascribed to it in the Fiji - World Bank Grant Agreement. 8. "Commitment Period" means the period defined in the World Bank - Fund Manager Grant Agreement during which period the Fund Manager may issue Guarantees. 9. "Covered Investment" has the meaning ascribed to it in Section 2(a) of Attachment III to the Schedule to this Agreement. 10. "Covered Loan" means a loan: (a) which satisfies the Covered Loan Criteria; (b) is extended by an Approved PFI to a Participating Individual Borrower or a Participating MSE Borrower under a Covered Loan Agreement; and (c) for which a Guarantee Agreement is entered into between the Fund Manager and the Approved PFI in accordance with the Fund Manager Operations Manual. 11. "Covered Loan Agreement" has the meaning ascribed to it in Section 1.11 of Attachment I to the Schedule to this Agreement. 17 12. "Covered Loan Criteria" has the meaning ascribed to it in Section 2 of Attachment III to the Schedule to this Agreement. 13. "Department of Energy" means Vanuatu's department responsible for energy within its ministry responsible for climate change and natural disasters, and any successor thereto. 14. "Environmental and Social Safeguards Documents" or "ESSD" means, in respect of Program activities implemented in Vanuatu's territory, the Environmental Code of Practice, dated August 2017 and the Environmental and Social Management Framework, dated December 2017, both adopted by Vanuatu for the Vanuatu Rural Electrification Projects. 15. "Fiji" means the Republic of Fiji. 16. "Fiji - PFI Agreement" has the meaning ascribed to it in Section 1.9 of Attachment I to the Schedule to this Agreement. 17. "Fiji - Vanuatu Implementation Agreement" has the meaning ascribed to it in Section 1.3 of Attachment 1 to the Schedule to this Agreement, as such agreement may be amended from time to time by its parties with the prior approval of the World Bank. 18. "Fiji - World Bank Grant Agreement" has the meaning ascribed to it in Section 1.1 of Attachment 1 to the Schedule to this Agreement. 19. "Fund Manager" means the Australia and New Zealand Banking Group Ltd, an entity established and operating under the laws of Australia, which has entered into the World Bank-Fund Manager Grant Agreement, and any successor thereto. 20. "Fund Manager Operations Manual" has the meaning ascribed to it in Section 11.2 of Attachment 1 to the Schedule to this Agreement. 21. "Fund Manager - PFI Agreement" has the meaning ascribed to it in Section 11.3 of Attachment 1 to the Schedule to this Agreement. 22. "Guarantee" means a guarantee issued by the Fund Manager to an Approved PFI for a loan properly submitted by an Approved PFI using the approved RSF Coverage Application. 23. "Guarantee Agreement" has the meaning ascribed to it in Section 11.5 of Attachment I to the Schedule to this Agreement. 24. "IBRD/IDA" means International Bank for Reconstruction and Development and International Development Association, acting in various capacities. 18 25. "MSE" means a micro- or small-enterprise, including a non-governmental organization, as further defined in the Regional Operations Manual. 26. "Participating Individual Borrower" has the meaning ascribed to it in Section 2(b) of Attachment III to the Schedule to this Agreement. 27. "Participating MSE Borrower" has the meaning ascribed to it in Section 2(b) of Attachment IHl to the Schedule to this Agreement. 28. "Participating Pacific Island State" means each of Fiji and Vanuatu; and "Participating Pacific Island States" means collectively, both Fiji and Vanuatu. 29. "PFI Eligibility Criteria" has the meaning ascribed to it in in Attachment II to the Schedule to this Agreement. 30. "PRIF" means the Pacific Region Infrastructure Facility. 31. "Program" means the Sustainable Energy Financing Program described in Schedule 1 to the Fiji - World Bank Grant Agreement. 32. "PV" means photo-voltaic. 33. "Regional Operations Manual" has the meaning ascribed to it in Section 1.4 of Attachment I to the Schedule to this Agreement. 34. "Regional Program Manager" means the manager referred to in Section I.A.2 of Schedule 2 to the Fiji - World Bank Grant Agreement. 35. "Risk Sharing Fund" and "RSF" means the Risk Sharing Fund provided under Part I of the Program. 36. "RSF Coverage Application" has the meaning ascribed to it in Section 11.4 of Attachment I to the Schedule to this Agreement. 37. "Sustainable Energy" means technologies related to the production of solar photo-voltaic, pico-hydro, coconut oil based or other approved forms of renewable energy. 38. "Vanuatu" means the Republic of Vanuatu. 39. "Vanuatu - PFI Agreement" has the meaning ascribed to it in Section 1.10 of Attachment I to the Schedule to this Agreement. 19 40. "Vanuatu Rural Electrification Projects" means, collectively: (a) the project described in the Pacific Region Infrastructure Facility (PRIF) Grant Agreement dated December 4, 2014 between Vanuatu and International Bank for Reconstruction and Development and International Development Association, acting as administrator of PRIF (PRIF Grant No. TFO18003); and (b) the project described in the Financing Agreement dated July 23, 2017 between Vanuatu and International Development Association for a Rural Electrification Project Stage II (Credit No. 6072-VU, Grant No. D1930-VU), and referred to in two Grant Agreements of same date providing co-financing for said project, one between Vanuatu and International Development Association, acting as administrator of Scaling up Renewal Energy Program in Low Income Countries (SREP) (SREP Grant Number TFA4979), and the other between Vanuatu and International Development Association, acting as administrator of PRIF (PRIF Grant Number TFA5406). 41. "Vanuatu's Project Activities" means those activities under Parts 1(b), 2 and 3 of the Program to be carried out by Vanuatu in Vanuatu's territory in accordance with this Agreement. 42. "Vanuatu's Representative" has the meaning ascribed to it in Section 4.02(a) of this Agreement. 43. "Vanuatu - World Bank Amending Agreement" has the meaning ascribed to it in Section 1.2 of Attachment I to the Schedule to this Agreement. 44. "World Bank - Fund Manager Grant Agreement" has the meaning ascribed to it in Section 11.1 of Attachment I to the Schedule to this Agreement. 20