OFFICIAL 4Lv IDOCUMENTS Supplemental Letter No. 3.10 (IBRD) PUBLIC UTILITY OF VINNYTSIA CITY COUNCIL "VINNYTSIAMISKTEPLOENERHO" August 18, 2014 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Re: Loan No. 8387-UA (Ukraine District Heating Energy Efficiency Project) Performance Monitoring Indicators Dear Sirs and Mesdames: This refers to Section II.A of the Schedule to the Project Agreement of even date herewith between the International Bank for Reconstruction and Development (the Bank) and the Public Utility of Vinnytsia City Council "Vinnytsiamiskteploenerho" (the Project Implementing Entity). The Project Implementing Entity hereby confirms to the Bank that the indicators set out in the attachment to this letter shall serve as a basis for the Project Implementing Entity to monitor and evaluate the progress of the Project and the achievement of the objectives Very truly yours, PUBLIC UTILITY OF VINNYTSIA CITY COUNCIL "VINNYTSIAMISKTEPLOENERHO" By _ _ _ _ Authorized Representative Attachment Attachment to the Supplemental Letter No. 3.10 (IBRD) District Heating Energy Efficiency Project Performance Monitoring Indicators Project Development Objective (PDO): To improve the energy efficiency and quality of service of selected Ukrainian DH companies, improve their financial viability and decrease their CO 2 emissions. Unit of Baselin Cumulative Target Values** Data Source! Responsibility Description PDO Level Results oFrequency Mtolgy for Data (indicator Indicators U Measure e YR I YR 2 YR3 YR 4 YR 5 YR 6 Methodology Collection definition etc.) Indicator One: Project lifetime fuel savings, reports gas savings calculated as decreased gas X needs of participating utilities for heat production* prjctin tH State Municipal Utility Ivano- 350 950 1,550 2,150 2,750 3,400 savings are Frankivskteplokomunenerho" estimated as (Ivano-Frankivsk) avoided gas-based Public Utility heat generation due "Miskteplovodenerhia" of Kamianets-Podilskyi City Thousand 550 1,550 2,550 3,600 4,600 5,600 Se n tof in imoved Council cubic reports of Participating generation, (ii) (Kamyanets-Podolsky) meters 0 Annually p iti DH companies, decreased network Public Utility "Kharkivski (tcr) DH companies losses; and (iii) Teplovi Merezhi" 1,250 3,500 5,750 8,000 10,200 12,500 and Minregion Minregion (Kharkiv) residential heat Municipal Public Utility consumption. For "Khersonteploenerho" 150 500 800 1,150 1,450 1,800 each company, gas (Kherson) savings are Oblast' Public Utility estimated as a sum "Mykolaivoblteploenerho" 650 1,800 3,000 4,150 5,350 6,550 of gas savings (Mykolaiv) generated by each Public Utility of Vinnytsia component of their City Council 750 2,150 3,500 4,900 6,300 7,650investment "Vinnytsiamiskteploenerho" programs. (Vinnytsia)__ * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation ofthe remaining feasibility studies is expected to commence in January 2014. -2- Cumulative Target Values** Responsibility Description PDO Level Results Unit of Baselin Data Source/ Indicators U Measure e YR 1 YR 2 YR3 YR 4 YR 5 YR 6 Methodology Collection definition etc The indi< reports en savings/ redu( of CO 2 emiss generated by Indicator Two: Project in Energy savings/ avoided participating CO 2 emissions of companies. En participating DH savings and avo companies* CO 2 emissions the companies estimated avoided gas-b heat generation to impri State Municipal Utility 10/ 15! 25/ 30/ 35/ efficiency of "Ivano- 5S generation, Frankivskteplokomunenerho" 850 2,350 3,900 5,400 6,700 8,500 Semi-annual decreased nets (Ivano-Frankivsk) GWh/ progrs Participating losses and decre Public Utility Tons of 0 15 / 25 / 35 / 50 / 60 / Annually rprtcp DH companies, residential "Miskteplovodenerhia" of CO2 5/ participating. Minregion consumption) Kamianets-Podilskyi City DH companies well Council 1,600 4,400 7,250 10,100 12,950 15,750 and Minregion decreased/avoid (Kamyanets-Podolsky) electricity use. Public Utility "Kharkivski 13 / 37/ 61 / 85 / 109 / 133 / avoided electr Teplovi Merezhi" 18,900 52,900 86,900 121,000 155,000 189,000 use is assumed I (Kharkiv) _ coal-based I Municipal Public Utility 2/ 5/ 10/ 12/ 15/ 20/ load electricity. "Khersonteploenerho" 450 1,350 2,250 3,100 4,000 4,850 each comp (Kherson) L45 energy savings Oblast' Public Utility 5/ 20/ 30/ 45/ 55/ 70/ reduction of "Mykolaivoblteploenerho" 10 emissions (Mykolaiv) 1,050 3,000 5,000 6,950 8,900 10,800 estimated as a Public Utility of Vinnytsia 5/ 20/ 35 / 50 / 65 / 80 / of energy saN City Council and reductions "Vinnytsiamiskteploenerho" emissions genei (Vinnytsia) 1,750 5,000 8,200 11,450 14,650 17,900 by each compo of their investi programs. * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation of the remaining feasibility studies is expected to commence in January 2014. -3- Cumulative Target Values** Responsibility Description PDO Level Results Indicators E Unit of as Baseline Frequen Data Source/ for Data (indicator Measure YR I YR 2 YR3 YR 4 YR 5 YR 6 cy Methodology Collection definition etc.) Indicator Three: Percentage of households that reported improved quality of service This indicator in buildings where IHSs were installed repots ho State Municipal Utility "Ivano- iprome in Frankivskteplokomunenerho" (Ivano- are perceived by Frankivsk) Public Utility "Miskteplovodenerhia" of hOu tha L Kamianets-Podilskyi City Council HEATING (Kamyanets-Podolsky) SEASON in Public Utility "Kharkivski Teplovi Merezhi" IHSs are installed as (Kharkiv) a part of the project. Municipal Public Utility "Khersonteploenerho" Annual quality heating season with Oblast' Public Utility each participating DH company reports better "Mykolaivoblteploenerho" (Mykolaiv) 0 quality of domestic hot water service, more Annually survey Minregion notice better, more Public Utility of Vinnytsia City Council comfortable temperatures in their apartments Minriotemperaturesr withi "Vinnytsiamiskteploenerho" (Vinnytsia) their apartments as Public Power-generating Utility well as better domestic hot water "Chemihivska Teploelektrotcentral" of Limited Liability Company Firm measures "Tchova"qualitative wl e asse "TehNova" Public Commercial Utility "Donetskmiskteplomerezha" annually as a part of the quality surveys, Public Utility "Dniproteploenerho" of included in the Dnipropetrovsk Oblast' Council Technical Assistance Subsidiary Enterprise "Kirovohradteplo" of Limited Liability project. Company "Center of Scientific and Technical Innovations of Ukrainian Oil and Gas Academy"_____________________________________ _______ ________________ -4- Baseline Cumulative Target Values** Responsibility Description PDO Level Results Unit of (2013 Frequency Datafor Data (indicator defini Indicators C. Measure forecast) YR I YR 2 Y YR 4 YR 5 YR 6 Methodology YR1 Y 2 Y3 R R R Collection etc.) This indi< evaluates finai Indicator Four: viability Ratio of total revenues to participating total operating costs companies. It (including debt service estimated as a rat requirements)* total revenues company to its operating c State Municipal Utility including "Ivano- service requirem Frankivskteplokomunenerho" Total revenues (lvano-Frankivsk) defined as the sui Public Utility total open "Miskteplovodenerhia" of revenues and Kamianets-Podilskyi City 0.8 >1 > 1 >1 Semi-annual non-operating Council progress Participating income. Net (Kamyanets-Podolsky) Number Annually reports of DH a rcipan, operating incom Public Utility "Kharkivski companies Minregion the differ Teplovi Merezhi" 0.8 > 1 > 1 >I and between reve (Kharkiv) Minregion from all sources < Municipal Public Utility than those relate "Khersonteploenerho" 0.7 > I >I I operations, (Kherson) expenses, inclu Oblast' Public Utility taxes. Total open "Mykolaivoblteploenerho" 0.8 > 1 1 I expenses are del (Mykolaiv) as all expe Public Utility of Vinnytsia related to operai City Council and provision "Vinnytsiamiskteploenerho" depreciation. I (Vinnytsia) service requirerr 0.8 >1 1 1 are defined as aggregate amour repayments of < including interest I_ _other charges. * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation of the remaining feasibility studies is expected to commence in January 2014. ** Any possible compensations of difference between residential tariffs and incurred costs are not taken into account in the forecasts -5- PDO Level Results E Unit of Cumulative Target Values** Data Source/ Responsibility Description e Baseline Frequency for Data (indicator Indicators . Measure YR 1 YR 2 YR3 YR 4 YR 5 YR 6 Methodology Collection definition etc.) This indicator reports the number of people who gain access to more energy efficient Indicator Five: boiler houses. For Number of people who gain Kherson, the exact access to more energy- X number of people- efficient heat-generating beneficiaries has facilities* been provided by the company. For Ivano-Frankivsk, Kamyanets- Podilsky and Vinnytsia, the number of State Municipal Utility beneficiaries was "Ivano- 3,350 9,350 15,400 21,450 27,450 33,500 estimated as the Frankivskteplokomunenerho" Semi-annual number of (Ivano-Frankivsk) progress Participating households that will Public Utility Number 0 Annually reports of DH DH companies, be served by "Miskteplovodenerhia" of companies and Minregion rehabilitated boiler Kamianets-Podilskyi City 1,100 3,000 5,000 7,000 8,900 10,850 Minregion houses (provided by Council the companies) (Kamyanets-Podolsky) multiplied by the Public Utility "Kharkivski average household Teplovi Merezhi" 35,550 99,550 163,550 227,550 291,550 355,550 size in a city. For (Kharkiv) Mykolayv and Municipal Public Utility Kharkiv, the "Khersonteploenerho" 4,950 13,900 22,850 31,800 40,750 49,700 number of (Kherson) beneficiaries was Oblast' Public Utility estimated as a share "Mykolaivoblteploenerho" 8,900 24,900 40,950 57,000 73,000 89,050 of the total (Mykolaiv) consumers served Public Utility of Vinnytsia by the rehabilitated City Council boiler houses, "Vinnytsiamiskteploenerho" determined by the (Vinnytsia) 2,550 7,250 11,900 16,600 21,250 25,950 share of the connected heat load served by the rehabilitated -6- PDO Level Results Unit of Cumulative Target Values** Data Source/ Resonsibility De iption Baseline FrequencyfoDaa(nitr Indicators U Measure YR 1 YR 2 YR3 YR 4 YR 5 YR 6 Methodology Collection definition etc facilities. Indicator Six: Direct Project beneficiaries X Number 1,960,700 All residential consumers of participating DH companies are d (for 6 appraised project beneficiaries. Hence, this indicator is estimated as the i companies)* number of residential consumers served by all participating 50 companies. of which female X % * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation of the remaining feasibility studies is expected to commence in January 2014. -7- INTERMEDIATE RESULTS Unit of Cumulative Target Values** Data Source Responsibility Description ea Baseline Frequency for Data (indicator definition Measure YR I YR 2 YR3 YR 4 YR5 YR6 Methodology Collection etc.) Efficiency of heat This indicator reports generation/ fuel saved due to X improvement in efficiency of efficiency gains*efienyo rehabilitated boiler houses in participating DH companies and State Municipal Utility 0/ 0.5%! 1.0%/ 1.5%/ 2.0%/ 2.3%! consequent gas energy "Ivano- savings. The change in Frankivskteplokomunenerho" 0 850 1,650 2,500 3,350 3,850 efficiency is estimated (Ivano-Frankivsk) as the average Public Utility "Kharkivski 0/ 0.1%/ 0.2%/ 0.3%/ 0.4%/ 0.5%! Semi-annual efficiency gains of all Public Utility progress boiler houses "Miskteplovodenerhia" of % reports of Participating rehabilitated by a Kamianets-Podilskyi City Gcal 0 0 5 10 15 25 30 Annually piiti DH companies, participating DH Council utilities and Minregion company in a (Kamyanets-Podolsky) Minrgio particular year as a Public Utility "Kharkivski 0/ 1.0%/ 3.0%/ 5.0%! 7.0%/ 8.0%! part of the project. Gas Teplovi Merezhi" 0 850 2,500 4,200 5,900 6,750are (Kharkiv) 0 8 20 , 5 0 7 estimated as a Municipal Public Utility 0/ 1.0%/ 2.5%/ 4.0%/ 5.5%/ 6.4%! reduction in heat "Kheronteloenrho"losses. Heat losses are "Khersonteploenerho" 0 1,450 3,600 5,750 7,900 9,200 estimated as the (Kherson) Oblast' Public Utility 0/ 0.5%! 1.0%/ 2.0%/ 3.0%/ 4.0%! difference between gas "Mykolaivoblteploenerho" 0 1,300 2,600 5,200 7,800 10,400of a (Mykolaiv) 0 3 2 0 2 7 00 participating company Public Utility of Vinnytsia 0/ 0.2%/ 0.4%/ 0.6%/ 0.8%/ 1.0%! and its total heat sales City Council in a particular year. "Vinnytsiamiskteploenerho" 0 850 1,750 2,650 3,550 4,400 (Vinnytsia)_ . I I I * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation ofthe remaining feasibility studies is expected to commence in January 2014. -8- U oCumulative Target Values** Responsibility Description 0 Measure Baseline Frequency for Data (indicator definii c.R) Measure YR YR 2 YR3 YR4 YR5 YR6 Methodology Collection etc.) Reduction in network heat losses * This indicator ti State Municipal Utility leduto nt "Ivano- 3,i 57 r eab5 tati Frankivskteplokomunenerho" 1,250 3,500 5,750 8,000 10,250 12,500 enviidtin (Ivano-Frankivsk) proe titin Public Utility as t ifer "Miskteplovodenerhia" of bete losse Kamianets-Podilskyi City 300 850 1,400 1,950 2,500 3,050 S inpeene by Council progres techical (Kamyanets-Podolsky) of 0 Annually reports Partcipaig characteristics) Public Utility "Kharkivski Gcal participating Minregion losses in the Teplovi Merezhi" 250 750 1,250 1,750 2,200 2,700 utilities and replacement I (Kharkiv) Minregion (defined by Municipal Public Utility technical "Khersonteploenerho" 200 550 900 1,200 1,600 1,950 Characteristics). (Kherson) indicator reports 1 Oblast' Public Utility only on rep] "Mykolaivoblteploenerho" 300 850 1,400 1,950 2,500 3,050 segments of (Mykolaiv) network, but n Public Utility of Vinnytsia the entire networl City Councilbyacmn. Ciyytsiaiskepl eero 4,100 11,500 18,900 26,300 33,700 41,050 "Vinnytsiamiskteploenerho" (Vinnytsia) _1 1 ___ * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation ofthe remaining feasibility studies is expected to commence in January 2014. -9- Cumulative Target Values** Responsibility Description &. e Unit of Bsln aaSuc/ Rsosblt ecito U Baseline Frequency DataoSoc for Data (indicator definition U Measure YR 1 YR 2 YR3 YR 4 YR5 YR6 Methodology Collection etc.) Reduction in residential heat consumption in Gcal buildings where IHSs were installed * State Municipal Utility "lvano- 1,000 2,850 4,700 6,550 8,400 10,250 Frankivskteplokomunenerho This indicator reports " (Ivano-Frankivsk) the reduction in heat Public Utility "Miskteplovodenerhia" of residential buildings Kamianets-Podilskyi City 350 1,050 1,750 2,450 3,150 3,850 Semi-annual where IHSs are Council progress Participating installed as a part of (Kamyanets-Podolsky) 0 Annually reports of utilities, the project. It is Public Utility "Kharkivski participating Minregion estimated as the Teplovi Merezhi" 5,100 14,350 23,550 32,800 42,000 51,200 utilities and difference between (Kharkiv) Minregion billed consumption in Municipal Public Utility year t and year (t+l), "Khersonteploenerho" 60 150 250 350 500 600 adjusted by degree (Kherson) days Oblast' Public Utility "Mykolaivoblteploenerho" 750 2,100 3,500 4,850 6,250 7,600 (Mykolaiv) Public Utility of Vinnytsia City Council 1,250 3,550 5,850 8,200 10,500 12,800 "Vinnytsiamiskteploenerho" (Vinnytsia) * Indicators for the remaining four participating DH companies will be determined soon after Board approval, after their feasibility studies are completed. Preparation of the remaining feasibility studies is expected to commence in January 2014. - 10 - Cumuativ Taget alue" CllecionDescription EUnit of O Baseline C T R RaueR Y Y Y Frequency M h Data Source/ l Responsibility Clton (indicator defi M easure YR1 R SemiRaRnRa fort at aec Adoption of the new Methodologies Methodologies, Methodologies, Anal Se n Utilt transitional (from "cost not developed/ regulatory regulatory pores Reulto plus" to "incentive- applied accounting forms atthe based") baed)mehdoo methodologies I and auditing principles and auditing Utilts Thpeeindiatorso principles RIm Regulator developed approved and used Ai Methodologies Selection criteria Methodologies, Anal Se n Utilt tehnilaisteu Applications of the new not developed/ for pilot regulatory pores R l the uties Rgu transitional trniinlapplied appliedndadiigRe municipalities accounting forms reportis ofmthemSuccessful methodologies in pilot fnlzd n uiigUiiisipeetto municipalities by theo potential pilot principles are municipalities tor municipalities are Reguato tcni e ass applied in selected theintrite Utilitiesidentified pilot municipalities stn i Benchmarking Standardized Country-ide Anal Se n Utilt Sector-wide invetmet has not been performance benchmarking benchmarking exercise pores R l b e c done template exercise completed completed by rtsthe thedeeodRguar Utilities RegulatorSores *Please indicate whether the indicator is a Core Sector Indicator (see further http://coreindicators) "Target values should be entered for the years data will be available, not necessarily annually -a i -