DISCLAIMER

Da Afghanistan Breshna Sherkat (“DABS”) has provided the indicative commercial principles set out below around (a) the structure and implementation of the Competitive Tender and (b) the terms of, and allocation of key risks under, the commercial agreements relating to the Project (as defined below), including the Project Agreements ("Commercial Principles").

Note: The stated positions in the draft Commercial Principles (“CP”) are NON-BINDING indicative terms and are subject to change at any

time, in DABS and the Government’s sole discretion, until mutual execution of Project documents with a successful bidder. It is noted further that the Government of Afghanistan’s (“GOA”) indicative position on any particular CP has been formed on the basis of a risk assessment of the CPs as a whole.

We have included references to the concept “bankable” to describe certain risk allocations used in international practice. “Bankable” means viable in the sense of being acceptable to credible providers of long-term limited recourse financing to large independent power projects in the region.

“Leading International Practices” is also used to describe those terms and conditions which we and other stakeholders with extensive experience in the international IPP market, and in renewable energy development, have observed.

INTRODUCTION

Afghanistan Power Auction Series (“APAS”) is designed as a vehicle to assist the Government of Afghanistan and Da Afghanistan Breshna Sherkat, the national utility, in accelerating the development of the country’s renewable energy market. APAS is a multi-round auction series. The first round of APAS will tender 40MW of Solar PV at Hisar-e-Shahi, a 207 hectares industrial park southwest of Jalalabad city in Nangarhar province.USAID has procured a team of transaction advisors (legal, financial and commercial) to ensure execution of APAS. The Transaction Advisory Team (the “Team”) has designed a process strongly focused on involving the entire market (developers, government, donors and lenders) to produce the commercial documents required to bring APAS successfully to market.APAS Approach

For the first stage of the APAS process, the Team, acting as a proxy for market, has spent the last two months working with DABS to compile a list of commercial principles (“CPs”) of risk allocation. The CPs are predicted on the concept of bankability and reference the concept to describe certain risk allocations used in international best practices.

In the CPs, “Leading International Practices” is also used to describe those terms and conditions which we and other stakeholders with extensive experience in the international IPP market, and in renewable energy development, have observed.

As we continue our collaboration through the APAS process, the Team aims to achieve alignment on the CPs though transparent forums such as this Webinar and would appreciate your comments and feedback on each risk allocation.

FEEDBACK FORM:

All feedback and comments will be treated as confidential and will be seen only by the Advisory Team. Please send all feedback to najib.rahmani@CrossBoundary.com and cc Kathleen.JeanPierre@CrossBoundary.com no later than the 18 th of June, 2019 .

Name:

Company Name:

Date:

The Commercial Principles are as follows:

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1. Project Description

An IPP to finance, develop, construct, operate and maintain a 40MW photovoltaic power plant at the Hisar-e-Shahi Industrial Park (the "Generation Facility") and to connect that Generation Facility to the existing national grid at the [•] Substation (together with all the agreements necessary to develop and finance the Generation Facility, the “Project”).

2. Principal Stakeholders

1. GIROA, represented by: Da Afghanistan Breshna Sherkat

(“DABS”). Ministry of Energy and Water Ministry of Finance NEPA MUDL

2. The Strategic Sponsor and potentially other equity investors in the Project Company (the "Investors").

3. USAID 4. The project Company5. Lenders to the Project Company,

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including their agents and trustee and any hedge providers (the "Lenders").

3. Project Term The Project Company's rights in respect of the Project will be expected to continue in force until [15-20] years from the commercial operation date of the Generation Facility; subject to limited circumstances which may give rise to an extension of the term, and any early termination of the Project Agreements. The exact term will be included in the relevant Project Agreements based on the outcome of tariff modelling analysis and assessment of useful life of anticipated technology. The exact term will be agreed between the Parties and included in the relevant Project Agreements based on the outcome of tariff modelling analysis, including the impact of any viability gap funding provided by donors, if any.

4. Land Acquisition

If expropriation of any land is required (either for the Generation Facility site (the "Site")

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and/or any access roads, etc.), GIROA, through the ARAZI office under the Ministry of Urban Development, will be expected to carry out the expropriation process in accordance with both Afghani law and international standards consistent with developing a bankable and feasible Project,. GIROA will also take responsibility for securing all wayleaves and any other land rights required for the construction and operation of the Shallow Grid Connection (see point 12 below), also in accordance with Afghani law and international standards consistent with developing a bankable and feasible Project. Any compensation payable to land owners and/or occupiers will be funded by the Strategic Sponsor.

5. Security Scenario

The tariff would typically be looked at every five years based on the security situation

6. Community Relations

GIROA will take responsibility for developing and carrying out a strategy of

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communications with the general population as part of stakeholder management, including in particular local authorities and people who live and/or work on or adjacent to the Site, access roads and surrounding areas, in accordance with both Applicable Law and international standards consistent with developing a bankable and feasible Project. The costs

7. Site Selection GIROA/DABS has identified an appropriate site for the Project.

8. Irradiation The ADB has commissioned a pre-feasibility report for the Project which will be made available to bidders. Although this report envisioned a project which was not grid connected and the Project will be grid connected,

9. Subcontracting The Project Company will be permitted to subcontract its rights to construct and operate the Project, subject to DABS’ pre-approval of

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specific subcontractors.

10. Implementation Agreement

An agreement with broader branches of government that would be required to cooperate or support the project ("Implementation Agreement" or “Government Services Agreement”) would be entered into between GIROA and the Project Company. The principal purpose of the Implementation Agreement will be to (a) grant the exclusive right to carry out the Project to the Project Company and to provide certain other assurances of the GIROA to the Project Company, and (b) allocate certain rights, responsibilities and risks to GIROA and the Project Company

11. PPA The power purchase agreement ("PPA") is expected to be entered into between DABS (the "Buyer") and the Project Company (as "Seller"). The purpose of the PPA will be to set out the commercial relationship of the parties with regard to the sale and purchase of

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generation energy.

12. Grid Connection Agreement

DABS will be responsible for the construction of the required connection between the Site boundary and the [designated] Substation (the "Shallow Grid Connection").

Construction of step-up transformer and synchronization machinery/procedure will be responsibility of the contractor.

If DABS's role as TSO is contained in a separate GCA, this would cover, inter alia (i) the right of the Project Company to connect the Generation Facility to the Shallow Grid Connection, and (ii) quality of electricity supply.

13. Other Project Agreements

The Project Company will be a party to several other project agreements, e.g. EPC contract, O&M contract, etc. (Except in the case of the lease of Government or DABS owned land, DABS and GIROA are not

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expected to be a party to these agreements.)

14. Lenders' Direct Agreement

DABS is open to providing for Lenders’ Direct Agreements for the major project documents.

15. Energy Charge DABS will be required to pay an energy charge, i.e. the

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tariff. Broadly this will be based on delivered energy.

Similarly to the Kajaki IPP project, during the Term, the tariff is expected be fixed as of execution of the PPA and will not be subject to adjustment other than, every 5 years, the tariff will be subject to review and confirmation by DABS based on a risk assessment. Should the risks to the project have materially reduced from the previous 5-year period, then DABS will have the right to lower the tariff based on a pre-defined structure in the PPA. (Note such structure is still under development.)

16. Deemed Energy

In the case of and certain events (e.g. related to GIROA or DABS events or circumstances which are the fault or responsibility of GIROA and/or DABS), the Project may be deemed to have delivered energy for the purposes of determining the energy charge. A standard metering reading system and calculation of such deemed energy will be developed based on Leading International Practice that gives DABS assurances that deemed energy calculations are accurate. An internationally bankable and feasible definition of Force Majeure will also apply.

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17. Test Energy DABS will only start purchasing electricity upon successful commissioning of the solar plant

18. Refinancing Gains

If the Project Company refinances and/or re-leverages itself, it will be required to share percentage (to be mutually agreed and set out in the PPA) of the 'refinancing gain' with DABS via a reduction in the energy charge. The Project Company will be required to share with DABS solely for the purpose of the calculation of any Refinancing Gain (a) its audited financial model as a condition precedent to the effectiveness of the PPA, and (b) its audited total project costs incurred as soon as is reasonably practicable after COD.

19. Take-or-pay DABS will be required to pay for energy the Project Company can produce and deliver to the interconnection point regardless of actual despatch of the Generation Facility if the despatch is not possible through no fault of the Project Company. A minimum floor for required production and a maximum ceiling

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for DABS’ take-obligation will be included.

A standard metering reading system and calculation of such deemed energy will be developed based on Leading International Practice that gives DABS assurances that deemed energy calculations are accurate. An internationally bankable and feasible definition of Force Majeure will also apply.

20. Interest Rates The Project Company will bear the risk of fluctuating interest rates.

21. DABS Credit Risk

The GOA is considering providing a guarantee of DABS's payment and performance obligations.

22. Taxes The Project and Project Company are expected to pay all applicable taxes.

23. Contracted Capacity

The "Contracted Capacity" is expected to be approximately 40 MW, subject to any technical adjustments to the overall

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parameters of the Project.

24. Required COD / Construction Risk

The Project Company will be required to reach the commercial operation date of the Generation Facility ("COD") by a certain deadline (the "Target COD").

COD will only be reached if the Generation Facility passes prescribed commissioning tests demonstrating, among other things, at least a minimum (to be determined) available capacity and that the as-built Generation Facility meets certain agreed standards. Accordingly, and with only limited exceptions described in the next sentence, construction risk is allocated to the Project Company.

The Target COD may be extended for delays which are either the fault or responsibility of GIROA and/or DABS or force majeure events (including Natural Force Majeure Events, Local Political Force Majeure Events and

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Foreign Political Force Majeure Events – see points 37 to 40 below).

If COD is not reached by the Target COD, the Project Company may be entitled to 'purchase' an extension for a limited period of time (40 days) by paying delay liquidated damages (the end of such period being the "Required COD"). If COD is not reached by the Required COD, DABS will have the right to terminate the PPA. (See point 42 below.)

The maximum amount of delay LDs will be required to be secured by a performance bond issued by a bank or other party with an acceptable credit rating.

25. Cost Overruns Cost overruns are to be borne by the Project Company, who DABS expects will enter into a turnkey/fixed price EPC contract.

26. Deemed Commissioning

If COD is delayed due to events or circumstances which are the fault or responsibility of GIROA and/or DABS (e.g.

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failure to construct the Shallow Grid Connection on time) or Local Political Force Majeure Events, a "deemed commissioning" may occur, following which the Project will be "deemed" to have been successfully commissioned and a "deemed" energy charge will become payable, regardless of the fact that the Project is not yet operational. Such mechanism, as well as a robust technical framework in line with Leading International Practices for calculation to be included in the PPA.

27. Shallow Grid connection

See point 12 above

28. Deep Grid Strengthening

Carrying out and paying for any deep grid strengthening which may be required to evacuate energy generated by the Generation Facility (up to the Contracted Capacity) will be DABS's responsibility.

29. Delivery Point Risk and title in electricity generated by the

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Generation Facility will pass at a point which is expected to be at or around the Site boundary (the "Delivery Point").

30. Metering The metering system, consisting of a main meter and check meter, will be located immediately prior to the Delivery Point, subject to review of the metering section of the Grid Code.

Installation of the meter will be monitored by an independent 3rd party who is an expert in the field and any commissioning will be contingent on such independent third party’s confirmation that the meters function properly.

The independent third-party expert will be hired in mutual agreement with DABS and IPP office. The entire cost of the third-party expert will be borne by the project company.

Maintenance of the meters will be the responsibility of the Seller but the Seller will

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provide the Buyer with notice and an opportunity to observe any major maintenance on the meters. Additionally, a Buyer Technical Expert for metering issues will be appointed and such costs will be included in Project costs.

31. O&M The Project Company will be responsible for the operation and maintenance of the Generation Facility (including all infrastructure up to the Delivery Point).

It is expected that the Project Company will contract with an O&M company (the "O&M Contractor") for the provision of O&M services.

DABS will be responsible for the operation and maintenance of the Grid up to the Delivery Point.

32. Environmental & Social Standards

All EPC and operations and maintenance would typically be required by development finance institutions to comply with Afghani

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law (including regulations by NEPA) and good industry practices

33. Insurance The Project Company will be responsible for obtaining and paying the cost of certain required insurances to cover physical damage and third-party liability in relation to the Generation Facility.

DABS may retain a specialist insurance advisor to advise on the insurance related provisions of the PPA, and the cost of such advisor will be a Project Cost and be provided to bidders ahead of submission of bids.

34.Forex Availability and Exchange Rate Risk

The tariff will be denominated and payable in USD until the end of the loan period. After the end of the loan period, the tariff will either be in Afghanis or in USD with a fixed exchange rate for the remainder of the PPA term.

All termination compensation amounts will be

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payable in USD.

35. Forex / Bank Accounts

The Project Company will be allowed to establish and operate bank accounts (including forex accounts) inside and outside of Afghanistan, provided in each case that it complies with all exchange control regulation. The Project Company must have a local bank account in Afghanistan and all transaction and transfer charges would be the responsibility of the Project Company.

36. Load/Demand See point 20 above

37. Grid Risk DABS will take grid risk. i.e., risk on the grid being able to evacuate the generation capacity of the Generation Facility subject to an excused grid unavailability threshold for maintenance and subject to force majeure.

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38. Natural Force Majeure Events

If the Project Company is precluded from performing its obligations by a natural force majeure event (e.g. typical 'Acts of God' such as storms, etc.) affecting the Generation Facility, the Project Company will be entitled to claim relief from its obligations (but not compensation).

If such event is prolonged (number of months to be agreed), the Project Company will have the right to terminate the Project Agreements.

39. Local Political Force Majeure Events

If e.g. changes in law and tax which impact adversely on the Project; permitting issues; expropriation; creeping expropriation; civil disturbances; terrorism; strikes, work-to-rule and/or go-slows which are not primarily motivated by a desire to influence the actions of the Project Company; etc. affecting the Generation Facility (and/or the Project Company) occur, as well as the Project Company being excused from performance for the duration of the relevant event (and its

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effects), DABS and/or GIROA will be expected to compensate the Project Company.

If such an event is prolonged (number of months to be agreed), the Project Company will have the right to terminate the Project Agreements.

40. Foreign Political Force Majeure Events

If e.g. an event which would be a Local Political Force Majeure Events except that it occurs outside of Afghanistan occurs and adversely affects the Project (e.g. equipment intended to form part of the Generation Facility is delayed in transit across another country due to a political event there), the Project Company will be excused from performance for the duration of the relevant event and its effects.

41. Government Approvals

Provided that the Project Company (and its sub-contractors) makes proper applications for and is in compliance with Applicable Law

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and environmental and social and other applicable standards relating to the same, to the extent that Government Approvals are required and not contained within the Implementation Agreement, e.g. a generation licence, environmental and/or construction permits, etc., GIROA would be expected to ensure that such Government Approvals are provided (on bankable terms) on a timely basis.

42. Purchase Obligation

Upon termination of the Project Agreements, DABS expects to purchase the Generation Facility or compensate the Project Company.

The purchase price itself would vary depending on (a) the nature of the event which caused the early termination, and (b) when the early termination (if any) occurs.

If an early termination event arises as a result of a Project Company Event of Default, then neither GIROA nor DABS will be obliged to

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terminate (and the Project Company will not be permitted to terminate) as a result of such early termination event. Should DABS elect to terminate, no compensation will be paid to the Seller.

All Early Terminations

Risk mitigation and allocations which are bankable are in the process of being crafted.

Specific Early Terminations

If an early termination occurs due to an event (if any) which is the fault or responsibility of GIROA and/or DABS, the early termination purchase price would typically be expected to be sufficient to pay all amounts owing to the Lenders, cover termination costs, and to provide a fair return on investment (exact amount to be determined) to the Project's investors.

To the extent that an insurer has confirmed

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that it will pay under insurances, the amounts payable may reduce the early termination purchase price (if any) which becomes payable.

Equally, if other proceeds arising from the relevant early termination event(s) are available, e.g. compensation under a bilateral investment treaty, the Project Company would not be permitted 'double compensation'.

43. BOOT The Project will be a BOOT model The Implementation Agreement and the PPA will include a mechanism for ensuring that the Generation Facility is appropriately maintained and refurbished in the final years of the PPA term, so that it is in appropriate condition for handover to GIROA or its designee. Such handover will be at zero cost to GOA or the relevant designee.

44. Governing The Implementation Agreement, PPA (and

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Law & Jurisdiction

Grid Connection Agreement (“GCA”) if this is separate to the PPA) are usually governed by local law.

Dispute resolution would most likely be expected to be in accordance with ICC international arbitration rules in London (however, hearings would be conducted in Dubai ).

As the Lenders' Direct Agreements are considered to be finance documents, in line with the other finance documents Leading International Practices provide that these agreements would be governed by English or NY law with dispute resolution in English or NY courts or international arbitration in England or NY.

45. Sovereign Immunity

GIROA and DABS (and any other state-owned entities) will be expected to waive sovereign immunity.

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