with XacBank LLC for Mongolia · 2020-02-14 · Energy Savings Insurance (ESI) model that comprises...

with XacBank LLC

for Mongolia

24 December 2019 | Strategic Frameworks

Programme title: Energy Savings Insurance Model Development

Country: Mongolia

National designated authority: Ministry of Environment and Tourism, Nature Conservation Fund

Implementing Institution: XacBank LLC

Date of first submission: 25 September 2018

Date of current submission / version number

10 December 2019 V.5

Readiness and Preparatory Support Page 2 of 26

How to complete this document?

- Please visit the Empowering Countries page of the GCF website to download the Readiness Guidebook and learn how to access funding under the GCF Readiness and Preparatory Support Programme.

- This document should be completed by National Designated Authorities (NDA) or focal points with support from their Delivery Partners where relevant. Once completed, this document should be submitted to the GCF by the NDA or focal point to [email protected].

- Please be concise. If you need to include any additional information, please attach it to the proposal. - If the Delivery Partner implementing the Readiness support is not a GCF Accredited Entity for project

Funding Proposals, please complete the Financial Management Capacity Assessment (FMCA) questionnaire and submit it prior to or with this Readiness proposal. The FMCA is available for download at the Library page of the GCF website.

Where to get support?

- If you are not sure how to complete this document, or require support, please send an e-mail to [email protected].

- You can also complete as much of this document as you can and then send it to [email protected], copying both the Readiness Delivery Partner and the relevant GCF Country Dialogue Specialist and Regional Advisor. Please refer to the Country Profiles page of the GCF website to identify the relevant GCF Country Dialogue Specialist and Regional Advisor.

- We will get back to you within five (5) working days to acknowledge receipt of your submission and discuss the way forward.

Please submit the completed form to:

[email protected]

Please use the following naming convention for the file name: “GCF Readiness Proposal-[Country]-[yymmdd]”

Note: Environmental and Social Safeguards and Gender

Throughout this document, when answering questions and providing details, please make sure to pay special attention to environmental, social and gender issues, particularly to the situation of vulnerable populations, including women and men. Please be specific about proposed actions to address these issues. Consult Annex IV of the Readiness Guidebook for more information.

https://www.greenclimate.fund/how-we-work/empowering-countries

mailto:[email protected]

https://www.greenclimate.fund/library/-/docs/list/574044



https://www.greenclimate.fund/countries



1. SUMMARY

Country submitting the proposal

Country name: Mongolia

Name of institution representing NDA or Focal Point: Ministry of Environment and Tourism, Environment and Climate Fund

Name of contact person: Mr. Batjargal Zamba

Contact person’s position: GCF Focal Point

Telephone number: +976 70000743

Email: [email protected] Full office address: 7th Floor, 22 Building, Amar Street, 8th Micro-district Sukhbaatar district, Ulaanbaatar, Mongolia

Additional email addresses that need to be copied on correspondences:

Date of initial submission 25 September 2018

Last date of resubmission 10 December 2019 Version number V.5

Which institution will implement the Readiness and Preparatory Support project?

☐ National designated authority ☒ Accredited entity ☐ Delivery partner Please provide contact information if the implementing partner is not the NDA/focal point

Name of institution: XacBank LLC

Name of official: Tuul Galzagd

Position: Director of Eco Banking Department

Telephone number: 7571188188 (ext 707)

Email: [email protected]

Full office address: XacBank HQ Building, Prime Minister Amar’s Street, Sukhbaatar District, Ulaanbaatar-14200, Mongolia

Additional email addresses that need to be copied on correspondences:

Title of the Readiness support proposal

Energy Savings Insurance Model Development

Type of Readiness support sought

Please select the relevant GCF Readiness activity area below (click on the box): ☐ I. Country capacity for engagement with GCF ☐ II. Country programming process ☐ III. Direct access to climate finance ☒ IV. Climate finance accessed ☐ V. Formulation of national adaptation planning and/or other adaptation planning

processes



Brief summary of the request

This proposal seeks readiness funding to support XacBank in structuring an energy efficiency/renewable energy (EE/RE) financing model that benefits and transforms the EE/RE market in Mongolia. XacBank proposes the development and incorporation of the Energy Savings Insurance (ESI) model that comprises of financial and non-financial mechanisms designed to work together to create trust and credibility among key actors, reduce the perceived risk of EE/RE projects for stakeholders, persuade clients to invest in EE/RE and generate a continuous pipeline of “bankable” projects. It is estimated that the preparation and implementation of the ESI model in Mongolia would take twelve months and would benefit from the previous experience of international experts who have developed and observed the success of the ESI model in other countries.

Total requested amount and currency USD 296,300 Anticipated duration 12 months


Has the country received or is expecting to receive other Readiness and Preparatory Support funding allocations (including adaptation planning) from GCF or other donors?

☒ Yes ☐ No

To date, five readiness support programs have been approved by the GCF and are being implemented in Mongolia:

1. GCF Readiness and Preparatory Support Project for NDA Mongolia with XacBank as a delivery partner.

This project covers two areas:

i. Establishing and strengthening the National Designated Authority (NDAs) or Focal Point.

ii. Strategic Frameworks for Engagement with the Fund, including the preparation of country programmes

This project aims to strengthen NDA/FP’s capacity in setting systematic country coordination mechanisms, developing a strategic framework as a basis for the preparation and implementation of funding proposals, and conducting roles and responsibilities as per decision B.04/05 including no objection procedure.

2. Scaling up of Implementation of Low-Carbon District Heating Systems in Mongolia (UNEP) The objective of this project is to develop a funding proposal to scale up the use of energy efficient district heating systems in Mongolia as well as potential alternate heat supply options in ‘ger’ areas with private sector participation to reduce emissions from energy use and address air pollution. Specific activities include a) situational assessment related to existing heat supply systems in demand areas, b) feasibility study and identification of business models, c) development of implementation plan and investment proposal.

3. Readiness Support for Enhancing Access to Green Finance in Mongolia with the Global Green Growth Institute (GGGI) as delivery partner. Within this project, market demand, investment potential in a) small scale RE and alternative energy solutions to peri urban areas, b) waste management and sanitation solutions, c) green and affordable residential buildings will be conducted. Based on assessment findings, bankable project proposals will be developed with the private sector and implementing agencies. A project seeks to prepare investment projects/programs within the scope of highest impact sub-sectors for green growth.

4. Building capacity to advance National Adaptation Plan Process (UNEP)


The objectives of the national adaptation plan are a) to reduce vulnerability to impacts of climate change by building adaptive capacity and resilience, and b) to facilitate the integration of climate change adaptation into new and existing policies, programmes and activities. NAP aims to achieve this through i) development of country capacity to improve climate change adaptation (CAA) at systemic, institutional, and individual levels, ii) establishing and strengthening system to generate and share knowledge, experience, gaps and needs are international, nation, aimag, and soum levels to advance CAA, iii) Development of a strategy to implement, monitor and communicate adaptation benefits at different levels.

5. Readiness Support to Strengthen Sustainable Finance Practices in Mongolia and Encourage Regional Knowledge Sharing The purpose of this proposal is to support Monglia’s efforts to develop a sustainable financial system aligned with Mongolia’s climate and green development targets and furthermore, promote Mongolia’s vision to become a sustainable finance knowledge center in the region. The activities under this proposal directly builds on the Mongolian Sustainable Finance Initiative, an industry wide voluntary initiative implemented by the banks to integrate environmental and social risk considerations in their lending operations, and compliments the ongoing work to establish the Mongolian Green Finance Corporation, the country’s first national green finance vehicle.

2. BACKGROUND

In June 2017, XacBank (Accredited Entity) received financing through the GCF to implement the Business Loan Program for GHG Emission Reduction in Mongolia which is a $60 million facility aimed at promoting the use of energy efficient and renewable energy solutions in the Mongolian MSME market. MSME’s make up more than 90% of the businesses in Mongolia, a lot of which are using outdated and inefficient equipment, processes and buildings. The programs main objective is to promote both the use and production of EE/RE projects in the domestic market. Of the total $60 million program, $20 million is funded by the GCF, which allows XacBank to improve its lending terms through blending with its current EE/RE funds.

Although there is a lot of potential for EE/RE projects to decrease energy costs of businesses, increase production efficiency, and improve electricity reliability, there are significant investment barriers (i.e. lack of priority in investing in EE/RE, lack of trust in technology/providers, difficulty with access to finance, limited knowledge of EE/RE) that prevent many enterprises from developing these projects. In order to persuade businesses to invest in EE/RE and generate a continuous pipeline of bankable projects, it is fundamental to have a strategy that can make these types of investment opportunities a priority for businesses, build trust and credibility among key actors, and improve the risk-return trade-off perception.


At board meeting decision B.15/24, the funding proposal for the Business Loan Programme for GHG Emissions Reductions was approved with a recommendation from the Independent Technical Advisory Panel (ITAP) to complete a market assessment for evaluating a third party energy savings insurance programme in order to “fully eliminate the technological risks and ensure the complete success of the [Business Loan] programme.” Following this recommendation, XacBank identified the Basel Agency for Sustainable Energy (BASE) as a partner to aid in the development and initial implementation of ESI mechanisms in the EE/RE market in Mongolia. BASE has extensive experience in implementing ESI all over Europe and Latin America and has already worked with the Bank to complete a market assessment in which they identified that Mongolia’s EE/RE market has the potential to launch ESI.

The proposed Energy Savings Insurance (ESI) Model is an established concept and innovative approach to scale up private sector investments in EE/RE and is comprised of the following mechanisms:

(i) A standardized contract, which establishes a legally binding agreement between the SME and a provider. It also offers a clear and transparent framework for negotiations. It reduces the risks involved in EE/RE projects by distributing the remaining risk to appropriate actors and fosters trust among them.

(ii) A risk coverage instrument (for businesses) offered by the technology provider to assure the promised energy savings. The cost of the risk coverage is embedded in the total cost of the EE/RE project, and is essentially paid by the business. According to BASE’s market and feasibility assessment, previous cases have shown that the insurance cost is between 1 and 2% of the total cost of the project. This instrument creates trust and reduces the credit risk for the SMEs. The aim of the energy savings insurance is to reduce the risk perception of the client regarding the EE or RE investment opportunity, and provide a better risk-return tradeoff profile of EE and RE investments. This mechanism is fundamental to convince clients to invest in these projects and complements the retention guarantee offered by the technology provider in the contract. BASE, who we have selected as our implementation partner, has relevant experience that shows that if the client does not have the certainty that they will receive the energy savings then they are likely to prioritize other investment opportunities, and will not commit to credit from the bank. ESI supports financial institutions to reduce the risk of client default as the results of the investment are guaranteed and insured.

(iii) A validation mechanism that uses an independent validation entity to evaluate the capacity of the project to generate the energy savings promised, to evaluate the capacity of the provider to deliver and install the appropriate technology solution and fulfill its obligations.

With ESI, the promised savings are ensured through an easy to understand contract, with the backing of a reputable validation entity, and a surety insurance in place to cover the potential energy savings not achieved through the project.

The market assessment results indicate that it is realistic to mobilize a total of $37 million ($29 million from EE/RE projects and $8 million from microscale solar PV projects for herders) within 5 years of the program commencing which would reduce GHG emissions by a total of 23,206 tons (214,933 tC02 + 19,272 tC02). Table 1 summarizes the figures projected by BASE in their assessment. The estimates provided are based on conservative market estimates on a target between 2% and 25% of the potential market for the specified sectors (target percentages were determined based on market assessment findings). The estimated full SME market size is significantly larger than the specified projections. Table 1: BASE’s projections for EE and RE projects under the ESI model- years 1 to 5

Year 1 Year 2 Year 3 Year 4 Year 5 Total over period of five years

Total # of target projects (cumulative)

38 70 110 150 150 518


Total investment mobilized (USD) (cumulative)

1’657’592 4’001’084 6’287’418 8’573’751 8’573’751 29’093’596

Total energy savings per year (GWh)

2.23 5.38 8.45 11.52 11.52 39.09

Total tCO2e emissions reduction per year

5’172 17’658 37’279 64’034 90’789 214’933

The expected project lifetime mitigation impact for the MSME Business Loan Program for Emission Reduction is 1,194,323.98 t CO2 eq and it is predicted that under the ESI programme, EE/RE projects would have a 214,933 tCO2eq emission reduction over 5 years.

By the time this readiness proposal is approved, we will be in the third year of the MSME Business Loan Program (FP028); however, these figures still show us that we can achieve an increase of at least 60,109 tCO2eq1 in mitigation impacts through the implementation of the ESI program over the remainder of FP028.

Additionally, the GCF MSME loan facility has the possibility to be extended for another 3 years. Therefore, as the Bank is aiming to continue this program for a total of 8 years, The MSME Business Loan Program would be able to benefit from the total increase of 214,933 tCO2eq from the ESI program over its lifetime.

The combination of the financial and non-financial mechanisms discussed above are designed to support the financing instrument, which will be provided by XacBank and can be used by other investors and EE/RE financiers in the future. Currently in Mongolia, XacBank is the only commercial bank that offers sustainable energy financing while also measuring the energy efficiency of products as a condition of our loans. Energy Savings Insurance is only feasible with EE/RE financing components in place as borrowers will only purchase this insurance if the conditions of their loan requires them to save a certain amount of CO2.

Additionally, Mongolia is planning to initiate the “Mongolian Green Financing Corporation” (MGFC), which is a joint public and private sector effort for creating a national financing vehicle (NFV) to overcome challenges and constraints for climate change mitigation. It will create a unique PPP structure consisting of multiple stakeholders (Government of Mongolia, Banks, and IFI’s) who will work together to facilitate green financing in Mongolia. Subject to the approval of the GCF, this programme will allow other financial institutions to access financial resources from the GCF in order to contribute to the mitigation targets set by the government.

We will be able to expand this product as soon as the 10 commercial banks who extended their willingness to join the MGFC will begin initiating sustainable energy financing. For the moment, however, XacBank is the only bank that will be able to launch ESI with the hopes that it will be accessible to the MGFC, and in turn to the larger Mongolian market in the very near future.

Since we have demonstrated through the market assessment that ESI would be extremely beneficial for Mongolia’s EE/RE market, this readiness support would enable us to develop the relevant mechanisms to be able to implement this model in the country. The beneficiaries of the ESI model are primarily the SMEs who will benefit as they will now have a way to insure their promised energy savings and reduce the risks related to their investments in more expensive EE/RE investments (in terms of upfront costs). Quality EE/RE technology providers are also beneficiaries, as they will have a way to distinguish themselves from less reliable, less efficient, and cheaper technologies. These two groups are also the beneficiaries of capacity building trainings. Lastly, banks, FI’s, and investment companies are beneficiaries of this programme as they will learn from our best practices and will be able to implement this model in the future

This readiness funding will be used to mitigate EE/RE investment risks by engaging consultants with expertise in the ESI model to aid in executing the development of the ESI mechanisms and in the implementation of the model. By financing the implementation of this model, the GCF will significantly contribute to the market development and increase private sector investments in EE/RE in Mongolia.

1 Total under the first 3 years of ESI


3. LOGICAL FRAMEWORK AND IMPLEMENTATION SCHEDULE

Outcomes Baseline2 Targets Activities3

(brief description and deliverables)

Anticipated duration: 12 months

Monthly implementation plan of activities4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Outcome 1: Private sector engagement through the development and preparation of ESI mechanisms

Sub-Outcome 1.1: Standardized contract

N/A Completed standardized contract

Activity 1.1.1: Develop a standardized contract, which is the basis of the commercial agreement between the bank client and technology provider. The contract is also needed to develop the insurance as it contains all the important contractual elements such as the main clauses, the guarantees, and the EE/RE commitment of the technology provider, which will be backed by the insurance product. Deliverable 1.1.1: Draft standardized contract

x

Sub-Outcome 1.2: Risk coverage mechanisms (energy savings insurance)

N/A Developed risk coverage product

Activity 1.2.1: Select a suitable risk coverage product (via a surety insurance from Tenger Insurance or a Bank guarantee offered by XacBank Corporate) based on cost, risks, acceptance by the market, and suitability for the program.

x

2 For baselines rated at 1 or 2, please shortly elaborate on current baselines on which the proposed activities can be built on, processes that are in place that the current Readiness proposal can strengthen, or any gaps that the proposed activities would fill in. If more space is needed, please elaborate this in Section 2. 3 Please include tangible and specific deliverables for each activity proposed, and the timeframe (month number) in which it will be delivered to GCF. Please note that during implementation all deliverables should be included within the implementation reports for GCF consideration. 4 If the duration of the proposal is longer than 24 months, please change the monthly columns to indicate 2 or 3 months each (e.g. change month “1” to month “1-2’ or “1-3”).


Identify first mover SME’s from the target sectors to engage in, and promote the program. Deliverable 1.2.1: Risk coverage product (insurance or bank guarantee)

Sub-Outcome 1.3: Validation mechanism

N/A Identified validation entities and validation formats, protocols and methodology.

Activity 1.3.1: Develop methodology and formats to present project proposals and validate EE/RE projects and technology providers, as well as develop protocols for arbitration of disputes between the clients and providers. Deliverable 1.3.1: Selection and assessment of validation entity Validation formats, protocols and methodology

x

Sub- Outcome 1.4: Financing map

N/A Completed outline of flow of information within the bank

Activity 1.4.1: Define the financing evaluation process and internal flow of information. Define strategies to reach and serve clients in rural areas or isolated communities. Integrate ESI mechanisms as part of the credit assessment process. Deliverable 1.4.1: Development and finalization of financing map.

x

Sub-Outcome 1.5:

N/A Developed strategy for

Activity 1.5.1: x


Consultations with key actors

promoting and serving clients Completed documentation of roundtable discussions

Discuss and socialize the ESI mechanisms with key market stakeholders. Roundtable discussions/workshops with technology providers, government officials, and potential clients where they will receive an explanation and have a chance to provide input on the ESI mechanisms. Three (3) half-day workshops will be held with: - Technology providers.

A minimum of 15 participants- 3 hour business event

- Enterprise sector associations/ SME sector associations and government officials. A minimum of 10 participants- 3 hour formal business event.

- Internal workshop with XacBank officials (20 people)

Deliverable 1.5.1: Strategy for promoting and serving clients in rural/urban areas. Documentation of roundtable discussion/workshop with technology providers and potential clients.

Sub-Outcome 1.6: Management information system

N/A Established terms and outlines for the management information system

Activity 1.6.1: Program data managed via web based management information system (MIS), where monitoring and reporting of projects takes place. This MIS will be

x


developed to include all of the information required for GCF reporting. BASE will provide an outline which is intended to be used as a guideline for the website/MIS programmers. BASE will provide the structure and data outlines. The following items are included as part of this: a) Website mapping b) Define users access

permissions of the different target users (clients, technology providers, XacBank officials, insurance company, validation entity, donors)

c) Website public content

d) Integration of the validation procedures

e) Define reporting formats and incorporate them into the online MIS platform.

Deliverable 1.6.1: Terms and outline for the WEB page/MIS. MIS and webpage.

Sub-Outcome 1.7: Promotion strategy

N/A Completed draft of a marketing and communications outline

Activity 1.7.1: Develop a promotion strategy to raise awareness of the key clients and engage technology providers as a marketing material to promote the ESI model. Deliverable 1.7.1: Draft of a marketing communication outline that includes the

x


objectives, target group insights, needs of the targeted client, main benefits of the program, and promotion targets.

Outcome 2: Crowding-in private sector investments through the Implementation; pilot of ESI model and mechanisms

Sub-Outcome 2.1: Identify and engage providers

N/A Completed draft of collaboration agreement between XacBank and the technology provider as well as a draft of collaboration between the insurance company and technology provider.

Activity 2.1.1: Source and identify technology providers during consultation process. Assess technology providers’ services, experience and potential engagement. Discuss business model with the technology providers and outline the different mechanisms (including ISO50006) and features in order to support them in operationalizing the ESI model. Both the independent validation entity and the insurance company will be vetting the technology provider. The technical validation of the provider is carried out by the validation entity and the insurance company carries out a financial evaluation of the technology provider. Other actors can be involved to support the engagement of providers and pipeline generation (ex/ associations). Deliverable 2.1.1: Draft collaboration agreement between XacBank and the technology provider. Draft collaboration agreement between the

x


insurance company and technology provider.

Sub-Outcome 2.2: Building strategic alliances

N/A Established collaboration agreements between XacBank and key business associations and banking associations.

Activity 2.2.2: Partner with organizations that help with approaching and engaging potential clients and potential technology providers. Deliverable 2.2.2: Comprehensive meeting report that identifies relevant business associations and banking associations.

x

Sub-Outcome 2.3: Build pipeline

N/A Identification of five technology providers and EE/RE projects.

Activity 2.3.3: Guide the technology providers and clients involved through the initial phase of the program. Identify the initial projects that can be financed through the EE/RE financing program. Deliverable 2.3.3: Meeting report identifying at least five technology providers and RE/EE projects as well as influential first mover businesses from the target sectors.

x


4. ADDITIONAL INFORMATION (ONLY FOR ADAPTATION PLANNING SUPPORT)

This section is only to be completed when seeking support for formulation of national adaptation plans and/or other adaptation planning processes. Please see Part 3 Section 4 in the Readiness Guidebook and please limit to maximum of 500 words.


5. BUDGET, PROCUREMENT, IMPLEMENTATION, AND DISBURSEMENT

5.1 Budget plan Please complete the Budget Plan in Excel using the template available in the Library page of the GCF website. 5.2 Procurement plan Please complete the Procurement Plan in Excel using the template available in the Library page of the GCF website. For goods, services, and consultancies to be procured, please list the items, descriptions in relation to the activities in section 2, estimated cost, procurement method, relevant threshold, and the estimated dates. Please include the procurement plan for at least the first tranche of disbursement requested below and provide a full procurement plan for the entire duration of the implementation period if available at this stage. 5.3 Disbursement schedule Please specify the proposed schedule for requesting disbursements from the GCF. For periodicity, specify whether it’s quarterly, bi-annually or annually only.

Please choose one option among the two below and delete the one that does not apply to you. Please fill in information under brackets:

☒ Readiness Proposal that requires a bilateral Grant Agreement to be signed with the GCF (please add more disbursement as needed)

• The first disbursement amounting USD 250,000will be transferred upon approval of the readiness request and effectiveness of the Grant Agreement;

• The second disbursement amounting USD 46,300 will be made upon submission of a completion report and financial report, in form and substance acceptable to the Fund, including an audited expenditure statement.

Please include an indicative disbursement table showing the expected amounts to be requested and keep to multiples of USD 5,000.




6. IMPLEMENTATION ARRANGEMENTS AND OTHER INFORMATION 6.1 Implementation map Please describe how funds will be managed by the NDA and/or the Readiness Delivery Partner.

XacBank as the AE will take responsibility for the management of readiness funding and will procure consultancy services necessary to deliver all activities. The XacBank Eco Banking Department will be the main implementing unit of the programme and will be responsible for overall coordination, oversight of the implementation of activities and monitoring of the project. The department will also be highly engaged in the development and implementation of all ESI mechanisms and activities. Four members of the XacBank Eco Banking department team will be involved in this project: Tuul Galzagd- Director of Eco Banking Greg Zegas- Senior Project Development Officer Batsanaa Batchuluun – Senior Project Development Officer Eric Nevalsky – Project Development Officer The Bank has selected an international consultancy- BASE, who are very experienced in developing and implementing ESI all over the world. BASE has already completed a market assessment and will be an implementation partner specifically engaged in the implementation of the ESI mechanisms. Please see the implementation plan annexed below for more detail. Certain mechanisms within the model will need to be developed and implemented by local experts. For instance, the standardized contract will be developed by a legal consultant with experience in engineering, procurement, financial mechanisms, and construction of a performance based guaranteed energy savings contract XacBank and BASE identified Tenger Insurance as a suitable insurance company to offer the risk coverage product. The insurance company will charge a premium to the technology provider who will usually recoup the premium from the client under the EE/RE contract. Typically, the premium is around 1% of product cost, or sometimes lower so that it is not a financial burden to the consumer. This product will not be exclusively for XacBank’s use; as more banks enter the green financing industry, they will also be able to partner with Tenger Insurance for the same purposes. Tenger Insurance was selected as they have a good understanding of the energy efficiency market and are one of the top five insurance companies in Mongolia with a good reputation and a reasonable share of the market. Tenger is also the only Mongolian insurance company with a fully bilingual leadership team, and BASE mentioned that they would prefer to work with Tenger to pilot the ESI product for this reason. Once other insurance companies in Mongolia have the sufficient experience in energy efficiency and sustainable finance, we will be able to launch the product more widely with other insurance companies as well. Through this readiness support program, a credible and experienced reinsurer will be selected with the help of BASE. Depending on the expected risks portfolio size, the insurance company would calculate their retention and decide how much to cede to reinsurers. Tenger Insurance is supportive of retaining minimal risk retention (of 5%) initially, to be revaluated as the program progresses after its first year. An independent and highly credible validation entity will be procured and in the market assessment, BASE identified and interviewed two international validation entities with a local presence- Societe Generale de Surveillance SA (SGS) and Bureau Veritas (BV). Both of these companies have the necessary expertise within the organization and the capacity to build a team in Mongolia. A credible validation entity is critical to the success of ESI as it is common to have some EE/RE projects where the client and provider do not agree on the projects EE/RE performance. In some cases the client may requests compensation for damages and the provider may argue that the project has achieved the promised energy savings. In order to settle such disputes it is recommended to have an independent validation entity, which will be playing an arbitration role in the case of disagreement between the client and the technology provider. When the parties do not agree, they can call on the validation entity to settle the dispute.


The contract provides that both parties will abide by the resolution of the validation entity. The technical arbitration role is key for the insurance company, which also responds in the event that the provider cannot fulfill its obligations. The validation entity essentially becomes the technical eyes of the insurance provider.

For this reason, the validation entity must be independent, have a strong reputation, and must be reliable. The arbitration costs of the validation entity would be paid by the organization that “loses” the dispute on order to discourage the abuse of the validation entity.

The validation entity also plays a role at the beginning of the project, when the bank is evaluating the project. The validation evaluates the capacity of the project to generate the energy savings promised, and the technology provider’s capabilities to deliver and install the EE/RE technology solution and fulfill its obligations. This is critical for the insurance company. Furthermore, the validation also verifies the project once it is installed and is ready for operation. This is to verify that the installed equipment is the same equipment that was promised and that the monitoring systems that are going to be used to measure the EE/RE are in place. The following figure illustrates the three validation interventions during the lifetime of the project. Validation entity interventions

In order to reduce validation costs and simplify the validation process, a methodology and standard protocols need to be developed that can be used by technology providers to present their proposals and facilitate the validation process. The methodology indicates how to estimate the baseline and the energy savings. This will facilitate and standardize the validation process. The validation methodology and protocols implemented in other countries are based on a recognized international standard, ISO 50006. The estimation of the baseline and energy savings information, as well as the completion of the required forms are carried out by the provider on behalf of the client, and this information is delivered together with the financing request of the client to XacBank. It is expected that XacBank then pass the information to the selected validation entity to conduct the technical evaluation. The technical validation protocols are developed per technology.

The methodology also provides the protocol for the periodic energy savings reports that would be filled out by the technology provider and approved by the client.

BASE, after completing the market assessment, recommended that all the formalities - proposal formats, validation processes, reporting and authorizations - are carried out through an online management information system, this will reduce cost, time and increase reliability of managing information of the projects. The MIS can be used to generate periodical impact reports and track energy savings and CO2 reductions.

The cost of validating of the technology provider is usually paid by the technology provider, and occurs just once for each technology provider. The cost of validating the project is paid by the client as part of the transaction cost. This is also paid once only. The arbitration costs of the validation entity would be paid by the organization that “loses” the dispute on order to discourage the abuse of the validation entity. The following table exemplifies potential validation costs. These costs are indicative only, and need to be negotiated with the validation entity in Mongolia.

Table 1: Estimation of validation and insurance costs by project size

Expense Who pays Project size

Small scale Medium size Large scale


(20K - 50K USD) (51K - 100K USD) (> 100K USD)

Providers validation (once only) Provider

500 USD (0.5 – 2.5% of project costs)d

Project validation (once only) Client

350 USD (0.7-1.75% of project costs)

600 USD (0.6%-1.2% of project costs)

1,000 USD (less than 1% of

project cost) Verification of project

on site (once only) Client

400 USD (0.8-2% of project

costs)

700 USD (0.7-1.4% of project

costs)

900 USD (less than 0.9% of

project costs) Validation of results in

case controversy (only if dispute arises)

Un-favored party

2,500

(approximate cost of resolving dispute) Insurance

(once only) Client 0.5-1.5% of total project costs A web programmer will be hired for developing a management information system/website to enable communication and information sharing among clients, technology providers, the insurance provider and the bank. The total timeline of this readiness proposal will be twelve months, beyond this, XacBank will continue to support technology providers to use and implement the model. XacBank will aim to support EE/RE projects with the aim that investments in EE/RE equipment demonstrates impact over time. Aimed EE/RE parameters: up to 5 years, premium cost between 1 and 2% of the CAPEX. Implementation of activities funded by the readiness support will be wholly monitored and managed by XacBank. All contracted and subcontracted entities engaged in the project will be subject to Bank’s AML/CFT compliance measures. Figure 1 below depicts the responsibilities of each key entity involved, the intended reporting mechanisms, and, the flow of funds within the project.


Figure 1

AE (XacBank)

Development and submission of readiness proposal

XacBank project team (Eco-banking department)

• Project development & management • Stakeholder engagement • Project and financial management • Oversight and monitoring of all parties

International and national experts

Activity areas outlined in section 3

Technology Providers

Cooperate in consultant surveys

Client/ Local stakeholders

Cooperate in stakeholder engagement activities

Utilize existing internal reporting mechanisms

Monthly reports supported by in person meetings

Project performance risk coverage

Project payment

Engagement via in person workshops, meetings, and training

Validation entity

Project & provider validation

Insurers

Re-insurers

Energy Efficient/Renewable

Energy Project


Flow of Funds

6.2 Risks, monitoring and evaluation (M&E), and other relevant information

As mentioned in section 2, the ESI program will significantly reduce EE/RE investment risks. However, some risks associated with ESI development and implementation are:

• The inability to find willing validation and reinsurance companies • Technology providers being hesitant to participate in the program • High transaction costs that limit the application of the model • Defaults on lease payments

These risks are predominantly considered low or moderate and are limited by the mitigation measures described below.

Selected Risk Factor 3

Description Risk category Level of impact Probability of risk occurring

Technology providers discouraged from participating in program due to stricter requirements and higher costs.

Involvement Low Low

Selected Risk Factor 1 Description Risk category Level of impact Probability of risk

occurring Inability to find validation

entity Management Low Low

Mitigation Measure(s) Since the validation entity has to be an independent, neutral (non-government affiliated), validation entity that has the credibility, technical capacity and experience for validation- it was assumed that the ability to identify such an entity would be difficult. However, during the market assessment, two international validation entities with a local presence (Societe Generale de Surveillance SA (SGS) and Bureau Veritas (BV)) were identified and interviewed. These companies have the necessary expertise within the organization and the capacity to build a team in Mongolia. Selected Risk Factor 2


Inability to find wiling reinsurance companies

Management Low Low

Mitigation Measure(s) XacBank and BASE have identified Tenger Insurance as a suitable entity to offer the insurance product as they not only have a good understanding of the energy efficiency market, but they are also one of the top 5 insurance companies in Mongolia with a good reputation and a reasonable share of the market. Experienced reinsurers and technology providers could be helpful in this regard. Since this instrument is new to the market, Tenger Insurance expressed interest in directly procuring one experienced reinsurance company. Tenger Insurance will work towards involving either Swiss Re or Hannover Re in this scheme as these companies have experience in supporting the development and implementation of ESI programs in other countries.

GCF XacBank • International Experts (BASE)

• Legal Consultant • Validation entity • Web programmer • Insurance company


Mitigation Measure(s) A large quantity of technology providers must participate in the program in order to drive demand for energy efficient projects. However, their initial participation might be hindered by stricter requirements, such as certification processes, undertaking audits, and the need to bear part of the risks through performance guarantees. The Bank would engage in extensive stakeholder engagement to confirm the interest in EE/RE as well as the conditions of the investment.

Reporting schedule:

Milestones/Reports Expected Dates Notes

Start of project implementation Upon effectiveness of the legal agreement

N/A

End of project implementation 12 months after the start of project implementation

N/A

Interim progress report Within 6 months after the start of project implementation

Will include all deliverables under activity 1.1.

Completion report Within 3 months after the end of project implementation

Will include all deliverables

“To avoid any possible conflicts of interest deriving from the Delivery Partner’s role as an Accredited Entity, the prioritization of investments and projects in the context of this readiness grant will be made through a broad consultation process with relevant stakeholders, including other potential implementing entities for Mongolia. The final validation of these priorities will be carried out through the countries’ own relevant coordination mechanism and institutional arrangements, with the participation of other government agencies, as well as representatives from civil society and private sector as the NDA deems relevant, to ensure chosen priorities are fully aligned with national plans and strategies and adequately includes inputs from consulted stakeholders.”

Selected Risk Factor 4 Description Risk category Level of impact Probability of risk

occurring Transaction costs can limit the application of

the ESI model.

Financial Low High

Mitigation Measure(s) The Bank will focus on investments that are over $20,000 given the transaction costs. The ESI model is not suitable for projects under USD 20,000 as it would be beneficial to have transaction costs that do not exceed 3-4% of the total project value. It is suggested that leasing be used for projects under $20,000 as there is already a market and there are already financial institutions providing leasing. Additionally, the share of the market served is small so it is a good time for entry. Selected Risk Factor 5


Client defaults on the lease payments (for

leasing model).

Financial Low Low

Mitigation Measure(s) XacBank will pre arrange collaboration agreements with key technology providers involving a commitment to reallocate the equipment if a client defaults on lease payments. The cost of this can be incorporated in the leasing rate. Technology providers can also become the main promoters of the leasing. There could be a financial leasing model where the lessee becomes the owner of the asset at the end of the leasing period. One risk mitigation strategy could be to aggregate a certain number of projects that share the commitment and guarantee the members leasing payment (share sanctions).


Annex 1: Implementation plan

Activities summary

The activities that comprise the development phase and the implementation phase are:

Activity 1: Development and preparation of the ESI mechanisms

1.1: Develop simplified, standardized contract (align with local laws and language).

1.2: Develop risk coverage mechanism (insurance)

1.3: Develop validation mechanism for selected technologies (with reputable validation entity).

1.4: Refine financing structure (with ESI in place)

1.5: Consultations with key actors

1.6: Develop management information systems (MRV system)

1.7: Develop promotion strategy

Activity 2: Implementation; pilot of model and mechanisms

2.2: Identify and engage providers

2.3: Building strategic alliances

2.4: Build pipeline of projects to demonstrate initial projects and build market momentum.

Detailed activity description

Activity 1: Developing and preparation of the ESI Mechanisms

The following activities are focused on supporting the development of the different ESI mechanisms.

Activity 1.1: Standardized contract

Develop a standardized contract, which is the basis of the commercial agreement between a client and a technology provider. The contract is also needed in order to develop the insurance as it contains all the important contractual elements such as the main clauses, the guarantees, and the EE/RE commitment of the technology provider, which will be backed by the insurance product.

BASE will provide the draft contract in English, which has the structure and main clauses. The Inter-American Development Bank also has example contracts (in Spanish) that can potentially be made available to make the process as straightforward as possible. The contract will be explained to and discussed with local lawyers, in order to support them to adapt it to the Mongolian laws and regulations, local language and according to the requirements of the insurance company / risk coverage provider

Activity 1.2: Risk coverage mechanisms (energy savings insurance)

The more suitable risk coverage product will be developed based on cost, risks, acceptance by the market, and suitability for the program. Depending on the decision of XacBank eco banking team, BASE will provide advice to the underwriting team to adapt and modify the existing risk coverage product (surety insurance or bank guarantee) to the context and needs of the ESI mechanism, including guiding the underwriter to define the relevant due diligence criteria and understand the risks associated with the EE/RE projects and possible risk mitigation measures. BASE’s financial and EE/RE experts also will be working with the guarantor to define the premium rate of the risk coverage product. The premium rate is the rate that the insurance company charges the technology provider for the project risk coverage product (regardless of whether it is successful or not). The premium is paid once by the technology provider to the insurance company. The premium needs to be negotiated with the selected insurance provider in Mongolia. Typically, the premium is around 1% of the product cost, or sometimes lower (for example, in Colombia it is 0.5%).

Activity 1.3: Validation mechanism

Develop the methodology and formats to present project proposals and validate EE/RE projects and technology providers, as well as develop protocols for arbitration of disputes between the clients and providers.

Draft formats and protocols for the validation procedures, monitoring, and reporting framework will be provided, to facilitate the validation entity adaption. This would significantly reduce the cost and time allocation of the


validation entity. BASE would also support XacBank to define the ToRs and key activities of the validation entity on the development phase and implementation, and will provide advice for selecting the most appropriate validation entity and will support XacBank during the negotiations with the validation entity.

The following methodologies, formats and activities would be developed:

a) Methodology to calculate: i) the baseline, ii) estimated energy consumption, and iii) actual energy consumption of equipment (e.g. industrial boilers, solar PV). The methodology should be self-explanatory (guideline for providers and clients). The methodology should explain the evaluation protocols.

b) Formats to standardize the information requested for projects. c) Evaluation protocols for EE/RE projects (criteria for rejecting or accepting an EE/RE project). There is

one general evaluation protocol for projects and an addendum per type of technology. d) Formats to standardize the information requested from providers. Formats must be self-explanatory. e) Evaluation protocols for technology providers (criteria for rejecting or accepting a technology provider). f) Formats to help providers report the correct installation of equipment as stated in their proposal.

Formats must be self-explanatory. g) Evaluation protocols to verify correct installation of equipment and criteria for rejecting or accepting the

installed equipment. h) Formats with indicators to help technology providers/clients to manage the reporting of the actual EE/RE

of a project and compare it with the estimated (promised) EE/RE. Formats must be self-explanatory. i) Evaluation protocols to verify energy savings (criteria for assessing the actual energy savings). j) Format to inform clients and technology provider about the energy savings assessment report. k) Internal evaluation procedures, flow of information and sources of information to carry out the different

validation mechanism procedures. l) Check translated versions (Mongolian) if correct and valid.

The validation mechanics are structured according to the methodology that has been developed for other EE/RE programs and is based on the ISO 50006 principles (EE/RE international standard). BASE has strong experience working with these monitoring, reporting and validation frameworks.

The validation formats, protocols and methodology will be shared and explained to the local validation entity in order to support hem to adapt it to the local context. This will allow the validation entity to significantly reduce the cost of developing the validation mechanisms.

BASE will provide support to XacBank during the process of developing the validation mechanism, to ensure it meets XacBank’s needs. BASE will work closely with the validation entity, ensuring the quality of outcomes, and the correct integration of the validation mechanisms with the contract and risk coverage product.

In addition, ADB and IFC expressed interest in the validation mechanism, as similar mechanisms may be needed for their upcoming programs.

Activity 1.4: Financing

Define the financing evaluation process and internal flow of information. Define strategies to reach and serve clients in urban/rural areas or isolated communities, especially where XacBank’s presence is not prominent. BASE will support XacBank in defining the financing criteria, due diligence protocols, and integration of the ESI mechanisms as part of the credit assessment process. Advice on financing projections and annual targets would be discussed with XacBank.

Furthermore, BASE will support XacBank to outline the flow of information within the bank for the evaluation of a credit and during the operational phase of a project. The flow of information will describe the actors, timing and documents that will be circulated within different bank departments during the evaluation process. A group of bank officials will be trained for the evaluation of EE/RE projects and the ESI model.

Different strategies for promoting XacBank’s financing (loans and leasing), serving and collecting payments from clients in urban/rural areas (that are interested in an EE/RE system) will be analyzed. For example providing leasing to finance a solar water pumps for a families in urban/rural areas.

Activity 1.5: Consultations with key actors

It is critical to discusses and socialize the ESI mechanisms with key market stakeholders. It is important to have the endorsement of technology providers and key business associations on the contract, insurance, and validation mechanisms. This can be done through roundtable discussions with technology providers, government


officials, and potential clients where they will received an explanation of the ESI mechanisms, and will be invited to provide their input on the ESI mechanisms.

This activity will involve organization and moderation of the workshop to discuss the developed mechanisms, and document the discussions. The program will have a better market acceptance if key actors are involved in the development process. The purpose of this roundtable/workshop is threefold: (i) promote the program with key actors; (ii) increase credibility and acceptance of the program; and (iii) identify potential first movers to pilot the project with.

Activity 1.6: Project reporting and Management Information Systems

Data for the program will be managed via a web-based Management Information System (MIS), where monitoring and reporting of projects takes place. This MIS will be developed to include all of the information required for GCF reporting.

BASE will provide the terms and outline of the Management Information System (MIS) and website programming based on other examples of ESI from Latin America and Europe.

As part of the MIS, BASE will help to define the impact, results, and activities indicators to monitor and assess whether the financial, social and climate change mitigation targets of XacBank’s financing program have been achieved or are on track to be achieved.

BASE has a very good understanding of the scope of the work and the outcome needed. The outline is intended to be used as a guideline for the Website/MIS programmers. The following items are included as part of this activity:

a) Website mapping b) Define users access permissions of the different target users (clients, technology providers, XacBank

officials, other financial institutions, Tenger Insurance, validation entity, donors) c) Website public content d) Integration of the validation procedures e) Define reporting formats and incorporate them into the online MIS platform

Activity 1.7: Promotion strategy

Develop a promotion strategy that is able to raise the awareness of key clients, and engage technology providers. The promotion strategy will include a communication strategy and marketing material to promote the ESI model. BASE has been developing strategies that are effective when promoting EE/RE, and will advise and support XacBank in the promotion strategy, which include the following activities:

a) Marketing strategy. Draft a marketing communication outline that will include a description of the objectives, target group insights, needs of the targeted client, state the main benefits of the XacBank program, set promotion targets. This outline will be used by the marketing specialist to develop the marketing strategy and material. XacBank may recruit a local consultant to develop the marketing and promotion strategy or might use the XacBank’s existing marketing team. In any case, BASE will provide a draft ToR for the recruitment of a consultant to develop the marketing and promotion strategy. Define the best communication channels, develop a corporate identity for the program (which would also be used on the website).

b) Marketing material. Develop material for printouts, such as posters, flyers and brochures that will be used by technology providers and bank officials to promote the ESI program and approach clients, and other activities such as designing a booth for display at trade exhibitions, or presentations for a forum, etc.

Outputs of activity 1:

f) Standardized contract. g) Risk coverage product (insurance product). h) ToR for validation entity, identification and assessment of validation entities i) Validation formats, protocols and methodology. j) Financing criteria and credit evaluation process of projects k) Flow of information within the bank l) Strategy for promoting and serving clients in urban/rural areas. m) Organizing and documenting the outcomes of the roundtable discussion/workshop with technology

providers and potential clients. n) Terms and outline for the WEB page/MIS. MIS and webpage. o) Outline for the marketing material.


Activity 2: Implementation

Activity 2.1: Identify and engage providers

Several potential technology providers have already been identified through the feasibility and market assessment. Additional technology providers will be sourced and identified during the consultation process. The activity involves discussing the business model with the technology providers, and outline the different mechanisms and features. This is a critical activity as the main goal is that technology providers view the ESI mechanisms as commercial tools that can be used to increase their sales of EE/RE products. The aim is to engage a minimum of 3 technology providers per technology.

A collaboration agreement between XacBank and the technology provider will be drafted. This agreement may include clauses that state the commitment of the provider to uninstall equipment when a debtor is unable to meet its legal obligation of debt and try to find another client to reallocate the equipment. Other financial institutions will be able to use the collaboration agreement as a basis for similar agreements.

Activity 2.2: Building strategic alliances and partnerships

This activity will be undertaken after a six month period.

It is key to partner with organizations that can help XacBank to approach and engage potential clients and potential technology providers. Collaboration agreements between XacBank and key business associations can help facilitate the promotion of the EE/RE loans and the ESI model. XacBank will identify and engage the more relevant business associations, and negotiate collaboration agreements with these associations.

Activity 2.3: Build a pipeline of projects

Experience has shown that the initial support is very important to generate the first projects; the providers and clients involved need to be guided during the initial phase of the program. The activity requires a lot of communication and a good approach with the technology providers. Furthermore, it is necessary to identify the initial projects that can be financed through the EE/RE financing program.

BASE and XacBank will identify and support these projects, and technology providers during the evaluation process until the financing approval stage. The submitted projects will be accompanied during the validation process in order to make sure they comply with the requirements, and that the mechanisms are working. An important amount of time will be dedicated to supporting the providers and clients to help them understand the mechanisms.

A key finding of the market assessment is that Mongolian customers tend to respond to role models or follow their peers. Several technology providers identified the use of “first movers” or “role models” as a key opportunity to promote the program. SOPOCO stated that Mongolian’s like to follow trends, and that once one household has a product (and is happy with it), others will follow. Schneider stated that there is a need to “demonstrate one project/product in order to make others follow. There is a reluctance to be the first,” and identified the use of role models as an important strategy. BASE will support XacBank to identify influential first mover SMEs from the target sectors to engage in, and promote the program. First movers are generally identified during the mechanism development phase, and should be locally reputable entities. The first movers become an important part of the promotion and communication activities.

Output 2:

a) List and contact details of technology providers. Description of the engaged technology providers. b) Collaboration agreement model between XacBank and the technology provider. c) Collaboration agreement model between XacBank and key business associations. d) Identify and support five technology providers and EE/RE projects in the evaluation process.

The following considerations are important when completing the budget:

1. Before preparing the Readiness and PPF budget, please read the full guidance on our website

2. You can select the appropriate budget categories from the dropdown list in the budget plan:

3. To insert additional rows, right click on the row number below where you wish to insert the new row and choose INSERT.

4. Additional budget categories may be added by manually typing them on the Budget Category sheet. :

Project Management Cost: Project management costs (PMC) are the direct administrative costs incurred to execute a project. They should cover only incremental costs incurred due to the GCF contribution. In most cases, these costs are directly related to the support of a dedicated project management unit (PMU) which managesthe day to day execution related activities of the project.

General Principles for PMC costs: 1. The percentage of PMC financed by GCF should not be more than the percentage share of the overall budget financed by GCF 2. PMC budget thresholds: Up to 7.5 per cent of total activity budget. > PMC exceeding 7.5 per cent for the readiness (including NAPs) proposals, and PPF proposals, up to $ 3 million will require detailed documentation and justification supporting the entire PMC budget. > The PMC should be shown as a separate component in the project budget. A detailed breakdown of PMC should be provided by budget category. > Indicative list of eligible project management costs:

> Project staffing and consultants: Project manager, Project Assistant, Procurement personnel, Finance personnel & Support/admin. Personnel> Other direct costs: Office equipment, Mission related travel cost of the PMU, Project management systems and information technology, Office supplies, Audit cost

Contingency :1. Select the appropriate % of Contingency Budget from the dropdown list :

2. Contingency budget for unforeseen costs arising during the project implementation should not be included in the outcome budget separately.3. Contingency budget must be used for any unforeseen programme (output level) cost that is unrelated to implementation/service fee.4. Any use of contingency must be reported to and agreed by the GCF Secretariat in writing in advance provided with justifications that are acceptable to the GCF5. If you get to the end of the project and you haven’t spent Contingency, you can’t increase the scope of the project or buy some more equipment to use it up.

6. The Budget Notes sheet should be used to record explanations, further details or cost breakdowns for individual lines

(https://www.greenclimate.fund/how-we-work/empowering-countries).

If you are unsure about how to complete the budget template, please send your query to: [email protected]

Readiness Grant Budget Preparation Guidelines







5.1 Budget PlanPlease add rows for Outcomes, Outputs and Cost Categories as required. Additional budget categories may be added by manually typing them on the Budget Category sheet.

Consultant - Individual - Local 30,000.00 10,000.00 10,000.00 10,000.00

Professional Services – Companies/Firm

10,000.00 3,333.33 3,333.33 3,333.33


5,800.00 1,933.33 1,933.33 1,933.33


20,000.00 6,666.67 6,666.67 6,666.67


50,000.00 16,666.67 16,666.67 16,666.67


14,400.00 4,800.00 4,800.00 4,800.00

1.4 Financing Professional Services – Companies/Firm

6,200.00 6,200.00 2,066.67 2,066.67 2,066.67


8,000.00 2,666.67 2,666.67 2,666.67

Workshop/Training 5,000.00 1,666.67 1,666.67 1,666.67 Professional Services – Companies/Firm

20,000.00 6,666.67 6,666.67 6,666.67


4,000.00 1,333.33 1,333.33 1,333.33


7,200.00 2,400.00 2,400.00 2,400.00

Audio Visual & Printing 7,000.00 2,333.33 2,333.33 2,333.33

Travel from Basel to Ulaanbaatar (x2) Travel - International 10,000.00 10,000.00 3,333.33 3,333.33 3,333.33

2.1 Identify and engage providers Professional Services – Companies/Firm

15,800.00 15,800.00 5,266.67 5,266.67 5,266.67

2.2 Building strategic alliances Professional Services – Companies/Firm

2,500.00 2,500.00 833.33 833.33 833.33

2.3 Building Pipeline Professional Services – Companies/Firm

16,500.00 16,500.00 5,500.00 5,500.00 5,500.00

Travel from Basel to Ulaanbaatar (x2) Travel - International 10,000.00 10,000.00 3,333.33 3,333.33 3,333.33

242,400.00 80,800.00 80,800.00 80,800.00 - - -

XacBank Staff Cost 9,000.00

Audit Fee 8,000.00

Office Supplies 1,300.00

-

-

Total (per budget category)

7,000.00

-

30,000.00

180,400.00 Project Management Cost (PMC) 7.5% requested

- Contingency requested

1,300.00

20,000.00

-

5,000.00

18,300.00

-

-

-

-

262,000.00

Project Management Cost (PMC)Up to 7.5% of Total Activity Budget

Total Outcome Budget

Consultant - Individual - Local

FOR GREEN CLIMATE FUND SECRETARIAT'S USE ONLY

Breakdown (per budget category)

Workshop/Training

Project Management Cost (PMC)

Total Outcome Budget + PMC

Audio Visual & Printing

Consultant - Individual - International

7.5%

242,400.00

12,300.00 18,300.00

FOR GREEN CLIMATE FUND SECRETARIAT'S USE ONLY

OutcomesDisbursement Plan

Budget Categorieschoose from the drop-down list

Unit 1m 24m

Detailed Budget (in US$)

12mTotal Budget(per budget category)

Total Budget(per outcome) 6mUnit Cost# of Unit Total Budget

(per sub-outcome)

1.1 Standardized contract

64,400.00

1.5 Consultations with key actors

1.2 Risk Coverage mechanism

40,000.00

1.3 Validation mechanisms

13,000.00

1.7 Promotion Strategy

44,800.00


IT Equipment

14,200.00

18,300.00

197,600.00

2. Implementation; pilot of model and mechanisms

1.6 Management information system (MRV system) 24,000.00

1. Development and Preparation of ESI

5%

Total Outcome Budget

Percentage of PMC requested:

25,800.00

273,000.00

23,300.00

Total Project Budget (Total Activity Budget + Contingency + PMC + DP)

Office Supplies

Travel - International

Delivery Partner Fee (DP) - Up to 8.5% of the Sub-Total

296,300.00$

Travel – Local Sub-Total (Total Outcome Budget + Contingency + PMC)

Budget Note Detailed Description

Project Management Cost Involvement of the XacBank team in all activities (1.1-2.3).

Professional Services- Companies/Firm

In activities 1.1-2.3, "Professional services- Companies/Firm" usually refers to BASE with some exceptions: (1) In activity 1.2, $20,000 is budgeted for the insurance company to develop a new insurance product and to aid in the development of a complimentary contract that is suitable for the program, (2) In activity 1.3, $50,000 is allocated for the validation entity, (3) In activity 1.6, $20,000 is budgeted for the web programmer.

Budget CategoriesAudio Visual & PrintingAudit FeeConsultant - Individual - InternationalConsultant - Individual - LocalProfessional Services – Companies/FirmIT EquipmentOffice SuppliesTravel - InternationalTravel – LocalWorkshop/Training Project Management Cost

(XacBank LLC)5.2 Procurement Plan

Note: XacBank’s policies are outlined in Mongolian Tugrik (MNT), and the exchange rate is 1 USD = 2474 MNT

Procurement Method (applies to both International and Local)

1 Open tendering method (goods and service)

2 Closed tendering method (goods and service)

3 Comparison method (goods and service)

4 Direct Procurement (goods and service)

5 Special Condition Procurement (goods and service)

Threshold for use of method

MNT 100 Million (USD 40,420) and above

Comments

MNT 100 Million (USD 40,420) and above

Between MNT 10,000,001 to 100,000,000 (USD 4,042.03 to 40,420)

Applies only when there are a limited number of suppliers for the goods or service.

Up to MNT 10 Million (USD 4,042)

None

This method applies for the following procurements:-When the goods and services have fixed price and the supplier can't make negotiation solely on price or; -If the goods/services are third party audit, legal consulting service, consulting service, PR, research and training or;-The procurement of goods and services required for any activities being implemented as an independent project according to the Bank's Board of Directors and Executive Management's decision can be made by the relevant Project unit or Procurement team (The Project unit/Procurement team must receive a permission to make this procurement from Chief Operating Officer)-When the rural branch is procuring goods and services from local/rural suppliers.

Item Estimated Cost (US$)

Workshop/Training $ 5,000.00

Audio Visual & Printing $ 7,000.00

$ 12,000.00

Insurance Company 20,000.00$

Validation Entity 50,000.00$

Audit Firm 8,000.00$ $ 238,400.00

Final audit Special condition procurement None Jul 2019 Jul 2019Sub-Total (US$)

Goods and Non-Consulting Services

Item Description Procurement MethodThresholds

(Min-Max monetary value for which indicated procurement method must be used)

Estimated Start Date Projected Contracting Date

Professional services - Companies/Firm

Hired for 6 months to develop and implement mechanisms under the ESI model (Activities 1.1-2.3). $ 110,400.00 Special condition procurement None

Workshops in activity 1.5 to consult on ESI mechanisms (at least 3 workshops will be organized and each procurement will be less than $2,000)

Direct procurement Up to MNT 10 Million (USD 4,042) Apr 2019 N/A

Jan 2019 Jan 2019

Consultancy Services

N/A

Sub-Total (US$)

Publishing costs for marketing materials in activity 1.7 (each procurement will be less than $3,000) Direct procurement Up to MNT 10 Million (USD 4,042) Apr 2019

Jan 2019 Jan 2019

Legal Consultant Development of standardized contract that will be used in ESI

model (Activity 1.1) 30,000.00$ Special condition procurement None

Feb 2019 Feb 2019Validation of EE , assessment of technology, and development of

validation formats, protocols, methodology (Activity 1.3) Special condition procurement None

Development of risk coverage product (Activity 1.2) Special condition procurement None Feb 2019 Feb 2019

Open tendering method MNT 100 Million (USD 40,420) and above Feb 2019 Mar 2019Web programmer Development and launch of webpage and MRV system including

terms and outline (Activity 1.6) 20,000.00$

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