“Electricity Supply Reliability Project - Additional Financing”

TERMS AND CONDITIONS OF INVESTMENT FUNDS Loan agreement for “Additional Financing of Electricity Supply Reliability Project” has been signed on August 6, 2014 between the International Bank of Reconstruction and Development (World Bank) and the Government of RoA in the framework of which a Loan at the extent of USD 40 mln. has been provided to “High Voltage Electric Networks“ CJSC. The Loan has been provided with the following conditions: The Annual interest rate is: Libor + WB variable spread + commission payment 1%. The principal amount repayments are equally semiannual installments from August 15, 2024 up to February 15, 2039.

Project Objectives Increasing the reliability and power of overhead transmission lines. Reconstruction of “Haghtanak” substation transmuting it into 220/110/10 kV key substation. Construction of new 110 kV OSY. Replacement of two 63 MVA descending transformers with two 125 MVA autotransformers. Reconstruction of “Cahrentsavan-3” and “Vanadzor-1” substations with the purpose of implementation of objectives foreseen by the “Electricity Supply Reliability Project-Additional Financing” Project. Procurement of Specialized Machinery and Heavy Vehicles with the aim of improving the exploitation .

Project Implementation Deadlines The completion of Project is foreseen at the end of 2018, in the framework of which will be reconstructed: “Haghtanak” 220/10 kV substation “Charentsavan” 110/10 kV substation “Vanadzor-1” 110/10/6 kV substation

EXPECTING RESULTS FROM THE PROJECT In the result of reconstruction, 220/10 kV “Haghtanak” substation will become 220/110/10 kV key substation. It is expected: Load replacement from 110kV OTLs, feeding from 220/110/10 kV “Shahumyan-2” substation to 220/110/10 kV “Haghtanak” substation which will decrease the load of overloaded transformers of “Shahumyan-2” substation. To increase reliability of power supply of consumers in the central and southern regions of Yerevan. To increase the reliability of Power grid. To reduce the amount of emergency outages caused by equipment breakdowns. To reduce operation costs.

In the result of replacement of worn out and obsolete equipment during the reconstruction of 110/10 kV “Charentsavan – 3’’ substation it is planned to reduce the amount of emergency outages caused by equipment breakdowns, to increase the reliability of Power grid and power supply of consumers, as well as to reduce operation costs. “Charentsavan – 3’’ 110/10 kV substation was built in 1985. The installed capacity of the substation is 50 MVA. The substation is located 37 km from Yerevan. Total area of the substation is 4,4 hectare.

In the result of replacement of worn out and obsolete equipment during the reconstruction of 110/10/6 kV “Vanadzor-1’’ substation it is planned to reduce the amount of emergency outages caused by equipment breakdowns, to increase the reliability of Power grid and power supply of consumers, as well as to reduce operation costs. 110/10/6 kV “Vanadzor-1’’ substation was built in 1933. It was finally reconstructed in 1980. The installed capacity of the substation is 160 MVA. The substation is located 125 km from Yerevan. Total area of the substation is 3,6 hectare.

In the framework of “Electricity Supply Reliability Project-Additional Financing” Project it is also foreseen Procurement of Specialized Machinery and Heavy Vehicles, in the result of which will be improved the operation works, will be increased the efficiency of failure elimination works, will be reduced the duration of failure elimination.

“Electricity Supply Reliability Project -Additional Financing” The impact on Electricity tariff in the result of Project Implementation Project name   01.08.2016-01.08.2017 01.08.2017-01.08.2018 01.08.2018-01.08.2019 01.08.2019-01.08.2020 01.08.2020-01.08.2021 01.08.2021-01.08.2022 01.08.2022-01.08.2023 01.08.2023-01.08.2024 01.08.2024-01.08.2025 01.08.2025-01.08.2026 01.08.2026-01.08.2027 01.08.2027-01.08.2028 01.08.2028-01.08.2029 01.08.2029-01.08.2030 “Electricity Supply Reliability Project -Additional Financing” mln dram 159.4 411.8 443.8 2,038.3 2,008.7 1,979.1 1,949.5 1,919.9 1,890.3 Impact on tariff 0.0234 0.0605 0.0652 0.2996 0.2952 0.2909 0.2865 0.2822 0.2778

The impact on Electricity tariff in the result of Project Implementation