Conformed Copy - C3766 - Power Development Project - Supplemental Letter 1

Supplemental Letter NEPAL ELECTRICITY AUTHORITY July 9, 2003 International Development Association 1818 H Street NW Washington, DC 20433 United States of America Re: NEPAL: Credit No. NEP Grant No. NEP (Power Development Project) Paragraph 3 (a) of Schedule 2 to the Project Agreement Performance Monitoring Indicators Dear Sirs and Mesdames: This letter is with reference to paragraph 3 (a) of Schedule 2 to the Project Agreement of even date herewith between the International Development Association (the Association) and the Nepal Electricity Authority (NEA) for the above-captioned project. Unless agreed otherwise with the Association, NEA shall monitor and evaluate implementation of the Project in accordance with the Performance Monitoring Indicators attached to this letter. Very truly yours, NEPAL ELECTRICITY AUTHORITY By /s/ Janak Lal Karmacharya Authorized Representative Attachment  Nepal Power Development Project Performance Indicators Indicators At Start At Mid-Term At Completion Power Development Fund Number of medium scale hydro projects under construction 0 1 0 Number of medium scale hydro projects completed 0 0 1 Number of small scale hydro projects under construction 0 5 12 Number of small scale hydro projects completed 0 0 7 Pipeline of small scale hydro projects [licensed, studies 3 7 15 completed, financing and PPA initiated] MW added 0 0 50 Administrator operating in accordance with administration -- Yes Yes agreement Micro-hydro Village Electrification Component MW of rural micro-hydro capacity installed 12 14 15 Number of rural households newly electrified by the project 0 20,000 30,000 Percentages of villages still successfully operating micro-hydro -- 95% 95% two years after installation 1. Socioeconomic Indicators Livelihood improvement under micro-hydro Baseline to be To be determined To be determined determined Number of end-uses/industrial uses in micro-hydro electrified Baseline to be To be determined To be determined villages determined Empowerment of women Baseline to be To be determined To be determined determined NEA Component Rural areas coverage increase Baseline to be To be determined To be determined determined Km of transmission line constructed -- 0 110 Financial performance – covenants achieved Achieved Achieved Achieved Improvement in financial management -- Achieved Achieved Loss reduction 23.4% 21% 17% 2 3