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CONFORMED COPY
GEF TRUST FUND GRANT NUMBER TF051248 CE
Global Environment Facility
Trust Fund Grant Agreement
(Renewable Energy for Rural Economic Development Project )
between
DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
acting as an Implementing Agency of the Global Environment Facility
Dated July 12, 2002
GEF TRUST FUND GRANT NUMBER TF051248 CE
GLOBAL ENVIRONMENT FACILITY TRUST FUND GRANT AGREEMENT
AGREEMENT, dated July 12, 2002, between DEMOCRATIC SOCIALIST REPUBLIC 
OF SRI LANKA (the Recipient) and INTERNATIONAL BANK FOR RECONSTRUCTION 
AND DEVELOPMENT (the Bank), acting as an implementing agency of the Global 
Environment Facility (GEF) in respect of grant funds provided to the GEF Trust Fund by certain 
members of the Bank as participants of the GEF.
WHEREAS (A) the Bank, pursuant to Resolution No. 91-5 of March 14, 1991, of the 
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Executive Directors of the Bank, established the GEF to assist in the protection of the global 
environment and promote, thereby, environmentally sound and sustainable economic 
development;
(B)
following the restructuring of the GEF, such arrangements continued in place on 
the basis set forth in Resolution No. 94-2 of May 24, 1994, of the Executive Directors of the 
Bank which, 
inter alia
,
established the GEF Trust Fund and appointed the Bank as trustee of the 
GEF Trust Fund (Resolution No. 94-2);
(C)
the second replenishment of the GEF Trust Fund was approved on the basis set 
forth in Resolution No. 98-2 of July 14, 1998, of the Executive Directors of the Bank (Resolution 
No. 98-2);
(D)
the Recipient, having satisfied itself as to the feasibility and priority of the 
Project described in Schedule 2 to the Development Credit Agreement, an agreement of even 
date herewith (the Development Credit Agreement), between the Recipient (in such capacity, the 
Borrower) and the International Development Association (the Association), has requested 
assistance from the resources of the GEF Trust Fund for financing the Project;
(E)
Recipient’s request was approved in accordance with the provisions of the 
Instrument for the Establishment of the Restructured Global Environment Facility approved 
under Resolution No. 94-2, and is to be funded from contributions to the GEF Trust Fund under 
Resolution No. 98-2, which may include funds carried over from the first replenishment of the 
GEF Trust Fund under Resolution No. 94-2;
(F)
the Borrower has also requested International Development Association (the 
Association) to provide additional financing for the Project; 
(G)
the Project shall be carried out by the DFCC Bank with the Recipient’s 
assistance, and as part of such assistance, the Recipient shall make available to DFCC Bank part 
of the proceeds of the grant to be provided under Article II of this Agreement (the GEF Trust 
Fund Grant) and part of the proceeds of the credit to be made under Article II of the 
Development Credit Agreement (the Credit); and
WHEREAS the Bank has agreed, on the basis, 
inter alia
,
of
the foregoing, to extend the 
GEF Trust Fund Grant to the Recipient upon the terms and conditions set forth in this Agreement 
and in the GEF Project Agreement of even date herewith between the Bank and DFCC Bank;
NOW, THEREFORE, the parties hereto, hereby, agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01 (a) The following provisions of the General Conditions Applicable to Loan 
and Guarantee Agreements for Currency Pool Loans of the Bank, dated January 1, 1985, (as 
amended through October 6, 1999) with the modifications set forth in paragraph (b) of this 
Section (the General Conditions) constitute an integral part of this Agreement:
(i)
Article I;
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(ii)
Sections 2.01 (1), (2), (3), (4), (6), (8), (9), (10), (15), (16), (17), (19) 
and (20), 2.02 and 2.03;
(iii)
Section 3.01;
(iv)
Section 4.01 and the first sentence of Section 4.09;
(v)
Article V;
(vi)
Sections 6.01, 6.02 (a), (c), (d), (e), (f), (i), (l), (m), (n), (o) and (p), 6.03, 
6.04 and 6.06;
(vii)
Section 8.01 (b);
(viii)
Sections 9.01 (a) and (c), 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09;
(ix)
Sections 10.01, 10.03 and 10.04; 
(x)
Article XI; and
(xi)
Sections 12.01 (c), 12.03 and 12.04.
(b)
The General Conditions shall be modified as follows:
(i)
a new paragraph shall be added to the end of Section 2.01 to read as 
follows: “the term “Special Drawing Rights” and the symbol “SDR” 
mean special drawing rights as valued by the International Monetary 
Fund in accordance with its Articles of Agreement”;
(ii)
the term “Bank”, wherever used in the General Conditions, other than in 
Sections 2.01 (8) and 6.02 (f) thereof and the last use of such term in 
Section 5.01 thereof, means the Bank acting as an implementing agency 
of the GEF, except that in Section 6.02, the term “Bank” shall also 
include the Bank acting in its own capacity;
(iii)
the term “Borrower”, wherever used in the General Conditions, means 
the Recipient;
(iv)
the term “Loan Agreement”, wherever used in the General Conditions, 
means this Agreement;
(v)
the term “Loan” and “loan”, wherever used in the General Conditions, 
means the GEF Trust Fund Grant;
(vi)
the term “Loan Account”, wherever used in the General Conditions, 
means the GEF Trust Fund Grant Account;
(vii)
The second sentence of Section 5.01 is modified to read: “Except as the 
Bank and the Recipient shall otherwise agree, no withdrawals shall be 
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made: (a) on account of expenditures in the territories of any country 
which is not a member of the Bank or for goods produced in, or services 
supplied from, such territories; or (b) for the purpose of any payment to 
persons or entities, or for any import of goods, if such payment or 
import, to the knowledge of the Bank, is prohibited by a decision of the 
United Nations Security Council taken under Chapter VII of the Charter 
of the United Nations.”; and
(viii)
a new subparagraph (q) is added after subparagraph (p) in Section 6.02 
of the 
General Conditions, as follows: “an extraordinary situation shall 
have arisen in 
which any further disbursement under the GEF Trust 
Fund Grant would exceed 
the resources available for disbursement 
from the GEF.”
Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, 
the several terms defined in the General Conditions (as defined in this Agreement) and the 
Recitals to this Agreement have the respective meanings therein set forth; and the following 
additional terms have the following meanings:
(a)
“Administration Agreement” means the agreement between the Recipient and 
DFCC Bank for implementing the Project, including all schedules, supplemental agreements and 
amendments made from time to time, approved by the Bank;
(b)
“Administrative Unit” means the Administrative Unit established by DFCC 
Bank, which is responsible for implementing the Project, in accordance with the terms and 
conditions of the Administration Agreement; 
(c)
“Development Credit Agreement” means the agreement of even date herewith 
between the Association and the Borrower relating to the Project, as the same may be amended 
from time to time, and such term includes all schedules and agreements supplemental to the 
Development Credit Agreement;
(d)
“DFCC Bank” means DFCC Bank, a body corporate established under the 
Development Finance Corporation of Ceylon Act No. 35 of 1955, as amended, and any successor 
entity to DFCC Bank recognized by the Recipient in accordance with the terms of the 
Administration Agreement; 
(e)
“Eligibility Criteria” means the Recipient’s list of criteria, acceptable to the 
Bank, to determine whether an entity qualifies to be a Participating Credit Institution (as 
hereinafter defined) for the purposes of this Project;
(f)
“Eligible Categories” means the categories (1) (a), (1) (b), (2), (3) (a), (3) (b), (3) 
(c), (4), and (5) set forth in the table in Part A.1 of Schedule 1 to this Agreement;
(g)
“Eligible Expenditures” means the expenditures for goods, works and services 
referred to in Section 2.02 of this Agreement;
(h)
“Environment and Social Assessment Framework” means Recipient’s framework 
document dated February 20, 2002, and any amendments to such document, satisfactory to the 
Bank, that shall: (i) enable the Recipient to assess, among other things, 
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the Project’s environmental and social impacts; and (ii) where applicable, govern the preparation 
of environmental management plans, resettlement and rehabilitation plans, indigenous peoples 
development plans and other appropriate mechanisms, satisfactory to the Bank, required to 
mitigate and monitor any adverse impacts from carrying out the Project;
(i)
“Fiscal Year” means the Fiscal Year of the Recipient beginning on January 1 of 
a calendar year and ending on December 31 of the calendar year;
(j)
“GEF Project Agreement” means the agreement between the Bank and DFCC 
Bank, of even date herewith relating to carrying out the Project, including any amendments 
made, from time to time, and all schedules and supplemental agreements;
(k)
“GEF Special Account” means the account referred to in Part B.1 of Schedule 1 
to this Agreement;
(l)
“IDA Project Agreement” means the agreement between the Association and 
DFCC Bank, of even date herewith relating to carrying out the Project, including any 
amendments made, from time to time, and all schedules and supplemental agreements;
(m)
“Investment Enterprise” means an entity or household that intends to carry out 
an Investment Project for which the entity or household receives or is expected to receive a 
Sub-grant or an Investment Project Preparation Grant from the Recipient (as such terms are 
hereinafter defined) out of the proceeds of the GEF Trust Fund Grant;
(n)
“Investment Project” means any of the following renewable energy or energy 
conservation projects that qualify under the Operating Guidelines (as hereinafter defined) for a 
Sub-loan, Sub-grant or an Investment Project Preparation Grant under the Project: 
(i)
grid-connected hydro, wind and biomass energy projects;
(ii)
solar photo voltaic projects;
(iii)
community-based wind, hydro and biomass energy projects; 
(iv)
energy efficiency, conservation and demand-side management projects; 
and
(v)
other eligible renewable energy projects that satisfy the Operating 
Guidelines;
(o)
“Investment Project Preparation Grant” means a grant made by the Recipient, 
utilizing the proceeds of the GEF Trust Fund Grant and the Credit, to assist an Investment 
Enterprise in preparing an Investment Project;
(p)
“Operating Guidelines” means the Recipient’s operating guidelines dated May 
10, 2002, for implementing the Project, satisfactory and acceptable to the Bank including any 
amendments made to these guidelines with the Bank’s agreement;
(q)
“Participation Agreement” means a participation agreement, in form and 
substance acceptable to the Bank, to be entered between the Borrower and a Participating Credit 
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Institution, relating among other things, to Sub-loans under Part A of the Project; 
(r)
“Participating Credit Institution” means any financial institution established and 
operating in accordance with the laws of the Borrower, that satisfies the Eligibility Criteria to 
participate in the Project and executes a Participation Agreement for this purpose;
(s)
“Project Implementation Plan” means Recipient’s Project Implementation Plan 
dated May 10, 2002, approved by the Bank, containing, among other things, financial projections 
or forecasts for the Project, details regarding procurement, format and content of project 
financial reports, monitoring and performance indicators and procedures to be used for 
implementation of the Project, and shall include any accompanying schedules or exhibits and any 
amendments or updates made, from time to time, by the Recipient or DFCC Bank with the 
Bank’s agreement;
(t)
“Project Management Report” means each report prepared in accordance with 
Section 4.02 of this Agreement;
(u)
“Rs” and “rupees” means the currency of the Recipient;
(v)
“Sub-grant” means a grant to an Investment Enterprise by the Recipient, out of 
the proceeds of the Credit or the GEF Trust Fund Grant, for an Investment Project under Part A 
of the Project, in accordance with the Operating Guidelines; and
(w)
“Sub-loan” means a loan or lease financing made, or proposed to be made, to an 
Investment Enterprise by a Participating Credit Institution, out of the Credit proceeds, for an 
Investment Project under Part A of the Project, in accordance with the Operating Guidelines, and 
the Participation Agreement between the Participating Credit Institution and the Recipient, and, 
unless the context otherwise requires, the term      “Sub-loan” includes a Free-Limit Sub-loan (as 
such term is defined in the Development Credit Agreement).
ARTICLE II
The GEF Trust Fund Grant
Secion 2.01. The Bank agrees to make available to the Recipient, on the terms and 
conditions set forth or referred to in this Agreement, the GEF Trust Fund Grant in an amount in 
various currencies equivalent to six million four hundred thousand Special Drawing Rights (SDR 
6,400,000).
Section 2.02.  The amount of the GEF Trust Fund Grant may be withdrawn from the 
GEF Trust Fund Grant Account in accordance with the provisions of Schedule 1 to this 
Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the 
reasonable cost of goods and services required for carrying out the Project and to be financed out 
of the proceeds of the GEF Trust Fund Grant.
Section 2.03. The Closing Date shall be June 30, 2008, or such later date as the Bank 
shall establish.  The Bank shall promptly notify the Recipient of such later date.
ARTICLE III
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Execution of the Project
Section 3.01. (a) The Recipient declares its commitment to the objectives of the Project 
as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, without any 
limitation or restriction upon any of its other obligations under this Agreement, shall cause 
DFCC Bank to perform, in accordance with the provisions of this agreement, the IDA Project 
Agreement, the GEF Project Agreement and the Administration Agreement, all the obligations of 
DFCC Bank and the Administrative Unit therein set forth, shall take and cause to be taken all 
action, including the provision of funds, facilities, services and other resources, necessary or 
appropriate to enable DFCC Bank to perform such obligations, and shall not take or permit to be 
taken any action which would prevent or interfere with such performance. 
(b)
The Recipient shall make available to the Administrative Unit, on a grant basis, 
proceeds of the GEF Trust Fund Grant allocated, from time to time, for:      (i) Sub-grants to be 
made to Investment Enterprises under Part A of the Project (finance for Investment Projects); and 
(ii) Investment Project Preparation Grants and other expenditure for activities under Part B 
(technical assistance) and Part C of the Project (project implementation assistance) in accordance 
with the Administration Agreement to be entered into between the Recipient and DFCC Bank.
(c)
The Recipient shall exercise its rights under the Administration Agreement and 
the arrangements referred to in paragraph 4 of Schedule 3 (Investment Projects) in such manner 
as to protect the interests of the Recipient and the Bank and to accomplish the purposes of the 
GEF Trust Fund Grant, and except as the Bank shall otherwise agree, the Recipient shall not 
assign, amend, abrogate or waive the Administration Agreement.
(d)
Without limitation upon the provisions of paragraph (a) of this Section and 
except as the Recipient and the Bank shall otherwise agree
(i)
the Recipient shall ensure that the Project is carried out in accordance 
with its obligations set forth in Schedule 2 (Recipient’s Project 
Obligations) and Schedule 3 (Investment Projects) to this Agreement; 
and 
(ii)
the Recipient shall cause DFCC Bank to carry out the Project in 
accordance with the Implementation Program set forth in Schedule 1 to 
the GEF Project Agreement.
Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works 
and consultants’ services required for the Project and to be financed out of the proceeds of the 
GEF Trust Fund Grant shall be governed by the provisions of Schedule 1 to the IDA Project 
Agreement.
Section 3.03. The obligations of the Borrower in Sections 3.02 (a) and 3.02 (b) of the 
Development Credit Agreement shall apply 
mutatis mutandis
 to the obligations of the Recipient 
under this Agreement.  
Section 3.04. For the purposes of Section 9.08 of the General Conditions and without 
limitation thereto, the Recipient shall:
(a)
prepare, on the basis of guidelines acceptable to the Bank, and furnish to the 
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Bank not later than six months after the Closing Date or such later date as may be agreed for this 
purpose between the Recipient and the Bank, a plan designed to ensure the sustainability of the 
Project; and
(b)
afford the Bank a reasonable opportunity to exchange views with the Recipient 
on said plan.
Section 3.05. The Recipient and the Bank hereby agree that the obligations set forth in 
Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, 
use of goods and services, plans and schedules, records and reports, maintenance and land 
acquisition, respectively) in respect of the Project shall be carried out by DFCC Bank pursuant to 
Section 2.03 of the GEF Project Agreement.
ARTICLE IV
Financial Conditions
Section 4.01.
For all expenditures with respect to which withdrawals from the GEF 
Trust Fund Grant Account were made on the basis of Project Management Reports, the Recipient 
shall, or shall cause DFCC Bank to:
(a)
(i)
maintain, in accordance with sound accounting practices,  
records and separate accounts reflecting such expenditures;
(ii)
ensure that all records (contracts, orders, invoices, bills, receipts 
and other documents) evidencing such expenditures are retained 
until at least one year after the Bank has received the audit 
report for the Fiscal Year in which the last withdrawal from the 
GEF Trust Fund Grant Account was made; and
(iii)
enable the Bank’s representatives to examine such records.
(b)
The Recipient shall, or shall cause DFCC Bank to:
(i)
have the records and accounts referred to in paragraph (a) (i) of 
this Section and those for the GEF Special Account for each 
Fiscal Year audited, in accordance with appropriate auditing 
principles consistently applied, by independent auditors 
acceptable to the Bank;
(ii)
furnish to the Bank as soon as available, but in any case not later 
than six months after the end of each such Fiscal Year, the 
report of such audit by said auditors, of such scope and in such 
detail as the Bank shall have reasonably requested, including a 
separate opinion by said auditors as to whether the Project 
Management Reports submitted during such Fiscal Year, 
together with the procedures and internal controls involved in 
their preparation, can be relied upon to support the related 
withdrawals; and
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(iii)
furnish to the Bank such other information concerning said 
records and accounts and the audit thereof as the Bank shall 
from time to time reasonably request.
Section 4.02.  The Recipient shall prepare, or shall cause the Administrative Unit to 
prepare, in accordance with guidelines acceptable to the Bank, and furnish to the Bank not later 
than 45 days after the end of each calendar quarter, a Project Management Report for such 
period, which:
(a)
(i) 
sets forth actual sources and applications of funds for the 
Project, both cumulatively and for the period covered by said 
report, and projected sources and applications of funds for the 
Project for the six-month period following the period covered by 
said report; and 
(ii)
shows separately expenditures financed out of the proceeds of 
the GEF 
Trust Fund Grant during the period covered by 
said report and 
expenditures proposed to be financed 
out of the proceeds of the GEF 
Trust Fund Grant during the 
six-month period following the period 
covered by said report;
(b) 
(i)
describes physical progress in Project implementation, both 
cumulatively and for the period covered by said report; and 
(ii) 
explains variances between the actual and previously forecast 
implementation targets; and
(c) 
sets forth the status of procurement under the Project and expenditures under 
contracts financed out of the proceeds of the GEF Trust Fund Grant, as at the 
end of the period covered by said report.
ARTICLE V
Remedies of the Bank
Section 5.01. Pursuant to Section 6.02 (p) of the General Conditions, the following 
additional events are specified:
(a)
DFCC Bank or the Administrative Unit shall have failed to perform any of its 
obligations under this Agreement, the Development Credit Agreement, the GEF Project 
Agreement, the IDA Project Agreement, or the Administration Agreement;
(b)
as a result of events which have occurred after the date of this Agreement, an 
extraordinary situation shall have arisen which shall make it improbable that DFCC Bank or the 
Administrative Unit will be able to perform its obligations under this Agreement, the 
Development Credit Agreement, the IDA Project Agreement, the GEF Project Agreement, or the 
Administration Agreement;
(c)
the legal framework or the principal corporate and organizational documents 
governing DFCC Bank shall have been amended, suspended, abrogated, repealed or waived so as 
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to affect materially and adversely the ability of DFCC Bank to perform any of its obligations 
under this Agreement, the Development Credit Agreement,  the IDA Project Agreement, the GEF 
Project Agreement, or the Administration Agreement;
(d)
the Recipient or any appropriate legal or regulatory authority within its 
jurisdiction shall have taken any action for the dissolution or disestablishment of DFCC Bank or 
for the suspension of its operations;
(e)
the Borrower shall have failed to perform any of its obligations under the 
Development Credit Agreement; and
(f)
the Borrower’s right to withdraw the proceeds of the Credit shall have been 
suspended, cancelled or terminated, in whole or in part, by the Association pursuant to the terms 
of the Development Credit Agreement.
Section 5.02. Pursuant to Section 7.01(k) of the General Conditions, the following 
additional events are specified:
(a)
any of the events specified in paragraphs (b) and (c) of Section 5.01 of this 
Agreement shall occur and shall continue for a period of thirty days after notice thereof shall 
have been given by the Bank  to the Recipient; and 
(b)
any of the events specified in paragraphs (e) and (f) of Section 5.01 of this 
Agreement shall occur.
ARTICLE VI
Effectiveness; Termination
Section 6.01. The following event is specified as conditions to the effectiveness of the 
GEF Trust Fund Grant within the meaning of Section 12.01 (c) of the General Conditions, 
namely that all conditions precedent to the effectiveness of the Development Credit Agreement 
have been fulfilled, other than those related to the effectiveness of this Agreement.
Section 6.02. The following are specified as additional matters, within the meaning of 
Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be 
furnished to the Bank:
(a)
the GEF Project Agreement has been duly authorized or ratified by DFCC Bank, 
and is legally binding upon DFCC Bank in accordance with their respective terms; and
(b)
the Administration Agreement has been duly authorized or ratified by, and 
executed and delivered on behalf of, the Recipient and DFCC Bank and is legally binding upon 
the Recipient and DFCC Bank in accordance with its terms.
Section 6.03. The date ninety (90) days after the date of this Agreement is hereby 
specified for the purposes of Section 12.04 of the General Conditions.
Section 6.04. This Agreement shall continue in effect until the GEF Trust Fund Grant 
has been fully disbursed and the parties to this Agreement have fulfilled their obligations 
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hereunder.
ARTICLE VII
Representatives of the Recipient; Addresses
Section 7.01. The Secretary, Ministry of Finance, or the Director General, External 
Resources Department, Ministry of Finance of the Recipient is designated as representative of 
the Recipient for the purposes of Section 11.03 of the General Conditions.
Section 7.02. The following addresses are specified for the purposes of Section 11.01 of 
the General Conditions:
For the Recipient:
Ministry of Finance
The Secretariat
Colombo 1, Sri Lanka
Cable address:
Telex:
Facsimile:
SECMINFIN
FINMIN 21409
449823
FORAID 21232
447633
For the Bank:
International Bank for
Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
Facsimile:
INTBAFRAD
248423 (MCI)
(202)-477-6391
Washington, D.C.
  64145 (MCI)
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized 
representatives, have caused this Agreement to be signed in their respective names in Colombo, 
Sri Lanka, as of the day and year first above written.
DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA
By /s/ Charitha Ratwatte
  Authorized Representative
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INTERNATIONAL BANK FOR  RECONSTRUCTION
AND DEVELOPMENT
acting as an implementing agency of the Global Environment     Facility
By /s/ Peter Harrold
Country Director, Sri Lanka
SCHEDULE 1
Withdrawal of the Proceeds of the GEF Trust Fund Grant
Part A:
General
1.
The table below sets forth the Categories of items to be financed out of the proceeds of 
the GEF Trust Fund Grant, the allocation of the amounts of the GEF Trust Fund Grant to each 
Category and the percentage of expenditures for items so to be financed in each Category:
       Amount of the
         GEF Trust Fund Grant
            % of
                                          Allocated (Expressed in
   Expenditures 
Category
 SDR Equivalent)
to be Financed
(1) Investment 
Project
Preparation Grants:
(a) Grants made for
200,000
100% of amounts
preparation activities and 
disbursed for
feasibility studies carried 
preparation activities
out by tax-exempt 
and feasibility studies
consultants and non-
governmental entities
(b) Other grants for 
40,000
80% of amounts
preparation activities and 
disbursed for
studies preparation 
activities
and feasibility studies
(2) 
Sub-grants under Part A of
2,960,000
100% of eligible
the Project
expenditures
(3) 
Consultants’ services,
training and study tours:
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(a) Individual consultants
700,000
80%
(b) Consulting firms
1,500,000
80%
(c) Training, workshops and
120,000
80%
study tours
(4) 
Goods
640,000
100% of foreign
expenditures,100%of the 
ex-factory cost of local 
expenditures;
75% of local
expenditures
(5)
Support for Administrative
160,000
100%
Unit
(6)
Unallocated
80,000
TOTAL
6,400,000
2.
For the purposes of this Schedule:
(a)
the term “foreign expenditures” means expenditures in the currency of any 
country other than that of the Recipient for goods or services supplied from the territory of any 
country other than that of the Recipient; 
(b)
the term “local expenditures” means expenditures in the currency of the 
Recipient or for goods or services supplied from the territory of the Recipient; 
(c)
the term “support for Administrative Unit” means staff costs, allowances, and 
local travel costs of individuals engaged as Project staff by the Administrative Unit for the 
purposes of carrying out the Project; and
(d)
the term “tax-exempt consultants and non-governmental entities” means those 
consultants and non-governmental entities who are not liable to tax under the laws of the 
Recipient.
3.
If the Bank shall have determined at any time that any payment made from the GEF 
Trust Fund Grant Account was used for any expenditure not consistent with the provisions of this 
Agreement, the Recipient shall, promptly upon notice from the Bank, refund to the Bank for 
deposit into the GEF Trust Fund Grant Account, an amount equal to the amount so used or the 
portion thereof as specified by the Bank.
Part B:
GEF Special Account
1.
The Recipient shall open and maintain in the Central Bank of Sri Lanka a special deposit 
account on terms and conditions satisfactory to the Bank.  Except as the Bank may otherwise 
specify by notice to the Recipient, all withdrawals from the GEF Trust Fund Grant Account shall 
be deposited by the Bank into the GEF Special Account in accordance with the provisions of this 
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Schedule.  Payments out of the GEF Special Account shall be made exclusively for Eligible 
Expenditures.  For each payment made by the Recipient out of the GEF Special Account, the 
Recipient shall, at such time as the Bank shall reasonably request, furnish to the Bank such 
documents and other evidence showing that such payment was made exclusively for Eligible 
Expenditures.
2.
Except as the Bank shall otherwise agree, after the Bank has received evidence 
satisfactory to it that the GEF Special Account has been duly opened, withdrawals from the GEF 
Trust Fund Grant Account of amounts to be deposited into the GEF Special Account shall be 
made as follows:
(a)
Each application for withdrawal from the GEF Trust Fund Grant Account shall 
be supported by a Project Management Report.
(b)
Upon receipt of each application for withdrawal of an amount of the Credit, the 
Bank shall, on behalf of the Recipient, withdraw from the GEF Trust Fund Grant Account and 
deposit into the GEF Special Account an amount equal to the lesser of: (i) the amount so 
requested; and (ii) the amount which the Bank has determined, based on the Project Management 
Report accompanying said application, is required to be deposited in order to finance Eligible 
Expenditures during the six-month period following the date of such report; provided, however, 
that the amount so deposited, when added to the amount indicated by said report to be remaining 
in the GEF Special Account, shall not exceed the equivalent of $1,600,000.  Each such deposit 
into the GEF Special Account shall be withdrawn by the Bank from the GEF Trust Fund Grant 
Account under one or more of the GEF Special Account’s Eligible Categories.
3.
Notwithstanding the provisions of Part B.2 of this Schedule, the Bank shall not be 
required to make further deposits into the GEF Special Account:
(a)
if the Bank determines at any time that any Project Management Report does not 
adequately provide the information required pursuant to Section 4.02 of this Agreement;
(b)
if the Bank determines at any time that all further withdrawals should be made 
by the Recipient directly from the GEF Trust Fund Grant Account; or
(c)
if the Recipient shall have failed to furnish to the Bank, within the period of time 
specified in Section 4.01(b)(ii) of this Agreement, any of the audit reports required to be 
furnished to the Bank pursuant to said Section in respect of the audit of (A) the records and 
accounts for the GEF Special Account or (B) the records and accounts reflecting expenditures 
with respect to which withdrawals were made on the basis of Project Management Reports.
4.
The Bank shall not be required to make further deposits into the GEF Special Account in 
accordance with the provisions of Part B.2 of this Schedule if, at any time, the Bank shall have 
notified the Recipient of its intention to suspend in whole or in part the right of the Recipient to 
make withdrawals from the GEF Trust Fund Grant Account pursuant to Section 6.02 of the 
General Conditions.  Upon such notification, the Bank shall determine, in its sole discretion, 
whether further deposits into the GEF Special Account may be made and what procedures should 
be followed for making such deposits, and shall notify the Recipient of its determination.
5.
(a)
If the Bank determines at any time that any payment out of the GEF Special 
Account was made for an expenditure which is not an Eligible Expenditure, or was not justified 
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by the evidence furnished to the Bank, the Recipient shall, promptly upon notice from the Bank, 
provide such additional evidence as the Bank may request, or deposit into the GEF Special 
Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of 
such payment.
(b)
If the Bank determines at any time that any amount outstanding in the GEF 
Special Account will not be required to cover payments for Eligible Expenditures during the 
six-month period following such determination, the Recipient shall, promptly upon notice from 
the Bank, refund to the Bank such outstanding amount.
(c)
The Recipient may, upon notice to the Bank, refund to the Bank all or any 
portion of the funds on deposit in the GEF Special Account.
(d)
Refunds to the Bank made pursuant to sub-paragraph (a), (b) or (c) of this 
paragraph 5 shall be credited to the GEF Trust Fund Grant Account for subsequent withdrawal or 
for cancellation in accordance with the provisions of the Grant Agreement.
SCHEDULE 2
Recipient’s Project Obligations
1.
The Recipient shall develop standards for the recycling and disposal of batteries used in 
solar home systems within two years of the Effective Date of this Agreement.
2.
The Recipient shall, or shall cause DFCC Bank to:
(a)
maintain policies and procedures adequate to enable it to monitor and evaluate 
on an ongoing basis, in accordance with indicators acceptable to the Bank, the carrying out of the 
Project and the achievement of the objectives thereof;
(b)
prepare, under terms of reference satisfactory to the Bank, and furnish to the 
Bank by December 31, 2004, a report integrating the results of the monitoring and evaluation 
activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the 
carrying out of the Project during the period preceding the date of said report and setting out the 
measures recommended to ensure the efficient carrying out of the Project and the achievement of 
the objectives thereof during the period following such date; and
(c)
review with the Bank, by March 31, 2005, or such later date as the Bank shall 
agree, the report referred to in paragraph (b) of this Section, and, thereafter, take all measures 
required to ensure the efficient completion of the Project and the achievement of the objectives 
thereof, based on the conclusions and recommendations of the said report and the Bank’s views 
on the matter.
SCHEDULE 3
Investment Projects
Appraising Investment Projects
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1.
Except as the Bank may otherwise agree, the Recipient shall ensure, or shall cause the 
Administrative Unit to ensure, that Investment Projects shall be promoted, identified, appraised, 
approved, carried out and monitored in accordance with the procedures and other provisions set 
forth or referred to in this Agreement and the Operating Guidelines.
Environmental and Social Assessment Framework
2.
The Recipient shall ensure that Investment Projects, which receive Sub-grants under the 
Project, comply with the environmental, resettlement and social standards set forth in the 
Environment and Social Assessment Framework.
3.
In accordance with paragraph 2, above, the Recipient shall ensure that:
(a)
each Investment Enterprise applying for financing under the Project provides 
evidence satisfactory to the Bank and the Recipient showing that the Investment Project in 
respect of which the application has been made has been prepared in accordance with the 
standards referred in paragraph 2, above.
(b)
An application for financing an Investment Project shall include, where 
applicable, among other things, an environmental assessment, an environmental management 
plan, a resettlement and rehabilitation plan and an indigenous peoples development plan, for such 
Investment Project, each of which shall be satisfactory and acceptable to the Bank.
(c)
The Recipient shall engage, or shall cause the Administrative Unit to engage, by 
no later than December 31, 2002, a consultant, with qualifications and experience satisfactory to 
the Bank, to review, for the purposes of sub-paragraphs (a) and (b), above, applications for 
financing Investment Projects from proceeds of the GEF Trust Fund Grant.
Investment Project Documentation
4.
The Recipient shall ensure, or shall cause the Administrative Unit to ensure, that 
appropriate and sufficient legal and financing documentation is made available by an Investment 
Enterprise prior to making a Sub-grant or an Investment Project Preparation Grant to the 
Investment Enterprise.
5.
In accordance with the terms of the Operating Guidelines, the documentation referred to 
in paragraph 4, above, shall contain necessary and appropriate provisions to protect the interests 
of the Bank, the Recipient and, where applicable, the Administrative Unit.