CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS

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1 page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

2 page 2 SECTION A. General description of project activity A.1. Title of the project activity: >>Sidi Daoud MW Wind Farm Project Version 01 February 3 rd, 2010 A.2. Description of the project activity: >>Sidi Daoud Wind Farm Project (hereafter referred to as the Project) is a newly built wind farm located on the vicinity of the Sidi Daoud rural Commune, in El Haouaria Delegation, Governorate of Nabeul, at approximately 100 km North-East of Tunis, Capital of Tunisia. The project is owned and will be operated by the Société Tunisienne d Electricité et de Gaz STEG, the public power Utility of Tunisia. The project comprises 26 wind turbines of 1,320 kw each, totalizing an overall installed capacity of MW. The project also includes a transformation substation aimed at upgrading the power generated by the turbines to 90 kv, and a 22.5 km high voltage transmission line (90 kv), linking the wind Farm to the nearest Central Transformation Station of Menzel Temime. This line will allow for exporting the total quantity of power generated by the project to the Tunisian interconnected Grid. The proposed project is expected to generate approximately 95,000 MWh per year (Load factor: 32%), all of which is to be totally exported to the STEG Grid. As the STEG Grid is dominated by the thermal power generation; mainly natural gas-based, the implementation of the project will lead to greenhouse gas (GHG) emission reductions, which is estimated to be approximately 50,000 tons of CO2e per year during the first crediting period. The proposed project will contribute to the sustainable development of Tunisia, through the following positive implications: - Environmental benefits: o Reducing GHG emission and other polluting gases; such as CH4, N2O, NOx, COVNM, CO SO2 and various particulates, that would have been emitted in case the electricity provided by the project would have been alternatively generated by thermal plants. - Economic benefits: o Relying on domestic energy resources, and thus reducing energy dependency on fossil fuel imports. o Diversifying energy supply in Tunisia, through Renewable Energy Development, and demonstrating the feasibility and effectiveness of the wind power integration into the interconnected power grid in Tunisia. o Reducing fossil energy imports for Tunisia: the project will displace almost 95 GWh/year; i.e GWh of electricity over the lifetime of the project, which would have been generated using mainly imported fossil fuel instead. This would result in more than 400,000 tons of oil equivalent of fuel savings, 1 over the lifetime period of the project (21 years). 1 Based on average specific consumption of the current mix of power plants in Tunisia.

3 page 3 o Attracting foreign financial resources and investments for the benefit of the Renewable Energy Development in Tunisia - Social benefits: o Providing new income through the renting fees that were disbursed to the population for the right to use space in the site. These revenues will allow for this population (practicing cereal cultivation, mainly barley, and traditional livestock activities) to develop their activities, and to improve their living conditions. o Creating local employment opportunities during the construction and installation phases of wind turbines. Furthermore, the project will, in particularly create 4 new permanent positions at the STEG site for project operation, in addition to other positions to be created by companies that will be contracted by STEG as a part of the maintenance activities. o Enhancing the economic value of the site, and thus providing for the development of diversified economic activities (e.g. tourist-based activities). This will contribute to improving the living conditions of the population. o Improvement of the access to the houses thanks to the pathways and local infrastructure implemented on site. - Industrial and Long-term Strategic benefits: o Provide for establishing technological and industrial partnership with World s wind power construction leaders, as to promote higher industrial integration of the wind power technology in Tunisia, and possibly take significant market-shares in the perspectives of the development of wind technology at international level. o Take benefits of possible new exporting opportunities for expertise and spare-part for the wind power technology. o Developing Tunisian capacities and expertise to implement operate and maintain Wind power technologies. o The registration of the Sidi Daoud Project under the CDM Scheme will give a critical signal and visibility that will promote the development of the wind power generation in Tunisia, and thus materialize effectively the wind Power Tunisian portfolio that have remained untapped until now. This will also give a good incentive to the achievement of Renewable Energy objectives of Tunisia. o Acquiring competence and experience on integration of intermittent energy into the interconnected power grid.

4 page 4 A.3. >> Project participants: Name of Party involved (*): Tunisia (Host) Private and/or public entity(ies) Project Participants(*) Société Tunisienne d Electricité et de Gaz (STEG) Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) No Government of Spain (Annex I) International Bank for Reconstruction and Development (IBRD) as the Trustee of the Spanish Carbon Fund (SCF) (*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Party involved may or may not have provided its approval. At the time of requesting registration, the approval by the Party(ies) involved is required. The contact information of the project participants is provided in the Annex 1. Yes A.4. >> Technical description of the project activity: A.4.1. Location of the project activity: >> Tunisia A Host Party(ies): A Region/State/Province etc.: >> Governorate of Nabeul, Delegation of El Haouaria A >> Sidi Daoud rural Commune City/Town/Community etc.:

5 page 5 A Details of physical location, including information allowing the unique identification of this project activity (maximum one page): >>The project activity is located at the vicinity of the Sidi Daoud rural commune, in El Haouaria Delegation, Governorate of Nabeul, at approximately 100 km North-East of Tunis, Capital of Tunisia. Geographical coordinates of the project are Longitude 10º56 East, and Latitude North. The electricity produced by the wind farm will be exported to the national interconnected grid, through a high voltage transmission line (90 kv) linked to the Transformation station of Menzel Temime. Location of the Project Activity Transformation Station of Menzel Temime Figure 1: Overall location of the Project Activity Location of the wind Farm of the Project Activity Figure 2: Precise location of the Project Activity

6 page 6 The 26 wind turbines of equal capacity are disposed over three rows, the middle row comprising 10 turbines while the two others include 8 turbines each as shown in figure Figure 3: Schematic overview of the 26 Wind turbines

7 page 7 Table 1: Geographical coordinates of the 26 Wind turbines involved in the project Turbine Coordinates in m X Y A.4.2. Category(ies) of project activity: >>Scope Number 1 Sectoral Scope Energy Industries (renewable/non-renewable sources) A.4.3. Technology to be employed by the project activity: >>The proposed project comprises the installation of 26 Gamesa AE61 wind turbines, with a 1.32 MW of unit capacity. The total installed capacity is MW. The key technical parameters of the project are shown in Table 2:

8 page 8 Table 2: Key technical parameters of the Project Type Manufacturer Hub Height MADE AE61 MADE (Group Gamesa Eolica) 60 m Turbine Rotor Rotate Speed 12.5 r/min to 18.8 r/min Number of Blades 3 Generator Rotor Diameter Swept Area Rated Wind Speed Type Rated capacity Rated Voltage Rated Frequency Rated Rotate Speed 61 m 2,922 m2 3.5 m/s to 25 m/s Asynchronous generator with double fed 1.32 MW 690 V 50 Hz 1,012 r/min to 1,518 r/min Main Transformer Rated Voltage 30 kv Transmission line Rated Voltage Lengh 90 kva 22.5 km A.4.4. Estimated amount of emission reductions over the chosen crediting period: >> Renewable crediting period (7 years 3) is adopted by the Project. The estimated emission reductions during the first crediting period (from July 1, 2010 to June 30, 2017) are presented in Table 3. Estimated emission reductions during the first crediting period are 353,115 tco2e.

9 page 9 Table 3: Emission reductions during the first crediting period of the project Year Estimation of annual emission reductions (tco2e) 2010 (July 1-Dec 31) (Jan 1-June 30) Total estimated emission reductions (tco2e) Total number of crediting years 7 Average annual emission reduction over the first crediting period (tco2e) A.4.5. Public funding of the project activity: >> The project activity is partly financed by concessional loan provided by Spanish Government. Such funding does not result in diversion of Official Development Assistance (ODA) and is separate from and is not counted towards the financial obligations of Spain (See Annex 2). SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the project activity: >> The methodology applied in the proposed project is the Approved consolidated baseline and monitoring methodology ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources (Version 10). Approved Consolidated Methodology ACM0002 also refers to the latest versions of the methodological tools that are relevant to the project activity. In this PDD, the following tools have been used: Tool to calculate the emission factor for an electricity system Version 02. Tool for the demonstration and assessment of additionality Version 05.2.

10 page 10 B.2. Justification of the choice of the methodology and why it is applicable to the project activity: >> Approved Consolidated Methodology ACM0002 is applicable to grid-connected renewable power generation project activities that involve electricity capacity additions. ACM0002 is applicable to the proposed Sidi Daoud project as this project: Involves capacity addition from wind sources. The project is connected to the grid. The geographic and system boundaries for the STEG electricity grid can be clearly identified and information on the characteristics of the grid is available. B.3. Description of the sources and gases included in the project boundary: >>According to the methodology ACM0002 Version 10, the project boundary includes the project power plant and all power plants connected physically to the electricity system that the CDM project power plant is connected to. The greenhouse gases and emission sources included in or excluded from the project boundary are shown in Table 4. Table 4: Emission sources and GHG included in or excluded from the project boundary Baseline Source Gas Included? Justification/Explanation CO2 emissions from electricity generation in CO 2 Yes Main emission source. fossil fuel fired power CH 4 No Minor emission source. plants that are displaced due to the project activity. N 2 O No Minor emission source. B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: >>The project match with ACM0002 Version 10, Consolidated baseline methodology for gridconnected electricity generation from renewable sources. The ACM0002 Version 10 is applicable to grid-connected renewable power generation project activities that (a) install a new power plant at a site where no renewable power plant was operated prior to the implementation of the project activity (greenfield plant); (b) involve a capacity addition; (c) involve a retrofit of (an) existing plant(s); or (d) involve a replacement of (an) existing plant(s). According to the ACM0002 Version 10, a capacity addition is an increase in the installed power generation capacity of an existing power plant through: (i) the installation of a new power plant beside the existing power plant/units, or (ii) the installation of new power units, additional to the existing power plant/units. The existing power plant/units continue to operate after the implementation of the project activity. This case applies to the current project activity, whereby a new wind power capacity totalizing 34 MW so called Project Activity- had been installed besides smaller wind power capacities.

11 page 11 It should however be notified that although considered as a capacity addition as per ACM0002 definition, the project has in reality the attributes of a new power plant, due to the following reasons: - The existing power capacities were considered as pilot projects from the beginning, as they involve smaller power capacities installed previously in August 2000 (10.56 MW) and September 2003 (8.72 MW) respectively, while the project activity involves MW; i.e. 170% of the aggregated capacity of the existing ones. - The project activity turbines represent the newest technologies in terms of size (Hub Height : 60 m) and unit capacities (1,320 MW per Generator). - The wind turbines related to the project activity are physically well separated from the existing pilot phase turbines. - The new project activity involves an export of the electricity to the Tunisian interconnected grid through a new High Voltage line, while the previous wind plants are only connected to the nearest city through a Medium Voltage line. - The new project involves critical changes in technical management of the plants, as well as in the monitoring approaches and equipments. Sticking to the ACM0002 definition, thus assuming a capacity addition, a Step-wise approach shall be applied as per the ACM0002 Version 10, for the identification of the baseline scenario (see section B.5), and for the calculation of baseline emissions (see section B.6).. According to the Tool to calculate the emission factor for an electricity system, the project electricity system is defined by the spatial extent of the power plants that are physically connected through transmission and distribution lines to the project activity and that can be dispatched without significant transmission constraints. These criterions fully apply to the STEG National Power Grid. The baseline scenario of the Project is the provision of an equivalent amount of annual power output by the STEG Power Grid which the Project is connected to. The only difference, for the Tunisian case at least, lies with the higher quality of service provided by the grid that guarantees power provision at any time, while intermittent wind-based power doesn t provide for such power supply security. Detailed analyses are described in Section B.5. and B.6. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (assessment and demonstration of additionality): >>The Tunisian Power Utility (STEG) doesn t consider wind power in its usual power equipment planning 2 due to its higher investment costs, weak economic performance, and inability to guarantee power needs. In the absence of any incentive to wind power generation in Tunisia, CDM was seen as the main leveraging factor for the Wind Power Development in Tunisia in particularly in the light of the rapidly evolving carbon market and rates. As a matter of fact, the CDM Portfolios prepared so far in Tunisia have duly considered wind power projects. 3 2 See «Programme d équipement en moyens de production », STEG, Décembre 2002, and «Aperçu sur le programme d équipement en moyens de production », STEG, mars See the following references: (i) Portfolio of Projects for Reducing Greenhouse Gas Emissions in Tunisia: An Overview - January UNDP-GEF Project (RAB 94/G31) - presented officially during the first CDM

12 page 12 The Sidi Daoud Project was considered from the identification phase as a CDM project activity. Additional income from the sale of certified emission reductions through access to CDM was considered crucial by STEG and Tunisian Authorities to justify investing in the project. Early contacts (2005) between STEG and a Spanish wind Turbines manufacturer have duly referred to CDM. The manufacturer included in its commercial offer (June 2005) an assistance to develop the CDM project. This was duly reflected in the commercial contract between the wind manufacturer and STEG. The overall timeline of the project activity is shown below: N. Timeline Milestone 1 First commercial Offer of the wind Turbines manufacturer to STEG, including the support for the CDM Project Development 4 24 June Transmission of an official offer from the wind Turbines supplier relating to the support to develop the CDM application for Sidi Daoud 3 Agreement of the High Commission of Public Transactions to proceed with the Wind Turbines supplier to build the Sidi Daoud Wind Park 4 Signature of the commercial contract between the Wind Turbines supplier and STEG October 4, January, May Completion of the first Environmental Impact study of the project May First consultation meeting on Sidi Daoud Project with stakeholders 20 June First version of the PIN for the Sidi Daoud Project, developed by the Wind Turbines supplier 8 Letter of Approval of the Environmental Impact study delivered by ANPE (National Environment Protection Agency) 9 Meeting Wind Turbines supplier -STEG focusing on collaboration on CDM in relation with the Sidi Daoud Project and on the potential implications of the project in terms of CERs and financial revenues 10 Entry into force of the commercial contract Wind Turbines supplier -STEG, based on the official confirmation of the financial mechanism supporting the project implementation July 17, 2006 August 2006 August, November 2006 donor meeting of its kind held in Marrakech January (ii) Plan d Action d atténuation des émissions de gaz à effet de serre par la maîtrise de l énergie en Tunisie». Projet SAGES Agence Nationale de Maîtrise de l Energie (Tunisie)- Agence de l Efficacité Energétique (Quebec). August (iii) Portefeuille de projets admissible au mécanisme pour un développement propre du protocole de Kyoto. Projet SAGES Agence Nationale de Maîtrise de l Energie (Tunisie)- Agence de l Efficacité Energétique (Quebec). August (vi) Portfolio of CDM Projects in the Energy and Industry Sectors in Tunisia, CDM Task Force - MIEPME /ANME. September Cf. Letter transmitted by MADE to STEG (24 June 2005)

13 page Construction starting of the Wind Power Plant 10 January PIN submission-approval by DNA Tunisia 13 June BNP Paris with STEG describing the CDM and suggesting the possibility to negotiate CERs, including those related to the Sidi Daoud Project 14 Talks between the World Bank and the Consultant as related to the preparation of the PDD 15 Preparation of PIN-World Bank version for Internal approval to buy CERs of the Sidi Daoud project 16 Letter from the World Bank to the Ministry of Development and International Cooperation announcing a World Bank Carbon mission to visit Tunisia to discussing Sidi Daoud Project 17 Completion of Financial Analysis supporting the World Bank decision to buy the CERs of the Sidi Daoud project 19 February 2008 May June July 2008 August Starting of the PDD preparation 4 February 2009 Approved methodology ACM0002 Version 10 requires to use the latest version of the Tool for the demonstration and assessment of additionality to demonstrate and assess the additionality of the proposed project. Additionality of the project is demonstrated below, based on the latest version of the Tool for the demonstration and assessment of additionality (Version 05.2). Step 1. Identification of alternatives to the project activity consistent with current laws and regulations Realistic and credible alternatives to the project activity are defined through the following sub-steps: Sub-step 1a. Define alternatives to the project activity: The alternatives available to STEG that provide outputs or services comparable (or almost comparable) with the proposed CDM project activity are presented below: Alternative A1: The proposed project activity undertaken without being registered as a CDM project activity Alternative A2: Continuation of the current situation: Electricity delivered to the grid by the project activity would have otherwise been generated by the operation of grid-connected power plants 5 and by the addition of new generation sources. 5 See Picture of the Tunisian interconnected Grid (figure A.3.1, annex 3).

14 page 14 Alternative A3: A dedicated fossil fuel-fired power plant with comparable capacity or electricity generation. Alternative A4: A power plant using other source of renewable energy with comparable capacity or electricity generation, such as PV, biomass and hydro, etc.. Alternative A1: In principle, due to its higher upfront costs, weak economic performance, and intermittent power provision (thus inability to guarantee power capacity), wind generation option is not considered by STEG in its long-term planning, 6 as this alternative does not displace thermal power capacity additions/investments. In fact, in practice, securing power provision at any time would require having available thermal capacity reserves equivalent to what the wind plant would have been supposed to provide, thus duplicating the investment. Therefore the proposed project not undertaken as a CDM project activity, hence without CER income, will be considered as an alternative for comparison purposes, although it is not financially attractive for the Project holder (see Investment analysis - Step 2 below). It would also face several barriers as shown in Step 3 below, and would not fit the common practices as shown in Step 4. Alternative A2: This alternative implies the continuation of the current situation, i.e. the use all power generation equipment that was already in use prior to the implementation of the project activity and undertaking business as usual maintenance. Furthermore, the contribution of the project activity is too small to trigger any capacity addition. Thus, the additional power generated under the project would be generated by existing and new grid-connected power plants operating in the electricity system. 7 This what, STEG would have done in the absence of project activity. In fact, this will be reflected in the baseline calculations presented below (Section B.6), which shows that almost 100% of current and recently added capacities are thermal-based power generation. Thus, comparable electricity generation provided by STEG Grid can be taken as a realistic alternative for the project activity and comply with the applicable laws and regulations. Therefore, Alternative 2 is a realistic and credible alternative to the project activity. Taking the Tunisian demand and power sector specificities, there are three main usual options that STEG considers when planning capacity additions: Combined Cycle (CC), Gas turbine (GT) and Steam turbine (ST). The selection of either options results from a long-term optimization modelling exercise, based both on demand and peak load expectations and on the specificities of each technological option. 8 Other strategic criteria might also be integrated into the model (security of supply, reserve margin, economic performances of each option, need to rely on diversified energy-mix; which justify the presence of bi-fuel Steam turbines). 6 See «Programme d équipement en moyens de production », STEG, Décembre 2002, and «Aperçu sur le programme d équipement en moyens de production », STEG, mars A list of all grid connected power plants and their specificities are included in table A.3.1 (Annex 3). 8 Combined cycle and steam turbines are relevant for base load and bigger capacity additions and thus require longer planning and construction time, while gas turbines are rather relevant for peak load needs and allow for more flexible planning and construction timelines.

15 page 15 Thus, Alternative 2 represents the 2005-power Mix (CC+ST+GT); showing the following contributions of each of these technologies to the national interconnected power generation: 9 - Combined Cycle: 44% - Steam Turbines: 45% - Gas Turbines: 11% Alternative A3 is not relevant for the Tunisian interconnected Grid. First of all, the quantities to be generated by the project activity (95 GWh/year) represent only 0.7 % of the national power generation. This quantity does not justify implementing a dedicated fossil fuel-fired power plant with comparable electricity generation. Power additions are decided by STEG for longer terms using optimization models based on two main determining criteria (demand and peak load progression) and taking the interconnection of the whole grid into account. Furthermore, due to faster demand and peak load progression, 10 annual capacity additions to the Tunisian grid used to exceed 100 MW in average since 2004, 11 and this is far beyond the needed size of the eventual alternative capacity to the project activity. Therefore, alternative A3 is not a realistic/credible alternative. Alternative A4: Besides wind energy, other kinds of renewable energy technologies, such as hydro, solar PV, solar Thermodynamic, geothermal, biomass, etc., are theoretically possible in Tunisia. However, hydroelectricity resources are currently fully utilized in Tunisia. 12 Geothermal resources are also limited in Tunisia, and there are no historical record indicating any possibility to develop geothermal applications for power generation. Regarding electricity generation from solar PV and solar thermodynamic, despite the important solar resources of Tunisia, these are the most expensive technologies for generating electricity for the time being, and they are out of the Tunisian investment possibilities. 13 Biomass could eventually be used to generate electricity, but it has not been considered yet in Tunisia, and hence technological and financial burdens might prevent from implementing such kind of projects unless prior pilot experiences could be launched in the future. All these possibilities are not realistic ones in Tunisia unless they would be leveraged by CDM, and thus alternative 4 is not considered as a relevant alternative to the project activity. 9 Data of year 2005, the year of the decision to implement the project activity. 10 Peak load has grown by over 100 MW in average per year over the period MW, 230 MW and 120 MW of additional capacities were implemented by STEG in 2004, 2005 and 2007 respectively. 12 Current installed hydro capacities amount to 63.4 MW. Since early eighties, only 2 MW of hydro capacities were added ( ). Due to financial constraints and limited potential, some remaining small hydro sites are unlikely to be equipped unless resorting to carbon credits. 13 Studies and data at international level shows costs equivalent to 7-8 M$/MW for PV (see in particular Tracking the Sun The installed costs of photovoltaïcs in the U.S from , Lawrence Berkeley National Laboratory February 2009 and The Market Value and Cost of Solar Photovoltaic Electricity Production, Severin Borenstein, January CSEM) and around 4.5 M$/MW for solar thermodynamic plants (See web site and related article La première centrale solaire à concentration en Europe ).

16 page 16 Sub-step 1b. Consistency with mandatory laws and regulations All the alternatives identified in sub-step 1a are in compliance with applicable mandatory laws and regulations. However, Alternatives 1 and 2 are the only potentially credible alternatives to the project activity. Conclusion: Alternatives A1 and A2 will be considered in the following steps. These Alternatives fully comply with mandatory applicable legal and regulatory requirements in Tunisia. Step 2. Investment analysis The additionality of the project is mainly based on barrier analysis, and confirmed and consolidated by the Common Practice analysis, as presented below. It is also relevant to demonstrate that the proposed project activity is economically or financially less attractive, than other identified alternatives. Accordingly, an investment analysis was undertaken to back-up the conclusions that resulted from the barrier and Common Practice analysis. To conduct the investment analysis, the following sub-steps are applied: Sub-step 2a. Determine appropriate analysis method This Sub-step is meant to determine whether to apply the simple cost analysis (Option I), investment comparison analysis (Option II) or benchmark analysis (Option III). In addition to the CERs revenues, the proposed project activity generates financial benefits by the sales of electricity, so the simple cost analysis (Option I) should not be applied. Thus, either the investment comparison analysis (Option II) or the benchmark analysis (Option III) should be applied to the project. Under Tunisian circumstances, thermal capacity additions are planned using WASP 14 optimization model based mainly on technical criteria (see presentation of the alternative A2 above), where the set of technically relevant and most cost-effective technologies (Combined Cycle, Steam Turbines and Gas Turbines) are integrated into the simulations. Due to its intermittence, Wind Power is not considered at all in the optimization modelling as it doesn t fit in the technical criteria (stability and reactivity during peak-load period). Furthermore, Wind Power s IRR is much below the usual and acceptable IRR ranges for STEG. Since the critical objective for the optimisation model is to meet the electricity demand and peak load expectations, and that technical options are identified ex-ante, the benchmark analysis is not relevant in the STEG decision making process. The expected result of the modelling exercise is to determine which -and when- of the three technologies (Combined cycle, Steam Turbines and Gas Turbines), would be implemented every year. Therefore, for this project, the Option II (Investment comparison analysis) will be applied as it better reflects the usual comparing practices in the electricity sector in Tunisia. 14 Wien Automatic System Planning Package (WASP).

17 page 17 Sub-step 2b. Apply investment comparison analysis Wind power is at its teething stages in Tunisia. Two small-scale wind power pilot projects have previously entered into operation in the Sidi Daoud site in August 2000 (10.56 MW), and in September 2003 (8.72 MW) respectively; i.e. before entry into force of the Kyoto Protocol. These pilot projects aimed at gaining experience on operating Wind Power installations in Tunisia and confirming the producible energy. These plants were not integrated into the national interconnected grid and only export electricity through a medium voltage line, to the nearest agglomeration (Menzel Temime). Therefore, up to know Tunisia has not enough experience to assess the criticality of the wind integration into the national interconnected Grid, whereas grid safety is one of the more critical quality factors of power supply for Tunisian Authorities. Therefore, the project activity is the first project of its kind in Tunisia, as it represents the first experience of larger scale and full integration, through High voltage line, of wind power into the interconnected grid in Tunisia. Sub-step 2c: Calculation and comparison of financial indicator: The financial indicator selected is the Project IRR. This indicator demonstrates that the Project activity undertaken without CDM (Alternative A1) is less attractive than the Continuation of the current situation (Alternative A2). IRR Comparisons The IRR is the annualized effective compounded return rate, which can be earned on the invested capital. In principle, where comparing options that provide exactly the same service, the higher the IRR is, the more attractive the alternative is. We consider here the PROJECT IRR. Basic parameters applied for the two alternatives to calculating IRR are as follows: Table 5: Basic assumption for IRR calculations Alternatives Alternative A1: The proposed project activity without CDM consideration Alternative A2: Continuation of the current situation Generic installed capacity 1 MW 1 MW Load Factor 31.6% 43.6% Estimated output (GWh/year) Life-duration 21 years 25 years Up-front Investment (1000 US$/MW) 1, O&M costs (% related to the up-front 25% 25% investment costs) 15 Annual Insurance rate (as a % of the upfront 0.25% 0.1% 15 O&M costs are expressed in terms of Net Present Value over the life-span of the plant.

18 page 18 investment) Energy prices (growth rate/year) Average electricity selling prices (growth rate/year) 0.9%/year over the period and 3.4%/year over the period in nominal terms (IEA Assumptions) % 2.6% The table 6 shows the results of IRR Calculations for the two alternatives. Table 6: IRR results (%) Alternatives Alternative A1: The proposed project activity without CDM consideration Alternative A2: Continuation of the current situation IRR without CERs 11% 34.8% The results of the IRR analysis show that the project activity without CDM (Alternative 1) is not economically attractive, with an IRR equal to 11%, as compared to the continuation of the current situation (Alternative 2). The most economically favourable alternative for the Tunisian electrical system is therefore Alternative 2 (IRR=34.8 %), 17 which is the continuation of the power-mix at the time of the decision in Sub-step 2d: Sensitivity Analysis: The sensitivity analysis is undertaken for assessing the robustness of the financial/economic conclusions to reasonable variations in the critical assumptions that affect the economic indicators. In the project context, the fluctuation of the two following parameters could probably affect the conclusions of the Investment Analysis: - The Energy prices. - The effective efficiency of the thermal mix alternatives. This will mainly impact the energy expenses. Regarding energy prices, the original simulations were based on yearly growth of the IEA 18 average natural gas prices that is the main fuel used by the electrical sector in Tunisia. The scenario 1 of the sensitivity 16 Worl Energy Outlook - IEA The aggregate IRR was calculated using a weighed average of the respective IRR of the three technologies composing the power mix in 2005 (Combined Cycle, Steam Turbines and Gas Turbines). The weighed average was calculated on the basis of the respective contribution of these technologies to the 2005 power production (in GWh); i.e. Combined Cycle: 44%, Steam Turbines: 45%, and Gas Turbines 11% %/year over the period , 0.9%/year over the period , and 3.4% over the period (Worl Energy Outlook - IEA 2006)..

19 page 19 analysis assumes an extra 1.5% annual growth of the gas prices as compared to the IEA scenario. This represents 44% to 160% variation in the annual gas price growth rates, resulting in 25% to 30% aggregate variation (increase) in energy expenses for the three thermal power technologies, and conferring an additional advantage to wind power generation. Regarding efficiency of thermal electricity generation, the original simulations were based on 55%, 40% and 35% efficiencies for Combine Cycle, Steam Turbines and Gas Turbines respectively. These are already below the current states of these technologies; 19 but they were taken as such for conservativeness purposes. Actual recorded efficiencies of the currently operated thermal plants in Tunisia are 48.3% (Combined Cycle), 36.5% (Steam Turbines) and 28.4% (Gas Turbines). The scenario 2 of sensitivity analysis assumes that the efficiency improvements of new plants would only reach half of the assumed efficiency improvements assumed by the original simulations, hence representing 50% variation in the efficiency expected improvement. Furthermore, these efficiencies would remain stable over the whole simulation period, although there are realistic perspectives of further efficiency improvements in the future. The stability of efficiencies should be considered as an additional advantage awarded to the wind power generation in the sensitivity analysis. The scenario 3 would cumulate the two assumptions, thus considering simultaneously a 1.5% extra yearly growth of gas prices and more conservative efficiency improvements. The table 7 shows the results of IRR Calculations for the various alternatives, based on the assumptions considered in the sensitivity scenarios. Table 7: IRR results without considering CERs (%) Alternatives Scenario 1: 1.5% extra growth of gas prices annually as related to IEA scenario Scenario 2: Only half of the realistic efficiency improvements Alternative A1: The proposed project activity without CDM consideration Alternative A2: Continuation of the current situation 11% 33.2% 11% 33.6% Scenario 3: Cumulative impacts of scenario 1 & 2 11% 31.8% The results of the IRR analysis show that the project activity is still not economically attractive, as compared to the mix of thermal alternatives. The most favourable alternative for the Tunisian electrical system is still alternative 2 (future mix) with a much attractive IRR (31.8 %) than the wind power (IRR=11%), even in the less advantageous scenario (scenario 3). 19 For example, current efficiencies for combined cycle, as recorded by technology providers, range from 57% to 60%.

20 page 20 Conclusions of the sensitivity analysis From the above analysis, it can be observed that even in the extremely less favourable scenario for the thermal alternatives (cumulated impacts of energy price growth and lower thermal plant efficiencies); the wind power generation is not economically attractive. If, in addition, we consider the existing barriers and the common practices (see below), the wind power generation would hardly compare to the thermal alternatives. For instance, to compensate for one of the major technical risk (uncertainty of supply due to intermittent wind power provision), a stand-by Gas Turbine plant of similar capacity (34.32 MW) would have theoretically to be implemented as a back-up to the wind plant. This will result in replicating the investment as to providing an output or services (i.e. electricity) with comparable quality. This would make a total Investment cost of 2.7 million TND/MW, instead of 1 million TND/MW for the mix of thermal alternatives, leading to much lower IRR (4.7%). Step 3. Barrier Analysis The barrier analysis aims to identify barriers that would prevent the implementation of the wind farm project activity, but which would not prevent the implementation of at least one of the identified alternatives. Sub-step 3a. Identify barriers that would prevent the implementation of the proposed CDM project activity (a) Investment barriers The proposed project activity faces Investment barriers that prevent its implementation as a baseline technological option. Wind power is much more capital-intensive than fossil fuel power generation, as it implies higher upfront investment costs than the other power generating options. In return, STEG doesn t receive any incentive or compensation to balance the higher up-front cost of the wind power generation. In addition, unlike the other thermal alternatives that are foreseen for higher load factors in Tunisia, the wind power generation hardly exceed 30-35% load factor under the Sidi Daoud circumstances. Table 8 shows Investment comparison, including various load factor options. It shows that up-font cost is even less advantageous for wind power generation when taking adjusted load factor into account (right column, table 8).. As shown, when adjusted to 70% potential load factor, wind power requires 4 times higher up-front investment costs than the most capital-intensive option (combined cycle), and 5 times higher than the least capital-intensive option (Gas turbines). In addition, the price of wind turbines has significantly increased in the last three years mainly due to the worldwide demand growth on wind power technologies and to scarcity of main and critical components. This will affect maintenance costs and reduce spare parts availability in the future, and thus reduce wind power attractiveness. In conclusion, the up-front unit investment cost of wind power is a major barrier, and prevents wind power generation from competing with other power generation alternatives.

21 page 21 Table 8: technical and cost indicators of power generation alternatives Potential Investment cost load factor (M$/MW) Actual average load factor ( ) Investment cost as adjusted to 70% load factor (M$/MW) Technological option Combined Cycle 70% 73% Steam Turbines 70% 61% Gas Turbines 50% 17% Wind plant 32% 32% (b) Technological barriers There is a lack of long term wind data that prevent wind power development in Tunisia. Unreliability of wind potential records implies uncertainty in the year to year cash flow estimation, which affects the project viability. Wind energy is an intermittent source of energy, and the producible energy is unpredictable as it is greatly affected by wind speed, and sometimes by weather conditions. The variability of the power generation potential of wind power technology implies more technical and financial risks than fossil fuel-based plant, for Utilities, and for the national grid as a whole. As for illustration, while the Sidi Daoud Site was supposed to generate around 30% load factor, the previous wind pilot phases has shown much lower values; with a 25% average load factor over the period , and a noteworthy variability. Grid stability is one of the majors concerns for power supply in Tunisia. Due to its intermittence, wind Power is unable to supply peak-load demand securely. In addition, its unpredictability raises a critical stability issue to the grid in the off-peak times, in particular with such first significant wind power capacity addition introduced by the project activity of Sidi Daoud. This is the first time that STEG experiences such scale of integration of intermittent energy into the national interconnected grid. Tus, STEG is very cautious regarding the integration of wind capacity into its interconnected Grid. The lack of suitable infrastructure and equipment for transporting wind turbine generators to their dedicated sites is also a source of concern for project proponent. Lack of large scale cranes to install the wind turbines at the top of their tour is also among the main technical issues to resolve for the project proponent. This is also the first time that such large scale generating turbines (1.3 MW/turbine) is installed in Tunisia. 20 This implies new human and technical capacities to manage such scale, and new operating rules, which STEG is not yet experienced with. This bears an inherent risk of non performance. In addition, Tunisia does not have yet the necessary skilled labour to adequately maintain the wind power generating equipment. Although the maintenance contract signed with GAMESA is supposed to provide timely and quality maintenance services for the Sidi Daoud Plant, STEG remains exposed to potential defections, in particularly beyond the initial 5-10 years period after the project starting, as it is reliant on foreign Wind turbine supplier. At his moment, there are currently no other alternatives for maintenance 20 Except one unit (1.3 MW) experimented since 2003.

22 page 22 and repairing, although simple maintenance activities might be undertaken internally or through subcontracting Tunisian operators. This poses a financial barrier by burdening the project developer with ongoing maintenance costs and exposure to elevated risk levels. Thermal power generation does not face these kinds of maintenance and repairing risks.. Lifetime duration of the project is also considered equal to 21 years. However, exposure to weather conditions in the site of Sidi Daoud, and to sea-salty air (higher risk of rusting for metal equipment, due to proximity of the sea to the site), might result in lower life duration and higher maintenance and repairing costs. With the implementation of the project, STEG accepts the technological risks and challenges mentioned above associated with the project activity. The additional revenues obtained through CDM will help compensating part of these risks. (c) Barriers due to prevailing practices As a Public Utility, STEG has four major responsibilities: - to meet the peak load capacity demand at any time - to meet the electricity demand of the whole grid at any time - to provide for secure electricity provision to the grid and high quality transmission to its clients - to supply electricity to its clients at the lowest costs. Peak load capacity demand is a very important parameter as it determines the power capacity that should be made available in mid and long terms in Tunisia. Peak load capacity demand is anticipated on the basis of the past peak load growth rates and on the major dynamics that are likely to influence the peak load. In Tunisia, the maximum peak load has shifted from winter to summer since the mid-90s, due to the dramatic progression of the air conditioning needs as a result of the economic growth and the resulting improvement of the standard of living of the Tunisian population. Air conditioning trends profile will continue in the future, until the saturation of Air Conditioning needs. Electricity demand is anticipated on the basis of the past electricity growth rates and on the major dynamics that are likely to influence the demand (economic growth expectations, sectoral growth rates, demand trends in household sector). STEG uses the WASP Model for its optimization equipment planning process. The WASP simulation is performed using the expected Peak load and electricity demand in the mid and longer terms, and the dismantling schedule of the existing plants. In principal, WASP model allows for selecting the least cost Equipment Mix for the projected planning period. When planning activities are made on time, the usual practice in Tunisia is to schedule the base load plants and the peak load plants. Wind power additions are not part of the modelling exercises, confirming that it is not considered in the optimizing exercise by STEG. Base load plants are either Combined Cycle or Steam Turbines as they offer the lowest power generation costs. Combined cycle is generally the most attractive option, as it allows for higher energy efficiency (about 27% lower specific fuel consumption than steam turbines). However, combined cycle technology

23 page 23 needs to be operated at the maximum of its capacity to get optimized, making it necessary to also anticipate off-peak capacity needs and times. Last but not the least, the combined cycle technology requires higher upfront investment costs (+30% as compared to steam turbines). Steam Turbines also provide for the possibility to switch from natural gas to fuel oil at any time, offering energy flexibility and diversity, and also the advantage to decide which fuel to use according to the comparative tariffs. All these factors obviously affect the optimization and decision making process. In the last decade, due to the availability of natural gas and its competitiveness, the combined cycle has appeared as the preferred option as a base load plant. However, due to the higher investment costs of the combined cycle option, Tunisian Authorities have decided to open up the power sector to private operators, allowing for the first Independent Power Producer (IPP-Carthage Power Company) to implement a combined cycle in The recourse to IPP allowed removing the investment cost barrier for STEG, and hence conserving the least cost option strategy and preference for combined cycle. While steam turbines remain in the picture, they have appeared to be the last recourse to meet the base load requirements since the end of nineties (the last steam turbine has been added to the Tunisian grid in 1998). The next planned capacity additions were a 400 MW combined cycle (in Ghannouche) expected to be installed in 2009, 21 and another 400 MW combined cycle (in El Hawaria) to be installed in Gas Turbines are the unique Peak load plants considered in the Tunisian power grid. Apart from their technical flexibility, they also offer other advantages such as their low investment costs and the rapidity of implementation (two years from investment decision to effective operation of the plant, versus 5 years for combined cycle or steam turbines). They also represent the emergency option in case of delayed implementation of the base load plants, or unexpected growth of the peak load demand. They may also appear more relevant to meet unexpected growing power demand in specific regions due to their flexibility and cost effectiveness, as they avoid transportation losses and reinforcement of power transportation infrastructure. Historically, since the last combined cycle operated in 2001, the Tunisian grid has exclusively recorded gas turbines additions up to 2007 (i.e. 2003, 2004, 2005 and 2007), except very small hydropower additions (2.2 MW within the period ). These analyses confirm the complexity of the power planning in Tunisia, given the specificity of the Tunisian demand profile and trends, and the priority to secure electricity provision as to adequately accompany the economic development in Tunisia. In the prevailing practices of the Tunisian electrical planning, wind power is completely out of the picture. Its intermittence makes it unable to meet the peak load capacity demand at any time, and it does not meet the least costs criteria under usual loan circumstances. As a matter of fact, wind power is out of the forecasting exercises of the official power equipment additions as planned by STEG. 22 The development of large scale grid connected wind farms being at an experimental phase in Tunisia, the project activity is therefore considered as the first project of its kind in Tunisia, generating electricity at such large scale, and exporting it to the interconnected grid, through a High Voltage Line. 21 See «Aperçu sur le programme d equipement en moyens de production », STEG Mars The Ghannouche Combined Cycle was finally delayed to See for example «Programme d équipement en moyens de production », STEG December 2002, and «Aperçu sur le programme d équipement en moyens de production », STEG Mars 2006.

24 page 24 Thus, the wind power is not in the baseline of the Tunisian electrical system, and the CDM will remain among the major leveraging factors of the wind power development in Tunisia in the future. Sub-step 3b. Show that the identified barriers would not prevent the implementation of at least one of the alternatives (except the proposed project activity): Since STEG Grid is considered as a provider for the same capacity and output, the barriers mentioned above would not prevent Alternative 2 from implementation. Step 4. Common Practice Analysis Sub-step 4a. Analyze other activities similar to the proposed project activity As mentioned above, there are currently no wind farms of similar scale in Tunisia. Unique existing wind plants have been installed by STEG in the same site of Sidi Daoud, successively in 2000 (32 wind turbines of 330 kw unit capacity, totalising 10.6 MW), and in 2003 (10 wind turbines of 600 kw unit capacity, one 800 kw turbine and one 1320 kw turbine, totalising 8.7 MW). Sub-step 4b. Discuss any similar options that are occurring Developing Wind energy is a part of efforts made by Tunisian Authorities to encourage renewable energies, and thus to maximizing the use of endogenous energy sources. The development of wind energy in Tunisia also pursue strategic (in case of growing fuel prices and market pressure on fossil fuels), technological and industrial purposes. However, due to the cost of the wind power generation as well as to the barriers mentioned above, wind power generation has not progressed at all in Tunisia, since the last small pilot plants installed in 2000 and 2003 respectively. The implementation of these wind plants was meant as pilot initiatives aimed at testing the technology and acquiring experience on operating wind farms. Furthermore, these plants were not linked to the interconnected grid and rather exported through a medium voltage transmission lines to the agglomeration of Menzel Temime. These pilot projects were not subject to similar barriers and can t be compared to the current project activity. In the absence, of any other incentive in Tunisia, CDM was among the crucial factors to support wind power development in Tunisia. Wind power was systematically included in the CDM project portfolios published so far by Tunisia. Presently, the Tunisian energy related-cdm portfolio 23 lists 10 other wind farm projects, of which two projects are being implemented by STEG (including the current Sidi Daoud Project), and eight others by other companies for their own self-consumption. All these projects are foreseen as CDM projects, which will be the most crucial leveraging effect for these projects to happen. Up to now, and despite the CDM advantage, most of these projects have not been decided yet, as they are stumbling over various constraints (cost-effectiveness, up-front investment costs, financial crisis, absence and uncertainties related to the wind potential records, regulatory and institutional constraints to access to the grid, etc.), as well as other barriers mentioned in the section above. In conclusion, the wind power generation is not the baseline option in Tunisia. CDM creates an incentive to overcome these barriers and mitigate risks. The project is therefore additional. 23 Portfolio of CDM Projects in the Energy and Industry Sectors in Tunisia, CDM Task Force - MIEPME /ANME. September 2008.

25 page 25 B.6. Emission reductions: B.6.1. Explanation of methodological choices: >>The ACM0002 Version 10 is applied in the context of the Sidi Daoud Project Activity using the following four steps: calculate the baseline GHG emissions; calculate the project GHG emissions; calculate the project leakage; calculate the emission reductions. I. Calculate the baseline GHG emissions According to ACM0002 Version 10, Baseline emissions for a given year (BE y ) include only CO2 emissions from electricity generation in fossil fuel fired power plants that are displaced due to the project activity. BE y is calculated as follows: BE y = EG PJ,y * EF grid,cm,yy (6) Where: BE y = Baseline emissions in year y (tco2/yr) EG PJ,y = Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) EF grid,cm,y = Combined margin CO2 emission factor (tco2/mwh) for grid connected power generation in year y calculated using the latest version of the Tool to calculate the emission factor for an electricity system (Version 02). Calculation of EG PJ,y According to ACM0002 Version 10, it is assumed that the addition of new wind power capacity does not significantly affect the electricity generated by existing plants. In this case, the electricity fed into the grid by the added power plant can be directly metered and used to determine EGPJ,y. To determine EG PJ,y, Option 2 is used in this project activity, since the electricity fed into the grid by the added power plant is separately metered. EG PJ,y = EG PJ_Add,y (10) Where: EG PJ,y EG PJ,_Add,y = Quantity of net electricity generation that is produced and fed into the grid as a result of the implementation of the CDM project activity in year y (MWh/yr) = Quantity of net electricity generation supplied to the grid in year y by the project plant/unit that has been added under the project activity (MWh/yr) According to the Tool to calculate the emission factor for an electricity system (Version 02), baseline emissions should be calculated using the following 7 steps:

26 page 26 Step 1. Identify the relevant electricity systems Electricity generated by the Project will be delivered to the STEG national interconnected electricity grid. The project activity will export the electricity produced to the clearly defined STEG national electricity grid through a high voltage transmission line. Thus, this production can be dispatched without significant transmission constraints to the grid. The STEG grid is operating at high level standards, experiencing very limited power cuts/failures in the past. Step 2. Choose whether to include off-grid power plants in the project electricity system (optional) Not applicable for the Tunisian case Step 3. Select a method to determine the operating margin (OM According to the Tool to calculate the emission factor for an electricity system (Version 02), the calculation of the operating margin emission factor (EF grid,om,y ) should be based on one of the following methods: (a) Simple OM, or (b) Simple adjusted OM, or (c) Dispatch data analysis OM, or (d) Average OM. As per the Tool to calculate the emission factor for an electricity system (Version 02), the method : (a) simple OM can be used when low-cost/must run resources constitute less than 50% of total grid generation. Thus simple OM can be used for calculation of the operating margin emission factor (EF grid,om,y ) of the current Sidi Daoud Project, based on the characteristics of the Tunisian Interconnected grid. The share of the low-cost/must run resources during each of the five most recent years is shown in table 9. The low-cost/must run resources were systematically below 2% for the five selected years. The calculated aggregated average of the low-cost/must run resources for the five years accounts for about 1.1%. Table 9: Share of low-cost/must run resources in the total grid generation Average Year TOTAL Low cost/must run resources (GWh) Hydro Wind TOTAL grid generation (GW) Share of Low cost/must run resources (%) 1.7% 1.5% 1.0% 0.7% 0.6% 1.1%

27 page 27 Step 4. Calculate the operating margin emission factor according to the selected method As per the Tool to calculate the emission factor for an electricity system (Version 02), the simple OM emissions factor (EF grid,omsimple,y ) can be calculated using Ex ante option; a 3-year generation-weighted average, based on the most recent data available at the time of submission of the CDM-PDD to the DOE for validation, without requirement to monitor and recalculate the emissions factor during the crediting period. This option will be used for calculating the EF grid,omsimple,y for Sidi Daoud Project Activity, and over the first crediting period. This will be calculated using the data from 2006 to 2008, available in various Electricity Retrospective Statistics documents (From to ) which are the most recent data available at the time of submission of CDM-PDD to the DOE for validation. Various other recent statistics and documents -some of which are unpublished- were also collected internally at STEG and from outside STEG. These provide very detailed pictures and analysis of the power production, particularly energy-related and emission-related ones. According to the Tool to calculate the emission factor for an electricity system (Version 02), the simple OM emissions factor is to be calculated as the generation-weighted average CO 2 emissions per unit net electricity generation (tco2/mwh) of all generating power plants serving the system, not including lowcost / must-run power plants / units. It may be calculated using one of the following options: Option A: data on fuel consumption and net electricity generation of each power plant / unit, or Option B: data on net electricity generation, the average efficiency of each power unit and the fuel type(s) used in each power unit, or Option C: data on the total net electricity generation of all power plants serving the system and the fuel types and total fuel consumption of the project electricity system. As per the Tool to calculate the emission factor for an electricity system (Version 02), Option A should be preferred and must be used if fuel consumption data is available for each power plant / unit. This is the case for the STEG electricity grid. Therefore Option A will be used for the calculation of the simple OM emissions factor for Sidi Daoud Project Activity. Thus EF grid,omsimple,y, is calculated as follows: EF grid,omsimple,y FC i,m,y * NCV i,y * EF CO2,i,y = im EG m,y m Where: EF grid,omsimple,y FC i,m,y NCV i,y EF CO2,i,y EG m,y m = Simple operating margin CO 2 emission factor in year y (tco 2 /MWh) = Amount of fossil fuel type i consumed by power plant / unit m in year y (mass or volume unit) = Net calorific value (energy content) of fossil fuel type i in year y (GJ / mass or volume unit) = CO 2 emission factor of fossil fuel type i in year y (tco 2 /GJ) = Net electricity generated and delivered to the grid by power plant / unit m in year y (MWh) = All power plants / units serving the grid in year y except low-cost / must-run power plants / units

28 page 28 i y = All fossil fuel types combusted in power plant / unit m in year y = The three most recent years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Using this calculating approach, the calculated simple OM emission factor (EF grid,omsimple,y ) of the STEG Power Grid is tco 2 e/mwh (see Annex 3 for details). Step 5. Identify the group of power units to be included in the build margin (BM) The sample group of power units m to be used to calculate the build margin consists of either: (a) The set of five power units that have been built most recently, or (b) The set of power capacity additions in the electricity system that comprise 20% of the system generation (in MWh) and that have been built most recently. Project participants should use the set of power units that comprises the larger annual generation. Assessing the annual generation of options (a) 24 and (b) for the Tunisian case, it comes that option (a) shares less than 10% of the annual generation of the whole grid, while option (b) shares almost 35% of the annual generation of the whole grid. Therefore, option (b) was used to calculate Build Margin Emission factor (EF grid,bm,y ). The group of power units that have been included in the Build Margin calculation are listed in table 10. Table 10: The group of power units to included in the build margin Designation Technology Energy used Commissionin g Date Installed Power (MW) Production in 2008 (GWh) CPC Combined cycle Natural Gas Thyna Gas turbine Natural Gas Thyna2 Gas turbine Natural Gas Goulette Gas turbine Natural Gas Feriana Gas turbine Natural Gas SEEB Gas turbine Natural Gas TOTAL Share of total electricity Production (%) 34.8% 24 See table A.3.5 in Annex 3

29 page 29 Step 6. Calculate the build margin emission factor According to the Tool to calculate the emission factor for an electricity system (Version 02), the build margin emissions factor is the generation-weighted average emission factor (tco2/mwh) of all power units m during the most recent year y for which power generation data is available, calculated as follows: EF grid,bm,y EG m,y * EF EL,m,y = m EG m,y m Where: EF grid,bm,y EG m,y EF EL,m,y m y = Build margin CO 2 emission factor in year y (tco 2 /MWh) = Net quantity of electricity generated and delivered to the grid by power unit m in year y (MWh) = CO 2 emission factor of power unit m in year y (tco 2 /MWh) = Power units included in the build margin = Most recent historical year for which power generation data is available Using this calculating approach for the most recent year where data could be collected (2008), BM emission factor (EF grid,bm,y ) of the STEG Power Grid was calculated at tco 2 e/mwh (see Annex 3 for details). Table 11: The group of power units included in the build margin Designation Production in 2008 (GWh) Energy Consumption (MNm3) NCV (toe/1000 Nm3) Energy Consumption (toe) NCV (Tj/MNm3) Energy Consumption (Tj) CO2 Emission factor (tco2/tj) CO2 Emissions in 2008 (tco2) CPC Thyna Thyna Goulette Feriana SEEB TOTAL Build Margin emission Factor (tco2/mwh) Step 7. Calculate the combined margin (CM) emissions factor According to the Tool to calculate the emission factor for an electricity system (Version 02), the combined margin emissions factor should be calculated as follows: EF grid,cm,y = EF grid,om,y * W OM + EF grid,bm,y * W BM

30 page 30 Where EF grid,bm,y = Build margin CO 2 emission factor in year y (tco 2 /MWh) EF grid,om,y = Operating margin CO 2 emission factor in year y (tco 2 /MWh) w OM = Weighting of operating margin emissions factor (%) w BM = Weighting of build margin emissions factor (%) The Tool to calculate the emission factor for an electricity system further states the following default values to be used for w OM and w BM for Wind power generation project activities: w OM = 0.75 w BM = 0.25 Therefore, the Combined Margin for the Sidi Daoud Project Activity would be the following: EF grid,cm,y = * * 0.25 = II. Calculate the project GHG emissions According to ACM0002 Version 10, the proposed wind farm project belongs to renewable energy activity; therefore PEy of the proposed project activity is zero. III. Calculate the project leakage According to ACM0002 Version 10, no leakage is to be considered for such kind of renewable project. IV. Calculate the emission reductions. The project activity will generate GHG emission reductions by avoiding CO2 emissions from electricity generation by fossil fuel power plants. The emission reduction (ER y ) for a given year y is calculated as follows: ER y = BE y PE y (11) Where: ER y = Emission reductions in year y (t CO2e/yr) BE y = Baseline emissions in year y (t CO2e/yr) PE y = Project emissions in year y (t CO2/yr) Since PE y and LE y are equal to zero, emission reductions due to the project will be equal to baseline emissions (BEy) as calculated above (end of Section I).

31 page 31 B.6.2. Data and parameters that are available at validation: (Copy this table for each data and parameter) Data / Parameter: Data unit: Description: Source of data used: Value applied: Measurement procedures (if any) Monitoring frequency Any comment: FCi,m,y Mass or volume unit (Nm3, m3, tons) Amount of fossil fuel type i consumed by power plant m, in year y Records from the utility STEG and SEEB (Independent producer) - Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Data / Parameter: EF OM,y Data unit: tco2e/mwh Description: Operating Margin Emission Factor of the STEG electricity Grid Source of data used: STEG Statistical Data Statistiques rétrospectives d électricité Direction des Etudes et Planification - STEG. Other unpublished STEG data and information (e.g. gas chemical properties, Net Calorific Value of gas, etc.) were also collected and used in the calculations. Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: Operating Margin Emission Factor was calculated using simple OM approach in accordance with ACM0002, Consolidated baseline methodology for gridconnected electricity generation from renewable sources (Version 10), and Tool to calculate the emission factor for an electricity system (Version 02). EF OM,y calculation based on weighed average covering the most recent years ( ) where high standard quality and consolidated data could be collected and validated. Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Parameter calculated based on Ex-ante approach Data / Parameter: EF BM,y Data unit: tco2e/mwh Description: Build Margin Emission Factor of the STEG electricity Grid Source of data used: STEG Statistical Data Statistiques rétrospectives d électricité Direction des Etudes et Planification - STEG. Other unpublished STEG data and information (e.g. gas chemical properties, Net Calorific Value of gas, etc.) were also collected and used in the calculations. Value applied:

32 page 32 Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: Build Margin Emission Factor was calculated in accordance with ACM0002, Consolidated baseline methodology for grid-connected electricity generation from renewable sources (Version 10), and Tool to calculate the emission factor for an electricity system (Version 02) EF BM,y calculation based on the most recent year (2008) where high standard quality data could be collected and validated. Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Parameter calculated based on Ex-ante approach Data / Parameter: EF CM,y Data unit: tco2e/mwh Description: Combined Margin Emission Factor of the STEG electricity Grid Source of data used: Calculation based on EF OM,y and EF BM,y, using respectively 0.75 and 0.25 default weights as specified by Tool to calculate the emission factor for an electricity system (Version 02) Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: Combined Margin Emission Factor was calculated in accordance with ACM0002, Consolidated baseline methodology for grid-connected electricity generation from renewable sources (Version 10), and Tool to calculate the emission factor for an electricity system (Version 02) Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Parameter calculated based on Ex-ante approach

33 page 33 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : NCV i,y Gj per mass or volume unit of fuel i Net calorific value (energy content) per mass of fossil fuel I in year y used by the operating Tunisian power Plants providing electricity to the interconnected grid STEG: for all data related to gas originating from all sources except El Bibane. STEG: for fuel and gas oil feeding the STEG plants SEEB: for gas provided by El Bibane oil/gas field Fuel Type Fuel origin NCV Natural Gas Mix of Miskar, Algerian and Gj/ Nm3 South Gas Natural Gas Mix of Miskar and South Gas Gj/ Nm3 Natural Gas Algerian Gj/ Nm3 Natural Gas Miskar Gj/ Nm3 Natural Gas South Fields Gj/ Nm3 Natural Gas El Bibane Gj/ Nm3 Natural Gas Chargui Gj/ Nm3 Fuel oil Gj/ T Diesel Gj/ T Tool to calculate the emission factor for an electricity system (Version 02), states that, where available, local values of NCVi should be used. This was the case for Tunisia There are three Power Utilities in Tunisia providing electricity to the interconnected Grid: STEG, CPC and SEEB. Apart from its role as the major power producer, STEG, the State Utility, has also the Monopoly for the transport and distribution of Electricity and Gas. CPC was created in It owns a single Combined Cycle (471 MW) and purchases its gas to operate its plant exclusively from STEG. It also sells the electricity produced exclusively to STEG. Monitoring frequency Any comment: SEEB was created in It owns a Gas Turbine (27 MW), using the gas recovered from the El Bibane oil field. After a three full-years activity ( ) SEEB stopped producing electricity due to problems in gas delivery feeding the SEEB plant. Gas delivery to SEEB restarted in year On the other side, SEEB sells the electricity produced exclusively to STEG. Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Weighed average NCV was used for various gas mixture (e.g. South&Miskar, South&Miskar&Algerian) Weighed average NCV was used for Operating Margin calculation Weighed average NCV related to fuels feeding the plants selected in the Build Margin calculation

34 page 34 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: EF CO2,i,y tco 2 /Tj CO 2 emission factor of fossil fuel I used in year y STEG: for all data related to gas originating from all sources except El Bibane. STEG: for fuel and gas oil feeding the STEG plants SEEB: for gas provided by El Bibane oil/gas field Fuel Type Fuel origin Carbon content (kg CO2/Gj) Natural Gas Mix of Miskar, Algerian and South Gas Natural Gas Mix of Miskar and South Gas Natural Gas Algerian Natural Gas Miskar Natural Gas South Fields Natural Gas El Bibane Natural Gas Chargui Fuel oil Various 78.1 Diesel Various 77.4 Tool to calculate the emission factor for an electricity system (Version 02), states that, where available, local values of Carbon content should be used. Carbon content of each fuel type was calculated base on chemical and molecular properties of fuels. Fuel properties were provided by: STEG: for all data related to gas originating from all sources except El Bibane. Fuel: for fuel and gas oil feeding the STEG plants SEEB: for gas provided by El Bibane oil/gas field Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Weighed average of Carbon content was used for various gas mixture (e.g. South&Miskar, South&Miskar&Algerian) Weighed average of Carbon content was used for Operating Margin calculation Weighed average of Carbon content related to fuels feeding the plants selected in the Build Margin calculation Data / Parameter: W OM, W BM Data unit: Description: Default weights of EF OM and EF BM for wind farm projects Source of data used: Tool to calculate the emission factor for an electricity system (Version 02) Value applied: W OM = 0.75, W BM = 0.25 Justification of the choice of data or ACM0002 (Version 10) recommends the use of methodologies described by

35 page 35 description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: Data / Parameter: Data unit: Description: Source of data used: Justification of the choice of data or description of measurement methods and procedures actually applied : Monitoring frequency Any comment: Tool to calculate the emission factor for an electricity system, which recommends to use 0.75 and 0.25 as weighing factors for OM and BM respectively to calculate the Combined Margin emission factor. Used to calculate Combined Margin emission factor EG m,y MWh/yr Net electricity generated by power plant m in year y Records detained by STEG and SEEB See tables in Annex 3 Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) EG historical MWh/yr Annual average historical net electricity generation delivered to the grid by the existing WIND plant that was operated at the project site prior to the implementation of the project activity Project activity site Electricity meters Once for each crediting period using the most recent three historical years for which data is available at the time of submission of the CDM-PDD to the DOE for validation (ex ante option) Yr EG historical (MWh)

36 page 36 B.6.3. Ex-ante calculation of emission reductions: >> The emission reductions (BEy in tco2) are the product of the baseline emissions factor (EFy in tco2/mwh) times the electricity supplied by the project activity to the grid (EGy in MWh). According to the wind potential of the Sidi Daoud site, the average projected electricity to be generated by the Sidi Daoud Wind Farm will be MWh per year. Using the calculated combined margin Emission Factor, Ex-ante emission reductions of the project would be as follows: ER y = BE y = MWh * = tco2 in average per year. B.6.4 Summary of the ex-ante estimation of emission reductions: >> Renewable crediting period (7 years 3) is adopted by the Project. It is expected that the project activity will generate emission reductions of about 353,115 tco e over the first 7-year crediting period from 2 07/2010 to 06/2017. Year 2010 (July 1-Dec 31) Estimation of project activity emissions PE y (tco2e) Table 12: Emission calculations Estimation of baseline emissions BE y (tco2e) Estimation of leakage LE y (tco2e) Emission reductions due to project activity ER y (téco2) (Jan 1-June 30) Total (tco2e)

37 page 37 B.7. Application of the monitoring methodology and description of the monitoring plan: The project uses the ACM0002 Consolidated baseline methodology for grid-connected electricity generation from renewable sources, Version 10. All data required for verification and issuance will be kept for at least two years after the end of the crediting period or the last issuance of CERs of this project. B.7.1 Data and parameters monitored: >>The electricity generated by each of the 26 wind turbines will be evacuated through a specific connection to the Transformer substation based on site. The production of each wind turbine will be registered and archived electronically at the turbine evacuation point. Departing at 30 kv from the turbines, the electricity will be upgraded to 90 kv on site, before being exported to the grid through a dedicated High Voltage line (90 kv). Electricity generated by the project activity will be centralised upstream of the main Transformer, where the main meter will be based. Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculating expected emission reductions in section B.6 Description of measurement methods and procedures to be applied: Monitoring frequency QA/QC procedures to be applied: Any comment: EG PJ_Add,y MWh Quantity of net electricity generation supplied by the project plant/unit to the grid in year y by the project plant that has been added under the project activity Project activity site 95,000 The electricity delivered to the grid by the proposed project will be monitored through the metering equipment downstream of the Turbine rows. Electrical readings that are the basis for the CDM Monitoring are continuously recorded and stored at the metering systems of the Cells 1, 2 and 3. The results from the three meters will be recorded and archived electronically and on paper daily in the project site. Continuous measurement and monthly recording Daily generation reports will be prepared by the Sidi Daoud Plan Manager before being sent to the STEG Headquarters, and the CDM-Chief Monitoring Officer Based at the STEG Planning Department Meter readings can be crosschecked against the three Scada metering systems situated downstream of each of the three wind turbine rows. The metering equipments will be calibrated and checked according to the appropriate industry standards. A monthly crosschecking will be made between the three main data operators at STEG. An annual crosschecking will also be made with the data registered downstream at the transformer station (Menzel Temime). The data will be archived for crediting period + 2 years.

38 page 38 B.7.2. Description of the monitoring plan: >>The implementation of a monitoring plan is necessary to ensure the complete, consistent, clear, and accurate monitoring of the project performance in terms of greenhouse gas (GHG) emission reductions (ER) during the whole crediting period. The monitoring plan will also ensure compliance with all relevant Clean Development Mechanism rules, including monitoring requirements, and thus secure CER generation. The project owner STEG is responsible for the implementation of the monitoring plan. The monitoring plan is further detailed in Annex 4. An operational monitoring plan will also be developed separately prior to the launching of the first crediting year. Parameters to be monitored The proposed registered 34.32MW Sidi Daoud project will generate electricity that will be totally exported to the STEG national interconnected grid through a high voltage line. The total electricity supplied to the grid by project is the only parameter that is required to be monitored. The emissions factor for the grid being calculated ex-ante, the emissions reductions (ER) will be calculated by multiplying the exported electricity by the ex-ante emission factor. Overview of the monitoring scheme and equipment The amount of electricity delivered to the grid (MWh) will be monitored using electronic meters that fully comply with the standards. The three wind generator rows are equipped with three separate SCADA systems, each of them centralizing and recording the electricity generated by the related row. In principal, the Scada meters represent the formal boundary of the power producer. The Scada meters are similarly used in all plants managed by STEG in the country, to determine the electricity generation of each plant, as recorded in the official STEG statistics. The electricity is then transformed into 30 kv and directed to three centralizing Cells, each of them endowed with meters representing the grid interconnection points. These meters will be used as the basis for the registering and monitoring power generation records for the CDM project. The metered electricity will be subsequently directed to the centralizing transformer substation situated on sitedownstream of the three cells, where the electricity will be upgraded from 30 to 90 kv, before being exported to the grid through the dedicated High Voltage line (90 kv). While the meters situated at the three cells will be used for CDM monitoring, the three Scada meters might also be used for data cross-check purposes and for ensuring proper data recoding of the CDM-dedicated meters.

39 page 39 SCADA Post metering systems T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14 T15 T16 T17 T18 T19 T20 T21 T22 T23 T24 T25 T26 Line 1 Turbines Line 2 Turbines 2 Line 3 Turbines kvtransformer High Voltage line CDM recording meters Boundary for the producer Monitoring activities Figure 4: Power connection and monitoring points of the project activity The monitoring activities will include six main activities: - Data collection, - Data transmission, - Data compilation, - Data cross-checking, - Quality Control/Quality insurance (including calibration of the metering materials, and - Preparation of the Monitoring Report. Monitoring Organisational Structure In order to ensure a successful operation of the project and the credibility and verifiability of the ERs achieved, the project must have a well defined management and operational system prior to the starting of the crediting period. It is the obligation of the operator to put such a system in place for the project. A management system requires clearly assigned roles and responsibilities. Three main persons will be involved in undertaking the monitoring activities; i.e: - A Wind Power Officer (WPO) based at the Wind power station will be in charge of daily data collection. - Wind Power Station Chief (WPSC). The WPSC will have the overall responsibility for the onsite CDM monitoring system. He will be responsible for ensuring adequate data collection, checking, storing and meter s calibration. He will also be in charge of transmitting Daily Report to the Exploitation Department at STEG Headquarters, and to the appointed CDM-Chief Monitoring Officer (CDM-CMO) -.The CDM-Chief Monitoring Officer (CDM-CMO) will be based at the Planning Department of STEG. The CDM-CMO will be the person responsible for handling the whole CDM Monitoring and Verification Processes.

40 page 40 Exploitation Department Wind Power Station CHIEF (WPSC) Wind Power Officer (WPO) Data Collection/Daily reports, Calibration, etc. Planning Department CDM-Chief Monitoring Officer (CDM-CMO) - Data compilation and archiving - CDM-related monthly reports & Cross-checking - Annual Monitoring Report - etc. - Cross-checking activities Figure 5: Monitoring organisational Chart of the project activity Monitoring Report A monitoring Report will be prepared by the CDM-CMO, at the end of each crediting year. The monitoring report will compile the necessary parameters for the calculation of the emission reductions to be claimed within the crediting year: the metered results of the electricity supplied to the grid, emission reduction calculations using the ex-ante combined margin. Repair records and calibration records of the monitoring equipment and any other event that might have affected the monitored data should also be reported in the monitoring report. The monitoring report will also list the sources/archived documentation that would have been utilized to feed the results and calculations mentioned in the monitoring report. B.8. Date of completion of the application of the baseline study and monitoring methodology and the name of the responsible person(s)/entity(ies): >>Date of completing the final draft of the baseline: January 23, 2010 Contact information of the person(s)/entity(ies) responsible: Organisation: Address: Postal Zip/City: Country: Represented by: Salut./First Name/Last Name: APEX Conseil 16 bis rue du Dr Alphonse Laveran 1002 Tunis Tunisian Dr Samir Amous Telephone: / Fax: amous.apex@gnet.tn Note: the above party is not a project participant.

41 page 41 SECTION C. Duration of the project activity / crediting period C.1. Duration of the project activity: C.1.1. Starting date of the project activity: >> May 12, 2006 (date of signature of the contract between STEG and the wind supplier). C.1.2. Expected operational lifetime of the project activity: >> 21y-0m C.2. Choice of the crediting period and related information: C.2.1. Renewable crediting period: C Starting date of the first crediting period: >> 01/07/2010 (or the date of registration, if later) >>7y-0m C Length of the first crediting period: C.2.2. Fixed crediting period: C >>Not applicable Starting date: >> C Length: SECTION D. Environmental impacts >> D.1. Documentation on the analysis of the environmental impacts, including transboundary impacts: STEG was not bound to a compulsory Environmental Impact Assessment (EIA) as per Decree of July 11, 2005, which abrogated Decree However, STEG prepared an EIA for the wind farm in May 2006, as a part of its internal routine quality requirements. This EIA was endorsed by the Tunisian Environmental Protection Agency (ANPE) in August 2006.

42 page 42 As a project participant, the World Bank requested an updated EIA for the wind farm and a new EIA for the 90 KV high-voltage transmission line connecting the wind farm to the Menzel Temime substation. Both documents were available on November 30 th Impacts on bird and bat populations The key environmental impact concerns the potential collision of birds (native and migratory) with the blades of wind turbines during operation. As noted in the Environmental Impact Assessment (EIA) report, tens of thousands of birds (representing a wide diversity of species) funnel through the Cap Bon. However, the project site is located at about 10 km, away form the corridor for migratory birds. The Project developer has established a number of measures to avoid and/or minimize impacts on bird and bat populations including: (i) the project has been designed to avoid areas where risks of collision where deemed higher; (ii) discussions with relevant stakeholders / NGOs / bird specialists to discuss prevention and mitigation measures were held in early 2009 (iii) STEG will implement a program of monitoring of the birds in the project s zone of influence. Impacts on ecosystems The site is situated in a rural area and mainly used for farming activities and breeding. Land cover is limited to plantations (mainly barley), and some limited fruit trees. Impacts on quality of soils and waters The surface taken by these wind plant included the parcels of land used to implement the towers (416 m2; i.e. 16m2/turbine), and the paths built to allow for access to the turbines (total 4000 m2). The total surface mobilized by the plant is insignificant when related to the total surface of the whole site. Except some minor surfaces which were purchased by STEG, surfaces necessary for the implementation of the wind plant were mainly acquired on a voluntary renting basis for a 30-years time period. The contractual renting clauses allow the land owners to continue using the rented areas for their usual farming activities. The wind power plant will not divert the lands from their usual usage, on the contrary it will contribute to helping the land owners to develop their activities thanks to the rental revenues which were paid entirely for the whole 30-years period at the signature of the renting contracts. In addition, unlike the thermal power generation, the wind park will not necessitate water for their operating activities. Noise pollution Noise generated by the electromechanical equipments of the turbines will remain at very low levels (below 55 dba at around 90 meters distance), and in conformity with the Norm: Acoustic noise measurement techniques for wind turbine generator IEC Noise generated by the rotor blades is insignificant, and generally below the wind whistling itself.

43 page 43 Visual pollution The landscape of the site is weakly impacted by the towers supporting the turbines. The overall positioning, dimensions of the wind tours, turbines and blades have been chosen to limit visual impacts of the site. Furthermore, all electric onsite connections and cables are placed underground and do not have any impact on landscape. Air pollution Wind power plants do not have any atmospheric rejection or emission as they do not involve any fuel combustion. The only emissions relate to the construction activities including transportation of construction material and construction of paths. These impacts are temporary as they come to an end at the completion of the construction. Waste generation During construction phase, waste earth generated by the digging operations for the foundation of the towers are evacuated to reserved sites as per regulations in Tunisia. In case of leakage (fuel, oils, etc.), measures are taken to evacuate them to authorized sites. During exploitation phase, solid wastes generated by the wind power plant are mainly ordinary domestic wastes (mainly office and paper wastes), and maintenance wastes (mainly rags). These wastes are collected in containers and evacuated by STEG to the landfill. Packaging and old spare-parts will also be duly collected and evacuated to the landfill. The plant will be equipped with a septic tank. All liquid rejections originating from the central and exploitation building will be evacuated to the septic tank through sanitary piping. Lubricating oils are used in small quantities in the turbines. These oils are confined in closed-circuit and regularly controlled. Waste oils are collected in metallic containers and delivered to the specialized oil recycler company (Société Tunisienne des Lubrifiants-SOTULUB) Potential accidents during operations Occurrence of accidents that might affect significantly the environment is unlikely for such kind of project. There might be three kinds of potential accidents: - Fires in the central building or in any of the turbines. STEG operates power generation plants for decades, and is familiar with electrical utilities. It has the capabilities and experience to deal with such accidents. The Sidi Daoud plant is equipped with the relevant fire detection and human resources to rapidly intervene to contain the fires, similar to those in place in its thermal plants. - Accidental lube leakage: this may occur in the electromechanical circuit of the turbines, but it is unlikely in the case of Sidi Daoud as the lubricate levels will be frequently controlled. Furthermore, the turbines are equipped with alarms in case of significant drop in the lubricate level. Lubricant leakage might also occur at the maintenance workshop. However, the workshop soil is made of concrete, and a quantity of sand is always available to cover the leaked lubricant and thus avoid any propagation. - Accidental falling of a turbine or the full tower: this is an unlikely accident. In case of violent wind speed, the blades stop automatically, reducing almost totally the risks. In case such exceptional accident would occur, any impact (potential contamination of soils with lubricates leakage, rubble, etc.) will be duly corrected, following the regulatory requirements.

44 page 44 Dismantling operations The wind power plant will be easily dismantled at the end of its lifetime. The wind tours are simply bolted on soils, and once dismantled the landscape recover its initial state. Transmission line The transmission line will also entail potential impacts on the natural and human environment of the areas on and through which these infrastructures will be established. The EIA includes precise recommendations for limiting the impacts during execution of the works, as well as for limiting impacts during operations of the line. Conclusion The Environmental Impact Assessment (EIA) reports of the Sidi Daoud Wind Farm Project (May 2006 and November 30, 2009) conclude that the project does not have any significant environmental impact. Some minor negative impacts are identified, but they are compensated by the project s social, economic, and environmental benefits. Finally, the EIA encourages the implementation of the suggested Environmental Management Plan to mitigate these minor impacts. D.2. If environmental impacts are considered significant by the project participants or the host Party, please provide conclusions and all references to support documentation of an environmental impact assessment undertaken in accordance with the procedures as required by the host Party: >>Not applicable SECTION E. Stakeholders comments >>Large consultations are generally launched very early in the process of implementing wind power plants, as the decision making and implementation process involve several stakeholders. This was the case for the project activity. First of all, the decision to implementing the project was taken by STEG after several consultations with the Ministry of Industry, Energy and Small and Medium Enterprises (MIEPME), which supervises the energy sector, including STEG. The approval to implement the project was given at the top level of the Government after several consultations with the inter-ministerial High Transaction Commission ( Commission Supérieure des Marchés ). Following the decision to implement the project, STEG hold several consultations and meetings with local stakeholders -authorities and inhabitants- within the scope of the project activity. Likewise, the project also involved the DNA-Tunisia, which comprises 15 stakeholders (Ministries, Agencies, NGO, etc.), all of whom were involved in approving the project as a CDM project (PIN phase). E.1. Brief description how comments by local stakeholders have been invited and compiled: >>Besides several informal consultations, STEG organized two main formal stakeholder consultation meetings to discuss the project: - A first consultation meeting on June A second consultation meeting on March

45 page 45 First consultation meeting June 20, 2006 This first formal consultation meeting was organized at the head offices of the local Authority (Delegation of El Haouaria) on 20 June More than 50 people attended this meeting, among which the Delegate, representatives from STEG and 47 land owners living at the area of the project. The objective of that meeting was to provide information to the local stakeholders of the launching of the project, and to start discussing the modalities for its implementation. STEG representatives presented the project at this meeting, emphasizing STEG s willingness to implement the project in coordination with all local stakeholders. The presentation was well received and a majority of landowners expressed their willingness to engage with STEG in the implementation of the project. However, residents and landowners expressed the following requests: - Increase the rents for lands on the project site - Differentiate prices according to land usage (irrigated and non-irrigated land) - Make use of the labor of the local population to the extent possible during the construction phase - Make sure not to damage the lands during construction - Address issues related to collective lands - Link the handicap school of Borj Salhi to the access road that is planned to serve the project, as to facilitate the access to the school. In most cases, STEG managed to satisfy all stakeholders requests: - The price of rents was increased compared to those in the first two pilot projects, according to the proportions requested by the populations and local authorities - The price of rents was differentiated according to use of land - The works involved the labor of local populations (approximately 500 people were hired during construction, and efforts will continue to be made to involve the local population in maintenance) - The lands were protected to the extent possible during construction - Attempts were made to resolve issued related to collective land - The road for the school was linked to the new road After the meeting, STEG and local authorities organized several smaller meetings to keep a regular dialogue with local stakeholders. These meetings aimed at negotiating tariffs with landowners and to address land ownership issues. Most landowners were interested in allowing STEG to lease their land. In cases where landowners were not willing to lease their land, STEG conceded to their wishes. Once the project was underway, landowners were still able to cultivate their land and livestock are still allowed to graze the land. STEG has an office at the site location. That office receives questions, complaints, etc. from anyone in the area and STEG responds to them accordingly.

46 page 46 Second consultation meeting March 17, 2009 On March 17, 2009, STEG hold a second consultation meeting in its Tunis headquarters to inform stakeholders about the launching of the CDM project. All main stakeholders were invited at the meeting: - Landowners representatives - Ministry of Industry, Energy, and Small and Medium Enterprises - Ministry of Environment and Sustainable Development. - DNA representative - National Energy Conservation Agency (ANME) - National Environment Protection Agency (ANPE) - Delegation of EL Haouaria - Municipality of El Haouaria - NGO s representatives 16 persons attended the consultation meeting including landowners representatives and local institutions. A CDM expert and a STEG representative presented the main features of the CDM project. First, Mr. Samir Amous, CDM-expert, and PDD developer provided a broad overview of the CDM process and explained the concrete CDM application applied to the Sidi Daoud Project, as well as the steps involved for the PDD preparation. Second, Mr. Adel Hamroun, STEG, presented the status of the wind farm project, from the first consultations in 2006, to the construction phase, up to the ongoing testing phase. Finally, STEG s representatives invited the participants to express their comments about the project. E.2. Summary of the comments received: >>Several interventions were made by the participants to the meeting. Oral comments In the first intervention, the President of the Municipality of EL Haouaria expressed the interest of the local Authorities to implement the project in the region, insisting on the wind potential of the Sidi Daoud region. The President of the Municipality also expressed his satisfaction that the Sidi Daoud project contributed to combating climate change, and this was being acknowledged by the International Community through the access of the project to the CDM. He also hoped that the efforts made by developing countries such as Tunisia would not preclude industrialized countries from meeting their own emission reduction commitments, as stated by the Kyoto Protocol. Moreover, the President of the Municipality recalled the success of the first two wind pilot projects in Sidi Daoud, as the site became a unique attraction for a significant number of domestic and international visitors (including tourists groups visits, school excursions, etc.). He pointed out that, despite the many economic benefits of the wind farm project for the local population, some minor negative impacts cannot be neglected due to the increased number of visitors and the need to preserve the quietness and the quality of the site. He also asked STEG to implement an efficient maintenance program for the pathways as to facilitate the mobility of the landowners in the site.

47 page 47 Finally, the President of the Municipality exhorted STEG to consolidate the development of wind power in the region by implementing new projects, which will provide further employment opportunities and other economic benefits to the region. In its intervention, the Representative from the Delegation of Haouaria emphasised that the issue raised during the first consultation in June 2006 related to the connection from the road dedicated to the project to the handicap school was stalled. He also recommended STEG to implement an Afforestation program dedicated to the site, as to improve the green-cover and hence the beauty of the site, and to reinforce the security in the site by establishing a security guard at the entrance of the wind farm. Landowners also expressed their views during the meeting. They acknowledged the quality of the design and the implementation of the project and its successful integration into the landscape of the site. They also expressed their gratitude to STEG for the improvement of the electricity supply to their homes, which had a great effect in improving their quality of life. Landowners also raised their concerns about the security issues that might result from the increasing numbers of visitors in the site, and recommended to place security guards at the entrance of the site. Written comments A questionnaire was distributed to participants at the end of the meeting. The survey was intended to gather additional questions/comments from the participants. The questionnaire included 8 questions: 1. Do you have a good knowledge of the new Sidi Daoud Project? 2. Were you in favour of the implementation of the project? 3. What are the positive implications of the project for you? 4. Are there any negative impacts? 5. How did you find the consultation process launched by STEG prior to the project implementation? 6. What do you think about the construction phase of the project? 7. What is the level of satisfaction on the way the overall project was conducted by STEG? 8. Other comments : Seven questionnaires were completed by participants before they left the meeting room. The responses to the questions focused on the same issues discussed during the meeting. All seven questionnaires responded positively to questions 1 and 2, suggesting full support to the project. Regarding question 3, respondents pointed out the energy saving impacts, social impacts (new economic revenues, employment, new infrastructure for the site, etc.), environment protection, as main positive implications. However, respondent mentioned the possible sound pollution, as well as the prohibitive cost of the wind power generation as negative impacts (question 4). Regarding questions 5 (consultation process), 6 (construction phase) and 7 (project overall opinion), respondent expressed their total satisfaction, which confirmed the positive collaboration between local stakeholders and STEG.

48 page 48 E.3. Report on how due account was taken of any comments received: >>At the end of the meeting, STEG s representative clarified the questions raised by stakeholders. The answers focused on the following five issues: - Maintenance of the pathways: STEG has already launched a maintenance programme and is willing to collaborate with the Municipality for the reinforcement of this programme. - Security issues: while recalling that the site was initially completely open (not fenced), and that it was maintained as such for the comfort of the landowners and their full mobility, STEG is willing to establish a security guard at the entrance of the site, and would totally collaborate with the population in order to explore all practical measures and acceptable solutions to potential security issues. - Afforestation: STEG is willing to collaborate with the Municipality and with the Forestry Department to implement an Afforestation programme for the site. - Public lighting: This service is a municipal service and does not fall within the scope of STEG s responsibilities. The installation of public lighting equipment in the site is a competence of the Municipal services. - Employment: during the construction phase, priority was given to workers from the region. 25 Staff currently in charge of the management of Sidi Daoud wind farm is also mainly native from the region. - Consolidation of wind power in the region: despite the fact that the Sidi Daoud region is one of the best suited areas for wind power development, STEG will develop its next CDM-wind power project in the region of Bizerte. However, STEG will continue exploring other cost-effective sites in the region of Sidi Daoud. Conclusions of the consultation meetings STEG is committed to address the three remaining issues addressed: (i) implementation of a maintenance programme for the pathways in site, (ii) establishing a security guard at the entrance of the site; (iii) Implementation of an Afforestation program in collaboration with the Municipality and the Forestry Authorities. Among the follow-up actions, STEG has already installed a permanent Guard at the entrance of the site. 25 About 120 workers were employed during the construction phase of the project by the various subcontractors, and 20 persons were employed for the implementation of the turbines.

49 page 49 Annex 1 CONTACT INFORMATION ON PARTICIPANTS IN THE PROJECT ACTIVITY Organization: Société Tunisienne d Electricité et de Gaz (STEG) Street/P.O.Box: STEG - 38 Rue Kemal Ataturk Building: City: Tunis State/Region: Postcode/ZIP: BP 190 / 1080 Tunis Cedex Country: Tunisia Telephone: FAX: mmehiri@steg.com.tn URL: Represented by: Title: Salutation: Mr Last name: Mehiri Middle name: First name: Mokhtar Department: Directeur de l équipement Mobile: Direct FAX: Direct tel: Personal

50 page 50 Organization: Société Tunisienne d Electricité et de Gaz (STEG) Street/P.O.Box: STEG - 38 Rue Kemal Ataturk Building: City: Tunis State/Region: Postcode/ZIP: BP 190 / 1080 Tunis Cedex Country: Tunisia Telephone: FAX: ahamroun@steg.com.tn URL: Represented by: Title: Project Director (Sidi Daoud Wind Farm) Salutation: Mr Last name: Hamroun Middle name: First name: Adel Department: Equipment Mobile: Direct FAX: Direct tel: Personal

51 page 51 Annex 2 INFORMATION REGARDING PUBLIC FUNDING It is confirmed by Spanish Government that public funding for the Project does not result in the diversion of official development assistance and is separate from and is not counted towards the financial obligations of Spain. Confirmation letter from Spanish Government was issued by Ministry of Economy and Finance of Spain on June 10, (See below).

52 page 52

53 page 53 Annex 3 BASELINE INFORMATION

54 page 54 Table A.3.1: List of all Tunisian grid connected power plants and their respective power capacities (MW) Fuel COMBINED CYCLE PLANTS CC-STEG/Sousse Nat. Gas CC-CPC/Radès Nat. Gas STEAM TURBINES Ghannouch Sousse Bi-fuel (Nat Radès A Gas and Radès B Fuel-oil) Goulette II GAS TURBINES Tunis-Sud Nat. Gas Korba Nat. Gas Kasserine Nat. Gas Ghannouch Nat. Gas Bouchemma Nat. Gas Sfax Nat. Gas M. Bourguiba Gas-oil Robbana Gas-oil Bir M'cherga Nat. Gas Zarzis Gas-oil Thyna Nat. Gas Thyna2 Nat. Gas Goulette Nat. Gas Feriana Nat. Gas SEEB-El Bibane Nat. Gas HYDRO-POWER PLANTS 62,5 62,8 63,4 63,4 63,4 63,4 Sidi salem Fernana 9,5 9,5 9,5 9,5 9,5 9,5 Nebeur 13,2 13,2 13,2 13,2 13,2 13,2 Low-cost/ Aroussia must-run 4,8 4,8 4,8 4,8 4,8 4,8 Kasseb 0,7 0,7 0,7 0,7 0,7 0,7 Bouhertma 1,3 1,6 1,6 1,6 1,6 1,6 Sejnene 0,6 0,6 0,6 0,6 WIND-POWER PLANTS 19,3 19,3 19,3 19,3 19,3 19,3 Sidi-Daoud I+II Low-cost/ must-run 19,3 19,3 19,3 19,3 19,3 19,3 TOTAL INTERCONNECTED GRID 2 846, , , , , ,7

55 page 55 Table A.3.2: Detailed electricity generation of the Tunisian interconnected grid (GWh) NATUREL GAS FUEL OIL DIESEL Sousse CC 2 823, , ,6 Radès CPC CC 2 864, , ,3 Ghannouch TV 317,7 332,4 365,0 Sousse TV 1 193, , ,8 Radès A TV 1 106, , ,9 Radès B TV 1 610, , ,8 Goulette TV 0,0 0,0 0,0 Tunis-Sud TG 6,7 0,8 1,9 Korba TG 42,9 8,4 47,7 Kasserine TG 10,9 3,8 8,3 Ghannouch TG 7,2 7,1 5,5 Bouchemma TG 13,7 10,3 7,1 Sfax TG 9,9 2,5 3,0 Bir M'cherga TG 309,7 367,7 375,6 Bouchemma TG3 299,0 217,1 380,1 Thyna TG 368,3 633,5 778,3 Thyna2 TG Goulette TG 92,8 76,8 80,2 Feriana TG 343,7 478,5 432,5 SEEB TG 0,0 0,0 101,7 Ghannouch TV 0,0 0,0 0,0 Sousse TV 62,8 27,4 0,0 Radès A TV 472,1 897,3 345,7 Radès B TV 411,6 466,8 336,4 Goulette II TV 0,0 0,0 0,0 Sfax TG 0,0 0,0 M. Bourguiba TG 0,4 0,1 0,2 Metlaoui TG 0,0 Korba TG 0,0 0,0 0,0 Kasserine TG 0,0 0,0 0,0 Robbana TG 0,0 0,04 0,2 Zarzis TG 0,0 0,04 0,1 Bir M'cherga TG 0,1 0,06 0,1 Radès A et B TV 0,0 Bouchemma TG 0,0 Feriana TG 0,0 0,0 Goulette TG 0,1 0,1 0,1 Thyna TG 0,0 0,0 0,0 Total Production (GWh)

56 page 56 NATUREL GAS FUEL OIL DIESEL Table A.3.3: Detailed fuel consumption of the Tunisian interconnected grid (toe) Sousse CC Radès CPC CC Ghannouch TV Sousse TV Radès A TV Radès B TV Goulette TV Tunis-Sud TG Korba TG Kasserine TG Ghannouch TG Bouchemma TG Sfax TG Bir M'cherga TG Bouchemma TG Thyna TG Thyna2 TG Goulette TG Feriana TG SEEB TG Ghannouch TV Sousse TV Radès A TV Radès B TV Goulette II TV Sfax TG M. Bourguiba TG Metlaoui TG Korba TG Kasserine TG Robbana TG Zarzis TG Bir M'cherga TG Radès A et B TV Bouchemma TG Feriana TG Goulette TG Thyna TG Total Energy Consumption (toe)

57 page 57 NATUREL GAS FUEL OIL DIESEL Table A.3.4: Detailed CO2 emissions of the Tunisian interconnected grid (tco2e) Technology Sousse CC Radès CPC CC Ghannouch TV Sousse TV Radès A TV Radès B TV Goulette TV Tunis-Sud TG Korba TG Kasserine TG Ghannouch TG Bouchemma TG Sfax TG Bir M'cherga TG Bouchemma TG Thyna TG Thyna2 TG Goulette TG Feriana TG SEEB TG Ghannouch TV Sousse TV Radès A TV Radès B TV Goulette II TV Sfax TG M. Bourguiba TG Metlaoui TG Korba TG Kasserine TG Robbana TG Zarzis TG Bir M'cherga TG Radès A et B TV Bouchemma TG Feriana TG Goulette TG Thyna TG Total CO2 Emissions (tco2e) Average Emissions Factor (tco2e/gwh)

58 page 58 Table A.3.5: Option (a) of the Build Margin calculation: the set of five power units that have been built the most recently Designation Technology Energy used Installed Commissionin Production in Power g Date 2008 (GWh) (MW) Thyna Gas turbine Natural Gas Thyna2 Gas turbine Natural Gas Goulette Gas turbine Natural Gas Feriana Gas turbine Natural Gas Sejnane Hydro TOTAL Share of total electricity Production (%) 9.5%

59 page 59 Figure A.3.1: Overall picture of the Tunisian interconnected grid