QUARTERLY STATUS REPORT DECEMBER 31, 2017

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1 QUARTERLY STATUS REPORT

2 TABLE OF CONTENTS 1. NADB and BECC Merge Summary of Financial & Operational Activity Project & Financing Activity Loan Program Grant Programs Community Assistance Program (CAP) Border Environment Infrastructure Fund (BEIF) Water Conservation Investment Fund (WCIF) Technical Assistance NADB Program Project Development Assistance Program (PDAP) Border 2020: U.S.-Mexico Environmental Program Funding Partnerships Project Closeout & Results Measurement Project Closeout Reports Impact Assessment Annex Active Projects by State

3 1. NADB and BECC Merge On November 10, 2017, the Second Protocol of Amendment to the Agreement between the Government of the United States and the Government of Mexico Concerning the Establishment of the Border Environment Cooperation Commission (BECC) and the North American Development Bank (NADB) entered into force, merging the two institutions into a single entity. Under the merger, the institutions shared mission of supporting the development of sustainable infrastructure projects that improve the environment and enhance the quality of life of residents along the U.S.-Mexico border remains unchanged. The functions of BECC have been fully integrated into NADB, thereby streamlining the project development process, making more efficient use of resources and maximizing service to border communities. The ten-member Board of Directors that governed both institutions also remains unchanged. However, to further ensure the continuity of the functions and programs previously administered by BECC, the position of Chief Environmental Officer (CEVO) was created within the integrated institution. In addition to verifying that all projects continue to comply with the criteria for certification, the CEVO will advise Management and the Board of Directors regarding the environmental integrity of the operations of the Bank, as well as support efforts to identify new areas of opportunity. Technical assistance and grant management programs have also been maintained, and public participation, transparency and access to information continue to be central to all NADB operations. The current offices located in San Antonio, Texas, and Ciudad Juarez, Chihuahua, will continue to serve the border region. The merger is the culmination of an initiative launched in July 2011 to enhance coordination of the respective processes and procedures of the two institutions, particularly those relating to technical assistance and project certification and development. Following approval of a Board resolution recommending their merger in December 2014, NADB and BECC developed and began implementing a transition plan to integrate their internal processes and operations, align their information and accounting systems and harmonize their policies. These efforts resulted in the seamless administrative and organizational integration of the institutions during Consequently, upon entry into force of the protocol in November 2017, all BECC operations, personnel and resources had been successfully transferred and integrated into NADB. As illustrated in the following charts and report, project development and financing activities have continued uninterrupted during this process and are expected to proceed with even greater efficiency under the integrated institution. 2

4 2. Summary of Financial & Operational Activity SUMMARY OF PROJECT AND FINANCING OPERATIONS (US$ Thousands) Project Certification Total projects certified By Sector Water Waste management Air quality Basic urban infrastructure Clean and efficient energy By Financing Type Loans NADB-funded grants NADB-administered grants Lending Operations Loans approved $ 273,186 $ 96,876 $ 239,177 $ 323,670 $ 273,242 Loans contracted 229, , , , ,881 Loans disbursed 101, , , , ,964 Grant Operations NADB-funded grants 4 Approved $ - $ 3,100 $ 1,000 $ 765 $ 2,183 Contracted 1,500 1,600 1, ,183 Disbursed 5 1, ,694 1, NADB-administered grants 6 Approved 6,236 25,022 20,274 24,936 6,104 Contracted 14,535 21,231 16,219 12,047 7,658 Disbursed 11,278 10,228 8,698 14,673 17,459 Technical Assistance 7 Approved $ 1,167 $ 972 $ 2,124 $ 1,320 $ 1,369 Disbursed 1,000 1,267 1,933 1,008 1,123 1 Project certification and financing proposals are approved simultaneously by the Board of Directors. 2 This category includes street paving, other roadway improvements, industrial emissions reduction and public transportation. 3 These projects consist of works from various sectors, such as roadway improvements, water and sewer lines, storm drainage, and public lighting. 4 Grants funded from designated retained earnings of the Bank for certified infrastructure projects (excludes technical assistance). 5 Includes both grant disbursements and expenditures for project supervision for Grants funded by EPA and administered by NADB through the Border Environment Infrastructure Fund (BEIF). 7 Includes project development activities, training seminars and sector studies funded by NADB and BECC. 3

5 NADB FINANCIAL SUMMARY (US$ Thousands) Balance Sheet Data Cash and investments $ 954,962 $ 511,558 $ 504,861 $ 442,954 $ 545,525 Loans outstanding 2 1,293,807 1,411,296 1,324,777 1,185,514 1,011,212 Total assets 2,145,753 1,812,866 1,780,599 1,633,369 1,573,076 Borrowings outstanding, gross 1,493,443 1,187,505 1,190,550 1,059,953 1,046,386 Total liabilities 1,511,438 1,208,832 1,215,017 1,090,683 1,054,422 Total equity 634, , , , ,654 Callable capital 2,351,667 2,351,667 2,295,000 2,295,000 2,295,000 Income Statement Data Total interest income $ 68,622 $ 59,012 $ 51,246 $ 43,710 $ 39,543 Loans 57,761 52,427 45,892 38,487 35,149 Investments 10,861 6,585 5,354 5,224 4,394 Interest expense 31,640 19,950 15,101 13,548 10,838 Net interest income 36,982 39,061 36,145 30,163 28,705 Total operating expenses 8,448 17,934 18,143 10,816 19,451 Provision for loan losses (3,945) 5,134 8,559 2,199 10,544 Total non-interest income (expense) 3,156 (369) 2,388 (1,093) (888) Income before program activity 31,690 20,758 20,389 18,254 8,366 Net program expenses 3 2,163 1,088 4,873 2,077 1,145 Net income 29,527 19,670 15,516 16,177 7,221 Ratios Total equity / loans outstanding 49.0% 42.8% 42.7% 45.8% 51.3% Gross debt / callable capital 63.5% 50.5% 51.9% 46.2% 45.6% Gross debt / total equity 235.4% 196.6% 210.5% 195.3% 201.8% Interest coverage 4 1.8x 2.3x 2.8x 2.6x 2.8x Liquid assets / total assets 44.3% 25.3% 25.3% 23.8% 31.3% Income before program activity / total equity 5.0% 3.4% 3.6% 3.4% 1.6% Income before program activity / average assets 1.6% 1.2% 1.2% 1.1% 0.6% Credit Ratings Moody s Investor Service Aa1/P-1 Aa1/P-1 Aa1/P-1 Aa1/P-1 Aaa/P-1 Fitch Ratings AA/F1+ AA/F1+ AA/F1+ AA/F1+ AA/F1+ 1 Excludes the U.S. domestic program. 2 Before allowance for loan losses, unamortized fees, and effect of foreign exchange adjustments and hedged items. 3 Program expenses include grant financing and technical assistance funded from the Bank's retained earnings. 4 Interest coverage ratio is defined as interest income minus operating expenses less provision for loan losses divided by interest expense. 4

6 3. Project & Financing Activity 3.1. Loan Program Lending Activity. During the last quarter of 2017, US$35.80 million in loans was disbursed to support the implementation of nine projects, including the initial disbursement of loan for the El Mezquite wind farm in Mina, Nuevo Leon, additional disbursements to Mercader, S.A. SOFOM E.R. (Mercader), under the lines of credit for the two low-emission bus programs and the final disbursement of the loan for the EDPR wind farm in General Cepeda, Coahuila. With respect to the EDPR Wind Energy Project, a loan for up to US$95.00 million was approved in November 2015, and a loan agreement for up to US$92.89 million was contracted in May The final disbursement was made on November 27, 2017, leaving an unused balance of just over US$3.10 million. Thus, the final loan amount for this project was US$89.79 million. In the case of the two low-emission bus programs, in November 2017, Mercader drew down US$1.51 million under the original pilot program to finance a total of 18 buses for two public transportation companies in Guadalupe, Nuevo Leon, as well as US$3.46 million under the second program to finance a total of 41 buses for three companies in the metropolitan area of Monterrey, Nuevo Leon, and one company in Ciudad Juarez, Chihuahua. To date, Mercader has drawn down a total of US$8.68 million under the pilot program to finance 76 buses and US$29.43 million under the second program to finance 326 buses. More details about the buses financed is provided under project implementation in this section. Additionally, during the quarter, the loan agreement was closed out for the South Wastewater Treatment Plant Cogeneration and Improvements Project in Ciudad Juarez, Chihuahua. A loan for up to $52.5 million pesos (US$3.49 million) was approved in May 2015 and fully contracted in December of the same year. The project was completed in May 2017, with loan disbursements totaling $49.15 million pesos (US$2.77 million), leaving an unused balance of $3.35 million pesos (US$720,567). Thus, the final loan amount for this project was US$2.77 million. In 2017, new loans totaling US$ million were approved for five projects; loan agreements totaling US$ million were signed with the sponsors of seven projects and US$ million was disbursed to support the implementation of 11 projects. Principal Payments. During the last quarter of 2017, two loans were prepaid as follows: On October 25, 2017, the El Paso Public Service Board prepaid the remaining balance of a US$15.00 million loan contracted and fully disbursed in the form of a municipal bond issue in August 2010 to support the Paisano Valley Water Project in El Paso, Texas. A total of US$12.02 million was prepaid. On December 28, 2017, the sponsor of the Ocotillo Express Wind Energy Project in Ocotillo, California, prepaid the remaining balance of the US$ million loan 5

7 contracted in October 2012 and fully disbursed by September A total of US$ million was prepaid. During 2017, the Bank received US$ million in principal payments, including the prepayment of three loans totaling more than US$ and the liquidation of a short-term loan for US$32.69 million. Excluding the prepaid loans, principal payments averaged US$8.17 million a month, while loan disbursements for the same period averaged US$8.45 million a month. Status of Loan Portfolio. NADB closed the year with an outstanding loan balance of US$1.294 billion, a decrease of 8.3% compared to the balance at the end of 2016 (US$1.411 billion). 1 A breakdown of the current loan portfolio by environmental sector, region and borrower type is shown in the following table. Outstanding Loan Portfolio As of December 31, 2017 No. % Amount (US$) % Public / Private Public % $ 252,558, % Private % 944,799, % Public-private 5 7.0% 96,447, % % 1,293,806, % Country U.S % 478,213, % Mexico % 815,592, % % 1,293,806, % Project Type Air quality % 95,634, % Basic urban infrastructure* 3 4.2% 37,093, % Other clean energy** 2 2.8% 4,252, % Public transportation 2 2.8% 31,162, % Solar energy % 291,197, % Storm drainage 2 2.8% 52,715, % Water / wastewater % 161,081, % Wind energy % 620,669, % % $ 1,293,806, % * These projects consist of components from various sectors, such as street paving, water and sewer lines, storm drainage and public lighting. ** Other clean energy currently includes two biogas projects. Additionally, at the end of the year, the Bank had US$ million in contracted loans pending disbursement for 12 projects, as well as approved loan commitments totaling an estimated US$ million for seven projects. Consequently, loans outstanding and loan commitments at the end of the year totaled almost US$1.62 billion. 1 These figures do not take into account allowances for loan losses, foreign exchange adjustments, unamortized loan fees and the fair value of hedged items. 6

8 ANNUAL LENDING ACTIVITY (US$ Millions) 12/31/ /31/2017 Outstanding balance, beginning of year $ 1, $ 1, Loan disbursements Principal repayments (49.73) (218.91) Outstanding balance, end of year 1, , Loans contracted, pending disbursement Loans approved, pending contracting Total loan commitments Outstanding loans & loan commitments $ 1, $ 1, Oustanding balances, before allowance for loan losses, unamortized fees, and effect of foreign exchange adjustments and hedged items. Of the 107 loans contracted to date, 104 have been partially or fully disbursed, 30 have been repaid in full, and three have been partially or fully written off. At year-end, one of the 71 loans outstanding was classified as non-performing with a balance of US$14.38 million, representing 1.1% of the loan portfolio. Detailed information about all NADB loans and approved loan commitments as of December 31, 2017, is provided in Annex 1. Project Implementation. During the last quarter of 2017, three renewable energy projects partially funded with NADB loans completed construction. EDPR Wind Energy Project in General Cepeda, Coahuila. The megawatt wind farm initiated commercial operations on April 19, 2017, and construction was fully completed in September. Located about 29 miles northwest of the city of Saltillo, the project included the installation of 95 wind turbines, each with a nominal capacity of 2.1 MW, as well as the construction of two substations, a 3.1-mile overhead transmission line and 39 miles of access roads. The electricity produced by the wind farm is being purchased by the Mexican mining company, Industrias Peñoles, S.A.B. de C.V., through a self-supply scheme. The project is expected to generate electricity equivalent to the annual consumption of 101,093 households and prevent the release of 381,424 metric tons/year of carbon dioxide equivalent. 7

9 Rocksprings Wind Energy Project in Val Verde County, Texas. In October 2017, the Rocksprings Wind Farm completed construction and began commercial operations on rural land about 30 miles northeast of the city of Del Rio, Texas. The wind farm consists of 69 turbines with a total generation capacity of megawatts, as well as a substation and underground transmission line. The electricity produced by the wind farm is being purchased by two private companies. The project is expected to generate electricity equivalent to the annual consumption of 50,327 households and prevent the release of approximately 330,805 metric tons/year of carbon dioxide, 414 metric tons/year of sulfur dioxide and 259 metric tons/year of nitrogen oxides. Los Santos Solar I Project in Ahumada, Chihuahua. The 13.7-megawatt solar park initiated commercial operations on July 1, 2017, and construction was fully completed in December The plant was constructed on 99 acres of rural land located about 29.5 miles southeast of the town of Villa Ahumada, using polycrystalline photovoltaic solar panels mounted on single-axis tracking system. The project also included construction of a substation and an overhead transmission line. The electricity produced by the solar park is being purchased by two private entities through a selfsupply scheme. The project is expected to generate electricity equivalent to the annual consumption of 5,838 households and prevent the release of approximately 16,509 metric tons/year of carbon dioxide and 57.6 metric tons/year of nitrogen oxides. In addition, in November 2017, Mercader, S.A. SOFOM E.R., financed additional buses through the credit lines established for two border-wide low-emission bus programs. A total of 59 vehicles were financed: 47 new diesel buses that at a minimum comply with EPA 2004 standards and 12 compressed natural gas (CNG) fueled vehicles that comply with EPA 2013 emission standards. To date, 402 vehicles have been purchased using the two programs: 258 diesel buses and 144 CNG 8

10 fueled vehicles. A breakdown of the type of buses financed per border community is presented in the table below. TOTAL BUSES FINANCED TO DATE Community Diesel CNG Total Cd. Juarez, CHIH Hermosillo, SON Monterrey, N.L Garcia, N.L Guadalupe, N.L Apodaca, N.L Escobedo, N.L Tijuana, B.C Use of new diesel buses that comply with EPA 2004 standards will lower nitrogen oxides (NOx) and hydrocarbons (HC) emissions by about 50% and will achieve nearly 24% lower carbon dioxide (CO 2) emissions. The reduction in criteria pollutant emissions is even higher for CNG-fueled vehicles. Given the revolving nature of these credit lines, additional buses are expected to be financed over the next eight to nine years, greatly increasing the impact of these two programs. In addition, during the quarter, two certified projects partially funded with NADB loans began construction: El Mezquite Wind Energy Project A 250-megawatt wind energy project with 100 wind turbines on rural land in the municipality of Mina, about 37 miles northwest of the urban area of Monterrey, Nuevo Leon. Vicente Guerrero Wind Energy Project A megawatt wind farm with 34 turbines on rural land located east of Ciudad Victoria, Tamaulipas. At the end of the year, 24 certified projects partially funded with NADB loans were under construction or pending closeout. Information on the status of these projects as of December 31, 2017, is provided in Annex 1 Projects in Development. At the close of 2017, three projects with potential loans totaling US$ million had been submitted for Board approval and were pending a decision: Desalination plant in Playas de Rosarito, Baja California; Desalination plant in San Quintin, Baja California; and Puerto Libertad Solar Park in Pitiquito, Sonora. 9

11 Two projects were in development and another 60 projects had been identified for possible development at year-end. Based on current information, the loan projects which could potentially be submitted for approval to the Board during the first quarter of 2018 are: Tres Mesas III wind energy project (50 MW) in Llera de Canales, Tamaulipas; and Salitrillos Wind Energy Project (93 MW) in Reynosa, Tamaulipas Grant Programs Community Assistance Program (CAP) Through this program, NADB provides grant financing from its retained earnings for critical environmental infrastructure projects in low income-communities. Grants are available for projects in all sectors eligible for NADB financing, with priority given to drinking water, wastewater, water conservation and solid waste infrastructure. During the last quarter of 2017, no new projects were certified to receive a CAP grant. However, a total US$567,833 in CAP grants was disbursed for the implementation of three projects, including the initial grant disbursement for the solid waste equipment projects in Nuevo Casas Grandes, Chihuahua, and Region Cinco Manantiales, Coahuila. Annual financing activity and the overall status of the CAP program as of December 31, 2017, is summarized in the table below. Community Assistance Program Annual Financing Activity and Program Status (US$ Millions) Cumulative Retained earnings allocated (1) $ - $ 2.62 $ Funds allocated for supervision Grants approved (2) Grants contracted (2) Grants disbursed (3) Grant cancellations (4) - (0.17) (0.43) Contracted grants, not yet disbursed $ 3.38 Additional approved grants, not yet contracted - Funding available for future projects (5) 6.75 (1) Funding allocations in 2017 include the approv al of US$2.0 million in additional retained earnings and US$619,425 in deobligated funds rolled ov er from Water Conserv ation Inv estment Fund (WCIF). (2) Annual and cumulativ e figures, less unused funds deobligated from completed projects. (3) Ex cludes disbursements for superv ision. (4) Unused funds deobligated from completed CAP projects and returned to the CAP program for future projects. (5) Allocated retained earnings less approv ed grants and funds allocated for superv ision. 10

12 In November 2017, one of the last two projects funded under the Water Conservation Investment Fund (WCIF) was completed under budget, and US$619,425 in unused WCIF grant funds were cancelled. In accordance with the Board resolution terminating the WCIF program, these funds were rolled over to the CAP program. Project Implementation. During the last quarter of 2017, six certified projects funded with CAP grants began implementation: Ahumada, Chihuahua Bidding to procure landfill equipment began in August 2017, and contracts for the purchase of a flatbed truck and water tank truck were awarded in October The remaining equipment will be rebid in Central Region, Coahuila - Bidding to procure a bulldozer for the landfill began in November 2017, and a contract was awarded in December. The bulldozer is expected to be delivered in the second quarter of Madera, Chihuahua - Bidding to procure the landfill equipment began in August A contract for the purchase of a water tank truck was awarded in October 2017, and the truck is expected to be delivered in February The remaining equipment will be rebid in Nuevo Casas Grandes, Chihuahua A bidding process to procure landfill equipment was carried out in September 2017, and contracts for the purchase of a dump truck, water tank truck, bulldozer, backhoe loader and 4-ton truck were awarded in November The equipment is expected to be delivered in January Region Cinco Manantiales, Coahuila Bidding to procure landfill and waste collection equipment began in August A contract for the purchase of two garbage collection trucks for the communities of Morelos and Villa Union was awarded in September 2017, and the trucks are expected to be delivered in January The remaining equipment will be rebid in Tombstone, Arizona Construction on improvements to the city s water system began in December, including installation of a system to blend water from Well No. 1 with spring water to reduce arsenic concentrations in compliance with revised federal regulations. Of the 16 projects funded with CAP grants, eight have been completed, seven are in various stages of implementation and one was preparing to begin bidding at the end of the year. Information on the status of certified projects that are currently in the process of being implemented or pending financial closeout as of December 31, 2017, is provided in Annex 1. Projects in Development. NADB continued to work with eight communities to complete development activities related to their water and/or wastewater infrastructure projects. Two projects have completed the development activities required to be ready for certification and are expected to be submitted to the Board for approval in the first half of New Water System for the Community of Jose Silva Sanchez in Soto La Marina, Tamaulipas; and Water System Improvements in Whetstone, Arizona. 11

13 Border Environment Infrastructure Fund (BEIF) Through this program, NADB administers grant resources provided by the Environmental Protection Agency (EPA) for the implementation of priority water and wastewater infrastructure projects. On November 9, 2017, the Board approved the certification of three projects to receive US$3.35 million in BEIF grants from the U.S. Environmental Protection Agency (EPA). Project BEIF Grant (US$ Millions) 1. Rehabilitation of the Collector Poniente in Tijuana, B.C. $ Wastewater Infrastructure Project in Marathon, TX Wastewater Collection Project in Loma Blanca, CHIH 0.63 TOTAL $ 3.35 Moreover, during the last quarter of 2017, the Bank disbursed US$4.22 million in BEIF grants for the implementation of 11 projects, including the initial disbursements for the wastewater projects in Sunland Park, New Mexico and the Cotton Valley subdivision in Socorro, Texas. Annual financing activity and the status of the BEIF program at the end of the year is summarized in the following table. Border Environment Infrastructure Fund Annual Activity and Program Status (US$ Millions) Cumulative EPA funding allocations: $ 9.56 $ 8.96 $ For projects For program administration Grants approved (1) Grants contracted (1) Grants disbursed Contracted grants, not yet disbursed $ Additional approvals, not yet contracted 4.44 Funding available for projects in development (2) (1) Less funds deobligated from completed or cancelled projects. (2) EPA funding allocations for projects less grants approved. During the quarter, EPA Regions 6 and 9 allocated an additional US$737,800 to the BEIF program: US$699,222 for project construction and US$38,578 for program administration. At the end of the quarter, there was just over US$10.21 million available for projects in development. 12

14 Project Implementation. Of the 119 projects funded with BEIF grants, 103 have been completed and/or closed out, 13 are in various stages of implementation, and three are in bidding or preparing to begin bidding. 2 Information on the status of certified projects that are currently in the process of being implemented or pending financial closeout as of December 31, 2017, is provided in Annex 1. Projects in Development. On October 20 th, the local water utility in Tijuana, Baja California, held its second public meeting to present a project for rehabilitation of a portion of the wastewater main, Collector Poniente. The project consists of replacing approximately 19,337 feet of 30 concrete pipe and related manholes. The meeting was attended by 15 residents who expressed their support for the project. At the end of 2017, there were 11 previously prioritized projects in development: eight in EPA Region 6 and three in EPA Region 9. Based on current information, a project to improve wastewater infrastructure in Camargo, Tamaulipas, could potentially be submitted for certification by the Board of Directors during the first quarter of Project Application and Prioritization Process. During the latter half of 2017, EPA Region 6 and Region 9 initiated a new project application and prioritization cycle for drinking water and wastewater infrastructure projects located within 100 km of U.S.-Mexico. Based on an initial evaluation process, 61 applications were deemed eligible for funding consideration. Of those, 25 are for projects in Region 9 and 36 for project in Region 6. The total investment represented by these applications is nearly US$300 million. A breakdown of the number of applications and associated construction costs by state and region are shown in the tables below. State EPA Region 9 EPA Region 6 No. Estimated Cost State No. Estimated Cost Arizona 9 $ New Mexico 4 $ California Texas Sonora Tamaulipas Baja California Chihuahua Total 25 $ Total 36 $ NADB is working closely with EPA to further evaluate the application ranking results and anticipates project selection to occur in the first quarter of There are 113 certified projects with BEIF funding contracted; however, one of those projects (the Texas Plan) consists of seven individual projects with seven individual grants, for a total of 119 water and wastewater projects. 13

15 Water Conservation Investment Fund (WCIF) At the beginning of the year, the last two projects funded through the WCIF, were under construction or pending financial closeout. One project was completed in June 2017, leaving one project in implementation at the end of the quarter. In November 2017, the Bank made the final grant disbursement to Hidalgo Irrigation District No. 16 in Texas, leaving US$619,426 in unused grant funds. These funds were debobligated and, in accordance with the Board resolution terminating the WCIF program, were rolled over to the CAP program, which includes water conservation among its priority project sectors. The grant agreement for the last project totals US$989,832, of which 90% (or US$894,238) has been disbursed, leaving approximately US$95,594 in grant funds pending disbursement or financial closeout at the end of the year. 14

16 4. Technical Assistance 4.1. NADB Program To support project sponsors and border communities in the development of sustainable projects for certification and financing, NADB offers various types of technical assistance in three categories: project development, institutional capacity-building and sector studies to identify needs and generate knowledge about a new sector or technology. During the last quarter of 2017, technical assistance grants totaling US$30,000 were approved to support two studies. Community / Sponsor TA Type* Description Amount (US$) 1 Eight municipalities in the SD Development Plan for the Rio Sonora $ 20,000 Sonora River watershed Special Economic Zone 2 Naco, SON PD Emergency technical services to 10,000 address wastewater overflows TOTAL: $ 30,000 * Technical assistance may be provided in three categories: project development (PD); sector development (SD) to identify needs, promote sound public policy or generate knowledge about a new sector or technology; and institutional strengthening through training or other capacity-building measures (IS). In 2017, technical assistance grants totaling US$1.17 million were approved to support 14 studies or other development activities, including various seminars and forums. As of December 31, 2017, there were 14 studies or other development activities in process or under development. The total grant commitment for those studies was US$ 891,500. During the quarter, four studies or other development and institutional strengthening activities were concluded. Evaluation of alternatives for flood mitigation in Douglas, AZ and Agua Prieta, SON. This project defined a regional strategy, at a basic engineering level, for controlling storm runoff in the Douglas-Agua Prieta cross-border basin, including the construction of dams upstream of urban areas and the incorporation of green infrastructure elements in open areas and along main thoroughfares. Pilot solar plant for a children s cancer center in Tijuana, B.C. The project consisted of equipping the children's hospital with a reliable source of renewable energy, which contributes to the financial sustainability of this altruistic institution. In collaboration with the Castro-Limón Foundation, NADB provided technical assistance to support the design, development and implementation of the solar facility, and secured the donation of the solar panels from Mission Solar Energy, a photovoltaic solar panel manufacturer based in San Antonio, Texas. A ribboncutting ceremony was held in October to inaugurate the plant, which will supply more than 95% of the electricity needs of the Centro Oncológico Pediátrico (COP) de Tijuana, established by the 15

17 Castro-Limón Foundation to provide comprehensive medical care free of charge to children with cancer who have no other medical support. Basics of Water Utility Management in Hermosillo, SON. The final session and graduation ceremony of this five-module course was held in October at the Sonora Norte Campus of the Monterrey Technological Institute (ITESM) in Hermosillo, Sonora. In the final session of this program, which is taught by ITESM s Latin American and Caribbean water center, Centro del Agua para América Latina y el Caribe (CDA), participants analyzed public policies to improve efficiency in the use of water resources and the challenges of sustainability associated with population growth, climate change and technological progress. In addition, graduates had to present a final project that could be applied to their respective water utility and had been validated by a committee of ITESM professors. Twenty-six participants representing 11 utilities and the state water agency received a diploma from ITESM for completing the course. Development Plan for the Rio Sonora Special Economic Zone. In September 2017, NADB provided technical assistance to the State of Sonora to prepare a 15-year plan for the development of the Sonora River Special Economic Zone, which was created under Act 178 of the State of Sonora in response to a chemical spill. In August 2014, 10,560,000 gallons of copper sulfide mixed with sulfuric acid and high concentrations of heavy metals was spilled in the region, impacting eight 16

18 municipalities and causing economic, production and social problems. The plan, developed with the collaboration of various state and municipal entities, as well as civil organizations, defines four catalyzing policies and seven cross-cutting programs, identifies seven general projects to be developed in 2018 and prioritizes 22 specific projects for implementation in The latter includes water infrastructure to improve the agricultural activity, healthcare facilities and local tourism, as well as fiscal incentives to encourage the development of regional businesses Project Development Assistance Program (PDAP) Under the merger, NADB will administer this EPA-funded program, which was previously managed by BECC, to assist communities in the development of water and wastewater projects that have been prioritized by EPA to receive BEIF grants. During the last quarter of 2017, US$101,442 in PDAP grants funded by EPA were awarded to support the development of a water project and a wastewater project. Community / Project Description Amount Sponsor Type (US$) 1 Presidio, TX W Final design for water system improvements $ 94,363 2 Sonoyta, SON WW Mexican environmental document and risk analysis for the wastewater treatment plant 7,079 TOTAL: $ 101,422 W = Water; WW = Wastewater During 2017, close to US$1.03 million in PDAP funds were awarded to support development of 18 water and wastewater projects for communities on both sides of the border Border 2020: U.S.-Mexico Environmental Program This binational program, developed by EPA and its Mexican counterpart, Secretaría de Medio Ambiente y Recursos Naturales (SEMARNAT) to improve the environment and protect the health of the millions of residents within 100 kilometers of both sides of the U.S.-Mexico border, focuses on initiatives for clean air, safe drinking water, reduced risk of exposure to hazardous waste and emergency preparedness. Under the merger, NADB will continue to perform the logistical and administrative services previously provided by BECC with respect to facilitating meetings, as well as identifying, contracting and managing projects and workshops funded under the program. 17

19 During the last quarter of 2017, the following projects were completed. No. Project Location Goal* Region 6 (Texas, Tamaulipas, Nuevo León, Coahuila, New Mexico, Chihuahua) 1 Law reform and environmental education Nuevo Laredo, TAM 5 2 Green infrastructure on Valle del Sol Avenue Ciudad Juarez, CHIH 2 * Border 2020 Goals: 1. Reduce air pollution; 2. Improve access to clean and safe water; 3. Promote materials management, waste management and clean sites; 4. Enhance joint preparedness for environmental response; 5 Compliance assurance and environmental stewardship; Fundamental strategies (FS). During 2017, eleven projects were completed, and eight projects were in process at year-end. Following a request for proposals in mid-2017, EPA Regions 6 and 9 authorized approximately US$1.54 million in grant funding to carry out 29 projects. Three of those proposals were cancelled for various reasons, leaving 26 projects to be implemented beginning in 2018: 14 projects in Region 6 for a total cost of US$612,572 and 12 projects in Region 9 for a total of US$805, Funding Partnerships In carrying out its mission, NADB pursues partnerships with other public and private organizations in an effort to promote environmental initiatives and projects on the border and identify additional support for their development and implementation. Inter-American Development Bank (IDB) Emerging Sustainable Cities Initiative The IDB Emerging and Sustainable Cities (ESC) initiative directly supports governments in the development and implementation of urban sustainability plans and uses a comprehensive, multidisciplinary approach to identify, organize and prioritize urban actions to tackle the main roadblocks preventing the sustainable growth of emerging cities in Latin America. In 2016, NADB teamed up with IDB to introduce the program to Mexican border communities and selected Hermosillo as the first candidate. The border research institute, Colegio de la Frontera Norte (COLEF), is overseeing this project and is working with the consultant firm, IDOM Ingeniería, S.A. de C.V., which was contracted to perform the baseline studies. The two-stage, five-phase ESC methodology was launched in August 2016, with the support of 97 government, academic and community stakeholders, who met to provide information on the main opportunities and challenges facing the community in a wide array of sectors, as well as the plans, programs and projects proposed to address them. Based on the results, 127 indicators were identified, quantified and ranked ranging from water services, waste management and vulnerabilities to natural disasters to social services, economic development and municipal finances, among many others. In addition, a general survey to determine the infrastructure priorities of the community was conducted. The final report has been completed, and the results will be presented jointly by NADB and IDB to the Municipality of Hermosillo in February

20 In conjunction with this effort, the Harvard University Graduate School of Design (GSD) launched a study entitled Rethinking Hermosillo Future Vision of the City, which consists of an urban analysis of the city to identify individual projects that can be developed and executed in the short and medium term. The results will serve to complement Hermosillo s action plan in the areas of urban development, housing and land use, as well as create a vision for the future and redirect the transformation of the city towards sustainable development environmentally, economically and socially. The study has been completed, and NADB has been working with Hermosillo to define the action plan for The study was also turned into a course entitled, Emerging Urbanism: Designing Visions for the City of Hermosillo, Mexico, which was taught during the 2017 fall semester at Harvard. IDB Multilateral Investment Fund (MIF) In December 2014, BECC signed an agreement with IDB to develop a sustainable e-waste management and recycling system in Mexicali, Baja California. The Massachusetts Institute of Technology (MIT), SEMARNAT, EPA, NADB, the Baja California Ministry of Environmental Protection and the Universidad Autónoma de Baja California (UABC) are also collaborating with this initiative, which is intended to promote the safe and efficient recycling of used electronic devices by training around 100 micro-businesses in the e-waste management industry to serve as collection points for workers in the field. The three-year project consists of four components: 1) environmental awareness and public education campaign; 2) training and certifying informal e- waste pickers and recyclers; 3) creation of a new e-waste system; and 4) knowledge management and dissemination. The environmental awareness and public education campaign was completed in 2015 with funding from EPA. The training and certification program for waste-pickers and recyclers was established in 2016 with support from the University of Baja California and training was provided by the non-governmental organization, Fundación Hélice A.C. During 2017, collection centers for various types of e-waste were set up based on studies and modeling performed by MIT and the participation of two recycling companies. All remaining MIF funds were used to finalize the work plan. A mid-term evaluation of the project provided recommendations for its completion, as well as for ensuring the continuity of the e-waste program. NADB, MIF and EPA, through the 2020 Border Program, are negotiating a technical assistance agreement to provide support for the start-up of the recycling centers, as well as to organize the first binational e-waste recycling forum in the fall of 2018, at which the results of this project will be presented so the methodology may be replicated in other cities. KfW In conjunction with the US$50 million line of credit provided by the German development bank (KfW) to NADB for water and wastewater projects in Mexico, BECC received 1 million euros from KfW for accompanying measures, including program marketing, climate screening of projects and results measurement. The German firm GITEC Consult GmbH was contracted to assist in carrying out these tasks. In addition to tasks such as evaluating project eligibility for financing with KfW funds and preparing various reports as needed, GITEC supported the development of the energy efficiency network for 14 water and wastewater utilities in the state of Coahuila. Having completed all tasks its assigned tasks, the contract with GITEC was closed out in November

21 5. Project Closeout & Results Measurement 5.1. Project Closeout Reports During the last quarter of 2017, four closeout reports were completed and delivered to the Board: the two Los Vientos wind energy projects in Cameron and Willacy, Texas; the second border-wide low-emission bus program sponsored by Mercader; and the storm drainage project in Nuevo Laredo, Tamaulipas. All four projects were partially funded with a loan. The following tables present the 2017 close-out pipeline for NADB-funded projects, along with their status as of December 31, The projects currently in process will be rolled over to the 2018 closeout pipeline CLOSEOUT PIPELINE FOR LOAN PROJECTS Community / Sponsor Project Certification Date Completed & delivered Astrosol Tech Park Solar energy project Jan-12 Los Vientos 1A Wind Farm Wind energy project Dec-12 Los Vientos 1B Wind Farm Wind energy project Dec-12 Mercader I Pilot low-emission bus program Apr-16 Mercader II Second low-emission bus program Nov-16 Nogales, SON Solid waste equipment Dec-07 Nuevo Laredo, TAM Water and wastewater Jun-04 Nuevo Laredo, TAM Storm drainage Jun-06 Completed and under Review by Technical and Environmental Committee Bryan Solar Park Solar energy project Jun-13 Cd. Juarez, CHIH Cogeneration and sludge management May-15 project El Porvenir Wind Farm Wind energy project Feb-12 FRV Tucson Solar Park (Picture Solar energy project Dec-12 Rocks, AZ) Hermosillo, SON* Wastewater treatment plant Nov-16 In Process Cd. Juarez, CHIH Air quality and urban mobility Jul-12 Ocotillo Wind Farm Wind energy project Jul-13 Tijuana, B.C. Paving rehabilitation (white-topping) Jul-09 * Closeout process in collaboration with KfW. 20

22 2017 PROJECT CLOSEOUT PIPELINE FOR NADB-FUNDED GRANTS Community / Sponsor Project Certification Date Completed and under Review by Technical and Environmental Committee Nuevo Casas Grandes, CHIH (CAP) Wastewater July-13 Piedras Negras, COAH (CAP) Wastewater May-14 Santiago, N.L. (CAP) Storm water May-13 Tecate, B.C. (CAP) Water and wastewater Dec-14 In process Nogales, SON (SWEP) Landfill/transfer station Dec-09 To date, 28 closeout reports for NADB-funded projects have been completed and delivered to the Board. In the case of BEIF projects, the close-out pipeline for 2017 included seven projects in EPA Region 6 and six in EPA Region 9, for a total of 13 BEIF close-out reports at the beginning of the year. The pipeline was modified so that it now includes 12 projects in EPA Region 6 and three projects in EPA Region 9, increasing the total number of anticipated BEIF close-out reports to 15 for the year. The closeout report for eight of those projects was completed and submitted to EPA prior to yearend. An additional five reports were in final draft form and under review by the Technical and Environmental Committee Impact Assessment During the last quarter of 2017, NADB finalized the scope of work and terms of reference for an impact assessment of the wastewater infrastructure projects in the sister cities of Nogales, Arizona and Nogales, Sonora, which is aimed at documenting project results in a binational context. Additionally, the local utilities and authorities in both communities agreed to cooperate in the development of the study, and a binational work team was formed with staff from NADB, the University of Arizona Tucson Campus and the Mexican research institute, Colegio de la Frontera Norte (COLEF) to oversee the assessment. NADB intends to engage a consultant to carry out the study, and an open bidding process will be initiated in February

23 ANNEX ACTIVE PROJECTS BY STATE December 31,

24

25 ANNEX 1 NADB QUARTERLY REPORT NORTH AMERICAN DEVELOPMENT BANK ACTIVE PROJECTS BY STATE December 31, 2017 Project Population to Certification Total Total NADB Funding Construction Phase 2 Benefit 1 Date Cost Approved Contracted Disbursed Develop. Construct. Complete UNITED STATES ARIZONA 1 1 Douglas (Bay Acres) WW 17, Nov Nogales W 1, May Tombstone W 1, Jun Willcox WW 3, May TOTAL ARIZONA 23, CALIFORNIA 5 1 Holtville (WWTP) WW 6, Feb SEPV Solar (Dixieland) SE 6, Nov-16 Reserved TOTAL CALIFORNIA 13, NEW MEXICO 7 1 Anthony WW 8,700 6-May Mesilla W 1, Nov Sunland Park/Santa Teresa (WWTP) WW 6, Apr TOTAL NEW MEXICO 16, TEXAS 10 1 Brownsville WW 2, Nov Cameron Irrigation District No. 6 WC 16-Dec Clint WW 1, Dec El Paso County (Cuadrilla) WW 85 3-Mar El Paso County (Vista del Este) W 1, Nov Hidalgo Irrigation District No. 16 WC 19-Mar North Alamo WSC (Hidalgo County) WW 1, Jun Rocksprings Wind (Val Verde County) WE 138,399 1-Mar-17 Reserved Socorro (Cotton Valley) WW Dec Tornillo (2) W/WW 3, Aug TOTAL TEXAS 148, U.S. BORDER REGION 20 1 CleanFund PACE Program EE/WC 13-Sep TOTAL US Border TOTAL U.S. 201,

26 ANNEX 1 ACTIVE PROJECTS BY STATE NADB QUARTERLY REPORT Project Population to Certification Total Total NADB Funding Construction Phase 2 Benefit 1 Date Cost Approved Contracted Disbursed Develop. Construct. Complete MEXICO BAJA CALIFORNIA 1 1 Ensenada W 96,000 6-Dec Mexicali (Col. Loma Linda/Esperanza) WW 2,230 3-Dec Playas de Rosarito BUI 90, May Tecate (Col. Piedra Angular) WW Dec Tijuana y Rosarito W/WW 1,373, Jul Tec.-La Gloria WWTP WW 187,036 1-Feb Tijuana WW 2014 WW 524,908 3-Dec TOTAL B.C. 1,562, CHIHUAHUA 8 1 Ahumada SW 11, Jun Cd. Juarez (South-South) WW 180, Dec Cd. Juarez (cogen) ENE-B 14-May Colonia Esperanza WW 1, Sep El Millón, Jesús Carranza & Tres Jacales WW 1,656 4-May Los Santos Solar (Ahumada) SE 21,016 1-Apr-15 Reserved Madera SW 17, Jun Nuevo Casas Grandes SW 59, Jun Praxedis W 3,641 8-Dec San Agustin W/WW 1,569 8-Nov Santa Maria Solar (Galeana) SE 195, Jun-17 Reserved TOTAL CHIH. 480, COAHUILA 21 1 AHMSA (Monclova) AQ 216, Aug-15 Reserved EDPR Wind (Gral. Cepeda) WE 384,153 5-Nov-15 Reserved Región Centro SW 345, Jun Reg. 5 Manantiales SW 77, Jun Sabinas WW 3,027 6-Nov TOTAL COAH. 1,026, NUEVO LEÓN 26 1 El Mezquite Wind (Mina) WE 432, Jun-17 Reserved Monterrey WW 3,592, Jun TOTAL N.L. 4,025,

27 ANNEX 1 ACTIVE PROJECTS BY STATE NADB QUARTERLY REPORT Project Population to Certification Total Total NADB Funding Construction Phase 2 Benefit 1 Date Cost Approved Contracted Disbursed Develop. Construct. Complete SONORA 28 1 Hermosillo WW 784,342 1-Apr Hermosillo BUI 784,342 9-May Nogales (SW colonias) W/WW 16, Nov Orejana Solar (Hermosillo) SE 175,417 7-Jul-17 Reserved San Luis Rio C. SW 161, Oct San Luis Rio C. (2) AQ 178, Sep San Luis Rio C. (4) WW 16,122 8-May Sonoyta WW 12, Dec TOTAL SON. 1,167, TAMAULIPAS 36 1 Frontera Ribereña SW 67, Dec La Mesa Wind (Güémez) WE 91,127 5-Feb-15 Reserved Matamoros (2) W / WW 160, Jul Miguel Alemán (2) WW 19, Jul Nuevo Laredo (2) WW 86, Jul Reynosa (2) WW 266,853 6-May Tres Mesas Wind (Llera de Canales) WE 255, Jun-14 Reserved Vicente Guerrero Wind (Güémez) WE 224,287 8-Feb-17 Reserved TOTAL TAMP. 1,152, MEXICAN BORDER REGION 44 1 Mercader Pilot Program PT 24-Jun Mercader Bus Program PT 13-Sep TOTAL MX Border TOTAL MEX. 9,415,900 2, TOTAL NADB 9,617,896 2, Populations benefiting from more than one project are only counted once. 2 Projects in development are either under final design, in preparation for bidding or in bidding. Projects that have completed construction may still be considered active because financing is still in process (pending disbursement or deobligation). AQ = Air quality; BUI = Basic urban infrastructure; EE = Energy efficiency; ENE-B = Energy from biogas; PT = Public transportation; SD = Storm drainage; SE = Solar energy; SW = Solid waste; W = Water; WC = Water conservation; WE = Wind energy; WW = Wastewater; WWTP = Wastewater treatment plant 3