India - Ramagundam Thermal Power Project : Credit 0874 - Project Agreement - 1 - Conformed

CONFORMED COPY CREDIT NUMBER 874 IN LOAN NUMBER 1648 IN Project Agreement (Ramagundam Thermal Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NATIONAL THERMAL POWER CORPORATION LIMITED Dated February 2, 1979 CREDIT NUMBER 874 IN LOAN NUMBER 1648 IN PROJECT AGREEMENT AGREEMENT, dated February 2, 1979, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association), INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (here- inafter called the Bank) and NATIONAL THERMAL POWER CORPORATION LIMITED (hereinafter called NTPC), a company registered under the Borrower's Companies Act, 1956, as amended. WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to two hundred million dollars ($200,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NTPC agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to fifty million dollars ($50,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that NTPC agree to undertake such obligations towards the Bank as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and NTPC, the proceeds of the credit provided for under the Development Credit Agreement and the proceeds of the Loan provided for under the Loan Agreement will be made available to NTPC on the terms and conditions therein set forth; and WHEREAS NTPC, in consideration of the Association's and the Bank's entering into the Development Credit Agreement and the Loan Agreement, respectively, with the Borrower, has agreed to under- take the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in - 2 - the Development Credit Agreement and in the General Conditions applicable thereto and in the Loan Agreement and in the General Conditions applicable thereto have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. NTPC shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices. Section 2.02. In order to assist NTPC in the detailed design of and preparation of specifications for the Project, and in the review of NTPC's project management system, NTPC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. Except as the Association and the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit and of the Loan, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) NTPC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit and of the Loan relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or instal- lation, and for such insurance any indemnity shall be payable in a currency freely usable by NTPC to replace or repair such goods. (b) Except as the Association and the Bank may otherwise agree, NTPC shall cause all goods and services financed out of the proceeds of the Credit and of the Loan relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) NTPC shall furnish to the Association and the Bank, promptly upon their preparation, the plans, speci- fications, reports, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association and the Bank shall reasonably request. (b) NTPC: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and impact), to identify the goods and services financed out of the proceeds of the Credit and of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (d) of this Section, enable the Association's and Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and of the Loan and any relevant records and documents; and (iii) shall furnish to the Association and the Bank all such information as the Association and the Bank shall reasonably request con- cerning the Project, its cost and, where appropriate, its impact, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Associ- ation, the Bank and NTPC, NTPC shall prepare and furnish to the Association and the Bank a report, of such scope and in such detail as the Association and the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and impact, the performance by NTPC, the Association and the Bank of their respective obligations under the Credit Agreement and the Loan Agreement, and the accomplishment of the purposes of the Credit and the Loan. (d) NTPC shall enable the Association's and the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of NTPC and any relevant records and documents. Section 2.06. NTPC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association and the Bank shall otherwise agree, NTPC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) NTPC shall at the request of the Associ- ation and the Bank, exchange views with the Association and the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement, the Loan Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit and the Loan. (b) NTPC shall promptly infor:- the Association and the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit and the Loan, or the performance by NTPC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.08. NTPC shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project and shall upon request furnish to the Association and the Bank, promptly after such acquisition, evidence satisfactory to the Association and the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 2.09. Except as the Association and the Bank shall otherwise agree, NTPC shall sell to the State Electricity Boards the entire output of power from the generating units to be installed under the Project as delivered at agreed bulk supply points under bulk supply contracts satisfactory to the Associ- ation. Section 2.10. NTPC shall take all measures necessary to ensure that the execution and operations of the Project are carried out with due regard to appropriate ecological and environ- mental factors in accordance with the environmental quality standards prescribed by the Borrower's National Committee on Environmental Planning and Coordination. ARTICLE III Management and Operations of NTPC Section 3.01. NTPC shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial, administrative and engineering practices and under the supervision of experienced and competent management assisted by adequate and competent staff. Section 3.02. (a) NTPC shall at all times maintain its corporate existence and the right to carry on its operations and to acquire and retain ownership of all lands and maintain and renew all interests in land and other properties, and take all -5- steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) NTPC shall at all times operate and maintain its plant, machinery, equipment and other property, and make all necessary repairs and renewals thereof, in accordance with sound engineering practices. (c) Except as the Association and the Bank shall otherwise agree, NTPC shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient operation of its business and undertaking. Section 3.03. NTPC shall inform the Association and the Bank on any proposal to modify existing limitations on the powers of NTPC's Board of Directors to borrow funds before placing such a proposal on the agenda for consideration by NTPC in general meeting. Section 3.04. NTPC shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Association and the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. NTPC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. NTPC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses, sources and application of funds statements and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by indepen- dent auditors acceptable to the Association; (ii) furnish to the Association and the Bank as soon as available, but in any case not later than seven months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) a certified copy of the auditors' report; and (iii) furnish to the Association and the Bank such other information concerning the accounts and financial statements of - 6 - NTPC and the audit thereof as the Association and the Bank shall from time to time reasonably request. Section 4.03. Except as shall be otherwise agreed between the Association, the Bank and NTPC: (a) NTPC shall set tariffs and conduct its operations and affairs in such manner as to achieve in the fiscal year beginning April 1, 1988 and maintain thereafter an annual rate of return of not less than nine and one-half per cent (9-1/2%). (b) NTPC shall set its tariffs from the time of the commis- sioning of its first 200 MW generating unit and until the fiscal year starting April 1, 1988 at levels not lower than those esti- mated to be required to achieve a 9-1/2% annual rate of return in the fiscal year beginning April. 1, 1988. (c) For the purposes of paragraphs (a) and (b) of this Section, the annual rate of return for any financial year shall be calculated by expressing the operating income for the particular financial year as a percentage of the average of the capital base at the beginning and end of such financial year. For the purposes of the foregoing: (i) "operating income" means total operating revenues from the sale of electricity and from other services incidental thereto; less all adminis- tration, operating and maintenance expenses, adequate provision for depreciation, and taxes (including income taxes), but excluding interest and other charges on debt; and (ii) "capital base" means the sum of (A) the gross book value of fixed assets in operation, and (B) the cost of intangible assets, less the amount of accumulated accrued depreciation. For the purposes of (i) and (ii) above, "depreciation" shall be calculated using the straight-line method on the value of depre- ciable fixed assets in service. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement and the Loan Agreement become effective. - 7 - Section 5.02. (a) This Agreement and all obligations of the Association, the Bank and of NTPC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement and the Loan Agreement shall terminate in accor- dance with their respective terms; or (ii) a date twenty-five years after the date of this Agreement. (b) If the Development Credit Agreement and the Loan Agreement terminate in accordance with their terms before the date specified in paragraph (a) (ii) of this Section, the Association and the Bank shall promptly notify NTPC of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement or the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. -8- For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For NTPC: National Thermal Power Corporation Ltd. 312 Kailash, 26 Kasturba Gandhi Marg New Delhi - 110001 India Cable address: THERMPOWER New Delhi Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of NTPC may be taken or executed by its Managing Director or such other person or persons as NTPC shall designate in writing, and NTPC shall furnish to the Association and the Bank sufficient evidence of the authority and the authen- ticated specimen signature of each such person. Section 6.03. As long as the Bank has not given notice to the contrary to NTPC and so long as the Development Credit Agreement shall not have terminated prior to the termination of the Loan Agreement: (a) the obligations of NTPC to consult with, and to furnish information, documents, plans, reports, records and statements to the Bank shall be satisfied to the extent performance in respect of such obligations is rendered to the Association; (b) the obligations of the Bank to consult with, and to furnish information to NTPC shall be satisfied to the extent such obligations are fulfilled by the Association; and (c) all actions taken (including the giving of approvals or the granting of waivers) by the Association pursuant to the Development Credit - 9 - Agreement shall be deemed to be taken pursuant to both the Devel- opment Credit Agreement and the Loan Agreement and in the name and on behalf of both the Association and the Bank. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ W. David Hopper Regional Vice President South Asia INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Is! W. David Hopper Regional Vice President South Asia NATIONAL THERMAL POWER CORPORATION LIMITED By Is! N.A. Palkhivala Authorized Representative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Goods shall be procured under contracts awarded in accor- dance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, NTPC shall prepare and forward to the Association and the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association and the Bank shall reasonably request; the Association and the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the oppor- tunity to bid for the goods in question. NTPC shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically supplied goods, shall be excluded; and (iii) the cost to NTPC of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: - 11 - 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Association and NTPC that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex- factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further comparee with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. - 12 - C. Review of Procurement Decisions by the Association 1. With respect to all contracts for the purchase of goods estimated to cost the equivalent of $1,000,000 or more: (a) Before bids are invited, NTPC shall furnish to the Association and the Bank for their comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Associ- ation and the Bank shall reasonably request. Any further modifi- cation to the bidding documents shall require the Association's and the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, NTPC shall, before a final decision on the award is made, inform the Association and the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Association and the Bank, in sufficient time for its review, a detailed report by NTPC or by the consultants referred to in Section 2.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award and such other information as the Association and the Bank shall reasonably request. The Association and the Bank shall, if they determine that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform NTPC and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's and the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association and the Bank promptly after its execution and prior to the submission to the Association and the Bank of the first application for withdrawal of funds from the Credit Account or the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, NTPC shall furnish to the Association and the Bank, promptly after its execution and prior to the submission to the Association and the Bank of the first application for withdrawal of funds from the Credit Account or the Loan Account in respect of - 13 - such contract, two conformed copies of such contract, together with the analysis of the respective bids and such other informa- tion as the Association and the Bank shall reasonably request. The Association and the Bank shall, if they determine that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform NTPC and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, granting an extension of the stipulated time for performance of such contract, and issuing any change order under such contract (except in cases of extreme urgency), which would increase the cost of the contract by more than 15% of the original price, NTPC shall inform the Association and the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Associa- tion and the Bank, if they determine that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform NTPC and state the reasons for its determination,