Conformed Copy - L2845 IN- Talcher Thermal Power Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2845 IN Project Agreement (Talcher Thermal Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NATIONAL THERMAL POWER CORPORATION LIMITED Dated December 21, 1987 LOAN NUMBER 2845 IN PROJECT AGREEMENT AGREEMENT, dated December 21, 1987, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NATIONAL THERMAL POWER CORPORATION LIMITED (NTPC). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred seventy-five million dollars ($375,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that NTPC agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and NTPC, the proceeds of the loan provided for under the Loan Agreement will be made available to NTPC on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS NTPC, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Page 2 Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. NTPC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. NTPC shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement. Section 2.04. NTPC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as 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 2.05. (a) NTPC shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) NTPC shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by NTPC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.06. NTPC shall take all measures necessary to ensure that the execution and operation of the Project is carried out with due regard to ecological and environmental factors, and shall comply with the environmental quality standards prescribed by the Borrower. Section 2.07. NTPC shall, by December 31, 1987, furnish to the Bank a satisfactory resettlement and rehabilitation plan for those people who are currently residing on the land acquired or to be acquired for the Project, or shall be displaced by such acquisition, and shall, in cooperation with the concerned government authorities, implement said plan. Page 3 ARTICLE III Management and Operations of NTPC Section 3.01. NTPC shall carry out its operations and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. (a) NTPC shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. (b) Except as the Bank shall otherwise agree, NTPC shall not sell, 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 take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. NTPC shall, not later than one year prior to the commissioning of the power station under the Project, enter into contractual arrangements with the appropriate authorities for the supply of coal for the operation of facilities installed under the Project, provided, however that any proposed contract for making said arrangements shall be furnished to the Bank for prior review and comment. Section 3.05. NTPC shall complete all surveys and collect necessary data, and make a formal application to the appropriate authorities by March 31, 1988 to obtain clearance required under the Forests (Conservation) Act, 1980 of the Borrower for the purposes of installation of transmission lines under the Project. ARTICLE IV Financial Covenants Section 4.01. (a) NTPC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) NTPC shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) \1aor each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than seven months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors of such scope and in such detail Page 4 as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. NTPC shall take all steps necessary to maintain its accounts receivable at a level not exceeding an amount equivalent to the proceeds of its sales of power for the two preceding months. Section 4.03. (a) Except as shall be otherwise agreed between the Bank and NTPC, NTPC shall set tariffs and conduct its operations and affairs in such manner as to achieve: (i) an annual rate of return of not less than 7% in its fiscal years through 1989/90; (ii) an annual rate of return of not less than 9-1/2% in its fiscal years 1990/91 through 1994/95; and (iii) thereafter, annual rates of return satisfactory to ensure the financial viability of NTPC. (b) For the purpose of paragraph (a) 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 administration, 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. (c) For the purposes of paragraph (b) of this Section, "depreciation" shall be calculated using the straight-line method on the value of depreciable 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 Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of NTPC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify NTPC thereof. Page 5 Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. 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 hereinafter 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 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 Limited 62-63 Nehru Place, NTPC Square New Delhi, 110019, 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 Chairman and Managing Director or such other person or persons as NTPC shall designate in writing, and NTPC shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT Page 6 By /s/ B. Alisbah Acting Regional Vice President Asia NATIONAL THERMAL POWER CORPORATION LIMITED By /s/ N. Misra Authorized Representative SCHEDULE Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Associated civil works and erection may form part of the contracts for certain packages. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $3,500,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Bank pursuant to said paragraph 2 (d) shall be furnished to the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, said procedures shall be modified to ensure that the two conformed copies of such contract together with the other information required to be furnished to the Bank pursuant to said paragraph 3 shall be furnished to the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to the Loan Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Page 7 Section II. Employment of Consultants In order to assist NTPC in carrying out the Project, NTPC shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981.