Conformed Copy - L2938 - Second Karnataka Power Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2938 IN Loan Agreement (Second Karnataka Power ProJect) between INDIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 27, 1988 LOAN NUMBER 2938 IN LOAN AGREEMENT AGREEMENT, dated July 27, 1988, between INDIA, acting by its President (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; (B) Part A of the Project will be carried. out by the Karnataka Power Corporation Limited (the Corporation) with the Borrower's assistance; (C) Part B of the Project will be carried out by the State of Karnataka (Karnataka) through the Karnataka State Electricity Board (the Board) with the Borrower's assistance; (D) For the purposes of carrying out the Project, as part of the Borrower's assistance, the Borrower will make available to Karnataka the proceeds of the Loan as provided in this Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Page 2 Agreement, in the Project Agreement of even date herewith between the Bank and the Corporation, and in the Karnataka Agreement of even date herewith between the Bank and Karnataka. NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Karnataka" means the State of Karnataka, a State of India; (b) "Karnataka Agreement" means the agreement between the Bank and Karnataka of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (c) "Corporation" means the Karnataka Power Corporation Limited, a company registered under the Companies Act, 1956, of the Borrower; (d) "Project Agreement" means the Agreement between the Bank and the Corporation of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (e) "Subsidiary Loan Agreement" means the agreement to be entered into between Karnataka and the Corporation pursuant to Section 3.01 (b) of the Karnataka Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (f) "Board" means the Karnataka Electricity Board established under the provisions of the Borrower's Electricity (Supply) Act, 1948, as amended to the date of this Agreement; (g) "Talakalale Dam" means the structure which holds a balancing reservoir between the Linganamakki reservoir and the intake structure of the Sharavathy Power Station in Karnataka; and (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to two hundred sixty million dollars ($260,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the Page 3 provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account in the Reserve Bank of India on terms and conditions satisfactory to the Bank. Deposits into, and payments out of the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1996 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank. (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on June 1 and December 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Loan Agreement, shall cause Karnataka to perform in accordance with the provisions of Page 4 the Karnataka Agreement all the obligations of Karnataka therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable Karnataka to perform such obligstions, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall make the proceeds of the Loan available to Karnataka in accordance with the Borrower's standard arrangements for developmental assistance to the States of India. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of the Schedule to the Karnataka Agreement. Section 3.03. The Bank and the Borrower hereby agree that 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 Part A of the Project shall be carried out or caused to be carried out by the Corporation pursuant to Section 2.03 of the Project Agreement, and in respect of Part B of the Project, shall be carried out or caused to be carried out by Karnataka pursuant to Section 2.04 of the Karnataka Agreement. ARTICLE IV Particular Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made; and (iii) enable the Bank's representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than seven months in respect of withdrawals for the Page 5 Corporation and nine months in respect of withdrawals for the Board, after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals; and (iii) furnish to the Bank such other information concerning said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 4.02. The Borrower shall have the Special Account for each financial year audited in accordance with appropriate auditing principles, consistently applied by independent auditors acceptable to the Bank and furnish to the Bank as soon as available, but in any case not later than six months after the end of each year the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) Karnataka or the Corporation shall have failed to perform any of its respective obligations under the Karnataka Agreement or the Project Agreement. (b) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that Karnataka or the Corporation will be able to perform its respective obligations under the Karnataka Agreement or the Project Agreement. (c) A change shall have been made in the Memorandum and Articles of Association of the Corporation amended to the date of this Agreement, without the consent of the Bank, whioh would materially and adversely affect the financial condition or operations of the Corporation. (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Board or the Corporation or for the suspension of its operations. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) the events specified in paragraphs (c) and (d) of Section 5.01 of this Agreement shall occur. Page 6 ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Subsidiary Loan Agreement has been executed on behalf of Karnataka and the Corporation. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Karnataka Agreement has been duly authorized or ratified by Karnataka and is legally binding upon Karnataka in accordance with its terms. (b) that the Project Agreement has been duly authorized or ratified by the Corporation, and is legally binding upon the Cor- poration in accordance with its terms; and (c) that the Subsidiary Loan Agreement has been duly authorized or ratified by Karnataka and the Corporation and is legally binding upon Karnataka and the Corporation in accordance with its terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. Any Secretary, Additional Secretary, Joint Secretary, Director, Deputy Secretary or Under Secretary of the Department of Economic Affairs in the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: The Secretary to the Government of India Department of Economic Affairs Ministry of Finance New Delhi, India Cable address: Telex: ECOFAIRS 953-313546 New Delhi For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex Page 7 INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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. INDIA By /s/ N. Misra Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Bilsel Alisbah Acting Regional Vice President Asia SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the alloc.ition of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works 40,000,000 65% (2) Equipment and 180,000,000 100% of foreign materials expenditures, and 100% of local expenditures (ex-factory cost) (3) Talakalale Dam 8,000,000 70% repairs (4) Afforestation 400,000 80% (5) Consultants' 1,600,000 100% services and training (6) Unallocated 30,000,000 _________________ TOTAL 260,000,000 Page 8 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) develop low cost hydro resources to meet power shortages in the Southern Region; (ii) provide efficient evacuation of power from the Sharavathy Hydropower Complex; (iii) strengthen Karnataka's transmission grid and the power distribution system in the City of Bangalore; (iv) introduce new technologies in Karnataka's distribution system; and (v) improve the Board's management capabilities . The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Part A: The Corporation (i) The construction of the 240 MW Sharavathy tail race hydroelectric scheme at Gersoppa; (ii) The establishment of compensatory afforestation associated with the hydroelectric scheme under Part (i) above; and (iii) The carrying out of a program of repairs of the Talakalale Dam. Part B: The Board (i) The construction of about 250 km of double circuit 400-kV line, about 250 km of single and double circuit 220 kV line and about 225 km of single circuit 220 kV line on existing towers together with associated substations. (ii) The laying of about 6 km of 66 kV cable together with the construction of the associated substations. (iii) The reinforcement of the 11 kV primary distribution grid in the City of Ban galore. (iv) The establishment of a computerized distribution system control center. (v) The acquisition of tools and equipment, and carrying out a program of training of Page 9 their use, for transmission and distribution construction works and its maintenance. (vi) Utilization of consultants' services for the design and construction supervision of 400 kV lines and substations under the Project. * * * * The Project is expected to be completed by June 30, 1995. SCHEDUIE 3 Amortization Schedule Date Payment Due Payment of Principal (Expressed in dollars)* December 1, 1993 4,745,000 June 1, 1994 4,930,000 December 1, 1994 5,120,000 June 1, 1995 5,315,000 December 1, 1995 5,520,000 June 1, 1996 5,735,000 December 1, 1996 5,955,000 June 1, 1997 6,185,000 December 1, 1997 6,425,000 June 1, 1998 6,675,000 December 1, 1998 6,930,000 June 1, 1999 7,200,000 December 1, 1999 7,475,000 June 1, 2000 7,765,000 December 1, 2000 8,065,000 June 1, 2001 8,375,000 December 1, 2001 8,700,000 June 1, 2002 9,035,000 December 1, 2002 9,385,000 June 1, 2003 9,745,000 December 1, 2003 10,120,000 June 1, 2004 10,510,000 December 1, 2004 10,920,000 June 1, 2005 11,340,000 December 1, 2005 11,775,000 June 1, 2006 12,230,000 December 1, 2006 12,705,000 June 1, 2007 13,195,000 December 1, 2007 13,705,000 June 1, 2008 14,220,000 __________________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the balance Page 10 outstanding on the Loan on the day of prepayment multiplied by: Not more than three years before maturity 0.15 More than three years but 0.30 not more than six years before maturity More than six years but 0.55 not more than 11 years before maturity More than 11 years but not 0.80 more than 16 years before maturity More than 16 years but not 0.90 more than 18 years before maturity More than 18 years before 1.00 maturity SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means the Categories (1), (2), (3), (4) and (5), set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term "Authorized Allocation" means an amount equivalent to $20,000,000 to be withdrawn from the Loan Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Except as the Bank shall otherwise agree, payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account may be made as follows: (a) On the basis of a request or requests by the Borrower for a deposit or deposits which add up to the aggregate amount of the Authorized Allocation, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) The Borrower shall furnish to the Bank requests for replenishment of the Special Account at such intervals as the Bank shall specify. On the basis of such requests, the Bank shall withdraw from the Loan Account and deposit into the Special Account such amounts as Page 11 shall be required to replenish the Special Account with amounts not exceeding the amount of payments made out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. 4. For each payment made by the Borrower out of the Special Account for which the Borrower requests replenishment pursuant to paragraph 3 (b) of this Schedule, the Borrower shall furnish to the Bank, prior to or at the time of such request, such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expenditures. 5. (a) Notwithstanding the provisions of paragraph 3 of this Schedule, no further deposit into the Special Account shall be made by the Bank when either of the following situations first arises: (i) the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (ii) the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall be equal to the equivalent of twice the amount of the Authorized Allocation. (b) Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawal shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to paragraph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank, deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. No further deposit by the Bank into the Special Account shall be made until the Borrower has made such deposit or refund. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount for crediting to the Loan Account. Page 12