Conformed Copy - L3237 IN - Northern Region Transmission Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3237 IN Project Agreement (Northern Region Transmission Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED Dated October 3, 1990 LOAN NUMBER 3237 IN PROJECT AGREEMENT AGREEMENT, dated October 3, 1990, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED (NHPC). 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 four hundred eighty five million dollars ($485,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that NHPC 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 NHPC, part of the proceeds of the loan provided for under the Loan Agreement will be made available to NHPC on the terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS NHPC, 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 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. NHPC 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 Part A of 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. NHPC 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 and Part A of the Project. Section 2.04. NHPC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, NHPC 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) NHPC 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) NHPC 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 NHPC of its obligations under this Agreement and under the Subsidiary Loan Agreement ARTICLE III Management and Operations of NHPC Section 3.01. NHPC shall carry on 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. NHPC 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 Page 3 thereof, all in accordance with sound engineering, financial and public utility practices. Section 3.03. NHPC 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. NHPC shall take all steps necessary to maintain: (i) its accounts receivable on October 31, 1990 at a level not more than 11 months of its average monthly sales of power during the previous 12 months; and (ii) its accounts receivable at a level not more than 9 months of its average monthly sales of power in FY 1991, 8 months in FY 1992, 6 months in FY 1993, 4 months in FY 1994 and 3 months in FY 1995 and thereafter. ARTICLE IV Financial Covenants Section 4.01. (a) NHPC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) NHPC shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each financial 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 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. (a) NHPC shall take from time to time all such measures as may be necessary including, if necessary, adjustment of its tariffs to ensure that the total revenues in any financial year shall, after meeting: (i) all expenses properly chargeable to revenues, including operating, maintenance and management expenses; (ii) taxes on income and profits; and (iii) depreciation; produce such surplus before interest as is not less than 11.5% in FYs 91 and thereafter, of the average net fixed assets of NHPC in service at the beginning and at the end of such year. (b) For the purposes of this Section: (i) "total revenues" means revenues of NHPC from the sale of electricity and other services, miscellaneous income, and subventions in respect of extraordinary costs which are borne by NHPC and which are not passed on to customers of NHPC; (ii) "expenses" means the cost of power purchased, fuel, operating, maintenance, management and administrative expenses, and all taxes and duties accruing during the financial year, other than taxes on income and profits of NHPC; (iii) "taxes on income and profits" consists of income taxes Page 4 and other levies accrued by NHPC according to the provisions of any legislation or regulation applicable in this respect; (iv) "depreciation" means a provision derived in accordance with the straight-line method based on the useful life of assets as stipulated in the Borrower's notification G.S.R. No. 1330 (E) dated December 12, 1986, issued under the provisions of Section 68 of the Electricity (Supply) Act 1948, of the Borrower, as amended from time to time, based on the gross value of NHPC's fixed assets in service at the beginning of each year; and (v) "net fixed assets of NHPC in service" means the original cost of such fixed assets, as reduced by the aggregate of the cumulative depreciation in respect of such assets. Section 4.03. NHPC shall furnish to the Bank by December 31 each year a report of NHPC's forecast of operational and financial performance for the ensuing two financial years. Commencing December 31, 1991, such reports shall specify the actions that will be taken to ensure fulfillment of the requirements of Section 4.02 of this Agreement. Section 4.04. NHPC shall one year prior to the commissioning of the transmission line from Abdullapur to Naptha Jhakri establish commercial arrangements with NJPC, acceptable to the Bank, in respect of the power generated by NJPC. 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 NHPC thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify NHPC thereof. 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 radio gram 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 Page 5 Cable address: Telex: INTBAFRAD 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) For NHPC: National Hydroelectric Power Corporation Limited Hemkunt Tower 98-Nehru Place New Delhi 110019, India Cable address: Telex: HYDROCORP 031-65850 NHPC 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 NHPC may be taken or executed by the Chairman and Managing Director or such other person or persons as NHPC shall designate in writing, and NHPC 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 By /s/ Attila Karaosmanoglu Regional Vice President Asia NATIONAL HYDROELECTRIC POWER CORPORATION LIMITED By /s/ Prem Singh Authorized Representative SCHEDULE Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part D hereof, goods and erection of substations and transmission lines 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). Part B: Preference for Domestic Manufacturers Page 6 In the procurement of goods in accordance with the procedures described in Part A 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: Preference for Domestic Contractors In the procurement for the erection of substations and transmission lines in accordance with the procedures described in Part A hereof, domestic contractors 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 paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Switchyard structures, cables and fittings may be procured on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Bank. 2. Special tools and instruments up to an aggregate amount not exceeding the equivalent of $7,200,000 may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the guidelines and in accordance with procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof), or through direct contracting if for reasons for standardization, or because the tool or instrument is proprietary or for any other reason, is available from only one source, provided, however, that the list of items to be procured under the provisions of this paragraph shall have been approved by the Bank. 3. Civil works contracts may be procured on the basis of competitive bidding advertised locally in accordance with procedures satisfactory to the Bank. Part E: 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 for equipment and materials estimated to cost the equivalent of $1,000,000 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 pre- ceding 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, such procedures shall be modified to ensure that the two conformed copies of the 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. (c) The provisions of the preceding sub-paragraph (b) shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.02 (a) (ii) of the Loan Agreement. 2. The figure of 15% is hereby specified for purposes of para- graph 4 of Appendix 1 to the Guidelines. Page 7 Section II: Employment of Consultants 1. In order to assist NHPC and NREB in carrying out of the Project, NHPC and NREB 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. 2. The terms of reference for the consultants required for carrying out the detailed design and supervision of procurement and installation of the load dispatch and control system under Part B (ii) of the Project, including a short list of consultants, acceptable to the Bank, shall be furnished to the Bank not later than December 31, 1991, and contracts for employing the selected consultants shall be awarded not later than July 31, 1992.