Conformed Copy - L3164 - Energy Sector Project - PNOC Loan Agreement

Page 1 LOAN NUMBER 3164 PH PNOC Loan Agreement (Energy Sector Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and PHILIPPINE NATIONAL OIL COMPANY Dated March 16, 1990 LOAN NUMBER 3164 PH PNOC LOAN AGREEMENT AGREEMENT, dated March 16, 1990 between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and PHILIPPINE NATIONAL OIL COMPANY (the Borrower). WHEREAS (A) Republic of the Philippines (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of Part A of the Project; (B) "Part A" of the Project will be carried out by the Borrower, PNOC Energy Development Corporation (PNOC-EDC) and PETRON Corporation (PETRON), subsidiaries of Philippine National Oil Company (PNOC), with the Borrower's assistance and, as part of such assistance, the Borrower will make available to PNOC-EDC and PETRON part of the proceeds of the Loan as provided in this Agreement; (C) "Part B" of the Project will be carried out by National Power Corporation (NPC), and, the Bank has agreed to make a loan (the NPC Loan) under a Loan Agreement of even date herewith between the Bank and NPC (the NPC Loan Agreement) under the terms and conditions therein set forth; (D) "Part C" of the Project will be carried out by the Republic of the Philippines (the Guarantor), and, the Bank has agreed to make a loan under a Loan Agreement of even date herewith between the Guarantor and the Bank (the Loan Agreement) under the terms and conditions Page 2 therein set forth; (E) NPC intends to contract from the Export-Import Bank of Japan (EXIMBANK) a loan (the EXIMBANK Loan) in an amount equivalent to $150,000,000 to assist in financing of Part B of the Project on the terms and conditions set forth in an agreement (the EXIMBANK Loan Agreement) to be entered into between NPC and EXIMBANK; (F) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee 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 Agreement; 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 and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (b) "Project Agreement" means the agreement between the Bank, PNOC-EDC and PETRON 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) "Subsidiary Loan Agreements" mean the agreements to be entered into between the Borrower and PNOC-EDC, and the Borrower and PETRON pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the respective Subsidiary Loan Agreements; (d) "NPC" means the National Power Corporation, a state owned company duly established and operating under the laws of the Republic of the Philippines; (e) "PNOC" means the Philippine National Oil Company, a state-owned company duly established and operating under the laws of the Republic of the Philippines; (f) "PNOC-EDC" means PNOC Energy Development Corporation, a subsidiary of PNOC; and Page 3 (g) "PETRON" means PETRON Corporation, a subsidiary of PNOC. ARTICLE II The Loan 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, various currencies that shall have an aggregate value equivalent to the amount of one hundred fifty million dollars ($150,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the 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 Part A of 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 Part A of the Project, open and maintain in dollars a special account in a commercial bank 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, 1994 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor 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 for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six - month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Page 4 Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) 'Quarter' means a three- month period commencing on January 1, April 1, July 1 or October 1 in a calendar year." (e) Notwithstanding the provisions of paragraph (a) of this Section, the interest rate for the Interest Period commencing in the first Semester of 1989 shall be seven and sixty-five hundredths percent (7.65%). Section 2.06. Interest and other charges shall be payable semiannually on April 15 and October 15 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 Part A 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 carry Page 5 out Part A ( 3 ) of the Project, and shall cause PNOC - EDC and PETRON to carry out Part A (1) and (2), respectively, to perform in accordance with the provisions of the Project Agreement all the obligations of PNOC-EDC and PETRON therein set forth, shall take or cause be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable PNOC-EDC and PETRON to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend $147,000,000 out of the proceeds of the Loan to PNOC-EDC and PETRON under two separate subsidiary loan agreements to be entered into between the Borrower and PNOC-EDC, and the Borrower and PETRON, respectively, under terms and conditions which shall have been approved by the Bank. (c) The Borrower shall exercise its rights under the respective Subsidiary Loan Agreements in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive any of Subsidiary Loan Agreements or any provision thereof. Section 3.02. Except as the Bank shall otherwise agree, procurement of goods, works and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Bank and the Borrower hereby agree that the obligations set forth in Section 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 to Part A (1) and (2) of the Project shall be carried out by PNOC-EDC and PETRON, respectively, pursuant to Section 2.03 of the Project Agreement. ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and industry practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 4.02. The Borrower shall at all times operate and maintain its plants, 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 industry practices. Section 4.03. The Borrower 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. Page 6 Section 4.04. The Borrower shall, by November 15 of each year, prepare its investment plan, for geothermal and refinery debottlenecking activities, for the forthcoming year and for the following four years and furnish such plan to the Bank for its review and comment. Section 4.05. The Borrower shall, by June 30, 1990, prepare and thereafter implement a training program for its staff in engineering, operations, maintenance and management and furnish the results to the Bank for review and comment. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) The Borrower shall: (i) have its records, corporate and consolidated accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the records and accounts for the Special Account 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 six 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. (c) 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, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, 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, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; Page 7 (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains 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. Section 5.02. The Borrower shall take all measures required on its part to increase PNOC-EDC's and PETRON's share capital, inter-company loans and other means for raising funds to enable PNOC-EDC and PETRON to carry out their obligations pursuant to Section 4.02, 4.03 and 4.04 of the Project Agreement. Section 5.03. The Borrower shall, or shall cause PNOC-EDC to, take all action which may be required on its part to ensure the timely conclusion of a soundly based agreement between PNOC-EDC and NPC for the supply of steam needed for the Project. ARTICLE VI Remedies of the Bank Section 6.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) PNOC-EDC shall have failed to perform any of its obligations under the Project Agreement. (b) PETRON shall have failed to perform any of its obligations under the Project Agreement. (c) 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 PNOC-EDC or PETRON will be able to perform their obligations under the Project Agreement. (d) Presidential Decree No. 334 as amended shall have been amended, suspended, abrogated, repealed or waived, so as to affect materially and adversely the ability of PNOC-EDC to perform any of its obligations under the Project Agreement. (e) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution and disestablishment of PNOC-EDC or PETRON or for the suspension of either of their operations. Section 6.02. Pursuant to Section 7.01 (h) of the General conditions, the following additional events are specified: (a) the event specified in paragraphs (a) and (b) of Section 6.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and Page 8 (b) any of the events specified in paragraphs (d) or (e) of Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the respective Subsidiary Loan Agreements have been executed on behalf of the Borrower and PNOC-EDC, and the Borrower and PETRON, respectively; (b) all conditions precedent to the effectiveness of the Loan Agreement between the Bank and the Republic of the Philippines of even date herewith (other than those related to the effectiveness of this Agreement) have been fulfilled; and (c) all conditions precedent to the effectiveness of the NPC Loan Agreement between the Bank and NPC of even date herewith (other than those related to the effectiveness of this Agreement) have been fulfilled. Section 7.02. 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 Project Agreement has been duly authorized or ratified by PNOC-EDC and PETRON, and is legally binding upon PNOC-EDC and PETRON in accordance with its terms; and (b) that the Subsidiary Loan Agreements have been duly authorized or ratified by the Borrower and PNOC-EDC, and the Borrower and PETRON, and are legally binding upon the Borrower and PNOC-EDC, and the Borrower and PETRON in accordance with their terms. Section 7.03. The date (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Representative of the Borrower; Addresses Section 8.01. The President of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Page 9 Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Philippine National Oil Company 7901 Makati Avenue Makati, Metro Manila Philippines Cable address: Telex: PNOC 22259 Makati Manila, Philippines 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/ Shinji Asanuma Acting Regional Vice President Asia PHILIPPINE NATIONAL OIL COMPANY By /s/ Emmanuel Pelaez Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the PNOC Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation 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 PNOC Loan Allocated % of (Expressed in Expenditures Category ollar Equivalent) to be Financed (1) Equipment and 128,000,000 100% of foreign materials, expenditures, including 100% of local installation expenditures (ex-factory Page 10 cost) and 70% of local ex- penditures for other items pro- cured locally (2) Technical 7,000,000 100% assistance and training (3) Unallocated 15,000,000 TOTAL 150,000,000 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 Guarantor for goods or services supplied from the territory of any country other than that of the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor or for goods or services supplied from the territory of the Guarantor. 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, except that withdrawals, in an aggregate amount not exceeding the equivalent of $8,000,000, may be made on account of payments made for expenditures before that date but after April 30, 1989. SCHEDULE 2 Description of the Project The objective of the Project is to orient the development strategy for the Philippines energy sector aimed at minimizing the cost of energy supply. The components of this strategy are: (a) a least-cost investment program which has been agreed upon by all participating agencies; (b) development of a sector-wide capability to plan and coordinate policy and project implementation in the energy sector; (c) encouraging private sector participation through joint-ventures, build-operate-and-transfer schemes, and other approaches; (d) consolidation of regulatory activities into an integrated system for monitoring the quality of service and consumer prices of petroleum, coal and electricity; (e) implementation of long-run marginal cost pricing for electricity; (f) development of technical capabilities to assess, manage and monitor the environmental impact of energy projects; and (g) implementation of measures to improve operational efficiency of the power sector by reducing electricity losses and rehabilitating aging plants. The Project consists of the following parts, subject to such modifications thereof as the Bank and the Borrowers may agree upon from time to time, to achieve such objective: Part A: PNOC, PNOC-EDC and PETRON Page 11 ( 1 ) Geothermal investments program which includes : completion of delineation drilling on prospective sites in Luzon and the Visayas; engineering, procurement, fabrication, installation and commissioning of steam gathering system at various sites for about 380 MW; drilling of additional production and reinjection wells; and technical assistance for geothermal reservoir assessment and engineering. (2) Debottlenecking of refinery processing capability which includes, inter alia, upgrading of facilities producing liquefied petroleum gas (LPG), including a new LPG Merox unit, an additional Thermal Catalytic Cracker gas compressor and debottlenecking of fractionating absorber; and an additional diesel desulfurizer, including a new gas oil hydrofiner and additional rundown coolers. (3) Institutional development of PNOC by strengthening its capabilities in system planning, project monitoring and management. Part B: NPC (1) Expansion of power generation capacity, including the completion and construction of: (i) 300 MW coal-fired Calaca 11 unit; (ii) 700 MW of combustion turbine (open cycle) capacity in Luzon, 115 MW in Visayas and 150 MW in Mindanao; (iii) 110 MW geothermal unit at Bacon Manito; (iv) modular geothermal units of twelve 20 MW capacity in Luzon and four 20 MW in Visayas. (2) Rehabilitation of generation plants including four generating units at the Sucat thermal power station and diesel power plants in the islands of Mindanao, Cebu, Negros, Panay and Bohol. (3) Expansion and rehabilitation of transmission system including: (i) 500 kV, 82 km, San Jose-Kalayaan line; (ii) about 430 km of 230 kV lines; (iii) about 1,500 km of 115-138 kV lines; (iv) about 1,800 km of 69 kV lines; and (v) associated substations of about 4000 MVA of transformer capacity and ancillary equipment. (4) Institutional development of NPC by strengthening its training program for the efficient operation and maintenance of the diverse types of power stations . Part C: The Republic of the Philippines (1) National Electrification Administration (NEA) and Rural Electrification Cooperatives (REC's): (i) improving NEA's institutional capabilities through the provision of computers, professional and office equipment, communication equipment, vehicles and warehouse equipment; (ii) improving NEA's functional capacity through the establishment and provision of operational and maintenance equipment for its Regional field operation offices and zonal repair and maintenance facilities; (iii) upgrading and rehabilitation of Page 12 distribution system at about 11 RECs; (iv) installing additional substations at about 8 RECs; and (v) training and technical assistance for NEA and RECs staff. (2) Office of Energy Affairs (OEA): (a) The carrying out of the following studies and training for OEA staff: (i) cost structures and transfer pricing in the petroleum industry; (ii) the non-power application of geothermal power plant effluents, hot water, etc.; (iii) the environmental impacts of accelerated geothermal energy development; (iv) development of a fuel contingency plan for a possible oil supply disruption; and (v) the feasibility of large-scale development of non-conventional energy resources. (b) Institutional strengthening of OEA through provision of technical assistance, training, equipment, building expansion and supplies. (3) Energy Regulatory Board (ERB): The strengthening of ERB's monitoring and analysis capabilities through the implementation of a six-part program of institutional development which will include: (i) staff training; (ii) improvement of management information system and organizational structure; (iii) training in LRMC pricing methodology; (iv) petroleum product testing; (v) meter testing; and (vi) ERB's information system. (4) Environmental Management Bureau (EMB) (i) Strengthening of EMB's operational capabilities; (ii) establishment of baseline sampling stations; (iii) strengthening of regional offices; and (iv) technical assistance. * * * The Project is expected to be completed by December 31, 1993. SCHEDULE 3 Amortization Schedule Page 13 Payment of Principal Date Payment Due (expressed in dollars)* October 15, 1995 2,735,000 April 15, 1996 2,840,000 October 15, 1996 2,950,000 April 15, 1997 3,065,000 October 15, 1997 3,180,000 April 15, 1998 3,305,000 October 15, 1998 3,430,000 April 15, 1999 3,565,000 October 15, 1999 3,705,000 April 15, 2000 3,845,000 October 15, 2000 3,995,000 April 15, 2001 4,150,000 October 15, 2001 4,310,000 April 15, 2002 4,475,000 October 15, 2002 4,650,000 April 15, 2003 4,830,000 October 15, 2003 5,020,000 April 15, 2004 5,210,000 October 15, 2004 5,415,000 April 15, 2005 5,625,000 October 15, 2005 5,840,000 April 15, 2006 6,065,000 October 15, 2006 6,300,000 April 15, 2007 6,545,000 October 15, 2007 6,800,000 April 15, 2008 7,060,000 October 15, 2008 7,335,000 April 15, 2009 7,620,000 October 15, 2009 7,915,000 April 15, 2010 8,220,000 __________________________ * 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 Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (ex- pressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.15 before maturity More than three years but 0.30 not more than six years before maturity More than six years but 0.55 Page 14 not more than 11 years before maturity More than 11 years but 0.80 not more than 16 years before maturity More than 16 years but 0.90 not 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 Categories 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 Part (A) of 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 $10,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. 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 shall be made as follows : (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, 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) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in Page 15 respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid 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 said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, 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 (b) once the total unwithdrawn amount of the Loan allocated to the eligible Categories for Part A of the Project, less the amount of any outstanding special commitment entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to Part A of the Project, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories for Part A of the Project shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals 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 an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) 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. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be . Page 16 (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. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.