Conformed Copy - L3577 - Powergrid System Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3577 IN Loan Agreement (Powergrid System Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and POWER GRID CORPORATION OF INDIA LIMITED Dated March 23, 1993 LOAN NUMBER 3577 IN LOAN AGREEMENT AGREEMENT, dated March 23, 1993, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and POWER GRID CORPORATION OF INDIA LIMITED (the Borrower). WHEREAS: (A) India, acting by its President (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 the Project; (B) 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: Page 2 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 modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) the last sentence of Section 3.02 is deleted; and (b) in Section 6.02, sub-paragraph (k) is re-lettered as sub-paragraph (l) and a new sub-paragraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be incon- sistent with the provisions of Article III, Section 3 of the Bank's Articles of 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) "Eastern Region" means the Eastern Region of India, comprising the States of Bihar, Orissa, Sikkim and West Bengal; (b) "Western Region" means the Western Region of India, comprising the States of GOA, Gujarat, Madhya Pradesh and Maharashtra, and Union Territories of Dadra and Nagar Haveli and Daman and Diu; (c) "Southern Region" means the Southern Region of India, comprising the States of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu, and the Union Territory of Pondicherry; (d) "North-Eastern Region" means the North-Eastern Region of India, comprising the States of Arunchal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura; (e) "SEB" means a State Electricity Board; (f) "RLDC" means a Regional Load Dispatch Center; (g) "Existing Liens" means the liens referred to in Schedule 6 to this Agreement; (h) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; and (i) "Rs." means Rupees in the currency of the Guarantor. 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 three hundred fifty million dollars ($350,000,000), 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 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 deposit account in the State Page 3 Bank of India on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 2000 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 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 Page 4 commencing on January 1, April 1, July 1 or October 1 in 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. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. 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 Schedule 4 to this Agreement. Section 3.03. The Borrower shall, not later than December 31, 1994, and June 30, 1994, review with the Guarantor and the Bank the findings and recommendations of the Technical Assistance under Part C (i) and C (iii), respectively, of the Project, and shall thereafter implement the agreed recommendations in accordance with time-bound action plans satisfactory to the Guarantor and the Bank. Section 3.04. The Borrower shall, not later than December 31, 1996, in consultation with the Bank and the Guarantor, carry out a mid-term review of the Project, including an assessment of the Borrower's overall performance. Section 3.05. The Borrower shall, not later than December 31, 1994, enter into commercial contracts on transmission services with the SEBs. 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 and engineering 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 and financial 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. 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. Page 5 (b) The Borrower shall: (i) have its records, accounts and financial state- ments (balance sheets, statements of income and expenses and related statements) and the records and accounts for the Special Account for each financial year audited, in accordance with appro- priate 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 con- cerning 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 financial year in which the last withdrawal from the Loan Account or payment out of the Special Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are includ- ed 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 audi- tors as to whether the statements of expenditure submitted during such financial year, together with the procedures and internal controls in- volved in their preparation, can be relied upon to support the related withdrawals. Section 5.02. The Borrower shall furnish to the Bank, for the Bank's review and comments, not later than December 31 of each year, starting December 31, 1993, its financial projections, including its investment program and financing plan. Section 5.03. The Borrower shall take all steps necessary to maintain its accounts receivable at a level not exceeding an amount equivalent to the proceeds of its transmission services for the two preceding months. Section 5.04. Except as the Bank shall otherwise agree, the Borrower shall take all such measures (including, without limitation, adjustments of the structure and levels of its tariffs) as shall be required to produce, starting with the fiscal year beginning April 1, 1993, funds from internal cash generation equivalent to not less than twenty percent (20%) of the annual average of the Borrower's capital expenditures incurred or expected to be incurred during the previous, current and following fiscal year. Page 6 (a) For the purposes of this paragraph: (i) the term "funds from internal sources" means the difference between: (A) the sum of gross revenues from all sources related to the Borrower's operations, contributions in aid of construction, net non-operating income and any reduction in non-cash working capital; and (B) the sum of all expenses of the Borrower's operations, including maintenance and administration (excluding depreciation and other non-cash operating charges), interest and other charges on debt (excluding interest financed under a loan contract), repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, all cash dividends and other cash distributions of surplus, increase in non-cash working capital and any other cash outflows other than cash expenditures related to the operations of the Borrower; (ii) the term "capital expenditures" means all expenditures incurred on account of fixed or capital assets, including interest charged to construction, related to the operations of the Borrower; (iii) "gross revenue" means the revenue earned and received for the services provided by the Borrower; (iv) "expenses" means the sum of all operating expenses, taxes on income and profits, depreciation and interest charged on all debentures, bonds and loans; (v) "operating expenses" means the cost of operation and maintenance, service management and administrative expenses, and all taxes accruing during the financial year, other than taxes on income and profits of the Borrower; (vi) "taxes on income and profits" consists of income taxes and other levies accrued by the Borrower according to the provisions of any legislation or regulation applicable in this respect; (vii) "depreciation" means the applicable provision derived pursuant to the requirements stipulated in the Electricity (Supply) Act 1948, as amended from time to time; (viii) "interest charged on all debentures, bonds and loans" means all interest, excluding interest during construction, accrued by the Borrower during the financial year and all other charges on debt. Section 5.05. (a) Except as the Bank shall otherwise agree, the Borrower shall not incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 4 to 1. (b) For purposes of this Section: (i) The term "debt" means any indebtedness of the Borrower maturing by its terms more than one year after the date on which it is originally incurred. Page 7 (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding. (iii) The term "equity" means the sum of the total unimpaired paid-up capital, retained earnings and reserves of the Borrower not allocated to cover specific liabilities. (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. Section 5.06. (a) The Borrower shall, subject to the provisions of paragraph (b) of this Section and to the priorities existing on charges created to the date of this Agreement, create in favor of the Bank no later than September 30, 1993, an equitable mortgage/charge in such form as the Bank may reasonably require to constitute by way of security for the Loan: (i) a first specific charge upon all of its immovable assets together with all rights and interests appertaining to or necessary for said assets to which the Borrower is now or may hereafter become beneficially entitled, such mortgage to rank in point of security equally and ratably with mortgages/charges upon the said assets in respect of Existing Liens but prior to any other lien upon the assets of the Borrower, now existing or hereafter created; and (ii) a first specific charge upon all movable assets of the Borrower, now existing or subsequently added thereto, together with all rights and interests appertaining to or necessary for said assets to which the Borrower is now or may hereafter become beneficially entitled such charge to rank in point of security equally and ratably with the Existing Liens upon the said assets but prior to any other liens upon such assets, now existing or hereafter created. (b) Pursuant to the provisions of Section 9.03 (b) of the General Conditions, it is agreed that the Borrower may: (i) (A) create liens, ranking in point of security equally and ratably the first specific charge referred to in sub-section (a) (i) of this Section, upon all the assets mentioned in said sub-section together with all rights and interests appertaining to or necessary for said assets to which the Borrower is now or may hereafter become beneficially entitled; and (B) create liens, ranking in point of security Page 8 equally and ratably with the first specific/floating charge referred to in sub-section (a) (ii) of this Section, upon all or any assets of the Borrower referred to in said sub-section; for securing debts or borrowings up to an aggregate under sub-paragraphs (A) and (B) of this paragraph, of Rs. 60 billion or such other amount acceptable to the Bank for the purposes of financing or refinancing capital investments including the investments required for the Project; and (ii) create liens, including hypothecations, ranking in priority to the security provided for in paragraph (a) of this Section on current assets (stores, spare parts and fuel, including coal) securing debts or borrowings maturing not more than one year (at a time) from their respective dates and incurred to bankers in the ordinary course of business, in an amount not exceeding in the aggregate at any one time Rs. 2 billion or such other amount acceptable to the Bank. (c) The Borrower undertakes that no subsidiary (if any) of the Borrower shall at any time without the consent of the Bank create any lien on its undertakings or assets (including uncalled capital) or any part thereof otherwise than in favor of the Borrower and that all liens created by any subsidiary of the Borrower in favor of the Borrower shall be retained by the Borrower and shall not be sold, transferred or otherwise disposed of by it and that it will not sell, transfer or otherwise dispose of any shares for the time being held by it in any subsidiary. (d) The Borrower shall: (i) take all necessary steps and shall require all other necessary parties to take all necessary steps to ensure that all liens, including the Existing Liens, outstanding upon the assets and all liens upon such assets to be created under this Section 5.06 shall be discharged or be varied to the reasonable satisfaction of the Bank so as to ensure that full effect may be given to the foregoing provisions of this Section; and (ii) obtain all necessary consents for the valid creation of aforesaid security and shall duly register or file, or cause to be duly registered or filed, as necessary, such security in accordance with the Companies Act, 1956 of the Guarantor together with such other documents as may be necessary or proper in order to render the same fully effective in accordance with its terms. (e) The Borrower shall secure all necessary permissions from the Guarantor to enable it to carry out its obligations under this Section. (f) Notwithstanding the foregoing provisions of this Section, the Borrower shall, if required by the Bank, convert the equitable mortgage to be created in accordance with paragraph (a) of this Section, into a legal mortgage in English form by way of a Trust Deed in favor of such trustees and in such form as the Bank may reasonably require to constitute by way of security for the Loan substantially in accordance with the foregoing provisions of this Section 5.06. To this end, the Borrower shall execute in favor of the Bank an irrevocable power of attorney authorizing the Bank, inter alia, to execute on behalf of the Borrower a legal mortgage in English form as aforesaid. Page 9 ARTICLE VI Remedies of the Bank Section 6.01. Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified: (a) a change shall have been made in the Memorandum and Articles of Association of the Borrower amended to the date of this Agreement, without the consent of the Bank, which would materially and adversely affect the financial condition or operations of the Borrower, or its ability to perform any of its obligations under this Agreement; and (b) a subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such creation, acquisition or taking over would materially and adversely affect the conduct of its business or its financial condition or the efficiency of its management and personnel or the carrying out of the Project. Section 6.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional event is specified, namely, that any event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Termination Section 7.01. 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 VIII Representative of the Borrower; Addresses Section 8.01. The Chairman 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 Cable address: Telex: INTBAFRAD 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For the Borrower: Power Grid Corporation of India Limited Hemkunt Chambers (10th Floor) 89 Nehru Place, New Delhi 110019 India Cable address: Telex: NATGRID 66138 New Delhi 65949 Page 10 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/ D. Joseph Wood Regional Vice President South Asia POWER GRID CORPORATION OF INDIA LIMITED By /s/ N. Valluri Authorized Representative 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 allocation of the amounts of the Loan to each Category and the percentage of expendi- tures 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) Equipment and 280,000,000 100% of foreign materials expenditures, 100% of local expendi- tures (ex-factory cost) and 80% of local expenditures for other items procured locally (2) Erection and 25,000,000 70% installation, including civil works (3) Consultants' 15,000,000 100% services and training (4) Unallocated 30,000,000 ___________ TOTAL 350,000,000 =========== 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 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 and services supplied from the Page 11 territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $35,000,000 may be made on account of payments made for expenditures before that date but after March 31, 1992. SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) assist India in restructuring the power transmission sub-sector, improving coordination in system operations and promoting inter-regional and inter-state power trading through regulatory, tariff and institutional reforms; (ii) support the Borrower's institutional development and help introduce satisfactory financial performance targets and commercial arrangements; and (iii) assist the Borrower in the development of modern system coordination and control facilities and reinforcement of its transmission system. 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: System Coordination and Control (i) The implementation of a coordination and control system for the Southern Region, consisting of a regional load dispatch center in Bangalore, State of Karnataka, four SEB load dispatch centers, about fourteen area control centers and about 300 associated remote terminal units in the States of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu and the Union Territory of Pondicherry; together with related communication facilities. (ii) The preparation of coordination and control system projects for each of the Eastern, Western and North-Eastern Regions, consisting of regional load dispatch centers, SEB load dispatch centers, area control centers and associated remote terminal units. Part B: Transmission System Reinforcement (i) The construction of Vindhyachal-Dhule transmission lines to evacuate the full output of the Vindhyachal power station and to strengthen the Western Region grid; (ii) The construction of Ramagundam-Hyderabad transmission line to help utilize the interconnection between the Western and Southern regions and to strengthen the Southern Region grid; (iii) The completion of transmission lines and substations under the on-going Central Power Transmission Project financed by the Bank under Loan No. 2283-IN and the Rihand Power Transmission Project financed by the Bank under Loan No. 2555-IN; (iv) The provision of modern interactive transmission system planning software and related hardware; training in the use of these facilities; preparation of a long-term transmission plan; carrying out of pre-feasibility studies and preparation for implementation of selected emerging major transmission system improvement projects; and (v) The installation of tariff meters. Part C: Technical Assistance The provision of consultants' services to assist in the implementation of a reform program for power transmission and system operations including: Page 12 (i) the Borrower's institutional development and refinement of its development plans; (ii) utility cooperation arrangements with a well established grid company, on coordination of system operations, operations of a power pool settlement system and transmission system operations; and (iii) studies on (a) bulk power tariffs (b) transmission tariffs and (c) transmission regulation. * * * The Project is expected to be completed by December 31, 1999. SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* December 1, 1998 6,545,000.00 June 1, 1999 6,785,000.00 December 1, 1999 7,040,000.00 June 1, 2000 7,300,000.00 December 1, 2000 7,570,000.00 June 1, 2001 7,855,000.00 December 1, 2001 8,145,000.00 June 1, 2002 8,445,000.00 December 1, 2002 8,760,000.00 June 1, 2003 9,085,000.00 December 1, 2003 9,425,000.00 June 1, 2004 9,775,000.00 December 1, 2004 10,135,000.00 June 1, 2005 10,515,000.00 December 1, 2005 10,905,000.00 June 1, 2006 11,310,000.00 December 1, 2006 11,730,000.00 June 1, 2007 12,165,000.00 December 1, 2007 12,615,000.00 June 1, 2008 13,085,000.00 December 1, 2008 13,570,000.00 June 1, 2009 14,075,000.00 December 1, 2009 14,600,000.00 June 1, 2010 15,140,000.00 December 1, 2010 15,705,000.00 June 1, 2011 16,285,000.00 December 1, 2011 16,890,000.00 June 1, 2012 17,520,000.00 December 1, 2012 18,170,000.00 June 1, 2013 18,855,000.00 _____________________________ * 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 (expressed as a percentage per annum) applicable to the Loan on Page 13 the day of prepayment multi- plied 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 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 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding Goods and works 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 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: Review by the Bank of Procurement Decisions 1. (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, 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 5 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Loan Account are to be made on the basis of statements of expenditure. Page 14 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants 1. In order to assist in carrying out of Parts A, B (iv) and C (i) and (ii) of the Project, the Borrower 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 (the Consultant Guidelines). 2. Notwithstanding the provisions of paragraph 1 of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budgets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts shall not apply to contracts estimated to cost less than $100,000 equivalent each. However, this exception to prior Bank review shall not apply to the terms of reference for such contracts nor to the employment of individuals, to single source selection of firms, to assignments of a critical nature as reasonably determined by the Bank and to amendments of contracts raising the contract value to $100,000 equivalent or above. SCHEDULE 5 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2) and (3) 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 $25,000,000 to be withdrawn from the Loan Account and deposited in 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, theBorrower 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 inter- vals as the Bank shall specify. Page 15 (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 para- graph 4 of this Schedule for the payment or payments in 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 Spe- cial 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, 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 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 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; or (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. (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. Page 16 (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. SCHEDULE 6 Existing Liens Amount of Debt Scheduled Date Item (Rs. in Crores) of Final Payment 1. Life Insurance Corporation 21.66 July 2006 of India Loans 2. Powergrid Bonds 200.00 March 2002 3. Neyveli Lignite Corporation 160.00 December 1996 Bonds 4. National Hydro Power 185.00 March 2002 Corporation of India Bonds