India - Singrauli Thermal Power Plant : Credit 0685 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 685 IN PROJECT AGREEMENT (Singrauli Thermal Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL THERMAL POWER CORPORATION LIMITED Dated April 1, 1977 PROJECT AGREEMENT AGREEMENT, dated April 1, 1977, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and NATIONAL THERMAL POWER CORPORATION LIMITED (hereinafter called NTPC). WHEREAS by the Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred and fifty million dollars ($150,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NTPC agrees to undertake such obligations toward the Association as hereinafter set forth; WHEREAS the proceeds of the credit provided for under the Development Credit Agreement will be made available to NTPC under a subsidiary loan agreement to be entered into between the Borrower and NTPC in accordance with the provisions of Sec- tion 3.01 (b) of the Development Credit Agreement; and WHEREAS NTPC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. -3- ARTICLE II Execution of the Project Section 2.01. NTPC shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices. Section 2.02. In order to assist NTPC in the design of and preparation of specifications for the construction of the facili- ties forming Parts A and B of the Project, NTPC shall employ con- sultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. In order to assist NTPC in the design, prepara- tion of specifications and supervision of construction of the 400 kV transmission lines included in Part C of the Project, NTPC shall employ consultants whose qualifications, experience and con- ditions of employment shall be satisfactory to the Association. Section 2.04. Except as the Association shall otherwise agree, contracts for the purchase of goods to be financed out of the pro- ceeds of the Credit shall be procured in accordance with the pro- visions of the Schedule to this Agreement. Section 2.05. (a) NTPC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by NTPC to replace or repair such goods. (b) Except as the Association may otherwise agree, NTPC shall cause all goods financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) NTPC shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) NTPC shall: (i) maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) without limitation upon the provisions of para- graph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) furnish to the Association all such information as the Association shall reason- ably request concerning the Project, the expenditure of the pro- ceeds of the Credit so relent to it and the goods and services financed out of such proceeds. (c) NTPC shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of NTPC and any relevant records and documents. -5- Section 2.07. NTPC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, NTPC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.08. (a) NTPC shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters related to the purposes of the Credit. (b) NTPC shall promptly inform the Association of any condi- tion which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by NTPC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.09. NTPC shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project and shall fur- nish to the Association, promptly after such acquisition, evidence satisfactory to the Association that such land and rights in re- spect of land are available for purposes related to the Project. Section 2.10. Except as the Association shall otherwise agree, NTPC shall sell to SEBs the entire output of power from the three generating units to be constructed under the Project as delivered at agreed bulk supply points under bulk supply contracts satisfac- tory to the Association. -6- Section 2.11. NTPC shall take all measures necessary to ensure that the execution and operation of the Project are carried out with due regard to ecological and environmental factors and will comply with environmental quality standards prescribed by the Borrower's National Committee on Environmental Planning. -7- ARTICLE III Management and Operations of NTPC Section 3.01. NTPC shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial, administrative and engineering practices and under the supervision of experienced and competent management assisted by adequate and competent staff. Section 3.02. (a) NTPC shall at all times maintain its cor- porate existence and the right to carry on its operations and to acquire and retain ownership of all lands and maintain and renew all interests in land and other properties, and take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) NTPC shall at all times operate and maintain its plant, machinery, equipment and other property, and make all necessary repairs and renewals thereof, in accordance with sound engineering practice. (c) Except as the Association shall otherwise agree, NTPC shall not sell, lease, transfer or otherwise dispose of any of its property or assets required for the efficient operation of its business and undertaking. - 8 - (d) Except as the Association shall otherwise agree, NTPC shall not alter its corporate structure or amend its by-laws in any way that will materially and adversely affect its ability to perform its obligations under this Agreement. Section 3.03. NTPC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. - 9 - ARTIOLE IV Financial Covenants Section 4.01. NTPC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. NTPC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses, sources and application of funds statements and related statements) fcr each fiscal year audited, in accordance with appropriate audit- 4.ng principles consistently applied, by independent auditors accept- able to the Association; (ii) furnish to the Association 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) a certified copy of the auditors' report; and (iii) furnish to the Association such other information concerning the accounts and financial statements of NTPC and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) Except as shall be otherwise agreed between the Association and NTPC, NTPC shall set tariffs and conduct its operations and affairs in such manner as to achieve in the fiscal year beginning April 1, 1987 and maintain thereafter an annual rate of return of not less than nine and one-half per cent (9-1/2%). - 10 - (b) NTPC shall set its tariffs from the time of the commis- sioning of the first unit to be constructed under the Project until the fiscal year starting April 1, 1987 at levels not lower than those estimated to be required to achieve a 9-1/2% annual rate of return using the full planned capacity of the Singrauli Station. (c) For the purposes of paragraphs (a) and (b) of this Section, the annual rate of return for any financial year shall be calculated by expressing the operating income for the respective financial year as a percentage of the average of the capital base at the beginning and end of such financial year. For the purposes of the foregoing: (i) "operating income" means total operating revenues from the sale of electricity and from other services incidental thereto; less all administration, operating and maintenance expenses, adequate provision for depreciation, and taxes (including income taxes), but excluding interest and other charges on debt; and (ii) "capital base" means the sum of (A) the gross book value of fixed assets in operation, and (B) the cost of intangible assets, less the amount of accumulated accrued depreciation. For the purposes of (i) and (ii) above, "depreciation" shall be calculated using the straight-line method on the value of depre- ciable fixed assets in service. - 11 - Section 4.04. In the event that NTPC acquires any asset valued at Rs50 crores or more, NTPC shall promptly inform the Association. 12 - 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 Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of NTPC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty-five years after the date of this Agreement. (b) If the Development Credit Agreement terminates in ac- cordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify NTPC of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. - 13 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have des- ignated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For NTPC: National Thermal Power Corporation Limited 312, Kailash, 26 Kasturba Gandhi Marg New Delhi - 110001 India Cable address: THERMPOWER New Delhi - 14 Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of NTPC may be taken or executed by its Man- aging Director or such other person or persons as NTPC shall de- signate in writing. Section 6.03. NTPC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of NTPC, take any action or execute any documents required or permitted to be taken or executed by NTPC pursuant to any of the provisions of this Agree- ment. Section 6.04. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. - 15 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 DEVELOPMENT ASSOCIATION By /s/ Ernest Stern Regional Vice President South Asia NATIONAL THERMAL POWER CORPORATION LIMITED By /s/ Kewal Singh Authorized Representative - 16 - SCHEDULE Procurement A. International Competitive Bidding Contracts for the purchase of goods shall be procured in ac- cordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex- factory price for domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and sim- ilar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to NTPC of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in India may be granted a margin of pref- erence in accordance with, and subject to, the following provisions: - 17 - (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the infor- mation required to establish the eligibility of a bid for such preference and the following methods and stages that will be fol- lowed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satis- faction of NTPC and the Association that the manu- facturing cost of such goods includes a value added in India equal to at least 20% of the ex- factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in India. (3) Group C: bids offering any other goods. (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evalu- ated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. - 18 - (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods of- fered in each group C bid, for the purpose of this further con- parison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by the Association 1. With respect to all contracts for goods estimated to cost the equivalent of $500,000 or more: (a) Before bids are invited, NTPC shall furnish to the Asso- ciation, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. - 19 - (b) After bids have been received and evaluated, NTPC shall, before a final decision on the award is made, inform the Associa- tion of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report, on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform NTPC and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for with- drawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract to be financed out of the pro- ceeds of the Credit and not governed by the preceding paragraph, NTPC shall furnish to the Association, promptly after its execu- tion and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall rea- sonably request. The Association shall, if it determines that the - 20 - award of the contract was not consistent with the Guidelines or this Schedule, promptly inform NTPC and state the reasons for such determination.