India - Second Singrauli Thermal Power Project : Credit 1027 - Project Agreement - Conformed

UI CREDIT NUMBER 1027 IN Project Agreement (Second Singrauli Thermal Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL THERMAL POWER CORPORATION LIMITED Dated ,1980 CREDIT NUMBER 1027 IN PROJECT AGREEMENT AGREEMENT, dated , 1980, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and NATIONAL THERMAL POWER CORPORATION LIMITED (hereinafter called NTPC), a company registered under the Indian Companies Act, 1956, as amended. 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 three hundred million dollars ($300,000,000), 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 are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and NTPC, the proceeds of the credit provided for under the Development Credit Agreement will be made available to NTPC on the terms and conditions therein set forth; 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: 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. 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 utilkty practices. - 2 - Section 2.02. NTPC shall employ consultants whose qualifica- tions, experience and terms and conditions of employment shall be mutually agreeable to the Association and NTPC to assist NTPC in: (i) detailed design and preparation of specifications for the 500 MW generating units under the Project; and (ii) the review of NTPC's project management and information system and the implementation thereof, such consultants for such review to be employed not later than October 15, 1980. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (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 and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.05. (a) NTPC shall furnish to the Association, promptly upon their preparation, the plans, specifications, reports, contract documents and work 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: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and impact), to identify the goods and services financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the impact, the expenditures of such proceeds and the goods and services financed out of such proceeds. - 3 - (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between NTPC and the Association, NTPC shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and impact, the performance by NTPC and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit. (d) 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. Section 2.06. 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 2.07. (a) NTPC shall, at the request of the Associa- tion, 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 relating to the purposes of the Credit. (b) ITPC shall promptly inform the Association of any condition 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 2.08. 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 upon request furnish to the Association, promptly after such acquisition, evidence satisfactory to the Association that such land and rights in respect of land are available for purposes related to the Project. Section 2.09. NTPC shall take all measures necessary to ensure that the execution and operations of the Project are carried out with due regard to appropriate ecological and environ- mental factors in accordance with the environmental quality standards prescribed by the Borrower's National Committee on Environmental Planning and Coordination. Section 2.10. Except as the Association may otherwise agree, NTPC shall sell to the State Electricity Boards and Delhi Electri- city Supply Undertaking the entire output of power from the generating units to be installed under the Project as delivered at agreed bulk supply points under bulk supply contracts mutually agreeable to the Association and NTPC. ARTICLE III Management an( )erations of NTPC Section 3.01. NTPC shall take out and maintain with res- ponsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. 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 3.03. (a) NTPC shall at all times maintain its corporate 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 plants, machinery, equipment and other property, and make all necessary repairs and renewals thereof, in accordance with sound engineering practices. (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. Section 3.04. NTPC shall inform the Association of any proposal to modity existing limitations on the powers of NTPC's Board of Directors to borrow funds before placing such a proposal on the agenda for consideration by NTPC in a general meeting. ARTICLE 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 and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable 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 i!s financial statements for such year as so audited, and (B) certified c>pies of the auditors' reports; and (iii) furnish to the Assoc-ation 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. Secti.)n 4.03. Except as shall be otherwise agreed between the Association and NTPC: (a) NTPC shall set tariffs and conduct its operations and affairs in such manner as to achieve in the fiscal year beginning April 1, 1988 and maintain thereafter an annual rate of return of not less than nine and one-half per cent (9-1/2%); (b) NTPC shall set its tariffs from the time of the commis- sioning of its first 200 MW generating unit and until the fiscal year starting April 1, 1988 at levels not lower than those esti- mated to be required to achieve a 9-1/2% annual rate of return in the fiscal year beginning April 1, 1988; and (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 particular 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: -6- (i) "operating income" means total operating revenues from the sale of electricity and from other services incidental thereto; less all adminis- tration, operating and maintenance expenses, adequate provision for depreciation, and taxes (including income taxes); and 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 tte straight-line method on the value of depreciable fixed assets in service. 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 accordance 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. Ail the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. -7- 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 herein- after specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the 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 NTPC Square 62-63 Nehru Place New Delhi, 110019 India Cable address: THERMPOWER New Delhi Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of NTPC may be taken or executed by its Managing Director or such other person or persons as NTPC shall designate in writing, and NTPC shall furnish to the Association sufficient evidence of the authority and the authenticated speci- men signature of each such person. - 8 - Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all col- lectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 DEVELOPMENT ASSOCIATION By Regional Vice President South Asia NATIONAL THERMAL POWER CORPORATION LIMITED By Authorized Representative -9- SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of interna- tional competitive bidding as described in Part A of the Guide- lines. 2. For goods to be procured on the basis of international competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, NTPC shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such. information as the Association shall reasonably request; the Association will arrange for the publica- tion of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. NTPC shall provide the necessary information to update such notice annually so lon& as any goods remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on imported goods and sales and similar 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. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in - 10 - India may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. 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 satisfaction of NTPC and the Association that the manufacturing 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 domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eval- uated 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. 4. If, as a result of the comparison under paragraph 3 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 evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison 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 3 is the lowest evaluated bid shall be selected. - 11 - C. Other Procurement Procedures Contracts for the supply of two 200 MW turbo-generator sets and boilers and other equipment and materials related thereto under the Project may be placed by exercising the option to purchase from previous suppliers of similar equipment being financed under the Development Credit Agreement (Singrauli Thermal Power Project) dated April 1, 1977 between the Borrower and the Association, provided that the terms and conditions of such purchase shall be satisfactory to the Association. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equi- valent of $1,500,000 or more: (a) Before bids are invited, NTPC shall furnish to the Association, for its comments, the text of the invitations to bid and the specifica tions and other bidding documents, together with a description o,. 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. (b) After bids have been received and evaluated, NTPC shall, before a final decision on the award is made, inform the Association 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 eva- luation 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, without 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 - 12 - the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, NTPC shall furnish to the Association, promptly after its execution 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 and such other information as the Association shall reasonably re- quest. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform NTPC and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sion of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, NTPC shall inform the Asso- ciation of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform NTPC and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the -day of 198 . FOR SECRETARY