Conformed Copy - L4014 - Orissa Power Sector Restructuring Project - ORISSA Agreement

Page 1 CONFORMED COPY LOAN NUMBER 4014 IN Orissa Agreement (Orissa Power Sector Restructuring Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and STATE OF ORISSA Dated July 10, 1996 LOAN NUMBER 4014 IN ORISSA AGREEMENT AGREEMENT, dated July 10, 1996, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and STATE OF ORISSA, acting by its Governor (Orissa). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred fifty million dollars ($350,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that Orissa agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) the proceeds of the loan provided for under the Loan Agreement will be made available to Orissa; (C) part of the Project will be carried out by the Orissa Hydro Power Corporation Limited (OHPC) and the Grid Corporation of Orissa Limited (GRIDCO); (D) by a Project Agreement of even date herewith among the Bank, and GRIDCO and OHPC, GRIDCO and OHPC have undertaken certain obligations towards the Bank as set forth in the Project Agreement; and (E) the Bank has received a letter dated April 4, 1996 from Page 2 the State of Orissa (Orissa) describing a program of objectives, policies and actions to reform the power sector in Orissa (hereinafter the Power Sector Reform Program) and declaring Orissa's commitment to carry such program; WHEREAS Orissa, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) Orissa declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end shall carry out or cause to be carried out: (i) Part C.1 of the Project through its relevant departments; (ii) Part A of the Project through GRIDCO or Private Distribution Companies; (iii) Part B of the Project through GRIDCO or End-Users; and (iv) the relevant activities under Part C.2 of the Project through GRIDCO and OHPC respectively; all with due diligence and efficiency and in conformity with appropriate administrative, financial and public utilities practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for such Parts of the Project. (b) Without any limitation or restriction upon any of its other obligations under this Agreement, Orissa shall cause GRIDCO and OHPC to perform in accordance with the provisions of the Project Agreement all the respective obligations of GRIDCO and OHPC therein set forth, shall take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable GRIDCO and OHPC to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. Section 2.02. (a) Subject to the provisions of Section 2.03 hereof, Orissa shall relend the proceeds of the Loan to GRIDCO, and, if necessary, to OHPC, Private Distribution Companies and End-Users under Subsidiary Loan Agreements to be entered into between Orissa, and each of GRIDCO, OHPC, Private Distribution Companies and End-Users under terms and conditions approved by the Bank, which shall include, that GRIDCO, OHPC, Private Distribution Companies and End-Users shall pay interest on the principal amount so relent and withdrawn and outstanding from time to time at a rate of not less than 13% per annum, and repay the principal amount so relent over a period of 15 years including therein a period of grace of five years and, that the foreign exchange risk shall be borne by the Borrower. (b) Orissa shall make available to GRIDCO and OHPC, without setting off any amounts that may be due to Orissa from GRIDCO and OHPC, and to Private Distribution Companies and End-Users the proceeds of the Loan immediately as they are withdrawn from the Loan Account and made Page 3 available to Orissa by the Borrower in respect of expenditures to be financed under the respective Subsidiary Loan Agreement. Section 2.03. Orissa shall: (a) prior to entering into a Subsidiary Loan Agreement with a Private Distribution Company ensure that: (i) the Private Distribution Company has been selected in accordance with procedures satisfactory to the Bank; (ii) the activities to be carried out by such Company under Part A of the Project meet the eligibility criteria set forth in Part I of the Schedule to this Agreement and are approved by the Bank for financing; (iii) a license under the Act has been granted to such Company by the Regulatory Commission enabling it to carry out such activities in a manner satisfactory to the Bank; and (iv) it obtains by an implementation contract with such Company, approved by the Bank, rights adequate to protect the interest of the Bank and Orissa including such rights in respect of the carrying out and operation of the approved activities as shall be satisfactory to the Bank. (b) prior to entering into a Subsidiary Loan Agreement with an End-User, ensure that: (i) the activities to be carried out by such End-User under Part B.2 of the Project meet the eligibility criteria set forth in Part II of the Schedule to this Agreement and are approved by the Bank for financing; and (ii) it obtains by an implementation contract with such End-User, approved by the Bank, rights adequate to protect the interest of the Bank and Orissa, including such rights in respect of the carrying out and operation of the approved activities as shall be satisfactory to the Bank. Provided, however, that the Bank's prior approval under clauses (i) and (ii) of this paragraph (b) shall not be required in respect of an activity implemented by an End-User under such Part B estimated to cost less than the equivalent of $200,000. Section 2.04. Except as the Bank shall otherwise agree, procure- ment 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 1 to the Project Agreement. Section 2.05. Without any limitation or restriction upon the provisions of Section 2.01 hereof, Orissa shall take all such actions as may be necessary or required including provision of consents as the shareholder of GRIDCO and OHPC, to enable GRIDCO and OHPC to perform their respective obligations under the Project Agreement. Section 2.06. (a) Orissa shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement, and under the Subsidiary Loan Agreements and other matters relating to the purposes of the Loan. (b) Orissa shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by Orissa of its obligations under this Agreement. ARTICLE III Page 4 Particular Covenants Section 3.01. Orissa shall, with the participation of GRIDCO and OHPC: (a) offer a part of its equity in GRIDCO and OHPC for sale to the public under terms and conditions satisfactory to the Bank with the objective of divesting such equity in accordance with a program and timetable satisfactory to the Bank; (b) take all such measures as may be necessary or required for efficiently implementing the transactions resulting from such offer; and (c) where no tenders are received in response to such offer or those that are received are not deemed responsive by Orissa, revise the terms and conditions of such offer in a manner satisfactory to the Bank and take such other steps which shall, without prejudice to the interests of Orissa, GRIDCO and OHPC, be adequate, in the view of the Bank, to making such offers attractive for acceptance by the public. Section 3.02. Orissa shall indemnify GRIDCO for all liabilities that may be incurred by GRIDCO as a result of commitments made by Orissa or the Orissa State Electricity Board under power purchase agreements, memoranda of understanding or other similar arrangements with independent power producers. Section 3.03. Orissa shall: (a) by December 31 of each year during the implementation of the Project provide to the Bank a statement of the estimated expenditure of the Regulatory Commission for the following Fiscal Year as prepared by the Commission; and (b) by March 31 of each year during the implementation of the Project inform the Bank of the approved budget of the Regulatory Commission for the following Fiscal Year. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 4.02. This Agreement and all obligations of the Bank and of Orissa thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify Orissa thereof. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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 designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: Page 5 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For Orissa: Secretary to the Government of Orissa Department of Energy Bhubaneswar, India Telex: (0675) 6390 Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Orissa may be taken or executed by a Secretary to the Government of Orissa or such other person or persons as Orissa shall designate in writing, and Orissa shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counter- parts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Heinz Vergin Acting Regional Vice President South Asia STATE OF ORISSA By /s/ N. Valluri Authorized Representative SCHEDULE Eligibility Criteria The following eligibility criteria shall apply for activities to be carried out under Parts A and B.2 of the Project by Private Distribution Companies and End-Users, respectively, referred to in paragraphs a (ii) and b (ii) of Section 2.03 of this Agreement. Part I: Distribution by Private Distribution Companies Under Part A of the Project (a) The justification (in the context of the overall transmission and Page 6 distribution development plan) and technical feasibility of the proposed transmission and distribution investment shall have been established to the satisfaction of the Bank; (b) All clearances/approvals including environmental clearances shall have been obtained from the relevant ministries, departments, agencies or other authorities of the Borrower and Orissa and documented in the project report; (c) An environmental assessment shall have been carried out, and an environmental mitigation plan, a resettlement and rehabilitation plan, if needed, based on the environmental assessment report, and a plan for the handling of materials to be replaced in the rehabilitation program, satisfactory to the Bank, shall have been prepared; and (d) A procurement plan shall have been prepared in accordance with the overall procurement strategy, namely bulk procurement of main items, turnkey construction by prequalified contractors (except for those owner-supplied main items). Part II: Demand-Side Management Activities by End-Users Under Part B.2 of the Project (a) Justification and technical feasibility of the proposed activity shall have been established to the satisfaction of the Bank; and (b) Financing and procurement plans acceptable to the Bank shall have been prepared.