SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
PANDA GLOBAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Cayman Islands 333-29005-01 75-2697755
(State of other jurisdictionCommission File IRS Employer
or incorporation) Number Identification No.)
4100 Spring Valley, Suite 1001, Dallas, Texas 75244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 980-7159
Not applicable
(Former name or former address, if changed since last report)
Item 5. Other Events.
Agreement with PEPCO Regarding the Company's Brandywine,
Maryland Facility. The Company's indirect wholly-owned
subsidiary, Panda-Brandywine, L.P. (the "Brandywine
Partnership"), has reached a tentative agreement with Potomac
Electric Power Company ("PEPCO") to make certain modifications to
the Power Purchase Agreement, dated August 9, 1991, as amended
(the "Power Purchase Agreement"), between the Brandywine
Partnership and PEPCO, which modifications resolve various
outstanding issues as to the method of calculation of capacity
payments thereunder.
The first significant outstanding issue involved a
disagreement between the Brandywine Partnership and PEPCO as to
the date on which the yield to maturity on United States Treasury
Bonds with a maturity of 12 years ("12-year T-Bonds") should be
determined under a provision in the Power Purchase Agreement that
requires capacity payments to be reduced if such interest rate is
less than 8%. Such provision states that the interest rate of 12-
year T-Bonds is to be determined, and adjustments to capacity
payments made, as of the date that the interest rate for
permanent financing for the Brandywine Facility (herein so
called) is designated pursuant to an executed commitment for such
financing. On October 6, 1994, the Brandywine Partnership entered
into a written commitment with General Electric Capital
Corporation ("GE Capital") with respect to permanent financing
for the Brandywine Facility, which commitment designated an
interest rate for such financing. Accordingly, the Brandywine
Partnership took the position that October 6, 1994 should be the
date used to determine the interest rate of 12-year T-Bonds under
the Power Purchase Agreement. The interest rate for 12-year T-
Bonds on such date was 7.94% per annum. PEPCO, on the other hand,
took the position that since the interest rate designated in such
commitment was a floating rate, the date to be used for
determining the interest rate of 12-year T-Bonds was the closing
date of the conversion of the Brandywine construction loan
facility to long-term financing in the form of a leveraged lease,
which occurred on December 18, 1996. The interest rate for 12-
year T-Bonds on such date was 6.36%.
The second significant outstanding issue involved a
disagreement between PEPCO and the Brandywine Partnership as to
the determination of PEPCO's system peak load, which is the basis
for certain reductions in capacity payments under the Power
Purchase Agreement. Under such provision, capacity payments are
to be reduced, commencing in 2006, if PEPCO's system peak load
does not exceed 5,697 MW prior to 1998, and are reduced by a
greater amount if PEPCO's system peak load does not exceed such
amount prior to 1999. PEPCO and Baltimore Gas & Electric Company
("BG&E") had announced their intention to merge during 1997 into
a new entity to be known as Constellation Energy Corporation
("Constellation"), and PEPCO had asked the Brandywine Partnership
to agree that peak load under the Power Purchase Agreement would
be calculated on the basis of the pre-merger PEPCO system and not
the post-merger Constellation system. Peak load based on the
Constellation system would have greatly exceeded 5,679 MW during
1997. However, PEPCO's position was that the parties intended to
use the then existing PEPCO system in calculating peak load and
that the merger with BG&E should be disregarded for such purpose.
The Brandywine Partnership disagreed with such position. The
Power Purchase Agreement does not contain any provision requiring
adjustments due to mergers or reorganizations. It was the
Brandywine Partnership's position that Constellation, as the
successor of PEPCO, would be substituted for PEPCO under the
Power Purchase Agreement and the Constellation system would be
used to calculate peak load. It is the Brandywine Partnership's
current understanding that the proposed merger between PEPCO and
BG&E has been terminated.
Under the agreement, the first issue discussed above was
resolved by adjusting the schedule (See Exhibit 99.5 attached
hereto) for capacity payments to be made by PEPCO to the
Brandywine Partnership under the Power Purchase Agreement such
that the amount of capacity payments to be made during the first
ten years following the commencement of commercial operations
(which occurred on October 31, 1996) will be increased and the
amount of capacity payments to be made during the last fifteen
years of the term of the Power Purchase Agreement (which expires
on October 30, 2021) will be reduced. The agreement provides
that PEPCO will pay to the Brandywine Partnership within two
business days following the effective date of the settlement (as
discussed below) approximately $3.8 million, which represents the
difference between the previously scheduled capacity payments and
the capacity payments due under the agreement for the first nine
months of 1997.
The second issue discussed above was resolved by the
agreement of both parties to base the peak load adjustment on
PEPCO's peak load.
In return for the resolution of the aforementioned
significant issues, PEPCO has agreed that the Brandywine
Partnership may acquire the exclusive right to broker (as defined
by the Federal Energy Regulatory Commission, or "FERC") capacity
from the Brandywine Facility for resale, up to certain specified
amounts and for specified periods. PEPCO will sell the capacity
pursuant to its Power Sales Tariff currently on file with the
FERC. The amount of released capacity to be made available for
brokering to the Brandywine Partnership is 130 megawatts for the
period January - May 1998, 200 megawatts for the period June 1998
- - May 1999, and 100 megawatts for the period June 1999-May 2000.
The Brandywine Partnership will pay PEPCO $1.25/kilowatt/month
for the capacity released.
In addition, PEPCO has agreed to release to the Brandywine
Partnership on a periodic basis through the year 2002 the rights
to sell energy for resale, which energy may or may not be from
the capacity released described above. Such releases will be
based upon PEPCO's projections of future facility operations
required to serve PEPCO's needs. Sales of energy not related to
released capacity will be subject to the availability of the
Brandywine Facility. Sales of energy outside the Pennsylvania-
Jersey-Maryland Pool ("PJM Pool") not related to released
capacity will be on an interruptible basis in accordance with PJM
Pool rules and requirements.
In connection with sales of released energy, the Brandywine
Partnership may function as a power marketer or power broker (in
either case, as defined by FERC). If the Brandywine Partnership
elects to function as a power marketer, it must become a member
of the PJM Pool. In either case, the Brandywine Partnership will
be required to obtain all necessary authorizations and approvals
to engage in such transactions, including any authorizations and
approvals required by FERC. If the Brandywine Partnership
functions as a power marketer, it will be required to pay PEPCO a
base fee equal to two percent of the Brandywine Partnership's
gross revenues from each sale of released energy, subject to an
additional incentive payment of up to 50% of the base fee based
on the timing of releases by PEPCO of blocks of energy available
for resale by the Brandywine Partnership.
If the Brandywine Partnership functions as a power broker,
it will be required to pay PEPCO a base fee, subject to the
incentive adjustment as described above, plus an additional fee
of one percent of the gross revenues from each sale. The PJM
Pool, not PEPCO, will supply transmission service. The agreement
also provides that PEPCO will enter into good faith negotiations
with the Brandywine Partnership prior to the end of the year 2002
with respect to energy releases after 2002, although neither
party is obligated to enter into any such agreement unless it is
to their mutual economic benefit.
The agreement further provides that for purposes of
determining PEPCO's system peak load which is the basis for
reductions in capacity payments under the Power Purchase
Agreement following any merger or other combination of PEPCO with
another utility, the actual peak load experienced by the portion
of the merged or combined company's system that constituted the
PEPCO system prior to such merger or combination shall be used.
The agreement further provides that the Brandywine
Partnership will enter into good faith negotiations with PEPCO on
a buyout or buydown of the Power Purchase Agreement in a manner
that maximizes and equitably shares the benefits of such
transaction between the parties, although neither party is
obligated to enter into any buyout or buydown agreement unless it
is to their mutual economic benefit.
The effectiveness of the agreement with PEPCO is subject to
the consent of the financing parties, including GE Capital, under
the long-term financing arrangements for the Brandywine Facility.
In this regard, the Brandywine Partnership has commenced
discussions with GE Capital and the other financing parties
concerning such consents, and has executed an agreement in
principle with GE Capital. Among other things, this agreement in
principle provides for (i) the re-allocation of lease payments
from the Brandywine Partnership to GE Capital in order to match
the revised capacity payments schedule with PEPCO, (ii) the
reimbursement to GE Capital by the Brandywine Partnership of
certain fees, and (iii) certain technical amendments to the
applicable financing documents. The closing of the agreement in
principle is subject to several conditions, including but not
limited to written consents from all other financing parties and
other applicable parties, receipt of legal opinions concerning
the tax and regulatory consequences of the transaction, and the
preparation of definitive legal documentation of the transaction
to the satisfaction of all parties involved.
To the Company's knowledge, no regulatory consents are
required in order for the agreement between PEPCO and the
Brandywine Partnership to take effect. There can be no assurance
that the requisite consents from GE Capital or the other
applicable financing parties can be obtained or that the
agreement with PEPCO will ever become effective.
Financial Closing of Nepal Project. On December 29, 1997,
financial closing occurred with respect to the 36 megawatt Upper
Bhote Koshi hydroelectric project in Nepal developed by a
subsidiary of the registrant (such subsidiary and certain of its
affiliates collectively are referred to herein as the "Company").
Approximately $98 million in non-recourse debt financing was
provided by a group of international lenders led by International
Finance Corporation ("IFC") and DEG-Deutsche Investitions-und
Entwicklungsgesellschaft mbH ("DEG").
The IFC financing consisted of a loan of up to approximately
$21 million for IFC's own account and a syndicated loan of up to
approximately $36 million for the account of the loan
participants, comprised of Dresdner Bank AG (up to approximately
$16.0 million), Bayerische Vereinsbank AG (up to approximately
$10.0 million) and Nederlandse Financierings-Maatschappij voor
Ontwikkelingslanden N.V. ("FMO") (up to approximately $10.0
million). The DEG financing consisted of a loan of up to
approximately $11.8 million.
The interest rates on these loans generally are at the
annual rate of 325 to 350 basis points above the London Interbank
Offered Rate, as adjusted every six months subject to market
conditions. The Company has the ability, at its option, to swap
these loans for fixed rate loans, taking advantage of the current
low interest rate environment. The fixed interest rate for the
IFC loan would be based on a formula set forth in the applicable
loan documents (which already have been executed), while such
interest rate for the DEG loan currently is set at 9.5% per
annum, subject to various adjustments which could reduce this
interest rate in certain circumstances. The monthly payments on
the current loans are amortized in "mortgage payment style," and
final maturity thereon currently is established at dates ranging
from nine to twelve years after the commercial operations date of
the project, depending on the loan.
Equity investments in the project are as follows: the
Company ($2.0 million paid at financial closing), MCN Investment
Corp. ("MCNIC") (commitment to pay the Company's remaining equity
investment up to approximately $20.1 million), Harza Engineering
Company International, L.P. ("Harza") (commitment of up to
approximately $1.5 million), IFC (commitment of up to
approximately $2.95 million) and Himal International Power
Corporation, Ltd. ("HIPC") (commitment of up to approximately
$2.95 million). Any cost over-runs up to $10 million will be
shared pro rata by MCNIC, Harza, Panda and HIPC.
Cash flow attributable to the Company's and MCNIC's combined
seventy-five percent (75%) ownership interest in the project will
be allocated 85% to MCNIC and 15% to the Company until MCNIC
achieves a twenty percent (20%) internal rate of return on its
investment, and 90% to the Company and 10% to MCNIC thereafter.
A Project Agreement exists between His Majesty's Government
of Nepal ("HMGN") and the Company, which outlines HMGN's
involvement and obligations in the construction and operation of
the project. Among other things, pursuant to such agreement,
HMGN has guaranteed all payments of the Nepal Electricity
Authority ("NEA") for electric power from the Nepal Project for
20 years after the commercial operations date, and also has
provided political risk protection for the project. In addition,
HMGN has agreed to issue a 40 year project license for the
project, make available land, structures, buildings and utilities
for the project, provide various tax benefits (including a 15
year income tax holiday) and exemptions, assure the prompt
availability of foreign exchange and repatriation and provide
administrative assistance in obtaining other licenses and
permits, fuel, sales and export rights and the ability to import
equipment.
Electric power from the project will be sold to the Nepal
Electricity Authority ("NEA") under a 25 year power purchase
agreement. At the end of the 25 year operation period of such
agreement, 50% of the ownership of the project will be
transferred to the NEA for a nominal sum. At the end of the 40
year license period of the project (which period includes the
construction period and part of the development period of the
project) the entire project will be transferred to HMGN
(including NEA's interest in the project).
The Amended and Restated Engineering, Procurement and
Construction Contract between China Gezhouba Construction Group
Corporation ("China Gezhouba") and the Company (the "EPC
Contract") sets forth China Gezhouba's design, equipment and
material procurement, engineering, performance testing and
guarantee and construction responsibilities regarding the
project. China Gezhouba, with a staff of more than 50,000
people, is one of the largest construction firms in China, and
has over 42 years of experience in the construction of hydropower
plants (more than 900 projects). For example, it currently is
working on the large (18,200 megawatt) Three Gorges hydropower
project in China. Among other things, the EPC Contract provides
for a retainage of 10% of the EPC Contract price until final
acceptance (as defined in the EPC Contract) of the project,
liquidated damages in a maximum amount of 35% of the EPC Contract
price (including change orders) and a maximum liability of China
Gezhouba of 100% of the EPC Contract price. A performance
guarantee has been posted by Industrial and Commercial Bank of
China, Singapore Branch on behalf of China Gezhouba, to cover 25%
of the EPC Contract price (with provisions for replenishment
thereof up to an additional 10% of the EPC Contract price).
Construction has begun on the project and the project
currently is scheduled to be placed in service in the fourth
quarter of 1999.
Disclosure Regarding Forward-Looking Statements. This Form
8-K includes forward-looking statements. All statements other
than statements of historical fact included in this Form 8-K,
including, without limitation, statements regarding financial
position, possible effectiveness of conditional contracts,
projects under development, construction or other budgets and
plans and objectives for future operations, are forward-looking
statements and actual results may differ. Although the
registrant believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ
materially from the registrants' expectations include, without
limitation, the impact of geopolitical occurrences world-wide;
the results of financing efforts; risks under contracts and swap
agreements; changes in laws and regulations; unforeseen engineering,
mechanical, technological or other difficulties; and other risks
described in the registrant's filings from time to time with the
Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Designation Description
Exhibit 99.1 Table Reflecting Changes to Capacity
Payments Under Proposed Brandywine
Partnership-PEPCO Agreement.
Exhibit 99.2 Press Release dated January 5, 1998.
Exhibit 99.3 Project Agreement between HMGN and
Bhote Koshi Power Company Private Limited
dated July 21, 1996. (1)
Exhibit 99.4 Amended and Restated Contract for the
Engineering, Procurement and Construction
of the Upper Bhote Koshi Hydroelectric
project between China Gezhouba Construction
Group Corporation and Bhote Koshi Power
Company Private Limited dated
December 19, 1996. (1)
Exhibit 99.5 Power Purchase Agreement between HMGN and
Bhote Koshi Power Company Private Limited,
dated July 21, 1996. (1)
Exhibit 99.6 Performance Guarantee by Industrial and
Commercial Bank of China, Singapore Branch.
(1) Previously filed as exhibits to the Registration Statement on
Form S-1 (Registration Number 333-29005-01) of Panda Global
Energy Company and Panda Global Holdings, Inc., and
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
PANDA GLOBAL HOLDINGS, INC.
Date: February 19, 1998 By: /s/ Bryan J. Urban
Name: Bryan J. Urban
Title: Vice President - Finance
EXHIBIT 99.1
EXHIBIT I
CAPACITY RATES
PEPCO-Panda Agreement October 24, 1997
<TABLE>
<CAPTION>
(1) (2) (3)
Adjusted Adjusted Annual
Capacity Rates Capacity Rates Adjusted
$/kW/Mo. $/kW/Mo. Capacity Payments
Year Jan. to Oct. Nov. & Dec. ($ Millions)
<C> <C> <C> <C>
1996 0.00 14.51 0.000
1997 14.51 14.70 25.121
1998 14.70 14.91 24.655
1999 14.91 15.13 41.243
2000 15.13 17.91 42.035
2001 16.96 18.08 49.334
2002 17.84 18.09 49.346
2003 17.88 17.88 49.340
2004 17.88 17.87 49.335
2005 17.88 17.88 49.356
2006 17.41 18.29 48.451
2007 17.56 17.56 48.454
2008 17.54 17.62 48.448
2009 17.41 18.30 48.461
2010 18.12 18.70 50.270
2011 19.11 21.45 52.471
2012 20.32 20.91 48.489
2013 19.94 20.24 48.514
2014 19.71 18.72 48.489
2015 19.79 15.71 48.474
2016 16.86 17.19 43.616
2017 16.42 16.77 43.607
2018 15.97 16.34 43.588
2019 15.54 15.92 43.599
2020 15.12 15.53 43.648
2021 14.82 0.00 36.369
</TABLE>
NOTE:
The table represents a summary of the applicable appendix to the
Power Purchase Agreement, reflecting the effects of the proposed
agreement with PEPCO. Please note also that column (3) is
subject to further adjustment in accordance with the provisions
of the Power Purchase Agreement.
EXHIBIT 99.2
For media information, contact: Cynthia Pharr (972) 243-0644
PANDA ENERGY COMPLETES $98 MILLION FINANCING
FOR HYDROELECTRIC PLANT IN NEPAL
Transaction described as the first privately financed
infrastructure project by an American company in Nepal.
Dallas, Texas, January 5, 1998 -- Panda Energy International,
Inc. today announced that it has closed on the $98 million
financing for a 36 megawatt hydroelectric plant in Nepal. The
non-recourse project financing is being provided through a group
of international lenders led by International Finance Corporation
(IFC), a subsidiary of the World Bank, and DEG-German Investment
and Development Company, a development bank owned by the German
Government. Other lenders consist of Dresdner Bank AG,
Bayerische Vereinsbank AG and Netherlands Development Finance
Company (FMO).
Panda Energy is the lead developer in the Nepal project and is
joined by MCN Investment Corporation (MCNIC), the diversified
energy arm of MCN Energy Group Inc. (NYSE:MCN); Himal
International Power Corporation, owned by Soaltee Group, a Nepal-
based conglomerate; Chicago-based Harza Engineering Company
International, L.P., the project's engineering coordinator and
operator; and IFC in providing equity for the Nepal project.
Infrastructure Finance Group (IFG) acted as the financial advisor
for the project sponsors.
"We are pleased to have had a leadership role in closing the
first privately financed infrastructure project by an American
company in Nepal," said Robert Carter, Chairman & Chief Executive
Officer. "This project's partnership is composed of strong
companies that expect to play a significant role in providing
much-needed power to this fast-developing part of the world.
With over 40,000 megawatts of hydroelectric potential, Nepal has
the greatest hydroelectric resources in the world," said Carter,
"and it is strategically located to supply the growing Indian
power market."
Construction on the project, known as the Upper Bhote Koshi
Hydroelectric Plant, began in early 1997. The plant is scheduled
to be placed in commercial operation in the fourth quarter of
1999. Located about 60 miles northeast of Kathmandu near the
border with China, Upper Bhote Koshi will boost Nepal's electric
power generation capacity by more than 10 percent.
Electricity production from the facility will be sold under a
long-term firm contract to the state-owned Nepal Electricity
Authority and is expected to total approximately 250,000 megawatt
hours annually.
(Visuals available upon request.)
Panda Energy International, Inc. is a private developer, owner
and operator of independent power projects in the global energy
market. The company is the third largest private power developer
in the U.S. and currently has facilities in operation or under
construction in the U.S. and abroad which generates over 570
megawatts of electricity. In addition, the Company has 4,500
megawatts in advanced development. Panda Energy is headquartered
in Dallas, Texas with offices in Washington D.C., Beijing, Rio de
Janeiro, Kathmandu, and Tegucigalpa, Honduras.
EXHIBIT 99.6
[Letterhead - Industrial and Commercial Bank of China, Singapore
Branch]
PERFORMANCE GUARANTEE
Irrevocable, Unconditional Guarantee
No. 9711073
TO: Bhote Koshi Power Company Private Limited
(hereinafter referred to as the "Owner")
KHA 1-960, Kalimati, Tachachal
Kathmandu, Nepal
ATTN: Ms Kim Knightstep Monk
10 December 1997
Dear Sirs:
We refer to our Performance Guarantee No. 9705047, for
USDLR3,400,000.00 dated 1 May 1997 and our Performance
Guarantee No. 9610025 for USDLR11,600,000.00 dated 8 Oct 1996.
Please be advised that these two guarantees are hereby
cancelled and replace by the following Guarantee No. 9711073.
Please confirm in writing that the above mentioned two
guarantees have been cancelled and shall cease to be valid and
binding on us upon your receipt of this Guarantee No. PG
9711073 dated 10 December 1997. This Guarantee replaces the
one (bearing the same number) which we sent to you via tested
Telex to Chase Manhattan Bank, New York on 8 December 1997.
Quote
Performance Guarantee No. 9711073
1. By an Amended and Restated Contract for the Engineering,
Procurement and Construction of the Upper Bhote Koshi
Hydroelectric Project on the Bhote Koshi River in the
Sindhupalchok District of Nepal (the "EPC Contract")
dated as of December 19, 1996 between the Owner and China
Gezhouba Construction Group Corporation for Water
Resources and Hydropower (the "Contractor"), the
Contractor shall provide an irrevocable, unconditional
bank guarantee from a financial institution acceptable to
Owner in an amount equal to twenty-five percent (25%) of
the Contract Price, namely US$11,600,000 (subject to
increase or decrease pursuant to Paragraph 2 hereof), and
Industrial and Commercial Bank of China (the
"Guarantor"), acting through its Singapore branch, which
has been requested by the Contractor, hereby agrees to
provide such Guarantee for the Contractor in favor of the
Owner. Terms defined and expressions construed in the
EPC Contract have the same meaning and construction in
this Guarantee.
2. The sum referred to in Paragraph 1 of this Guarantee
shall be amended as follows:
(i) Upon receipt by the Guarantor of a
certificate from the Owner stating that there
has been an increase or decrease of the
Contract Price pursuant to Article 6 of the EPC
Contract and stating the amount of such
increase or decrease, the sum referred to in
Paragraph 1 shall be increased or decreased, as
applicable, by the amount stated in such
certificate from the Owner (it being understood
that the aforesaid certificate shall have a
copy of the relevant change order attached);
(ii) Upon receipt by the Guarantor of a
certificate from the Owner stating that there
has been a drawing under this Guarantee for
amounts due from the Contractor for Performance
Liquidated Damages or Schedule Liquidated
Damages pursuant to Article 12 or Article 13 of
the EPC Contract and stating the amount of such
drawing, the Guarantor shall increase the
amount of this Guarantee by the amount of any
such drawing;
(iii) Promptly, upon receipt of a
certificate at any time and from time to time
pursuant to clause (i) or (ii) above from the
Owner, the Guarantor shall execute and deliver
by international courier to the Owner (or to
its respective order) (with a copy to the
Trustee) an amendment to this Guarantee, in the
form of Annex A (correctly completed),
confirming the adjustment of the amount of the
Guarantee in accordance with the terms hereof.
It is the express understanding and agreement of the
Guarantor, the Owner, and the Contractor that, except on
account of increases pursuant to Clause (i) of Paragraph
2 hereof, the maximum amount of the Contractor's
liability which is being guaranteed by the Guarantor
pursuant to this Guarantee is an amount equal to thirty-
five percent (35%) of the Contract Price, namely
USD16,219,000.00.
3. It is a condition precedent to the Owner's obligation
under the EPC Contract to employ the Contractor or to
continue such employment anytime during the term of the
EPC Contract that the Guarantor enters into this first
demand Guarantee in favor of the Owner of such twenty-
five percent (25%) of the Contract Price (subject to
increase and decrease pursuant to Paragraph 2 hereof).
4. This Guarantee is issued at the request of the Contractor
as per Exhibit G (as revised and agreed upon between the
Owner and the Contractor) of the EPC Contract, and shall
automatically become effective at Financial Closing,
without any further action or confirmation by the
Guarantor or the Contractor. This Guarantee shall be a
continuing guarantee remaining in full force and effect
during the entire term of the EPC Contract and until the
later of (i) the date falling thirty (30) days after WTC
has indicated, in a written notice to the Guarantor, the
agreement (a copy of which agreement does not need to be
presented to the Guarantor) of IFC that the Final
Acceptance of the Facility (as defined in the EPC
Contract) has occurred, and (ii) the date the Contractor
has delivered to the Owner (with a copy to the Trustee) a
Warranty Guarantee (in accordance with the EPC Contract)
in form and substance satisfactory to the Trustee, at
which time the Owner (or, if applicable, the Trustee)
shall return this Performance Guarantee to the Guarantor
with instructions for cancellation.
5. It is acknowledged and agreed that an intended assignee
of this Guarantee is Wilmington Trust Company, or any
substitute or replacement therefor from time to time
(provided IFC (as defined below) has given written notice
to the Guarantor of such substitute or replacement)
(Wilmington Trust Company or, as applicable, any such
substitute or replacement hereinafter referred to as
"WTC"), in each case acting on behalf of and for the
benefit of International Finance Corporation, an
international organization organized and existing by
virtue of the Articles of Agreement among its member
countries ("IFC") and DEG-Deutsche Investitions-und
Entwicklungsgesellschaft mbH, a company organised and
existing under the laws of the Federal Republic of
Germany ("DEG") (WTC, acting on behalf of and for the
benefit of IFC, referred to herein as the "Trustee").
6 This is an irrevocable and unconditional guarantee issued
by the Guarantor, whereby the Guarantor shall assume the
liability of a primary obligor, and not merely as
guarantor under an ordinary guarantee, and shall be
jointly and severally liable with the Contractor to the
Owner for the twenty-five percent (25%) of the EPC
Contract Price, namely US $11,600,000.00 (subject to
increase and decrease pursuant to Paragraph 2 hereof).
Accordingly, the Guarantor hereby unconditionally and
irrevocably guarantees the due and punctual payment by
the Contractor of all sums whatsoever that the Owner
shall certify (in a manner set out in paragraph 6 below)
are due and owing by the Contractor to the Owner, whether
actually or contingently, under or in connection with the
EPC Contract, up to a maximum amount of US$11,600.000.00
(the "Guaranteed Amount") (subject to increase and
decrease pursuant to Paragraph 2 hereof) and the
Guarantor unconditionally and irrevocably agrees that, if
the Owner notifies (in writing) the Guarantor that for
any reason the Contractor has not made payment on first
demand of any such sums, the Guarantor will pay such sums
on first demand by the Owner, up to the Guaranteed
Amount. Should there be any increase or decrease of the
Contract Price pursuant to Paragraph 2 hereof, the
Guaranteed Amount automatically shall be adjusted
accordingly immediately upon the delivery to the
Guarantor of a certificate in accordance with Paragraph 2
hereof, and any delay by the Owner to deliver to the
Guarantor a certificate in accordance with Paragraph 2
hereof shall not affect the increase or decrease of the
Guaranteed Amount immediately upon delivery of such
certificate, nor shall the failure of the Guarantor to
execute and deliver an amendment in accordance with
Paragraph 2(iii) hereof affect the increase or decrease
of the Guaranteed Amount.
7. Under this Guarantee, the Owner is hereby granted with
absolute and unconditional rights to make multiple
drawings from time to time, and in the event that the
Contractor fails to perform its obligations under the EPC
Contract, the Owner shall be entitled to issue a written
demand to the Guarantor for payment up to an aggregate
amount not to exceed the Guaranteed Amount, as increased
or decreased from time to time as aforesaid. Such
written demand shall be in the following form:
"Re: Guarantee No. [___________________]
(i) We refer to the Irrevocable Unconditional
Guarantee No. [______________] (the "Guarantee") for
a maximum amount of US$11,600,000.00 (or such other
amount as may be provided for therein). Terms
defined in the Guarantee shall have the same meaning
in this Certificate.
(ii) We hereby state that the Contractor has failed
to perform its obligations under the EPC Contract.
(iii) We hereby demand from you the sum of
US$[_____________] under the Guarantee.
(iii) We hereby confirm and certify to you that
as at the date of this Certificate, the sum being
drawn is due and owing by the Contractor under the
EPC Contract and the Contractor has not fulfilled
its obligations under the EPC Contract to pay such
sum on first demand and that, accordingly, we are
entitled to make a claim on you under the Guarantee.
(iv) Please pay such amount by wire transfer, in
immediately available funds, in US Dollars, to
Account No. , in the name of ,
at Wilmington Trust Company, [address]."
The Guarantor shall not require that such written demand
be accompanied by any documents from any third parties or
any evidence of the Contractor's non-compliance with the
EPC Contract.
8. Under this Guarantee, the Guarantor is hereby committed
to honor such written demand from the Owner for payment
immediately upon presentation. Each payment by the
Guarantor hereunder shall be made in US Dollars and shall
reduce the cumulative amount of the Guaranteed Amount on
a dollar-for-dollar basis, subject, however, to the
Guarantor's obligation to increase the amount of this
Guarantee pursuant to Paragraph 2 hereof. The Guarantor
shall neither require the Owner to exercise its recourse
against the Contractor first, nor require the Owner to
exhaust its remedies against the Contractor first, and
shall not set such requirements as a precondition of the
Guarantor to effect its payment under this Guarantee. In
particular, the Guarantor shall not raise any contractual
defense by the Contractor under the EPC Contract, but
shall honor its obligations hereunder as an indebtedness
independent of the EPC Contract or any obligations of the
Contractor thereunder. Without limiting the foregoing,
any evidence or assertion submitted or made by the
Contractor or any third party shall not impact in any way
the Guarantor's obligations to make payments under this
Guarantee upon written demand therefor from the Owner.
9. This Guarantee is not assignable by either the Guarantor
or the Owner, except by the Owner to the Trustee or by
the Owner to any person to whom the Trustee or IFC may
sell an interest in the Facility upon delivery to the
Guarantor of a completed notice of assignment, signed by
the assignor and counter-signed by the assignee. This
Guarantee shall be binding on the Guarantor and its
successors and shall inure to the benefit of the Owner
(and its successors and permitted assignees).
10. The obligations of the Guarantor hereunder shall not be
discharged by (i) any time, grace, indulgence, waiver or
consent at any time given to the Contractor, (ii) any
lack of validity or enforceability of, or any termination
of, amendment to or affecting, or waiver of, any clause
of the EPC Contract, provided that any amendment to the
EPC Contract which increases the Contract Price (with the
exception of any increase pursuant to Paragraph 2 hereof)
will not increase the amount guaranteed by the Guarantor
hereunder, (iii) any failure or delay in the enforcement
or release of any rights in connection with or under the
EPC Contract or this Guarantee. The Guarantor further
acknowledges and agrees that it will remain liable
hereunder notwithstanding that the Contractor may cease
to exist or for any other reason the Owner may no longer
be able to deal with the Contractor.
11. The Guarantor hereby represents, warrants and covenants
to the Owner as follows:
(a) The Guarantor is a state-owned bank duly
organized and validly existing under the laws of
China, is duly registered to do business in
Singapore as a branch and has full power, authority
and legal capacity to execute and deliver this
Guarantee and to assume and perform the obligations
provided for herein;
(b) The Guarantor has taken all appropriate and
necessary legal and other actions to authorize the
execution, delivery and performance of this
Guarantee;
(c) This Guarantee constitutes a legal, valid and
binding obligation of the Guarantor enforceable in
accordance with its terms;
(d) The obligations of the Guarantor hereunder rank
and will rank at least pari passu in priority of
payment and in all other respects with all other
unsecured indebtedness of the Guarantor;
(e) The Guarantor shall supply to the Owner and the
Trustee, upon request, copies of the annual
financial statements of the Guarantor; and
(f) There are no conditions precedent to the
obligation of the Guarantor to perform under, or for
the effectiveness of, this Guarantee.
12. This Guarantee is a commercial act of the Guarantor in
relation to a commercial transaction and all obligations
of the Guarantor arising under this Guarantee are
commercial in nature. The Guarantor hereby irrevocably
waives, and agrees not to raise, any claim of immunity
(if any) from suit, attachment or execution in respect of
any claims which may be made against it at any time
concerning its obligations under this Guarantee, and the
Guarantor agrees that the waivers and agreements set
forth herein shall have the fullest scope permitted under
the Foreign Sovereign Immunities Act of 1976 of the
United States and are intended to be irrevocable for the
purposes of such Act.
13. Any demand from the Owner to the Guarantor for payment
must be in written form, in the English language
delivered to the Guarantor at the following address (or
any new address designated by the Guarantor in writing
duly notified to the Owner in the future) in the
following manner:
(a) Method of delivery: (i) personally delivered,
(ii) transmitted by postage prepaid registered mail
(airmail if international), (iii) transmitted by
internationally recognized courier service, or (iv)
transmitted by telex or facsimile.
(b) Address of the Guarantor:
Industrial and Commercial Bank of China
c/o Singapore Branch
6 Raffles Quay, #12-01
John Hancock Tower
Singapore 048580
Telephone Number: (65)538 2780
Fax Number: (65)538 1370
Attn.: General Manager
14. This Guarantee sets out the entire undertaking of the
Guarantor to the Owner.
15. This Guarantee shall be governed by and construed in
accordance with Singapore Law.
IN WITNESS WHEREOF, the undersigned Guarantor has executed
this Guarantee by its duly authorized officer the day and year
first above-written.
INDUSTRIAL AND COMMERCIAL BANK OF CHINA
c/o Singapore Branch
6, Raffles Quay, #12-01,
John Hancock Tower
Singapore 048580
By:____________________________________
Name: Wang Dewen
Title: General Manager
Annex A
Form of Letter of Amendment to Amount of Performance Guarantee
To: Bhote Koshi Power Company Private Limited and
Trustee
Amendment to the Performance Guarantee
No. dated [ ] 1997
Whereas we, Industrial and Commercial Bank of China, acting
through its Singapore Branch, as the Guarantor under the
Performance Guarantee, issued such Performance Guarantee in
favour of the Owner on [ ] 1997 and have
received a certificate from the Owner in accordance with
Paragraph 2 of the Performance Guarantee.
NOW THIS AMENDMENT WITNESSETH as follows:
1. The sum set out in Paragraph 1 of the Performance Guarantee
is [increased] [reduced] by the amount of US$ [amount
certified by the Owner, as applicable].
2. As a consequence of the [increase] [decrease] referred to in
Paragraph 1 of this Amendment, the sum set out in Paragraph
1 of the Performance Guarantee is [amount specified in
Paragraph 1 of the Performance Guarantee prior to amendment
increased or decreased, as applicable, by the amount
specified in Paragraph 1 of this Amendment].
3. All other terms and conditions of the Performance Guarantee
shall remain unchanged.
4. A term defined in the Performance Guarantee has the same
meaning in this Annex A.
Yours faithfully
__________________________________
(Authorized Signatories)
For an on behalf of
Industrial and Commercial Bank of China
