UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-23148
AES CHINA GENERATING CO. LTD.
(Exact name of registrant as specified in its charter)
Bermuda 98-0152612
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3/F., Golden Bridge Plaza
#1 Jianguomenwai Avenue
Beijing 100020, People's Republic of China
(Address of principal executive office)
Telephone Number (86 10) 65089619
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock, as of October 14, 1996.
8,134,100 shares of Class A Common Stock, $.01 par value.
7,500,000 shares of Class B Common Stock, $.01 par value.
<PAGE>
AES CHINA GENERATING CO. LTD.
INDEX
PART I. FINANCIAL INFORMATION Page No
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations.................. 3
Consolidated Balance Sheets.............................5
Consolidated Statements of Cash Flows...................7
Notes to Consolidated Financial Statements..............8
Item 2. Discussion and Analysis of Financial Condition
and Results of Operations...........................11
PART II. OTHER INFORMATION
Item 3. Legal Proceedings............................ Not Applicable
Item 4. Submission of Matters to a Vote of
Security Holders ............................ Not Applicable
Item 5. Other Information ............................ Not Applicable
Item 6. Exhibits and Reports on Form 8-K ......................17
Signatures.............................................19
2
<PAGE>
PART I
Item 1. Consolidated Financial Statements
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
Three Months
Ended
August 31, 1996 August 31, 1995
--------------------------------------------
(unaudited)
<S> <C> <C>
REVENUES:
Electricity sales US$ 4,106 US$ 543
Construction delay fee (3) -
------------------- ------------------
Total revenues 4,103 543
OPERATING COSTS AND EXPENSES:
Costs of sales 1,870 187
Development, selling, general and
administrative expenses 1,824 2,256
------------------- ------------------
Total operating costs and expenses 3,694 2,443
------------------- ------------------
OPERATING INCOME / (LOSS) 409 (1,900)
OTHER INCOME / (EXPENSE):
Interest income 1,286 2,453
Interest expense (357)
-
Equity in earnings of affiliate 189 61
------------------- ------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,527 614
Income taxes 253
-
Minority interest 237 38
------------------- ------------------
NET INCOME US$ 1,037 US$ 576
------------------- ------------------
NET INCOME PER SHARE US$ 0.06 US$ 0.03
=================== ==================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
Nine Months
Ended
August 31, 1996 August 31, 1995
--------------------------------------------
(unaudited)
<S> <C> <C>
REVENUES:
Electricity sales US$ 6,553 US$ 916
Construction delay fee 400 -
------------------- ------------------
Total revenues 6,953
916
OPERATING COSTS AND EXPENSES:
Costs of sales 3,867 496
Development, selling, general and
administrative expenses 5,229 6,920
------------------- ------------------
Total operating costs and expenses 9,096 7,416
------------------- ------------------
OPERATING LOSS (2,143) (6,500)
OTHER INCOME / (EXPENSE):
Interest income 5,001 8,060
Interest expense (679) -
Equity in earnings of affiliate 441 102
------------------- ------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,620 1,662
Income taxes
455 -
Minority interest 218 93
------------------- ------------------
NET INCOME US$ 1,947 US$ 1,569
------------------- ------------------
NET INCOME PER SHARE US$ 0.12 US$ 0.09
=================== ==================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values and share amounts)
<TABLE>
As of As of
August 31, 1996 November 30, 1995
------------------ ---------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents US$ 92,043 US$ 125,684
Investments - held-to-maturity 6,657 41,609
Investments - available-for-sale 5,911 2,995
Accounts receivable from related parties 4,179 463
Interest receivable 139 293
Inventory 956 31
Prepaid expenses and other current assets 1,530 422
------------------ ---------------------
Total current assets 111,415 171,497
Property, Plant and Equipment:
Electric generating facilities 59,303 6,468
Equipment, furniture and leasehold improvements 2,260 1,233
Accumulated depreciation and amortization (2,221) (665)
Construction in progress 74,442 39,555
------------------ ---------------------
Total property, plant and equipment, net 133,784 46,591
Other Assets:
Project development costs 892 1,083
Investments in and advances to affiliates 19,185 2,566
Note receivable 4,214 7,500
Deposits and other assets 812 634
------------------ ---------------------
Total other assets 25,103 11,783
------------------ ---------------------
TOTAL US$ 270,302 US$ 229,871
================== =====================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values and share amounts)
<TABLE>
As of As of
August 31, 1996 November 30, 1995
------------------ --------------------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - The AES Corporation US$ 1,747 US$ 214
Accounts payable 1,817 537
Payable for repurchase of shares - 10,011
Payable for investment purchase - 2,995
Accrued liabilities 1,372 1,430
Accrued liabilities for construction 7,618 -
Loans from minority shareholders - current portion 1,365 351
Notes payable 481 1,000
------------------ --------------------
Total current liabilities 14,400 16,538
Long-Term Liabilities:
Deferred income taxes 455 -
Loans from minority shareholders 33,982 6,666
------------------ --------------------
Total long-term liabilities 34,437 6,666
Minority Interest 33,345 19,082
Commitments and Contingencies
Shareholders' Equity:
Class A Common Stock - par value $0.01 per share (50,000,000 shares
authorized; 1995-10,216,000 shares issued;
1996-8,134,100 shares issued and outstanding after deducting
retirement of treasury stock) 81 102
Class B Common Stock - par value $0.01 per share
(50,000,000 shares authorized; 7,500,000 shares issued
and outstanding) 75 75
Additional paid-in capital 183,980 201,762
Retained earnings 3,714 1,767
Cumulative translation adjustment 270 250
Treasury stock, at cost
(1,912,600 shares at November 30, 1995, of Class A
Common Stock) - (16,371)
------------------ --------------------
Total shareholders' equity 188,120 187,585
------------------ --------------------
TOTAL US$ 270,302 US$ 229,871
================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
Nine Months Ended
August 31, 1996 August 31, 1995
------------------------------------------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income US$ 1,947 US$ 1,569
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,321 348
Provision for deferred taxes 455 -
Minority interest 218 93
Equity in earnings of affiliates (441) (102)
Dividend from affiliate 447
Change in assets and liabilities:
Accounts receivable from related parties (3,373) (748)
Interest receivable 246 369
Inventory, prepaid expenses and other current assets (1,851) 126
Deposits (90) (98)
Accounts payable and accrued expenses 2,755 (206)
--------------------- -------------------
Net cash provided by operating activities 1,634 1,351
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions and loans from minority shareholders 1,117 4,000
Proceeds from note payable 481 -
Repayment of note payable (1,000) -
Repurchase of Class A common stock (11,443) (3,793)
--------------------- -------------------
Net cash provided by/ (used in) financing activities (10,845) 207
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress (37,552) (11,848)
Purchase of short-term investments (38,082) (156,719)
Proceeds from the sale/ maturity of investments 67,123 191,479
Investments in and advances to affiliates (8,500) (1,250)
Project development costs and other assets (3,205) (923)
Investment in note receivable (4,214) -
--------------------- -------------------
Net cash provided by/ (used in) investing activities (24,430) 20,739
--------------------- -------------------
Increase / (decrease) in cash and cash equivalents (33,641) 22,297
CASH AND CASH EQUIVALENTS,
Beginning of period 125,684 95,486
--------------------- -------------------
End of period US$ 92,043 US$ 117,783
===================== ===================
</TABLE>
See Notes to Consolidated Financial Statements
Supplementary Disclosure:
- --------------------------
In April 1996, the Company's joint venture partner in Jiaozuo Wan Fang
contributed capital and shareholder loans of $38.4 million in the form of land
use rights, construction-in-progress, equipment and receivables, net of accounts
payable.
7
<PAGE>
AES CHINA GENERATING CO. LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. General and Basis of Presentation
AES China Generating Co. Ltd. ("AES Chigen" or the "Company"), a Bermuda
company, was incorporated on December 7, 1993, to develop, acquire, finance,
construct, own and manage electric power generation facilities in the People's
Republic of China (the "PRC"). The Company is an effectively controlled
affiliate of The AES Corporation ("AES"). As of August 31, 1996, AES owned
approximately 48% of the outstanding common stock of the Company.
The consolidated financial statements include the accounts of AES Chigen and its
subsidiaries. Investments in 50% or less owned affiliates over which the Company
has the ability to exercise significant influence, but not control, are
accounted for using the equity method. Intercompany transactions and balances
have been eliminated. In the second quarter of 1996, a subsidiary of the Company
acquired a controlling interest in Jiaozuo Wan Fang Power Company Limited
("Jiaozuo Wan Fang") for cash which approximated the fair value of net tangible
assets acquired. The acquisition was accounted for as a purchase.
In the Company's opinion, all adjustments necessary for a fair presentation of
the unaudited results of operations for the three months and nine months ended
August 31, 1996 and 1995 are included. All such adjustments are accruals of a
normal and recurring nature. The results of operations for the periods are not
necessarily indicative of the results of operations for the full year. The
financial statements are unaudited.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at August 31, 1996 and November 30, 1995 and
the reported amounts of revenues and expenses during the three months and nine
months ended August 31, 1996 and 1995. Actual results could differ from those
estimates.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the Company's
financial statements filed as part of the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1995 (the "Annual Report"). This
Quarterly Report on Form 10-Q should be read in conjunction with such Annual
Report.
2. Investments in and Advances to Affiliates
The Company's investments in and advances to affiliates consists of a 25%
ownership interest in Yangchun Fuyang Diesel Power Co. Ltd. and, from August
1996, a 25% ownership interest in Wuhu Shaoda Electric Power Development Company
Ltd. ("Wuhu Shaoda") and a subordinate loan to the project.
8
<PAGE>
3. Note Receivable
In August 1995, the Company provided a non-interest bearing loan in the amount
of $7.5 million to China Power International Holding Limited to develop and
invest in Wuhu Shaoda with a condition that the loan will convert to a minority
equity investment in the project upon obtaining approvals from the PRC
government. In August 1996, the loan successfully converted to a minority equity
investment in the project.
As of August 31, 1996, Jiaozuo Wan Fang had provided a loan in the amount of
$4.2 million to Zhongyuan Trust and Investment Company for the purpose of
providing a loan to Henan Electric Power Corporation for the construction of
interconnection and transmission facilities.
4. Loans from Minority Shareholders
As of August 31, 1996 loans from minority shareholders included a loan in the
amount of $24.7 million from Jiaozuo Aluminum Mill to Jiaozuo Wan Fang. The
total commitment amounts to $29.3 million. The loan is unsecured and bears
interest at 15.3% per annum and a service fee to the lender at 3% per annum. The
loan is divided into two tranches in equal amount. Interest on the first tranche
of the loan is payable quarterly in arrears following commercial operation of
unit one. Interest on the second tranche of the loan is payable quarterly in
arrears following commercial operation of unit two. Principal of the first
tranche is repayable in 27 quarterly installments beginning January 1, 1998 and
the payment of the second tranche is payable in 25 quarterly installments
beginning July 1, 1998.
5. Commitments and Contingencies
During the nine months ended August 31, 1996, the Company through its
wholly-owned subsidiary, AES China Holding Company (L) Limited, committed to
invest an aggregate of $18.0 million in the form of a subordinated term loan to
Wuhu Shaoda. As of August 31, 1996, $9.1 million of the committed term loan was
advanced to the joint venture.
In April 1996, Wuhu Shaoda entered into a $65.0 million syndicated senior loan
agreement with a group of nine banks ("lenders") to finance the construction of
the power plant. As a condition to the extension of the facility, AES China
Holding Company (L) Limited, and the other joint venture partners (together
referred to as "Partners"), entered into an undertaking and subordination deed
with the lenders and Wuhu Shaoda whereby, the Partners committed to fund any
construction cost overrun and working capital deficit of the project in
proportion to each Partner's respective equity contribution percentage in the
joint venture up to $6.0 million.
In April 1996, the Company committed to invest an aggregate of $68.3 million in
the form of shareholder loans to Jiaozuo Wan Fang. In October 1996 the Company
funded $20.0 million of its shareholder loan commitment. As of August 31, 1996,
Jiaozuo Wan Fang had an outstanding commitment to provide a loan of $5.7 million
to Zhongyuan Trust and Investment Company for the purpose of providing a loan to
Henan Electric Power Corporation for the construction of interconnection and
transmission facilities.
9
<PAGE>
6. Income Taxes
As of August 31, 1996, a deferred tax liability amounting to approximately $0.5
million was provided for, mainly for timing differences arising from deferred
expenses and accelerated depreciation of property, plant and equipment under the
PRC tax rules.
7. Subsequent Events
In September 1996, Chengdu AES-Kaihua Gas Turbine Power Company Ltd., a joint
venture, was established to construct, own and operate a 48MW natural gas-fired
power plant in Chengdu City, Sichuan Province. The Company has a 35% ownership
interest in the project and has committed to invest an aggregate of
approximately $18.0 million in the form of equity contributions and shareholder
loans to the joint venture.
In October 1996, Anhui Liyuan-AES Power Company Ltd. and Hefei Zhongli Energy
Company Ltd., two cooperative joint ventures, were established to construct, own
and operate a 115.2MW combined cycle power plant in Hefei, Anhui Province. The
Company has a 70% ownership interest in the projects and has committed to invest
an aggregate of approximately $37.0 million in the form of equity contributions
and shareholder loans to these two joint ventures.
10
<PAGE>
Item 2. Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
The Company, directly and through its wholly-owned offshore subsidiaries,
engages in the development, construction, operation and ownership of electric
power generating facilities in the PRC by means of its participation in PRC
joint venture limited liability companies to which the Company, or one of its
wholly-owned subsidiaries, has made a contribution to the equity thereof ("Joint
Ventures"). The Company currently owns interests in the following eight power
plants with an aggregate nameplate capacity of approximately 818MW.
<TABLE>
Projects in Operation or Under Construction
Company Company
Location Capacity Interest Ownership
Joint Venture(s) (Province) (MW) (MW) (%) Fuel Status
- ---------------- ---------- ---- ---- --- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Jiaozuo Wan Fang Power Henan 250 175 70 Coal Under
Company Ltd. construction
("Jiaozuo Wan Fang") (first unit to
be in
operation by
the second
quarter of
1997;
second unit to
be in
operation by
the second
quarter of
1998)
Wuhu Shaoda Electric Anhui 250 62.5 25 Coal First unit in
Power Development operation
Company Ltd. (second unit
("Wuhu Shaoda") to be in
operation by
the second
quarter of
1997)
Anhui Liyuan-AES Power Anhui 115.2 80.6 70 Oil Under
Company Ltd. construction
("Anhui Liyuan") (simple cycle
and Hefei Zhongli Energy unit to be in
Company Ltd. operation by
("Zhongli Energy") the third
quarter of
1997; combined
cycle unit to
be in
operation in
the second
quarter of
1998)
11
<PAGE>
Wuxi-AES-CAREC Gas Jiangsu 63 34.7 55 Oil Simple cycle
Turbine Power Company unit in
Ltd. service;
("Wuxi-AES-CAREC") (combined
and Wuxi-AES-Zhonghang cycle unit to
Power Co. Ltd. be in
("Wuxi-AES-Zhonghang") operation by
the first
quarter of
1997)
Sichuan Fuling Aixi Sichuan 50 35 70 Coal Under
Power Company Ltd. construction
("Fuling Aixi") (to be in
operation in
February 1998)
Chengdu AES-Kaihua Gas Sichuan 48 16.8 35 Natural Under
Turbine Power Company Gas construction
Ltd. (to be in
("Chengdu AES-Kaihua") operation in
the third
quarter of
1997)
Hunan Xiangci-AES Hydro Hunan 26.2 13.4 51 Hydro Two of three
Power Company Ltd. units in
("Xiangci-AES") operation
(last unit to
be in
operation in
the fourth
quarter of
1996)
Yangchun Fuyang Diesel Guangdong 15.1 3.8 25 Oil In operation
Engine Power Co. Ltd.
("Yangchun Fuyang")
----------- -------------
TOTAL 817.5 421.8
=========== =============
</TABLE>
The Company is considering an investment in the Yangcheng International Power
Company Limited, a project with an aggregate nameplate capacity of 2,100MW, and
is considering investments in four other power projects with an aggregate
nameplate capacity of 1,206MW.
The economics of any individual electric power project, once in commercial
operation, are primarily a function of the tariffs to be paid and the quantity
of electricity which is purchased. The Company shares in the net income of the
Joint Ventures for the duration of their terms. The
12
<PAGE>
Joint Ventures generate revenues through the sale of electricity to power
purchasers pursuant to long term power purchase contracts. These contracts
require the power purchaser to purchase and pay for minimum quantities of
electricity annually or to pay for such quantities if not purchased, in either
case, at prices determined according to tariff formulas set forth in the power
purchase contracts. These tariff formulas are designed, based on the minimum
take obligation of the power purchaser, to be sufficient to pay the operating
costs and financing costs of the project and to enable the Company to realize a
return on its investment.
Demand for power produced by a plant is determined by the demand for electric
power in the areas which the plant serves and the degree to which the power
plant is dispatched. If the plant is dispatched above the minimum quantity
required to be purchased under the power purchase contract, these sales will
generate additional income for the Joint Venture and enhance its profitability.
If demand is significantly below the minimum level, the Joint Venture will look
only to the credit of the power purchaser to pay the required amount. The
Company focuses its development efforts on plants that will provide power to
areas of high demand relative to existing and planned capacity.
The Company receives cash from the Joint Ventures in the form of equity
distributions and payments of principal and interest on shareholder loans made
by the Company or its wholly-owned subsidiaries to the Joint Ventures. In a
number of cases, the Company has, or anticipates having, priority in the payment
of dividends over the Chinese partners to the Joint Venture. The Company's
shareholder loans rank as general obligations of the Joint Ventures, except in
some instances in which third party financing has been secured or will be
secured for the Joint Venture, in which case the shareholder loans generally
are, or will be, subordinated to such third party debt.
Because of the significant magnitude and complexity of constructing electric
power plants, construction periods generally range from one to five years,
depending on the size of the power plant, the technology utilized and the
location. A power plant does not produce revenues until it is completed. If
construction is delayed, revenues from the power plant will be similarly delayed
and perhaps, if the delay is extended, lost. Additionally, the cost of
developing power plants is substantial. The Company capitalizes its development
costs and seeks to recover them at the financial closing of a power plant and by
amortizing them over the life of the Joint Venture. However, if a power plant
under development is abandoned or not financed and completed, such development
costs may be unrecoverable.
The Company's near-term revenue growth will depend in large part on the
Company's ability to bring the Joint Ventures' power plants which are currently
under construction into commercial operation. The Company's longer term revenue
growth will depend in large part on the Company's ability to secure financing
and achieve the financial closing, construction completion and commercial
operation of additional projects under development. The Company believes that
there are, and will be in the foreseeable future, significant shortages of
electric generating capacity in the PRC, especially in many economically
important and developed regions of the country. The Company believes it is
well-positioned after nearly three years of operations in the PRC to continue to
take advantage of opportunities in the China power market.
13
<PAGE>
Results of Operations
Revenues and Costs of Sales. Total revenues increased from approximately
$500,000 to $4.1 million from the third quarter of 1995 to the third quarter of
1996. Costs of sales, which include fuel, operations and maintenance expenses,
depreciation and amortization increased from approximately $200,000 to $1.9
million from the third quarter of 1995 to the third quarter of 1996. The
increases in revenues and costs of sales were primarily due to the commencement
of operations of the Wuxi facility.
Total revenues increased from approximately $900,000 to $7.0 million from the
nine months ended August 31, 1995 to the nine months ended August 31, 1996.
Costs of sales, which include fuel, operations and maintenance expenses,
depreciation and amortization, increased from approximately $500,000 to $3.9
million from the first nine months of 1995 to the same period of 1996. The
increases in revenues and costs of sales were due primarily to the commencement
of operations of Wuxi-AES-CAREC.
Development, Selling, General and Administrative Expenses. Development, selling,
general and administrative expenses decreased $0.5 million from $2.3 million to
$1.8 million from the third quarter of 1996 to the third quarter of 1995. For
the nine months ended August 31, 1996, development, selling, general and
administrative expenses decreased $1.7 million from $6.9 million to $5.2 million
compared with the same period in 1995.
The decreases in development, selling, general and administrative expenses for
the three months and nine months ended August 31, 1996 were primarily due to the
capitalization of a higher proportion of development costs associated with
projects which have achieved financial closing.
Interest Income. Interest income for the third quarter of 1996 and 1995 and the
nine months ended August 31, 1996 and 1995 was primarily generated by income
from marketable securities purchased with the proceeds received from the
Company's 1994 initial public offering. Interest income decreased $1.2 million
to $1.3 million from the third quarter of 1995 to the third quarter of 1996.
Interest income for the nine months ended August 31, 1996 decreased $3.1 million
from $8.1 million to $5.0 million compared with the corresponding period of
1995. The decreases in interest income for the three months and nine months
ended August 31, 1996 were primarily due to a lower average amount of funds
available for investment due to investments in Joint Ventures, as well as the
repurchase of a portion of the outstanding shares of the Company's Class A
Common Stock in the beginning of fiscal 1996.
Interest Expense. During the third quarter of 1996 and the nine months ended
August 31, 1996, interest expense was approximately $400,000 and $700,000,
respectively, related solely to the interest on two minority shareholder loans
to Wuxi-AES-CAREC. For the corresponding period in 1995, the Company had no
outstanding loans.
14
<PAGE>
Liquidity and Capital Resources
The Company's business requires substantial investment associated with the
development, acquisition and construction of electric power plants and related
facilities through its Joint Ventures. As of August 31, 1996, the Company had
entered into commitments to invest a total of $204.6 million in the form of
equity contributions and loans to its Joint Ventures, of which $91.8 million had
been invested as of August 31, 1996. After September 1, 1996, the Company
entered into commitments to provide an additional $55.0 million in equity
contributions and shareholder loans to Chengdu AES-Kaihua, Liyuan-AES and
Zhongli Energy. The Company expects to incur additional commitments in the
future in connection with the development, acquisition, construction, ownership
and operation of additional electric power plant and related facilities in
China.
The Company has financed its investments to date out of the proceeds of its
initial public offering in 1994. At August 31, 1996, cash and cash equivalents
of the Company totaled $92.0 million. In order to meet the Company's commitment
to its existing projects and fund the future investment opportunities, the
Company will raise debt or additional equity. In addition, the Company expects
to obtain additional funds from operating activities as more of its electric
power plants become operational.
The Company and its Joint Venture partners will need to raise limited-recourse
or non-recourse financing from third parties for certain large projects. The
Company believes such projects will be successfully developed only if such debt
is obtained.
The ability of one of the Joint Ventures, Wuhu Shaoda, to pay dividends or
distribute earnings to the Company is restricted by the terms of a bank facility
which has been entered into by the Joint Venture. The declaration of equity
distributions by certain Joint Ventures in which the Company is not entitled to
appoint a majority of the board of directors will depend on the consent of the
other directors. The Company believes that neither of these restrictions is
likely to have a material adverse effect on its liquidity. Also, the ability of
the Joint Ventures to make payment in US dollars to lenders with respect to
third party debt, to make payment in US dollars to the Company with respect to
its shareholder loans to the Joint Ventures and to make equity distributions in
US dollars may be subject to certain constraints.
Cash from Operations
Operating cash flows for the nine months ended August 31, 1996 were $1.6 million
as compared with $1.4 million in the same period in 1995, and were primarily
attributable to the commencement of operations of Wuxi, together with revenues
attributable to the operations of Xiangci-AES.
Cash from Investing Activities
Cash used for investing activities of $24.4 million in the nine months ended
August 31, 1996 reflects $53.4 million of cash used to purchase property, plant
and equipment and other project
15
<PAGE>
related investments which was partially offset by cash of $29.0 million provided
by short-term investments (net of purchases).
Cash from Financing Activities
During the nine months ended August 31, 1996, $10.8 million in cash was used in
financing activities, which was attributable to the repurchase by the Company of
shares of its Class A Common Stock, and the repayment of notes payable,
partially offset by loans and contributions made to subsidiaries by minority
shareholders.
Inflation
Over the last few years, the PRC economy has registered high growth rates and
high rates of inflation. In response, the PRC Government has taken measures to
curb inflation. These measures, along with other factors, have reduced inflation
in the PRC in 1996. However, there can be no assurance that these austerity
measures alone will succeed in controlling inflation, nor that they will not
result in severe dislocations in the PRC economy in general.
The Company will attempt, whenever possible, to take measures to hedge its
projects against the effects of inflation. Generally, this will be done by
structuring the tariff formulas in its power purchase contracts to pass through
increased costs resulting from inflation.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.32 Equity Joint Venture Contract dated February 12, 1996 among China
Power International Holdings Limited, AES China Holding Company
(L) Ltd., Anhui Liyuan Electric Power Development Company and Wuhu
Energy Development Company
10.33* Operation & Offtake Contract dated July 5, 1996 between Wuhu
Shaoda Electric Power Development Company Limited and Anhui
Provincial Electric Power Corporation
10.34 Undertaking and Subordination Deed dated June 26, 1996 among AES
China Holding Company (L) Limited, Anhui Liyuan Electric Power
Development Company Limited, China Power International Holding
Limited, Wuhu Energy Development Company, Wuhu Shaoda Electric
Power Development Company Limited and CCIC Finance Limited
10.35 Junior Subordination Agreement among China Power International
Holding Limited, AES China Holding Company (L) Limited, Anhui
Liyuan Electric Power Development Company Limited, Wuhu Energy
Development Company and Wuhu Shaoda Electric Power Development
Company Limited
10.36 Subordinated Insurance Assignment between Wuhu Shaoda Electric
Power Development Company Limited and AES China Holdings Company
(L) Limited
10.37 Subordinated Borrower Charge Over Accounts between Wuhu Shaoda
Electric Power Development Company Limited and AES China Holdings
Company (L) Limited
10.38 Subordinated Project Contracts Assignment between Wuhu Shaoda
Electric Power Development Company Limited and AES China Holdings
Company (L) Limited
10.39 Subordinated Mortgage Contract between Wuhu Shaoda Electric Power
Development Company Limited and AES China Holdings Company (L)
Limited
11 Consolidated Statements Regarding Computation of Earnings Per
Share
b. Reports on Form 8-K
Registrant filed a Current Report on Form 8-K, dated October 2, 1996,
to provide certain cautionary statements for purposes of the "safe
harbor" for forward looking statements under the Private Securities
Litigation Reform Act of 1995.
- -----------------------
* The Company has sought confidential treatment for certain information
identified in this exhibit.
17
<PAGE>
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 thereunto duly authorized.
AES China Generating Co. Ltd.
-------------------------------------
(Registrant)
October 15, 1996 /s/ Jeffery A. Safford
- ---------------- -------------------------------------
Date Jeffery A. Safford Vice
President Chief Financial Officer and
Secretary
18
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
10.32 Equity Joint Venture Contract dated February 12, 1996 among China
Power International Holdings Limited, AES China Holding Company (L)
Ltd., Anhui Liyuan Electric Power Development Company and Wuhu
Energy Development Company
10.33* Operation & Offtake Contract dated July 5, 1996 between Wuhu Shaoda
Electric Power Development Company Limited and Anhui Provincial
Electric Power Corporation
10.34 Undertaking and Subordination Deed dated June 26, 1996 among AES
China Holding Company (L) Limited, Anhui Liyuan Electric Power
Development Company Limited, China Power International Holding
Limited, Wuhu Energy Development Company, Wuhu Shaoda Electric Power
Development Company Limited and CCIC Finance Limited
10.35 Junior Subordination Agreement among China Power International
Holding Limited, AES China Holding Company (L) Limited, Anhui Liyuan
Electric Power Development Company Limited, Wuhu Energy Development
Company and Wuhu Shaoda Electric Power Development Company Limited
10.36 Subordinated Insurance Assignment between Wuhu Shaoda Electric Power
Development Company Limited and AES China Holdings Company (L)
Limited
10.37 Subordinated Borrower Charge Over Accounts between Wuhu Shaoda
Electric Power Development Company Limited and AES China Holdings
Company (L) Limited
10.38 Subordinated Project Contracts Assignment between Wuhu Shaoda
Electric Power Development Company Limited and AES China Holdings
Company (L) Limited
10.39 Subordinated Mortgage Contract between Wuhu Shaoda Electric Power
Development Company Limited and AES China Holdings Company (L)
Limited
11 Consolidated Statements Regarding Computation of Earnings Per Share
Exhibit 10.32
China Power International Holdings Limited
AES China Holding Company (L) Ltd.
Anhui Liyuan Electric Power Development Company
Wuhu Energy Development Company
Equity Joint Venture Contract
February 12, 1996
Page: 1 of 30
<PAGE>
Table of Contents
Article 1. Definitions................................................. 3
Article 2. Parties to the Joint Venture................................ 7
Article 3. Establishment of the Joint Venture.......................... 8
Article 4. Purpose, Scope and Scale of Business........................ 9
Article 5. Total Amount of Investment and Registered Capital........... 9
Article 6. USD and RMB Financing....................................... 10
Article 7. Responsibilities of Parties to the Joint Venture............ 11
Article 8. Site........................................................ 13
Article 9. Construction and Operation of the Power Plant............... 13
Article 10. Electricity Sale and Tariffs................................ 14
Article 11. Purchase of Equipment & Materials and Services.............. 14
Article 12. Electricity Fees, Profit Distributions and Sharing of
Risks and Losses........................................... 14
Article 13. The Board of Directors...................................... 15
Article 14. Operation and Management Organization....................... 18
Article 15. Labor Management............................................ 19
Article 16. Annual Operating Plans and Budgets.......................... 19
Article 17. Taxes, Accounting and Audit................................. 20
Article 18. Bank Account and Foreign Exchange........................... 22
Article 19. Term of the Joint Venture................................... 22
Article 20. Transfer of Interests....................................... 22
Article 21. Termination Prior to the Expiration and Dissolution......... 23
Article 22. Disposal of Assets upon the Expiration of the JV............ 24
Article 23. Liabilities for Breach of Contract.......................... 24
Article 24. Power Plant Insurance....................................... 25
Article 25. Confidentiality............................................. 25
Article 26. Force Majeure............................................... 26
Article 27. Applicable Laws............................................. 26
Article 28. Settlement of Disputes...................................... 27
Article 29. Miscellaneous............................................... 27
Page: 2 of 30
<PAGE>
PREAMBLE
IN ACCORDANCE WITH THE LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON SINO-FOREIGN
EQUITY JOINT VENTURES (HEREINAFTER REFERRED TO AS "THE EQUITY JOINT VENTURE
LAW") AND OTHER PROMULGATED RELEVANT CHINESE LAWS AND REGULATIONS, CHINA POWER
INTERNATIONAL HOLDING LIMITED ("PARTY A"), AES CHINA HOLDING COMPANY (L) LTD.
("PARTY B"), ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY ("PARTY C") AND
WUHU ENERGY DEVELOPMENT COMPANY ("PARTY D") (EACH, A "PARTY" AND COLLECTIVELY,
THE "PARTIES"), ADHERING TO THE PRINCIPAL OF EQUALITY AND MUTUAL BENEFIT, AGREE
TO SET UP A SINO-FOREIGN JOINT VENTURE ENTERPRISE IN WUHU CITY, ANHUI PROVINCE,
THE PEOPLE'S REPUBLIC OF CHINA. THE PARTIES HAVE HERETO REACHED THE FOLLOWING
AGREEMENT:
Article 1. Definitions
Unless otherwise stated in the provisions of this Contract, the following terms
shall have meanings set forth below:
1.1 "Power Plant" shall mean the power plant which will be built,
designed, constructed, commissioned and
completed in Wuhu City, Anhui Province,
the People's Republic of China
consisting of 2 x 125MW coal-fired
generating units and all buildings,
equipment and machines, including but
not limited to coal and ash handling
facilities, civil works and marine
works, the transmission facilities
linking the plant with the grid,
auxiliary buildings and offices in
accordance with the terms and conditions
of this Contract and the EPC Contract.
1.2 "Anhui Power" shall mean Anhui Provincial Electric Power
Corporation.
1.3 "EPC Contract" shall mean the construction contract entered into
by and between the Joint Venture and
Anhui Power for the purpose of the
overall design and construction of the
Power Plant.
1.4 "Operation and Offtake
Contract" shall mean the contract entered into by and between
the Joint Venture and Anhui Power
regarding the operation of, and sale of
the electricity from the Power Plant.
1.5 "Site" shall mean the site on which the Power Plant is
located in Wuhu Power Plant of Anhui
Province, China.
1.6 "Project Budget" shall mean the project budget as included in the
EPC Contract.
Page: 3 of 30
<PAGE>
1.7 "Tariff" shall mean the on-grid tariff per KWH of
electricity generated by the Power Plant
which is approved by relevant Chinese
authorities and paid by Anhui Power and
which can be adjusted in accordance with
Article 7 of the Operation and Offtake
Contract.
1.8 "Plant Insurance" shall mean in accordance with Article 24 hereof,
insurance obtained and maintained by
Anhui Power on behalf of the Joint
Venture for the construction and
operation of the Power Plant.
1.9 "Actual Completion Date"
shall mean in accordance with EPC Contract, the
date on which any one of the units
successfully completes the 72 hour and
24 hour trial operation, and such
completion is certified by the
Engineering Consultant (as defined in
the EPC Contract) approved by the
Creditors.
1.10 "Contract Completion Date"
shall mean as defined in Article 5 of the EPC
Contract.
1.11 "Joint Venture" or "JV"
shall mean the joint venture company set up by the
Parties pursuant to the Equity Joint
Venture Law, other promulgated relevant
Chinese laws and regulations and this
Contract. The name of the Joint Venture
in Chinese is: (omitted) and the name
of the JV in English is: Wuhu Shaoda
Electric Power Development Company
Limited.
1.12 "Articles of Association"
shall mean the Articles of Association of the Joint
Venture.
1.13 "Business License" shall mean the Business license to be issued to the
Joint Venture by the State
Administration for Industry and Commerce
of China or its other related local
branches.
1.14 "Board of Directors" or "Board"
shall mean the Board of Directors of the Joint
Venture.
1.15 "Directors" shall mean members of the Board of Directors of the
Joint Venture.
1.16 "Establishment Date of the
Joint Venture" shall mean the date when the Business License of
the Joint Venture is issued.
1.17 "Examination and Approval
Authority" shall mean the Ministry of Foreign Trade and
Economic Cooperation of China and its
authorized examination and approval
authorities.
1.18 "Term of the Joint Venture"
shall mean the duration of the Joint Venture set
forth in Article 19 of this Contract,
including any extended term.
Page: 4 of 30
<PAGE>
1.19 "Affiliate of a Party" shall
mean a company directly or indirectly
controlled by a party by means of its
voting right or other means, or a Party
directly or indirectly controlled by a
company by means of its voting right or
other means. "Control" means the right
to elect the member of the Board of
Directors or the direction of operation
and management.
1.20 "Confidential Information"
shall mean technology and know-how as well as
analytical data, processes, programs,
manuals, designs, sketches, photographs,
plans, drawings, specifications,
reports, studies, findings, non -
patented inventions and ideas and other
information relating to the
construction, installation and financing
of the Power Plant as well as the use or
sale of electricity, whether of a
technical engineering, operational,
business or economic nature, whenever
designated as "Confidential" by any
Party or any of its relevant Affiliates
and provided by any Party or any of its
relevant Affiliates in connection with
the negotiation of the project
contemplated hereunder, the
implementation of this Contract or the
conduct of the business contemplated by
this Contract. Confidential Information,
however, shall not include such
information which is now or hereafter
becomes part of the public domain
through authorized publication,
information which the receiving Party
can demonstrate was already in its
possession at the time of receipt, and
information which hereafter comes into
the possession of the receiving Party
and was or is not acquired by the
receiving Party directly or indirectly
from the providing Party or sources
under an obligation of secrecy to such
providing Party.
1.21 "Force Majeure" shall mean any of the following events
(1) wars, hostilities or insurrections;
(2) pestilence or other epidemics;
(3) fires that are not caused by
carelessness or deliberateness
(4) lightning;
(5) earthquakes;
(6) other natural forces including
natural disasters.
The events listed above must have all of
the following five characteristics at
the same time:
(1) taking place after the signing of
this Contract;
(2) enforeseable or unavoidable;
(3) beyond the control of any of the
Parties;
(4) directly preventing the performance
of the obligations under this Contract
by any Party.
(5) unpreventable by the best efforts of
the Party affected.
Page: 5 of 30
<PAGE>
1.22 "Renminbi" or "RMB" shall mean the lawful currency of China.
1.23 "RMB Financing" shall mean the RMB loans to the Joint Venture
provided from sources within China.
1.24 "Foreign Exchange" shall mean any currency other than RMB.
1.25 "U.S. Dollars", "USD" or "US$"
shall mean the lawful currency of the United States
of America.
1.26 "US$ Senior Loan" shall mean the USD loans provided by the First
Creditor to the Joint Venture on the
terms and conditions set forth in the
USD Senior Loan Contract.
1.27 "USD Senior Loan Contract"
shall mean the Contract signed between the Joint
Venture and the First Creditor for the
purpose of providing the USD Senior Loan
needed by the Power Plant.
1.28 "USD Subordinated Loan" shall
mean the USD loans provided by the Second
Creditor to the Joint Venture on the
terms and conditions set forth in the
USD Subordinated Loan Contract.
1.29 "USD Subordinated Loan
Contract" shall mean the Contract signed between the Joint
Venture and the Second Creditor for the
purpose of providing the USD
Subordinated Loan needed by the Power
Plant.
1.30 "Creditor" shall mean an agency or legal person who provides
funds under the Financing Contract.
1.31 "Financing Contract" shall
mean any Contract entered into by and between
the JV and a Creditor by which to obtain
construction funds for the Power Plant,
including USD Senior Loan Contract, USD
Subordinated Loan Contract and RMB Loan
Contract.
1.32 "China" shall mean the People's Republic of China.
Page: 6 of 30
<PAGE>
Article 2. Parties to the Joint Venture
2.1 Each of the Parties hereby represents and warrants to other Parties
that it is duly established and registered as set forth below, that it
has full legal power and right to enter into this Contract that its
legal representative named below is duly authorized to sign this
Contract and other contracts contemplated hereunder on its behalf, that
it has taken all necessary actions and will seek approval from the
Examination and Approval Authority to approve this Contract and the
other contracts contemplated hereunder; that upon the approval of the
Examination and Approval Authority, this Contract shall constitute the
legal, valid and binding obligations of such Party, and the terms of
this Contract shall be enforceable against such Party; its execution,
delivery and performance of this Contract and other contracts will not
violate any of its constituent documents, other agreements,
obligations, or any currently effective law, regulation or decree of
its home country that may be applicable to any aspect of the
transactions contemplated hereunder.
2.2 The parties to this Contract are:
Party A: China Power International Holdings Limited
Legal address: Suite 5306, 531 F, Central Plaza
18 Harbour Road, Wanchai,
Hong Kong
Legal Representative: Zang Mingchang
Position: General Manager
Nationality: People's Republic of China
Party B: AES China Holding Company (L) Ltd.
Legal Address: Lot A, Level 3, Wisma Oceanic
Jalan Okk Awang Besar, 87007
Federal Territory of Labuan
Legal Representative: Paul Hanrahan
Position: President
Nationality: USA
Party C: Anhui Liyuan Electric Power Develpment Company
Legal Address: No. 415 Wuhu Road
Hefei, Anhui Province
China, 230061
Legal Representative: Cheng Guangjie
Position: Chairman of the Board of Directors
Nationality: People's Republic of China
Page: 7 of 30
<PAGE>
Party D: Wuhu Energy Development Company
Legal Address: Commercial Office Building
Huangshan West Road
Wuhu, Anhui Province
China, 241000
Legal Representative: Wang Wudao
Position: General Manager
Nationality: People's Republic of China
Article 3. Establishment of the Joint Venture
3.1 The Parties of the Joint Venture agree to set up the Joint Venture in
accordance with the Equity Joint Venture Law and other relevant laws
and regulations of China. The JV is a legal entity in China, and under
the protection and governance of Chinese laws. All activities of the JV
shall abide by promulgated relevant laws, and rules and regulations of
China.
3.2 The name of the JV in Chinese is: (omitted) and in English is Wuhu
Shaoda Electric Power Development Company Limited.
The legal address of the JV is Commercial Office Building, Huangshan
West Road, Wuhu City, Anhui Province.
3.3 The form of organization of the JV shall be a limited liability
company. All parties shall share the losses, risks, legal liabilities
and other liabilities of the JV in proportion to their respective
contributions to the registered capital of the JV. Such liabilities are
limited to the registered capital contributed by each Party. Unless
otherwise agreed upon in written agreement among the Parties to the JV,
other than to provide registered capital, each Party shall not be
collectively or individually held responsible to the JV or to a third
party in connection with the JV's activities. If any action of a Party,
which causes losses, increased risks and liabilities, is not in the
scope of this Contract and violates the Article of Association or is
not included in the scope of business of the Joint Venture, no other
Party shall be held responsible for such losses, risks, legal or other
liabilities.
3.4 After the JV has obtained the approval certificate, the JV Parties
shall proceed to register with and obtain a Business License from the
Administration for Industry and Commerce in accordance with relevant
laws and regulations of the People's Republic of China.
Page: 8 of 30
<PAGE>
Article 4. Purpose, Scope, and Scale of Business
4.1 The purposes of the JV shall be to:
(a) build and develop the Power Plant, and generate and sell
electricity generated by the Power Plant in order to support and
encourage Wuhu's opening to the outside world and bring into play its
own advantages, strengthen economic cooperation and technical
exchanges,
(b) obtain advanced and appropriate equipment for the Power Plant and
use modern managerial methods in order to increase the electricity
supply in Anhui Province;
(c) achieve expected economic benefits for each Party.
4.2 The JV's scope of business is to build, own and operate the Power
Plant, and generate and sell electricity.
4.3 The scale of the JV's business includes the generation and sale of the
electricity generated by 2x125 MW coal-fired generators.
Article 5. Total Amount of Investment
and Registered Capital
5.1 The total amount of investment of the JV shall be US$118.37 million, of
which the transmission project accounts for US$ 18.07 million.
5.2 The registered capital of the JV shall be US$30 million, and shall be
contributed by the Parties according to the following ratios:
Party A 45% US$13.50 million
Party B 25% US$7.50 million
Party C 20% US$6.00 million
Party D 10% US$3.00 million
Page: 9 of 30
<PAGE>
5.3 The registered capital of the JV shall be paid in cash by the Parties.
Party C and D shall contribute their portions in RMB cash. The amount
of RMB cash shall be calculated on the basis of the actual amount of
RMB deposited into the designated bank accounts of the JV using the
reference USD/RMB exchange rate on the date of the deposit as announced
by the People's Bank of China. Party A and B shall contribute their
portions in USD cash.
5.4 All cash payments made by the Parties to the Joint Venture as their
respective registered capital contributions shall be remitted to the
Joint Venture's bank accounts.
5.5 The Parties shall make their respective registered capital
contributions in accordance with Articles 5.2, 5.3 and 5.4 hereof
within 30 days after the establishment of the JV and the obtaining of
the Business License.
5.6 After the Parties have made their respective registered capital
contributions to the JV, the JV shall, at its own expense, engage an
accountant registered in China, and accepted by all the Parties, to
verify the registered capital contributions and issue a verification
report, at which time investment certificates shall be issued to the
contributing Parties by the JV.
5.7 Any proposed increase of registered capital of the JV shall be approved
by the Board of Directors and then be submitted to the Examination and
Approval Authority for approval. After being approved by the
Examination and Approval Authority, the JV shall register such increase
with the relevant Administration for Industry and Commerce. The
contribution ratio among the Parties for any additional registered
capital shall be the same as the original registered capital
construction ratio unless otherwise agreed upon by the Parties. Upon
the agreement of the Parties and approval by the Examination and
Approval Authority, the Parties may agree to adjust the current ratio
of the registered capital contribution of the Parties.
5.8 All costs related to the project development shall be included in the
total amount of investment of the JV and be paid by the JV.
Article 6. USD Financing and RMB Financing
6.1 The Parties shall arrange financings for the Joint Venture in an amount
equivalent to the difference between the amount of the total investment
and the amount of the registered capital of the Joint Venture in
accordance with Article 6.2 of this Contract.
Page: 10 of 30
<PAGE>
6.2 Party A shall procure the provision to the Joint Venture of the USD
Senior Loan amounting to US$65 million on behalf of the Joint Venture
and shall provide guarantee for the USD Senior Loan; Party B shall
procure the provision to the Joint Venture of the USD Subordinated Loan
amounting to US$18 million on behalf of the Joint Venture, and shall
provide guarantee for the USD Subordinated Loan.
Party C and Party D shall provide or procure the provision to the Joint
Venture of financing up to US$3.75 million (equivalent to RMB 31.10
million approximately at the exchange rate of US$1:RMB 8.3), and shall
provide guarantee for such financing.
Should there be any cost overrun in the course of construction, the
Parties shall each raise funds in proportions to their contributions to
registered capital.
Article 7. Responsibilities of Parties to the Joint Venture
7.1 Responsibilities of Party C and D include the following:
(a) contributing their respective portions of the registered capital in
accordance with this Contract and other relevant laws and regulations;
(b) arranging financing in accordance with this Contract;
(c) assisting the Joint Venture in applying to relevant authorities of
China for approval, registration, permission, business license and
other matters concerning the establishment and operation of the JV,
including relevant plans for the construction and the annual generation
plans of the Power Plant;
(d) assisting the JV in purchasing and receiving equipment that shall
be purchased in China;
(e) assisting the JV in obtaining required coal, steel, cement and
other materials in accordance with the JV's required quantities,
specifications and delivery time and assisting the JV in obtaining any
necessary quota;
(f) assisting the JV in negotiating with the relevant land
administration department and other government agencies for the use of
the Site for the Power Plant, and assisting in handling all other
necessary formalities so as to ensure that during the term, the JV is
authorized to use the land at the Site in accordance with its scope of
business;
Page: 11 of 30
<PAGE>
(g) assisting the JV and its foreign employees in obtaining entry
visas, residence and work permits, and in arranging for board and
lodging, medical care, other related matters and in processing their
traveling procedures in China;
(h) assisting the JV in applying for applicable taxes and other
applicable preferential treatments in accordance with relevant laws and
regulations of China;
(i) assisting the JV in obtaining, within one month of the
establishment of the Joint Venture official approval for opening USD
and RMB accounts as provided in this Contract;
(j) assisting the JV in applying for relevant approvals and permission
so that the JV can (1) convert RMB into USD and balance the foreign
exchange account; (2) remit Party A and Party B's shares of profits and
other distributions and (3) adjust Tariffs in accordance with Article
10 of this Contract;
(k) handling other reasonable matters entrusted by the Joint Venture
from time to time.
7.2 Additional responsibilities of Party C shall be to:
(a) cause Anhui Power to sign the EPC Contract and abide by the
responsibilities set forth in the EPC Contract;
(b) cause Anhui Poser to sign the Operation and Offtake Contract and
abide by the responsibilities set forth in the Operation and Offtake
Contract;
(c) assist the JV in steadily generating electricity and in selling
such electricity to the Anhui provincial power grid in accordance with
the design capacity of the Power Plant during the term of the JV;
(d) assist the JV in recruiting local Chinese management personnel,
technical personnel, workers and other necessary personnel;
(e) cause Anhui Power to perform or do all other acts or matters
envisaged in the other provisions of this Contract to be performed or
done by Anhui Power;
(f) assist Party A and Party B in negotiating and obtaining foreign
fund financing for any in the name of the Joint Venture by providing
necessary documents;
7.3 Responsibilities of Parties A and B shall include the following:
(a) contributing their respective portions of the registered capital of
the JV in accordance with this Contract and relevant laws;
Page: 12 of 30
<PAGE>
(b) arranging financing outside of China in accordance with Article 6.2
of this Contract;
(c) assisting the Joint Venture to purchase equipment, supplies and
materials within China and overseas;
(d) assisting the Joint Venture in introducing advanced management
technique and financial management experiences;
(e) assisting the Joint Venture in recruiting qualified personnel and
consultants when necessary;
(f) assisting the staff of the Joint Venture in handing formalities for
overseas visa for training in the operation and management of the Power
Plant;
(g) handling other reasonable matters entrusted by the Joint Venture
from time to time.
Article 8. Site
The Joint Venture shall obtain the lawful right to use the site in
accordance with the provisions of Chinese laws in order to ensure its
excessive use of the Site during the term of this Contract.
Article 9. Construction and Operation of the Power Plant
9.1 The Joint Venture will entrust Anhui Power as the general contractor
for construction in change of the construction of the Power Plant.
9.2 The Joint Venture will entrust Anhui Power as the constractor for
operation in charge of the operation and management of the Power Plant,
including the supply of coal for the Power Plant.
9.3 The Parties agree that Anhui Power shall be responsible for the design,
construction, completion, commissioning, delivery, operation and
management of the Power Plant in accordance with this Contract, EPC
Contract and Operation and Offtake Contract. Management as referred to
in the previous paragraph shall mean the management of the Power Plant
and not the management of the Joint Venture.
Page: 13 of 30
<PAGE>
9.4 Party C shall cause Anhui Power to prepare in time on behalf of the JV
an annual generation plans, an annual income and expenditures plan, and
an annual renovations and improvements plan, and submit these plans to
the Board of Directors for approval and be responsible to implement
them upon approval.
Article 10. Electricity Sale and Tariffs
All electricity generated by the Power Plant shall be dispatched to the
Anhui provincial power grid for sale. The details concerning the
dispatch of electricity, Tariffs and payment shall be as presented in
the Operation and Offtake Contract.
Article 11. Purchase of Equipment
& Materials and Services
11.1 Provided that all conditions being equal, the JV shall purchase
required machinery and equipment, raw materials, fuels, accessories and
office supplies first in China.
11.2 For all imported machinery, transportation tools, raw materials and
accessories, the JV shall, in accordance with "Laws of Inspection of
Import and Export Goods of the People's Republic of China", tender all
imports to Import and Export Commodities Inspection Authority of the
PRC for inspection.
Article 12. Electricity Fees, Profit Distributions and Sharing
of Risks and Losses
12.1 Whereas, Anhui Power shall provide services in accordance with the EPC
Contract and the Operation and Offtake Contract, the JV shall pay to
Anhui Power a management fee pursuant to these contracts.
12.2 The revenues due to the JV, including the monthly payments made by
Anhui Power for electricity under the Operation and Offtake Contract,
insurance proceeds and all other amounts, shall be distributed in the
following order of priority after having paid the projected operation
and fuel costs of the Power Plant, financial charges (loan interest,
exchange loss and financing cost), the cost of the Joint
Venture and all kinds of taxes:
(i) principal repayable in respect of the USD Senior Loan;
Page: 14 of 30
<PAGE>
(ii) principal repayable in respect of the USD Subordinated Loan;
(iii) principal payable in respect of the RMB Loan;
(iv) the JV's losses from the previous fiscal year as approved by
the Board;
(v) contributions to the three funds as required by the Chinese
law and in accordance with Article 17.3 of this Contract;
(vi) distribution of profits to Parties A, B, C and D in accordance
with Articles 12.3 hereof.
12.3 Each of the Parties shall be distributed its profits in accordance with
its respective ratio of contributions of the registered capital of the
Joint Venture. Each Party's profit shall be calculated in US dollars.
The distribution of profits to Parties A and B shall be in USD and if
the JV possesses insufficient foreign exchange, they can be paid in RMB
on the prerequisite of ensuring the foreign exchange required for
repaying USD financing, and the distribution of profits to Party C and
D shall be in RMB.
Article 13. The Board of Directors
13.1 The Board of Directors shall consist of nine directors, three of which
will be appointed by Party A, two by Party B, two by Party C and two by
Party D. The Board shall have one Chairman, and two Vice Chairmen. The
Chairman shall be appointed by Party A; Parties B and C shall appoint
one Vice Chairman each. The Chairman and Vice Chairmen shall serve for
a term of four years and the term may be renewable by the appointing
Parties. If there is a vacancy on the Board, it shall be filled by the
Party who appointed the initial Director. Any Party may remove at any
time for any reason any or all of the Directors appointed by such Party
and appoint in lieu thereof any other person to serve the remainder of
the relevant term.
13.2 The Chairman of the Board shall be the legal representative of the JV
and shall at all times carry out decisions, resolutions and orders made
by the Board. If the Chairman is unable or fails to exercise his
responsibilities for any reason, he shall authorize a Vice Chairman to
act on his behalf. The duties of the Directors shall not include daily
administrative duties.
13.3 The Board shall be the highest authority of the JV and shall decide all
major issues of the JV. For details regarding its authority and
responsibilities, see this Contract and the Articles of Association.
Page: 15 of 30
<PAGE>
13.4 The following issues must be approved by all the directors voting in
person or by proxy at an officially-convened Board meeting in order to
be validated:
(a) amendment(s) of the Articles of Association and this Contract;
(b) increase or transfer of the registered capital pledge of interests
under this Contract, and adjustment to the percentage of the JV
Parties' registered capital contributions;
(c) JV's merger with any other economic organizations;
(d) transfer, sale, lease or other means of disposal of the JV's
business or its assets in part or in total; purchase of control or
acquisition in part or in total of business or assets of other
companies or units;
(e) extension and termination of the term, dissolution or liquidation
of the JV;
(f) any expenditures related to compensation for losses caused by any
Force Majeure as defined in the EPC Contract or the Operation and
Offtake Contract;
(g) change of the Contract Completion Date specified in the EPC
Contract;
(h) change in the Project Budgets;
(i) decision over the annual operating budget (including change of
Tariffs), annual financial budget and financial reports (including the
balance sheet and the profit-loss statement);
(j) increase in the JV's production capacity;
(k) signing or amending any loan contracts, guarantees or other
important contracts (including but not limited to the EPC Contract and
the Operation and Offtake Contract) signed on behalf of or by the JV or
using any of the JV's interests, buildings, real estate, and fixed
assets or capital goods hereby as collateral, pledges, or guarantees;
(l) the appointment and dismissal of an independent auditor and
approval of the audited annual financial report of the JV;
(m) decisions regarding the annual generation plan, operating plan and
strategies;
(n) decisions with respect to funding for the general reserve fund, the
enterprise development fund and employee bonus and welfare fund; and
decisions on how to use the general reserve fund and the enterprise
development fund;
Page: 16 of 30
<PAGE>
(o) decisions on using foreign exchange in ways unspecified in Article
18.3 of this Contract;
(p) decisions regarding the use or expenditure of the employee bonus
and welfare fund; and
(q) the appointment and dismissal of the General Manager and Deputy
General Managers, and decision regarding salaries of the General
manager, Deputy General Managers and other senior management personnel.
(r) other issues specified in this Contract or the Articles of
Association.
13.5 The Board shall convene at least one meeting every year. The meetings
shall be held at the legal address of the JV or the registered
addresses of Party A, B or C, or at such other place discussed by the
Board. The quorum shall be at least six directors with at least one
from each party. The Board's resolutions can also be voted on via fax
or written forms.
13.6 Within three days after receiving a proposal for an interim meeting by
two directors, the Chairman, or any one of the Vice Chairmen, shall
decide whether to convene such meeting and promptly notify all other
directors of his or her decision.
13.7 The Chairman or any of the Vice Chairmen shall send notices regarding
any annual or interim meeting to each Director at least 14 days prior
to the date of such meeting, including the agenda, time and place of
such meeting. Such notices may be waived by the unanimous consent of
all Directors attending the meeting in person or by proxy. The Board
meeting shall not be held less than 14 days or more than 28 days from
the date of the issuance of the notification.
13.8 If any Directors can not attend any meeting for any reason, such
Directors may authorize a person in writing (via mail, fax or
hand-delivery) to represent them in attending the meeting and voting at
the meeting. A proxy can represent one or more than one Director.
13.9 The Directors shall serve without compensation from the JV. If a
Director is an employee of the JV at the same time, the JV shall
compensate the person according to his or her position in the JV. The
JV shall reimburse Directors for all reasonable expenses incurred
related to the Board meetings.
Page: 17 of 30
<PAGE>
13.10 Minutes of every Board meeting shall be recorded and signed by all
attending Directors. If a proxy attends the meeting on behalf of a
Director, the proxy shall sign the minutes of that meeting on behalf of
the Director. In order to facilitate each meeting, the Chairman shall
designate the secretary of the meeting (if the Chairman is absent, then
the Vice Chairman shall do so). The responsibilities of the secretary
are to keep minutes of each meeting and to translate or arrange
translation of all documents related to the meeting. The secretary
shall also distribute the above documents to each Director. Minutes
shall be kept in Chinese, kept on file by the JV, and copies of minutes
shall be distributed to each Party at the addresses specified in
Article 29.6.
Article 14. Operation and Management Organization
14.1 The Board of Directors shall establish an operation and management
organization which shall be responsible for the daily operation and
management of the JV. The organization shall consist of a General
Manager and several Deputy General Managers appointed by the Board of
Directors. (one Deputy General Manager shall be appointed by Party B to
be responsible for supervising the operation and maintenance of the
Power Plant).
14.2 The responsibility of the General Manager shall be to carry out the
resolutions of the Board of Directors and organize and conduct the
daily operation and management of the JV. The Deputy General Managers
shall assist the General Manager and be concurrently the manager of the
various business departments. The specifics relating to the authority
of the General Manager and Deputy General Managers are detailed in the
Articles of Association.
14.3 The General Manger shall propose and suggest the formation of the
business and management departments and candidates for senior staff,
and submit the proposals to the Board of Directors for approval.
14.4 Managers may be dismissed for abuse of power, seeking personal
interests, graft or serious dereliction of duty, or if they are
completely incapable of accomplishing their work assignment. Unless
otherwise approved by the Board of Directors, managers and other
employees of the JV shall not take any positions or work in other
companies, units, entities or organizations. Unless otherwise approved
by the Board of Directors, persons who violate this rule shall be
dismissed immediately.
Page: 18 of 30
<PAGE>
Article 15. Labor Management
15.1 The JV shall enjoy the full independence of an equity joint venture
enterprise with respect to hiring and dismissing its employees. The
recruitment, employment, dismissal, resignation, wages, salaries, labor
insurance, welfare, bonuses and labor discipline, etc. of the employees
of the JV shall be handled in accordance with relevant laws and
regulations of China.
15.2 The employees of the JV shall abide by the regulations and rules set by
the JV and fulfill their duties. Upon authorization by the Board of
Directors, the General Manager shall formulate and promulgate
regulations and measures regarding labor management. The recruitment,
employment, dismissal, resignation, wages, salaries, labor insurance,
welfare, bonuses and penalties, property rights to any invention or
publication made by the employees of the JV during their employment and
procedure for application for protecting the relevant copyrights shall
be specified in written labor contracts with each employee and in
recruitment regulations and rules of the JV.
15.3 Anhui Power's employees selected to work in the Power Plant shall be
managed by Anhui Power, but shall be considered as employees of the JV
when calculating these employee's wages, bonuses, and welfare.
15.4 Depending on the merits of the case, the General Manager is fully
authorized to warn, record a demerit of, deduct wage of, or dismiss any
employee who violates the provisions of the labor contract or the
rules, regulations or labor discipline of the JV.
Article 16. Annual Operating Plans and Budgets
16.1 The General Manager and his staff shall be responsible for the
preparation of the annual operating plans and budgets of the JV based
on the annual operating plans and budgets submitted by Anhui Power. The
operating plans and budgets (including balance sheet, profit and loss
statement and cash flow projection) for each fiscal year shall be
submitted to the Board of Directors for examination and approval prior
to December of the preceding year and shall include, but not be limited
to, comprehensive and detailed information regarding:
(a) Procurement of coal and other materials, equipment, machinery and
other assets of the JV;
Page: 19 of 30
<PAGE>
(b) Raising and use of funds (including foreign exchange and RMB);
(c) Plans with respect to the generation and sale of electricity;
(d) Projected revenues, expenditures and profits of the JV;
(e) Tariff policies; and
(f) Plans for staff and workers' training.
16.2 The Board of Directors shall complete its examination and approval of
the annual operating plan and budget for each at a meeting in the
preceding year. The General Manager shall be responsible for the
implementation of the annual operating plan and budget as approved by
the Board of Directors.
Article 17. Taxes, Accounting and Audit
17.1 The JV shall pay taxes in accordance with relevant Chinese laws and
regulations. The JV shall apply for enjoying all preferential taxes
available under the law applicable to the JV in China.
17.2 The individual employees of the JV shall be responsible for paying
their own individual income taxes in accordance with relevant
officially promulgated laws and regulations of China.
17.3 After payment of income taxes by the JV, the JV shall in accordance
with relevant officially promulgated regulations of China set aside a
certain amount for the reserve fund, the bonus and welfare fund for
workers and staff members and the enterprise development fund. The
actual amounts to be allocated each year for such funds shall be
determined by the Board of Directors on the basis of the JV's actual
economic circumstances, but the amount allocated to the bonus and
welfare fund in any year shall not exceed five (5%) percent and the
aggregate amount allocated to all three funds in any year shall not
exceed fifteen (15%) percent of the JV's net after-tax profits for such
year. If a change in the law of China renders either of these limits
ineffective, it shall be adjusted accordingly.
17.4 The fiscal year of the JV shall start on January 1 of the year and end
on December 31 of the same year. The first fiscal year of the JV shall
commence on the Establishment Date and end on December 31 of the same
year. The last fiscal year of the JV shall start on January 1 of the
year of termination and end on the date of termination of the JV.
Page: 20 of 30
<PAGE>
17.5 The JV shall adopt internationally recognized accrual basis and debit
and credit accounting systems. Accounting records, vouchers, books and
statements of the JV shall be prepared and kept in Chinese. The JV
shall use RMB as the base bookkeeping currency for its financial
records. The annual quarterly and monthly reports shall be approved and
jointly signed by the General Manager and the chief accountant (who
shall be employed by the JV) and shall be prepared and kept in Chinese.
17.6 In accordance with the relevant laws and regulations of China,
including the Foreign Investment Enterprise Accounting System of the
People's Republic of China, the JV shall formulate accounting and
administrative measures regarding its financial affairs.
17.7 An accountant registered in China and acceptable to all the Parties
shall be engaged by the JV as its auditor to examine and verify the
accounts and books of the JV and shall submit the audit report to the
Board and the General Manager. Any Party shall also have the right, but
not the obligation, not more than once in each fiscal year to appoint
an accountant registered in China or abroad to audit the accounts of
the JV at the expense of such Party; provided, however, that such
auditor shall undertake to keep confidential all documents used in the
audit. The JV shall make available its accounting books and records to
such auditor on reasonable terms.
17.8 The JV shall prepare and provide to the Parties the following reports
in the format of generally accepted accounting principles as applicable
in the electric power industry of China;
(a) Within 90 days after the last day of each fiscal year, the JV shall
provide the Parties with complete and audited financial statements
(including the profit and loss statement and balance sheet) as of the
last day of such fiscal year;
(b) Within 30 days after the last day of each financial quarter, the JV
shall provide the Parties with the unaudited financial statements for
such quarter, including a profit and loss statement (for such quarter
and for the year-to-date) and a balance sheet (as of the last day of
such quarter);
(c) Within 21 days after the last day of each month, the JV shall
provide the Parties with (i) a profit and loss statement for such
month, and (ii) a forecast for the remainder of the current financial
quarter, which shall include, without limitation, the number of
personnel, revenue, cash balance and expenses.
17.9 The JV's accounting systems shall be filed with the Wuhu Finance Bureau
and the Wuhu Taxation Bureau. The Board of Directors shall have the
right to perform the duty of financial supervision. The Parties shall
have the right to appoint accountants at their own expenses to examine
and audit the books of the JV.
Page: 21 of 30
<PAGE>
Article 18. Bank Account and Foreign Exchange
18.1 The JV shall open its RMB and foreign exchange accounts in banks
approved and acknowledged by the Chinese Government. Such foreign
exchange account shall hold all monthly payments made by Anhui Power to
the JV in respect of the USD Financing as well as the monthly
distribution of profit. The procedures for signing and issuing JV
checks shall be decided by the Board of Directors and specified in the
financial rules of the JV.
18.2 The balance of foreign exchange of the JV shall be resolved through
regulation after the procedures as stipulated by Chinese laws are
approved by relevant department.
18.3 The JV foreign exchanges shall be allocated and utilized in accordance
with the following order of priorities or an order of priority
otherwise unanimously approved by the Board:
(a) payments for USD Financing costs;
(b) payments of principal and interest in accordance with USD Senior
Loans and USD Subordinated Loans;
(c) payments for other foreign exchange expenses;
(d) profit distributions to Party A and Party B in profit
distributions.
Article 19. Term of the Joint Venture
19.1 The term of the JV shall be 20 years starting from the Establishment
Date of the JV, unless the JV is terminated prior to the expiration of
the term as specified in Article 21 or extends its term as specified in
Article 19.2.
19.2 If proposed by one Party and unanimously approved by the Board, an
application for an extension of the term of the JV shall be submitted
to the original Examination and Approval Authority six months prior to
the expiration date of the JV.
Page: 22 of 30
<PAGE>
Article 20. Transfer of Interests
20.1 No Party shall transfer any of its interests in the registered capital
of the JV before the Actual Completion Date for both units of the Power
Plant.
20.2 No Party shall sell, assign or otherwise dispose of all or part of its
interest to the registered capital of the JV to any other Party or to a
third party without first obtaining the unanimous approval from the
Board of Directors. Any person to which one of the Party's registered
capital contribution is assigned shall agree in writing to be bound by
the relevant rights and responsibilities under this Contract. Such
assignment shall not adversely affect any other Party's rights and
responsibilities under this Contract.
20.3 Subject to Article 21.1 and 21.2 above, any Party (seller) wishing to
sell, assign or otherwise dispose of the whole or any part of interest
in the registered capital of the JV shall do so in accordance with
procedures of relevant laws and regulations. The other JV Parties have
the preemptive right of purchase. Any Party's conditions for assignment
of contributions to a third party shall not be more favorable than
those to the other JV Parties, if within 45 days' issuance of a written
notice by the assigning party, the other JV Parties have not accepted
these conditions or have not indicated their intuitions to purchase,
they shall be deemed to agree to this assignment. When a Party assigns
its contributions to its associated organization, the above preemptive
right of purchase shall not apply.
20.4 Neither the business of the JV nor the performance of this Contract or
other contracts or agreements shall be interrupted by any such sale or
other transfer of such interest.
20.5 All transfers shall be submitted to the Examination and Approval
Authority for approval. Upon receipt of the approval, the JV shall
register the change with the relevant Administration for Industry and
Commerce.
Article 21. Termination Prior to the Expiration
and Dissolution
21.1 Should there be any event of force majeure during the repayment period
of the USD Senior Loans, the JV may be terminated in advance by
unanimous agreement among all the Parties upon condition that all
amounts outstanding or owing by the Joint Venture under or in
connection with the USD Senior Loan have been fully discharged and have
been approved by the Examination and Approval Authority.
Page: 23 of 30
<PAGE>
21.2 Shall there be any of the following occurrences after all the accounts
in connection with the USD Senior Loan have been discharged:
(i) Owing to causes of a force majeure event, the Power Plant is
damaged, outage continues for a year without any hope of
recovery;
(ii) The Operation and offtabe Contract is terminated and the Power
Purchase will not perform its duty to purchase power;
(iii) The Joint Venture fails to achieve its business purpose and
holds no prospect for development;
the Joint Venture may terminate prior to expiration upon unanimous
agreement by the Board of Directors and having been approved by the
original Examination and Approval Authority.
21.3 Upon earlier termination, the Joint Venture shall undergo liquidation
according to law and having repaid all its debts, the remaining assets
shall be distributed in accordance with the proportion of the
registered capital contributed by each Party.
Article 22. Disposal of Assets upon the Expiration
of the JV
Upon the expiration of the term of the JV (including any extended
term), the JV shall carry out liquidation according to relevant laws.
The assets after liquidation shall be distributed in accordance with
the proportion of registered capital contributed by each Party.
Article 23. Liabilities for Breach of Contract
23.1 If any party fails to perform its obligations hereunder and fails to
cure them within the restricted period, it will constitute breach of
contract. Subject to the conditions permitted by the Chinese law, the
breaching party shall indemnify any direct or indirect losses of the
other JV Parties and the JV for its breach of Contract; such losses
include but are not limited to legal and other expenses arising from
such dispute.
Page: 24 of 30
<PAGE>
23.2 If any Party faults made its registered capital contributions in the
amounts and at the time as set forth in the provisions of Article 5 of
this Contract, commencing from the first month of arrears, the
breaching Party shall make a monthly payment of a breach of contract
penalty to the non-breaching Parties which is equal to one point five
percent (1.5%) of the contribution in arrears. If a contribution is in
arrears for 3 months, the non-breaching Parties shall have the right to
supersede the status of the breaching Party and according to the law to
claim the compensation from the breaching Party for the losses
resulting from its failure to make its capital contribution.
23.3 If this Contract cannot be performed or cannot be performed completely
because of the default of one of the Parties, the Company and the
non-breaching Party shall send a notice to the breaching Party
requiring it to rectify its default within 30 days from receipt of such
notice. If within such period rectification has not been made by the
breaching Party, it shall be considered to constitute a breach of this
Contract and Party the non-breaching Party shall be liable for
compensating the Company and the non-breaching Party for the losses
suffered.
23.4 If more than one Party is at default, each breaching Party shall
respectively bear its share of the liability for breaching the
Contract.
Article 24. Power Plant Insurance
Appropriate arrangements will be made for the insurance of the Power
Plant during the construction period and during the operating period.
The types of insurance coverage, term and amounts of insurance shall be
discussed and decided by the Board of Directors and purchased from
insurance companies within China.
Article 25. Confidentiality
25.1 Each of the parties acknowledges and agrees that the performance of its
obligations under this contract may involved the disclosure of
Confidential Information.
25.2 Each of the Parties, their relevant Affiliates, and the JV and their
respective employees and personnel shall use the Confidential
Information only for the purposes specified in this Contract, and shall
not disclose any of the Confidential Information to third parties,
except to its attorneys, accountants and advisers retained in
connection with the subject matter hereof, without the prior written
consent of the Party providing such Confidential Information. All
Parties, their Affiliates and the JV shall make such confidential
information available only to those JV personnel whose duties require
them to be familiar with such Confidential Information.
Page: 25 of 30
<PAGE>
Article 26. Force Majeure
26.1 If any Party is prevented by any Force Majeure event from performing
its obligations specified in this Contract, the time to perform such
obligations by the Party affected shall be extended, on a day-for-day
basis, by the number of days during which the Party is excused from
performing its obligations under this Contract as a result of an event
of Force Majeure. All the other obligations and time to perform those
obligations shall not be affected.
26.2 Upon occurrence of any Force Majeure event, the Party affected shall
promptly notify the other Parties by cable, telex or fax and, within 15
days, provide details of the event, together with a valid certifying
documents evidencing the reasons for which the Contract cannot be
performed or cannot be performed in part or for which performance needs
to be delayed. Such certifying document shall be provided by the local
notorial office where the force majeure event occurred. In accordance
with the degree of impact of the event on the performance of the
Contract, the Parties shall discuss and decide whether there is to be
full or partial exemption from responsibility for performing the
Contract, or whether the performe of the Contract is to be delayed.
However, the party's obligations to make capital contributions shall
not be affected by the force majeure event, and before the decision is
made in connection with exemption from or delayed performance of
obligations of the Contract, the Party that encounters and event of
force majeure must use its best efforts to performance its obligations
under the Contract and to reduce to the minimum the losses to the
Company and the Other Parties.
26.3 If a force majeure event has resulted in the destruction of the Power
Plant during the Joint Venture term, the Board of Directors at the
request of at least two Directors, shall meet to determine whether to
terminate this Contract in accordance with the provisions of Article
21.
Article 27. Applicable Laws
This Contract shall be governed by the laws of China.
Page: 26 of 30
<PAGE>
Article 28. Settlement of Disputes
28.1 Should there be any dispute in connection with this Contract, one Party
shall notify the others in writing of the dispute. Should the Party
intend to resolve the dispute through friendly consultations, the Party
shall notify the other of their intention in writing. Under such
circumstances, the Parties shall make their best efforts to settle the
dispute through friendly consultations within 60 days after the date of
issuing the notification.
28.2 In case no settlement can be reached within 60 days after the date of
issuing the notification, the dispute shall be submitted to arbitration
for final arbitration.
28.3 The dispute shall be submitted to the China International Economic and
Trade Arbitration Commission in Beijing for arbitration. The
arbitration award is final and binding upon all Parties.
Article 29. Miscellaneous
29.1 This Contract is executed in Chinese and English. Should there be any
inconsistency in the interpretation of the two languages, the Chinese
version shall prevail.
29.2 This Contract may be amended only by a document in writing executed by
the duly authorized representatives of all Parties hereto, Such
amendments may become effective only upon approval by the relevant
Chinese government authorities.
29.3 The rights and obligations of the Parties under this Contract shall
continue to exist throughout the term of JV (and any extension thereof)
and shall not be prejudiced by the establishment of the JV, the
adoption of the Articles of Association or the execution of any of the
related Contracts hereto. In the event of any conflict or inconsistency
between the provisions of this Contract and the provisions of the
Articles of Association or any of the related Contracts hereto
(including specifically and without limitation the EPC Contract) on the
other, the provisions of this Contract shall prevail.
29.4 This Contract shall become effective after being approved by the
Ministry of Foreign Trade and Economic Cooperation of the People's
Republic of China or its authorized examination and approval authority.
It is also applicable to amendments to this Contract.
Page: 27 of 30
<PAGE>
29.5 All notices given by one Party to the other Parties shall be made in
Chinese by personal delivery, fax or registered air mail promptly
transmitted or addressed as indicated below or to such other address
notified in lieu thereof. Unless otherwise specifically provided, the
date of receipt of a notice or communication hereunder shall be deemed
to be the date of receipt if delivered personally, 10 days after its
postmark in the case of a registered air mail and 1 working day after
dispatch in the case of a fax, (or whichever shall first occur if
different delivery means are used). Any Party may change its address
for the purpose hereunder by written notice to the other Parties.
Party A: China Power International Holding Limited
Address: 5/f, Office Building, Capital Hotel
No. 3 Qianmen East Avenue
Beijing, China
Telephone: 010-5129988-3510
Facsimile: 010-5227647
Post Code: 100008
Party B: AES China Holding Company (L) Ltd.
Address: 3/F (W), Golden Bridge Building
No.1 (A) Jianguomenwai Avenue
Beijing, China
Telephone: 010-5089619
Facsimile: 010-5089828
Post Code: 100020
Party C: Anhui Liyuan Electric Power Development Company Ltd.
Address: No. 415 Wuhu Road
Hefei City, Anhui Province, China
Telephone: 0551-3632007
Facsimile: 0551-3633393
Post Code: 230061
Page: 28 of 30
<PAGE>
Party D: Wuhu Energy Development Company
Address: Commercial Office Building
Huangshan West Road
Wuhu City, Anhui Province, China
Telephone: 0553-3823224
Facsimile: 0553-3823224
Post Code: 241000
29.6 Failure or delay on the part of any Party to exercise any right or
privilege under this Contract shall not be regarded as a waiver of such
rights or privileges nor shall any partial exercise of any right or
privilege preclude any further exercise thereof. Any waiver by a Party
at a certain time of a breach by another Party shall not be construed
as a waiver by such Party of its rights to such provision, or any of
its other rights hereunder.
29.7 If any one or more of the provisions contained in this Contract or any
document executed in connection herewith shall be invalid, illegal or
unenforceable in any respect under any applicable law, (i) the
validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or
impaired and shall remain in full force and effect; and (ii) the
invalid, illegal or unenforceable provision shall be replaced by a new
provision that is valid, legal and enforceable and that comes closest
in expressing the intention of such invalid, illegal or unenforceable
provision.
29.8 The headings contained in this Contract are for reference only and
shall not be deemed to be a part of this Contract or to affect the
remaining or interpretation hereof.
Each of the Parties hereto have caused this Contract to be executed by
their duly authorized representatives on , 1996.
China Power International Holdings Limited
Signatory: /s/ [SIGNATURE ILLEGIBLE]
Name:
Title:
AES China Holding Company (L) Ltd.
Signatory: /s/ [SIGNATURE ILLEGIBLE]
<PAGE>
Name:
Title:
Party C: Anhui Liyuan Electric Power Development Company
Signatory: /s/ [SIGNATURE ILLEGIBLE]
Name:
Title:
Wuhu Energy Development Company
Signatory: /s/ [SIGNATURE ILLEGIBLE]
Name:
Title:
Information contained herein, marked with [*], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.33
Dated 5th July 1996
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
And
ANHUI PROVINCIAL ELECTRIC POWER CORPORATION
PHASE IV OF WUHU POWER PLANT OPERATION & OFFTAKE CONTRACT
<PAGE>
This Contract has been entered into on 5th July, 1996 by and
BETWEEN
Anhui Provincial Electric Power Corporation ("Anhui Power"); and
Wuhu Shaoda Electric Power Development Company Limited (hereinafter
referred to as the "Joint Venture")
IT IS HEREBY AGREED as follows:
ARTICLE 1. DEFINITIONS
With respect to this Contract the following expressions
shall have the meanings set forth below:
1.1 "Actual Completion Date" shall mean, as defined in the EPC
Contract, in respect of any Unit, the date on which such
Unit has successfully completed its 72-hour and 24-hour
trial operation and other tests required by applicable laws
and regulations in China and such completion has been
certified by the engineering consultant approved by the US$
Creditor(s).
1.2 "Annual Generation Plan" shall mean the annual generation
plan compiled in accordance with Article 6.2.
1.3 "Approved Operating Costs" shall mean the portion of the
Electricity Fee deemed by the relevant price control
authorities to be attributable to the operating and fuel
costs of the Power Plant.
1.4 "Approved Swap Agreement" means an agreement with respect to
the exchange of payments representing interest rates entered
into by the Joint Venture in compliance with and according
to the terms of the US$ Senior Loan Contract.
1.5 "Responsibility of the Joint Venture" has the meaning set
forth in Article 8.3.
1.6 "Cost Component of the Joint Venture" shall mean, in respect
of any period, the portion of the Electricity Fee
attributable to the payment of the administration and
management expenses, insurance premium and expenses, taxes
levied on the business transactions of the Joint Venture,
auditor's fees, engineering consultant fees, advisory fees
and all other fees of a similar nature incurred by the Joint
Venture for such period.
1.7 "Contract Completion Date" shall mean in respect of any Unit
the date as defined in Article 5 of the EPC Contract in
respect of such Unit.
1.8 "Creditor" shall mean any creditor or legal entity providing
financing pursuant to a Financing Contract.
1.9 "Delivery Point" shall mean the measuring point at the high
voltage side of the step-up transformer.
1.10 "Electricity Sales Tax" or "EST" shall mean the Value Added
Tax and surcharges levied against the Joint Venture by any
State or local tax authorities in accordance with the
Provisional Regulations of Value Added Tax of the People's
Republic of China and the Rules of Implementation thereof,
the Notice concerning the Regulations on Value Added Tax for
Electricity Products published by the State Tax
Administration, and/or other similar taxes of whatever name
or according to any laws or regulations which replaced the
above laws and regulations and/or any other value added or
sales taxes (i.e. all
1
<PAGE>
taxes or surcharges charged against the Joint Venture on the
amount of electricity sold by the Joint Venture or on the
amount of any payments received by the Joint Venture).
1.11 "Electricity Fee" shall mean in respect of any Unit for any
12 month period the Tariff for that 12 month period as
approved by the pricing control authority multiplied by the
Minimum Purchase Quantity of such Unit for such 12 month
period.
1.12 "Financing Contract" shall mean any contract entered into by
and between the Joint Venture and one or more Creditors by
which the Joint Venture is to obtain, inter alia,
construction funds for the Power Plant, including the US$
Senior Loan Contract, the US$ Subordinated Loan Contract and
the RMB Loan Contract.
1.13 "FX Financing Contracts" shall mean the US$ Senior Loan
Contract, US$ Subordinated Loan Contract, all security and
other documents entered into by the Joint Venture pursuant
to the terms of the US$ Senior Loan Contract and all
Approved Swap Agreements (if any) and any other agreement
pursuant to which the Joint Venture incurs foreign exchange
obligations in connection with the planning, arrangement,
construction, operation or management of the Power Plant and
which has been entered into by the Joint Venture in
compliance with the terms of the US$ Senior Loan Contract
and US$ Subordinated Loan Contract.
1.14 "Joint Venture Contract" shall mean the contract entered
into on 12 February 1996 for the establishment of the Joint
Venture and the development of the Power Plant, as amended
from time to time.
1.15 "KWH" shall mean Kilowatt Hour.
1.16 "Minimum Purchase Quantity" or "MPQ" shall mean, unless
otherwise specified, the Minimum Purchase Quantity of each
Unit of the Power Plant for a 12 month period and shall have
the meaning stipulated in Article 2.2.
1.17 "Month" shall mean calendar month.
1.18 "Power Grid" shall mean the electricity transmission grid in
Anhui Province.
1.19 "Operation Services" shall mean the services in respect of
the management, operation and maintenance of the Power Plant
to be performed pursuant to Article 4.
1.20 "Power Plant" shall mean the Power Plant which will be
built, designed, constructed, commissioned and completed in
Wuhu City, Anhui Province, People's Republic of China,
consisting of 2 x 125 MW coal-fired generating units and all
buildings, equipment and machines, including but not limited
to the transmission facilities linking the Power Plant to
the Power Grid, office and other auxiliary buildings, coal
and ash handling facilities, civil works and marine works in
accordance with the terms and conditions of the Joint
Venture Contract and the EPC Contract.
1.21 "Power Plant Force Majeure" shall have the meaning as
defined in Article 12.1.
1.22 "EPC Contract" shall mean the contract entered into by and
between the Joint Venture and Anhui Power for the purpose of
the overall engineering, procurement and construction of the
Power Plant.
1.23 "Pre-Operation Services" shall mean the services to be
performed in relation to each Unit before such Unit comes
into operation as detailed in Article 4 and Appendix III.
1.24 "Renminbi" and "RMB" shall mean the lawful currency of the
People's Republic of China.
2
<PAGE>
1.25 "RMB Equity Return Portion" shall mean the portion of the
Electricity Fee attributable as profits payable to Parties C
and D under the Joint Venture Contract in respect of the
relevant 12 month period.
1.26 "RMB Financing Portion" shall mean the portion of the
Electricity Fee to enable the Joint Venture to repay the
principal and interest due and payable on any RMB debt of
the Joint Venture in respect of the relevant 12 month
period.
1.27 "Tariff" shall mean the on-grid tariff per KWH of
electricity purchased by Anhui Power and approved by
relevant Chinese authorities. The tariff shall be adjusted
in accordance with Article 7.
1.28 "Tariff Commencement Date" for Unit I shall mean the earlier
of (a) the Actual Completion Date of Unit I and (b) the date
falling six months after the date of the US$ Senior Loan
Contract and for Unit II shall mean the earlier of (a) the
Actual Completion Date of Unit II and (b) the date falling
twelve months after the date of the US$ Senior Loan
Contract.
1.29 "Termination Payment" shall mean an amount in RMB which,
when received by the Joint Venture and (where relevant)
converted into US$ (and net of any associated costs payable
by the Joint Venture) shall be the greater of (i) the
expected revenue of the Power Plant net of operating and
fuel costs over the period from the date of termination to
the original scheduled expiry date of this Contract
discounted for early receipt using a discount rate of ten
per cent. per annum and (ii) an amount sufficient to
discharge in full all obligations and liabilities (actual
and contingent) of the Joint Venture in respect of (a)
operating expenses of the Power Plant, (b) US$ Senior Debt
Costs and (c) any other debt or liability of the Joint
Venture which has not been effectively subordinated to the
US$ Senior Debt Costs.
1.30 "Termination Event" shall mean any Event of Default (as
defined in the US$ Senior Loan Contract).
1.31 "Unit" shall mean either Unit I or Unit II.
1.32 "Unit I" shall mean the first unit of the Power Plant to be
completed, together with the common facilities and all
essential, auxiliary and service facilities.
1.33 "Unit II" shall mean the second unit of the Power Plant to
be completed, together with the common facilities and all
essential, auxiliary and service facilities.
1.34 "Unit Commissioning" shall mean, in respect of any Unit, the
commissioning and bringing into operation and service of
such Unit until the relevant Unit has successfully completed
its 72-hr. and 24-hr. tests.
1.35 "US Dollars" and "US$" shall mean the lawful currency of the
United States of America.
1.36 "US$ Equity Return Portion" shall mean the portion of the
Electricity Fee attributable as profit to Parties A and B
under the Joint Venture Contract in respect of the relevant
12 month period.
1.37 "US$ Financing Component" shall mean the portion of the
Electricity Fee to enable the Joint Venture to make all
payments of principal, interest, indemnity amounts, fees,
costs and expenses and other amounts due and payable under
the FX Financing Contracts in respect of the relevant 12
month period.
1.38 "US$ Senior Debt Costs" means all and any sums (whether
principal, interest, indemnity amounts, fees, costs,
expenses or other amounts) which are or will be at any
relevant
3
<PAGE>
time due and payable, whether on their due date, on
demand or howsoever, under any FX Financing Contract in each
case as conclusively determined by the Facility Agent (as
defined in the US$ Senior Loan Contract).
1.39 "US$ Subordinated Loan Contract" means the agreement between
the Joint Venture and AES China Holding (L) Company Limited
for the provision of a loan of US$18,000,000 to the Joint
Venture.
1.40 "US$ Senior Loan Contract" means the agreement between the
Joint Venture and certain Creditors for the provision of a
loan of US$65,000,000 to the Joint Venture.
1.41 "Year" shall mean a calendar year (from January 1st to
December 31st).
1.42 "Pre-Commercial Operation Period" shall mean in respect of
each Unit the first 185 days after the Actual Completion
Date of that Unit.
1.43 "IIR" means the rate of interest which discounts the flow of
revenue received by an investment so that the net present
value of the cash flow is equal to the capital sum invested.
1.44 "Interconnection Contract" means the contract dated the date
hereof between the Joint Venture and Anhui Power providing
for the Power Plant to be connected to the Power Grid.
ARTICLE 2. SALE AND PURCHASE OF ELECTRICITY
2.1 Minimum Generation Quantity
2.1.1 In the first 365 days starting from the Actual
Completion Date of each Unit, the Minimum
Generation Quantity (MGQ1) for that Unit shall be
125,000 X 5,000 KWH
2.1.2 Thereafter the Minimum Generation Quantity
(MGQ2)for each Unit subsequent to the first 365
days (reduced pro rata if less than one year) is:
125,000 X 5,500 KWH
2.2 Minimum Purchase Quantity
2.2.1 The Minimum Purchase Quantity (MPQ1) of each Unit
for the first 365 days starting from the Actual
Completion Date of that Unit is:
MGQ1 x (1-7.6%)
2.2.2 The Minimum Purchase Quantity (MPQ2) for each
Unit thereafter (reduced pro rata if less than
one year) is:
MGQ2 x (1-7.6%)
2.3 Obligation to Take Electricity
Anhui Power shall:
(a) Take all electricity generated and available to
be taken off from the Delivery Point by each Unit
during the Unit Commissioning and interconnection
thereof as and when it is generated in accordance
with the program for Unit Commissioning of the
Joint Venture;
4
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(b) from the Actual Completion Date of Unit I to the
Actual Completion Date of Unit II, take
electricity generated by Unit 1 in accordance
with the Annual Generation Plan agreed under
Article 6, namely, MPQ1 x the number of days
between the Actual Completion Dates of the two
Units/365 days; and
(c) from the Actual Completion Date of Unit II until
the end of the Joint Venture term, take not less
than the MPQ of both Units during each year
(reduced pro rata if less than a year).
2.4 Commissioning
The Joint Venture and Anhui Power shall consult with each
other, as soon as practicable, on the proposed
commissioning schedule, including testing dates, and Anhui
Power shall notify the Joint Venture immediately on each
occasion on which it will be ready to commence any such
test.
2.5 Steady Electricity Generation
Within the allowed range of the Power Grid, Anhui Power
shall ensure that the Power Plant is always kept running
at a load at which the Power Plant may be operated in a
stable condition in accordance with all relevant
regulations and rules of China including without
limitation those issued from time to time by the Ministry
of Electric Power or other competent authority.
2.6 Steady Electricity Offtake
Anhui Power shall maintain a steady offtake of electricity
from the Power Plant.
2.7 Offtake During Pre-Commercial Operation Period
The first 185 days after the Actual Completion Date of
each Unit shall be the Pre-Commercial Operation Period of
that Unit. Anhui Power shall offtake the electricity
generated during the Pre-Commercial Operation Period by
each Unit and make payment therefor at on-grid Tariff (as
determined under Article 7) and enable the Unit(s) to
start and shut down for load adjustments. The Joint
Venture shall compensate Anhui Power on the basis of
[***] on-grid electricity. Such compensation
shall be part of the generation cost of the Power Plant
and form part of the projected operating costs.
ARTICLE 3. DELIVERY OF ELECTRICITY
3.1 Delivery Point
When electricity is delivered through the Delivery Point
to the Power Grid, it shall be deemed to have been
received by the Power Grid.
3.2 Measurements and Records
The quantities of electricity delivered shall be measured
and recorded in accordance with the provisions of Article
5 of the Interconnection Contract. Such measurements and
record shall, in the absence of manifest error and
omission, be conclusive and final. Anhui Power and the
Joint Venture shall consult with each other to determine
the procedure for further verification relating to the
above which may, from time to time, be considered
necessary.
5
<PAGE>
ARTICLE 4. OPERATION OF THE POWER PLANT
4.1 Entrusting Anhui Power as Operator
The Joint Venture appoints Anhui Power as operator
(Operator), and Anhui Power accepts the appointment to act
as Operator in connection with the management, operation
and maintenance of the Power Plant. The role of the
Operator includes the obligation to perform the
Pre-Operation Services, Operation Services (see Appendix
III for details) and the obligation of coal supply to the
Power Plant.
4.2 General
4.2.1 When performing the Operation Services, Anhui Power shall
not cause the Joint Venture to breach any laws and
regulations relevant to the operation of the Power Plant
and the terms of any other contracts to which the Joint
Venture is a party.
4.2.2 Anhui Power shall operate the Power Plant in accordance
with good industry operating practice for thermal power
plants and carry out its Operation Services in order to
achieve commercial interests of the Joint Venture as a
priority;
4.2.3 As part of the Operation Services, Anhui Power shall
ensure that the Power Plant is regularly and properly
maintained and overhauled so that it is able to generate
the Minimum Purchase Quantity for both Units throughout
the term of this Contract.
4.3 Operation
Subject to compliance with Article 4.4 and with good
operating practice for thermal power plants, from the
Actual Completion Date of Unit I, Anhui Power shall use
best efforts to keep the Power Plant operating at such
capacity as may from time to time be necessary to meet the
Power Grid's demand for electricity.
4.4 Operation in Accordance with Design Specifications:
In order to ensure that the Power Plant operates safely
and efficiently during both Units' designed operation
period and to ensure that the Power Plant does not
encounter avoidable breakdowns, damage or deterioration
throughout the period for which it has been designed to
operate, the Power Plant must be operated in accordance
with its operating manuals so as not to exceed the
limitations on operation recommended by the equipment
manufacturer.
4.5 Scope of Entrustment
Anhui Power shall be responsible for the operation,
management and maintenance of the 2 x 125 MW Units and its
ancillary facilities and for supplying sufficient fuel to
the Power Plant.
4.6 Pre-Operation Services
Anhui Power shall:
(a) perform the services necessary to prepare the
Power Plant to commence operations and provide
on-job training of the operation staff;
(b) provide the necessary staffing and resources to
the Joint Venture to enable the Joint Venture to
perform its obligations with respect to the Power
Plant construction and the commissioning of the
Units. The related expenses shall be included in
the Project Budget as stipulated in Appendix I of
the EPC Contract;
6
<PAGE>
(c) provide such advice and support to the Joint
Venture in connection with the construction of
the Power Plant and the commissioning of the
Units as may be reasonably expected to be within
the scope of Anhui Power's qualifications,
competence and experience, and as the Joint
Venture may reasonably request; and
(d) provide the other Pre-Operation Services, as
detailed in Appendix III.
The obligations of Anhui Power in relation to the
Pre-Operation Services for each Unit will
commence upon execution of this Contract and
remain in effect until discharged by the end of
the Defects Liability Period (as defined in the
EPC Contract).
4.7 Operation Services
Upon and after the Actual Completion Date of each Unit,
Anhui Power shall provide the following Operation Services
throughout the continuance of this Contract to such Unit
as follows:
(a) perform all its duties and obligations in
relations to the Power Plant operation, so as to
fulfil Anhui Power's obligations under this
Article 4; and
(b) provide such advice and support to the Joint
Venture in connection with the operation of the
Power Plant as may be reasonably expected to be
within the scope of Anhui Power's qualifications,
competence and experience, and as the Joint
Venture may reasonably request.
(c) provide the other Operation Services, as detailed
in Appendix III.
4.8 Coal Supply
4.8.1 Anhui Power is responsible for the coal supply to
the Power Plant according to the specifications
set forth in Appendix IV hereof, and shall
deliver coal to the Power Plant's coal yard so as
to ensure that the Power Plant has sufficient
coal at all relevant times as may be necessary to
generate the Minimum Generation Quantity for both
Units as set out in Article 2.1.
4.8.2 Before the Actual Completion Date of each Unit,
Anhui Power shall provide fuel oil, coal,
chemicals, consumables and personnel needed for
commissioning of the Unit during the trial
operation period which expenses have been
included in project budget set out in Appendix I
of the EPC Contract.
4.9 Plans and Budget
Anhui Power shall consult and agree with, and submit to
the Joint Venture before the end of each year the
generation plan and the annual budget of the generation
and operating cost of the Power Plant for the next year.
4.10 Information
Anhui Power shall periodically provide information related
concerning the operation of the Power Plant and the
carrying out of the Pre-Operation Services and the
Operation Services to the Joint Venture. Anhui Power shall
provide the Joint Venture with periodic reports and send
copies of the reports to each party to the Joint Venture
Contract and the Engineering Consultant referred to under
the EPC Contract. The reports shall include financial and
operation statements. (For details, see Appendix III,
Section 5).
7
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4.11 Key Personnel
After consulting with the Joint Venture, Anhui Power shall
nominate a qualified, competent and experienced person to
act as Plant Manager, who shall not be replaced without
prior consultation with the Joint Venture. If the Plant
Manager resigns, or is dismissed or is otherwise unable to
perform his duties, Anhui Power shall promptly consult
with the Joint Venture, and shall promptly appoint another
qualified, competent and experienced person to fill the
vacancy.
4.12 Sub-Contracting
4.12.1 Anhui Power shall not delegate or
subcontract the entire Pre-Operation Services or
the Operating Services to any third party.
4.12.2 Subject to Article 4.12.1 hereof, Anhui
Power may subcontract part only of the
Pre-Operation Services or the Operation Services
to specialists or other subcontractors as are
necessary to enable it to fulfil its obligations.
Such subcontracting shall not relieve Anhui Power
from any of its duties, obligations and
liabilities under this Contract. Anhui Power
shall be fully responsible for the actions and
breaches of all subcontractors as if they were
its own actions and breaches.
4.13 Strict Obligations
Anhui Power's obligations under this Contract are strict
obligations. Anhui Power shall not be relieved from any of
its obligations under this Contract by reason of any
exercise or non-exercise, or delay in exercise, by the
Joint Venture of any or all of its powers or rights under
this Contract.
Article 5. OPERATION DUTIES
5.1 General
The Joint Venture shall provide assistance and advice in
connection with the placing of the insurance identified in
Article 11 which shall be effected by Anhui Power on the
behalf of the Joint Venture.
5.2 Working Capital
The Joint Venture shall be required to provide to Anhui
Power a [***] working capital prior to the Actual
Completion Date of Unit 1.
During the operational period Anhui Power shall be
responsible for arranging and obtaining any necessary
additional working capital on its own account as required
and the interest expenses incurred in connection therewith
shall be counted as part of the cost of generation. The
Joint Venture shall provide Anhui Power with assistance in
the arrangement of such loans but shall not be obliged to
advance, or procure the advance of, or to guarantee or
otherwise incur any liability (contingent or actual) in
respect of any advance by a third party of, any funds to
Anhui Power.
5.3 Limitation of Liabilities and Mitigation
5.3.1 If the Power Plant cannot generate electricity
because of a Power Plant Force Majeure event
Anhui Power shall use all efforts to resume
operation of the Power Plant at full capacity as
soon as possible.
5.3.2 Obligations of Anhui Power
8
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
On and from the Actual Completion Date of each
Unit, Anhui Power shall be fully responsible for
ensuring that that Unit generates its Minimum
Purchase Quantity. If the relevant Unit cannot
generate its Minimum Purchase Quantity, the
resulting shortfall in generation shall be
compensated by Anhui Power. Anhui Power's
liability under this Article 5.3.2 shall only be
relieved within the limit of this Contract due to
the liability of the Joint Venture or Power Plant
Force Majeure in accordance with and pursuant to
Article 8.5.
5.4 Payments for Pre-Operation Services
In order to enable Anhui Power to carry out the
Pre-Operation Services pursuant to Article 4.6, the Joint
Venture shall pay the Pre-operation service fees to Anhui
Power. Pre-operation services fees are included in the
Project Budget in Appendix I of the EPC Contract.
5.5 Payment for Operation Service
In order to enable Anhui Power to carry out the Operation
Services pursuant to Article 4.7, the Joint Venture shall
pay Anhui Power a monthly management fee, calculated at a
rate of [***] of on-grid power after the
Pre-Commercial Operation Period of each Unit. Such fee
will be counted as part of the generation cost of the
Power Plant and form part of the projected operating
costs.
5.6 Payment - General
Anhui Power shall only be entitled to receive from the
Joint Venture the amounts expressly provided for under
this Contract.
Article 6. EXCHANGE OF INFORMATION
6.1 Preparation of Operation Plans: In order to ensure that
the Power Plant operates efficiently at all times,
according to Article 4.4, Anhui Power shall:
(a) compile a preliminary operation plan no later
than the end of July of each year, and specify:
(i) the Power Plant's projected average
operation load for the succeeding year;
(ii) the projected periods during which each
Unit may be shut down for overhaul,
repair and maintenance in the succeeding
year; and
(b) hold regular meetings with the Joint Venture
regarding the offtake obligations and electricity
demands so that, subject to the above provisions,
Anhui Power can amend the relevant operation
schedule mentioned above if necessary, but
without prejudice to the Tariff or the MPQ of any
Unit.
6.2 Annual Generation Plan
Anhui Power shall, no later than November of each year,
finalize and submit to the Joint Venture the Annual
Generation Plan for the Power Plant for the succeeding
year.
6.3 Change in Load Level
After the Actual Completion Date of each Unit, generation
of electricity from such Unit shall comply with the
central scheduling and dispatch requirements for Anhui
Province (For details, see the Interconnection Contract).
The Power Plant must be operated in
9
<PAGE>
accordance with the provisions of Article 4 and with good
thermal power plant operation practice.
6.4 Exchange of Information
6.4.1 Anhui Power shall promptly notify the Joint
Venture of the occurrence if it becomes aware
that the maximum generating capacity of the Power
Plant is insufficient to meet the scheduled
operating load of the Power Plant.
6.4.2 Anhui Power and the Joint Venture shall hold
regular meetings to discuss and resolve any
problems so as to ensure the smooth operation of
the Power Plant and the smooth offtake of
electricity therefrom.
Article 7. Price and Terms of Payment
7.1 The Calculation and Approval of the Tariff
During the term of this Contract the Tariff in any one
year shall, assuming that each Unit of the Power Plant
delivers its Minimum Purchase Quantity, be sufficient to
enable the Joint Venture to pay the Power Plant's
operating costs (including but not limited to fuel cost),
all amounts payable by the Joint Venture in that year in
respect of US$ Senior Debt Costs (including principal,
interest, fees and maintaining any retention/reserve
amounts required pursuant to the US$ Senior Loan Contract)
all amounts payable by the Joint Venture in that year in
respect of any other US$ loans and/or RMB loans, fees and
losses on conversion in foreign exchange, necessary
expenses of the Joint Venture, taxes to be paid, the Joint
Venture reserves and the investors' anticipated return on
equity of the Joint Venture and, for this purpose, where
any such amount is denominated in a currency other than
RMB, the applicable part of the tariff payment shall equal
an RMB amount that, after conversion into the applicable
foreign currency will enable the Joint Venture to
discharge the relevant amount. Anhui Power and the Joint
Venture will estimate and agree these costs in
consultation with the Facility Agent, and the Joint
Venture will submit the agreed proposed Tariff in respect
of the level of which it shall previously have consulted
with the Facility Agent to the relevant pricing
authorities for approval. The proposed on-grid Tariff will
be estimated in this manner and submitted for adjustment
on an annual basis.
7.1.1 Components of the On-Grid Tariff
RMB Portion:
Loan principal
Reasonable profit
Salaries
Unforeseeable costs
Financing costs
Water costs
Materials
Repairs
Fuel
Depreciation
Taxes
Entrusted operation and management fees
Other expenses
US$ Portion:
Loan principal (of both the US$ Senior Loan
and US$ Subordinated Loan)
10
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Financing costs (including interest, fees, realised
` foreign exchange losses, other financing costs etc)
any amount required to fill the Dollar Retention Account
to the Dollar Retention Amount (as defined in the US$
Senior Loan Contract)
Reasonable profit
Other expenses
7.1.2 Approval of the On Grid Tariff:
The on-grid tariff submitted for approval shall be
calculated on the basis of 5,500 hours of annual
utilization of each Unit of generating equipment; in the
first year after the Actual Completion Date of each Unit,
the on-grid tariff submitted for approval will be
calculated on the basis of 5,000 annual utilization hours
of each Unit.
Without limiting the foregoing, the estimated on-grid
tariff shall be:
(a) based on, among other matters, the loan repayment
period of 7 (seven) years (including construction
period) under the US$ Senior Loan Contract and
ten years under the US$ Subordinated Loan
Contract and the RMB Loan Contract, the loan
interest rate and other costs and the after tax
IRR of [***] since the
date of contribution of the registered capital;
and
(b) adjusted via adjustment accounts to compensate
for unforeseeable increase in costs resulting
from changes in fuel, interest rate, exchange
rate, tax expenses and other factors
7.1.3 Adjustment of On-Grid Tariff:
Before the end of each year, the Joint Venture shall
estimate and apply for the on-grid Tariff of the next year
according to the mechanism and taking into account all the
factors set out in this Article 7.1.
7.1.4 On-Grid Tariff:
The Joint Venture will be responsible for estimating the
proposed on-grid Tariff for each Year and submitting the
annual application to the relevant pricing authorities in
Anhui Province for approval. Anhui Power shall provide
such assistance and information as the Joint Venture may
require.
7.1.5 Composition of the Sales Tariff from the Power Grid to
end-users:
(a) electricity supply costs (including purchase
costs)
(b) reasonable profit
(c) interest and principal repayments for the
associated transmission project
(d) taxes
7.1.6 Approval of the Sales Tariff:
Anhui Power will be responsible for estimating the sales
tariff and submitting the application to the relevant
pricing authorities in Anhui Province for approval.
7.1.7 Adjustment of Sales Tariff:
11
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
The sales tariff will be adjusted annually according to
the same principle for adjusting the on- grid tariff.
7.2 Generation before the Actual Completion Date:
All electricity generated by either Unit I or Unit II
before the relevant Tariff Commencement Date will be
delivered to Anhui Power free of charge while its
operating and fuel costs shall be borne by Anhui Power.
7.3 Payment for Minimum Purchase Quantity:
Notwithstanding any other provision of this Contract, as
the strict liability of Anhui Power, irrespective of
whether the Actual Completion Date of either Unit has
occurred and as an unconditional obligation, Anhui Power
shall:
(a) from the Tariff Commencement Date of Unit I to the Tariff
Commencement Date of Unit II, pay the Electricity Fee of
Unit I on a monthly basis in the proportion specified in
Appendix I, and
(b) from the Tariff Commencement Date of Unit II pay the
Electricity Fee of both Units on a monthly basis in the
proportion specified in Appendix I.
Every payment shall be made to the Joint Venture not later
than the end of the following calendar month and made to a
bank account designated by the Joint Venture.
7.4 Financial Arrangements
7.4.1 The Joint Venture and Anhui Power shall make an estimate
of on-grid price and cost prior to the beginning of each
year pursuant to Article 7.1 and after submitting it to
the competent pricing authorities of Anhui Province for
approval, shall determine, in accordance with the
requirements of the US$ Senior Loan Contract, projected
unit operating cost of the on-grid price of that year. The
projected unit operating cost shall include unit operating
and fuel cost and other unit costs as described in Table 2
of Appendix I hereto and as approved by the Joint Venture
in compliance with its obligations under the US$ Senior
Loan Contract.
After review by the relevant price control authorities,
the portion of the projected operating costs of the type
set out in Table 2 of Appendix 1 approved for inclusion in
the Tariff for a particular Year shall be the Approved
Operating Costs for that Year. The Joint Venture shall
calculate the exact level of the Approved Operating Costs,
the Approved Operating Cost per KWH and the AOC Percentage
for that Year. The AOC Percentage is:
Approved Operating Cost per KWH x [***] %
---------------------------------------
Tariff
7.4.2 It is agreed that, as operator of the Power Plant,
Anhui Power shall be responsible to satisfy all
operating costs of the Power Plant (including fuel
costs and other costs specified in Table 2 of Appendix
I) and Anhui Power shall indemnify the Joint Venture in
respect of every loss, cost, liability or expense which
the Joint Venture may suffer or incur as a consequence
of any failure by Anhui Power to fulfil its obligations
hereunder. The Approved Operating Cost shall be
deducted from the Electricity Fee. The deduction shall
be by retention of the AOC Percentage from each payment
to be made under this Contract by Anhui Power. Anhui
Power shall not be entitled to make such deduction if:-
12
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(a) an Event of Default or prospective Event of Default
(each as therein defined) has occurred under the US$
Senior Loan Contract; or
(b) Anhui Power is in breach of any of its obligations
under this Contract.
The remainder (after deduction if applicable) is payable
to the bank account designated by the Joint Venture.
7.4.3 The Joint Venture will be responsible for converting
relevant parts of the Electricity Fee to foreign
currencies to enable the Joint Venture to meet its
obligations denominated in foreign currencies. By request
from the Joint Venture, Anhui Power shall provide
reasonable assistance to Joint Venture with respect to
said foreign exchange conversion and obtaining the
necessary approvals.
7.5 Electricity Generation in Excess of Minimum Purchase
Quantity:
7.5.1 Anhui Power shall purchase the electricity generated in
excess of the Minimum Purchase Quantity for both Units at
the on-grid tariff. The income from this excess
electricity net of the AOC Percentage (provided that the
conditions in Article 7.4.2(a) and (b) are satisfied - if
such conditions are not satisfied such income shall be
paid gross) shall first be paid to the Joint Venture and
shall be applied by the Joint Venture in satisfaction of
any shortfall in Electricity Fee, consequent upon the
application of Article 8.5.2. To the extent there is any
remaining surplus:
(a) In the first 365 days after the Actual Completion
Date of each Unit 30% of such surplus shall be
paid to Anhui Power as incentive payment for
taking electricity in excess of 10,000
utilisation hours (cumulative both Units).
(b) For each year afterwards:
(i) [***]% of such surplus will be paid to
Anhui Power as incentive payments for the
portion in excess of 11000 hours if both
Units achieve between 11000 and 13000
utilization hours in aggregate;
(ii) [***]% of such surplus will be the
incentive payments to Anhui Power for the
portion in excess of 13000 hours if both
Units achieve more than 13000 utilization
hours in aggregate;
(iii) Any remaining amount will be retained by
the Joint Venture.
If pursuant to Appendix 1 a refund is due to Anhui Power
at the end of any Year, this shall be refunded by the
Joint Venture within 60 days following the end of the
relevant Year. Provided that the Joint Venture shall not
be obliged to make this refund at that time if, and for so
long as, this would jeopardise its ability to make
payments under the US$ Senior Loan Contract, US$
Subordinated Loan Contract and in respect of other
unsubordinated debt or liability of the Joint Venture as
they fall due.
7.6 Invoices and Payments
7.6.1 Anhui Power shall provide to the Joint Venture the
preceding months financial report for each Unit before the
14th day of each month, and shall exchange the accounts
records with each other so that, after the approval of the
Joint Venture, such records will be used as the basis for
making account books.
7.6.2 Anhui Power shall provide to the Joint Venture annual
financial statements for each Unit within 60 days after
the end of each year.
13
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
7.6.3 The Electricity Fee, net of Approved Operating Costs
(where permitted as set out in Article 7.4.2) shall be
paid in full in accordance with the payment schedule set
out in Appendix I without any other deduction, set-off or
withholding of any nature whatsoever. If any withholding
is required by law, Anhui Power shall at the same time pay
to the Joint Venture such additional amounts as will
ensure that the Joint Venture receives the full amount of
the Electricity Fee on the due date as if such deduction
or withholding had not been made.
7.6.4 Notwithstanding any other provision of this Contract
Anhui Power's obligation to pay the Electricity Fee in
accordance with this Article 7 and the Joint Venture's
right to receive such amounts are independent of the
Power Plant and production or dispatch therefrom and
the calculation and receipt by Anhui Power of the sales
tariff from the grid to end-users and any other matter
or circumstance whatsoever (except as and to the extent
that relief has been expressly provided for in Article
8.5.2) and Anhui Power's payment obligations hereunder
are absolute, unconditional and independent of any
other dealings between the parties or any other matter
or circumstance whatsoever.
7.6.5 If Anhui Power cannot fulfil its payment obligations on
the date specified in this Contract, it shall pay to the
Joint Venture a late payment penalty calculated at [***]%
of the delinquent amount of payments per day on an
accumulative basis.
Article 8. CAUSE OF FAILURE TO GENERATE
8.1 Determining the Causes
The following procedure shall be used to determine whether
any failure to generate electricity was caused by a Power
Plant Force Majeure event, or is the responsibility of
Anhui Power, or the responsibility of the Joint Venture.
8.1.1 The Joint Venture and Anhui Power shall, acting through
their respective technical consultants, endeavor to reach
agreement on the cause for failure to generate
electricity. Any such agreement shall be binding to all
parties.
8.1.2 If no agreement can be reached within 14 days after the
day on which all parties were notified, then either party
may request an expert, mutually agreed upon, from a third
party, to make a decision which, when made, shall be
binding on all parties.
Pending the decision Anhui Power shall make payments under
Article 8.5.2 as if the cause of the occurrence were Power
Plant Force Majeure. If it is subsequently determined that
the cause was Anhui Power's Responsibility, Anhui Power
shall forthwith pay the difference between the payments it
would have made but for this paragraph and the payments
actually made by Anhui Power pursuant to this paragraph,
to the Joint Venture.
8.2 Responsibility of Anhui Power
If the cause for failure to generate is not Power Plant
Force Majeure event or the Responsibility of the Joint
Venture, then Anhui Power is liable for the cause.
8.3 Responsibility of the Joint Venture
Responsibility of the Joint Venture means that the Joint
Venture failed to perform its obligations under this
Contract.
8.4 Power Plant Force Majeure (as defined in Article 12.1).
8.5 Adjustment of MPQ
14
<PAGE>
8.5.1 Planned Outages: Each Unit of the Power Plant may be
shutdown for a period or periods not exceeding, in
aggregate:-
(a) Forty-five days for each Unit in each third Year in
which a major overhaul will take place; and
(b) twenty-two days for each Unit in each Year,
for the purposes of repair and maintenance, provided that,
subject to Article 8.5.2, any such shutdown or other
failure to dispatch shall not affect Anhui Power's
obligation to pay the Electricity Fee in accordance with
Article 7.
8.5.2 Unplanned Outages: If in any Year any Unit is shutdown
or fails to generate for a period in excess of that
specified in Article 8.5.1 and it is determined in
accordance with Article 8 that the cause of such
shutdown or failure is the Responsibility of the Joint
Venture or is caused by Power Plant Force Majeure, the
proportionate part of the MPQ attributable to the
period of shutdown or other non-generation shall be
reduced by a proportion which is equal to the
proportion which the US$ Equity Return Portion plus the
RMB Equity Return Portion bears to the aggregate
Electricity Fee in the relevant period. In no event
shall any reduction in the Electricity Fee be such as
to result in the Electricity Fee less the Approved
Operating Costs for the relevant period being
insufficient to enable the Joint Venture to pay its
entire US$ Senior Debt Costs and any other financing
costs for the relevant period.
8.5.3 Prior to the Joint Venture unconditionally satisfying its
obligations under the US$ Senior Loan Contract, the
payments to be made by Anhui Power under this Contract for
MPQ of the two Units shall be on the basis of an 11,000
integrated working hours of such Units. After the Joint
Venture has unconditionally satisfied its obligations
under the US$ Senior Loan Contract, the parties shall
agree upon the working hours, taking into account the
conditions of the Power Grid and the Tariff, so as to
achieve the anticipated rate of return.
Article 9. PREPARATION TO INTERCONNECT TO GRID
9.1 Interconnection to the Power Grid:
9.1.1 Anhui Power shall guarantee that the Power Plant is
interconnected to 220KV transmission network of the Power
Grid by the Tariff Commencement Date of Unit I.
9.1.2 The Power Grid shall be capable of providing the Power
Plant with sufficient quantities of electricity power as
required for the performance of the commissioning tests
and start up without delay or restriction, for the
performance of the synchronizing of each Unit without
delay or restriction and for the Power Plant to transmit
all electricity produced during Unit Commissioning and to
transmit continuously the maximum output of electricity
generated by each Unit.
9.2 Liability of Anhui Power
If the Power Plant is not interconnected with the Power
Grid by the Tariff Commencement Date of Unit I, or is not
available for use in accordance with the requirements as
described in Article 9 hereof, then the failure of the
Power Plant to generate electricity shall be deemed to be
Anhui Power's responsibility.
Anhui Power must purchase all electricity delivered from
the Delivery Point and pay according to Article 7.
15
<PAGE>
9.3 Liability of the Joint Venture
The Joint Venture shall be at fault if it fails to make
any required payment under and in accordance with the EPC
Contract and this results in the Power Plant not being
interconnected with the Power Grid.
Article 10. INDEMNITY
If a party to this Contract is in breach of its
obligations under it, the breaching party shall bear
responsibility for and shall indemnify and hold the
non-breaching party harmless from and against any loss or
damage, cost, liability or claim against the non-breaching
party, and all expenses relating thereto, including, but
not limited to, legal fees and expenses, which may be
suffered by the non-breaching party, due to the other
party's breach of its obligations under any relevant
contract including but not limited to this Contract and
the Interconnection Contract.
ARTICLE 11. INSURANCE
11.1 Insurance from Joint Venture
The Joint Venture shall maintain and obtain such insurance
in respect of the construction and operation of the Power
Plant (including, but not limited to, those specified in
Appendix 5) in the name of the Joint Venture as required
by the FX Financing Contracts. The insurance expense shall
be counted as part of the cost of electricity generation.
11.2 Insurance from Anhui Power
Anhui Power shall obtain and maintain insurance, in its
own name, and shall be responsible for any liability
relating to workers and staff and as required by the
relevant laws of China. The insurance expense shall be
passed through to the Tariff as part of the cost of
electricity generation.
11.3 Policies and Claims
Anhui Power shall comply with all requirements of such
insurance and shall provide the Joint Venture with all
information and assistance within its capacity to aid the
Joint Venture in making any claims under insurance carried
and maintained under Article 11.1 and in processing claims
under its insurance. Anhui Power shall promptly notify the
Joint Venture of the occurrence of any accident or other
event covered by or affecting the insurance.
ARTICLE 12. OCCURRENCE OF POWER PLANT FORCE MAJEURE
12.1 Power Plant Force Majeure means any of the following events:
(a) war, hostility or insurrection;
(b) plague or other epidemics;
(c) fire;
(d) lightning;
(e) earthquake; or
16
<PAGE>
(f) damages to property as a result of the operation of the
forces of nature, including natural calamities, and which
an experienced power plant operator or electricity
supplier, as the case may be, could not foresee;
which, in each case;
(i) occurs within the boundaries of the Power Plant; and
(ii) prevents the Power Plant from generating electricity; and
(iii) cannot be prevented by any effort according to the good
operating practices for thermal power plants.
12.2 Notification
If an event of Power Plant Force Majeure occurs at any
time, Anhui Power shall, as soon as possible, notify the
Joint Venture of such event. Together with such
notification, Anhui Power shall present its proposals to
mitigate the effects of such event of Power Plant Force
Majeure.
12.3 Consultation
Anhui Power and the Joint Venture shall as soon as
possible consult with each other with the object of
maintaining economic production of electricity by the
Power Plant and minimizing any occurrence of expenses and
disruption.
12.4 Mitigation
Anhui Power shall use its best efforts to overcome the
effects of the event of Power Plant Force Majeure.
ARTICLE 13. SPECIFICATION OF COAL
13.1 Coal Must Comply with Specifications
Anhui Power shall ensure that each of the deliveries of
coal supplied to the Power Plant shall comply with all of
the specifications set forth in Appendix IV.
13.2 Coal Analysis on Delivery
When each load of coal is delivered at the Power Plant,
the coal shall, at the cost of Anhui Power (which shall
form part of the operating expenses), be weighed and
analyzed based on the condition when payment is made in
accordance with the procedures set forth in Measurement
Standards Bureau of P.R.C. standards: (1) ((GB475-83))
Sampling Process for Commercial Coal: (2) ((GB474-83))
Coal Sample Making Process: and (3) ((GB212-91)) The
industrial Analysis Process of Coal (or such other
equivalent internationally accepted standards as the
Parties may agree).
ARTICLE 14. NOTICES
14.1 Address for Notices
Under this Contract, each invoice, notice or other
document to be sent by each party by courier, mail or
facsimile or delivered to other parties shall be in
writing and sent or delivered to the other party at the
following addresses:
(a) Anhui Power:
17
<PAGE>
No. 415 Wuhu Road
Hefei, Anhui, P.R.C. 230061
Facsimile: 0551-3633393
Receiver: Cheng Guangjie
(b) The Joint Venture:
Commercial Office Building
West Huangshan Road
Wuhu, Anhui, P.R.C. 241000
Facsimile: 0553-3823224
Receiver: Wang Wudao
or other address as one party may have notified to the
other party in writing from time to time.
14.2 Delivery of Notices
Any such invoice, notice or other document:
(a) may be delivered in person to the relevant address
on any day during the hours of 9.00 a.m. to 12.00
noon and 2.00 p.m. to 5.00 p.m. in an envelope.
The envelope shall indicate on the front of it the
subject matter of its contents and the envelope
shall be marked for the attention of such officer
or employee (if any) as the relevant party shall
have notified to the other party for the purpose.
(b) if so presented for delivery, may be handed to any
person then present at such address who will
provide written notice of the receipt of the same;
and
(c) if the person effecting delivery is unable to
obtain such written acknowledgment within one hour
of his arrival at such address, may be left there.
14.3 Deemed Delivery
Any invoice, notice or other document delivered by hand
shall be deemed to have been delivered and received if
delivery is effected in accordance with Article 14.2. Any
document sent by facsimile shall be deemed to be delivered
on the working day after it is sent. Any document sent by
mail shall be deemed to have been delivered three working
days after it is mailed.
ARTICLE 15. MISCELLANEOUS
15.1 Separate and Independent Contract
This Contract shall be construed as a separate and
independent contract. If there is any conflict between
this Contract and any other agreement between any of the
parties relating to the same subject matter, the
provisions of this Contract shall prevail.
15.2 Language of Contract
This Contract shall be executed in Chinese and English.
Both the English and Chinese versions of this Contract are
of equal validity.
15.3 Amendments
Any amendments to this Contract and/or the Appendices must
be in writing and signed by the duly authorized
representatives of the Joint Venture and Anhui Power and
approved by the relevant authorities.
18
<PAGE>
ARTICLE 16. TERMINATION IN ADVANCE
16.1 Termination Events
Upon the occurrence of a Termination Event, Anhui Power
shall be obliged to immediately pay to the Joint Venture
the Termination Payment, whereupon the Joint Venture shall
transfer all right, title and interest in the Power Plant
to Anhui Power or to such other person as Anhui Power
shall nominate and, without prejudice to any existing
accrued rights of the parties, this Contract shall
automatically terminate.
If the Parties do not, for whatever reason, within 60 days
after the occurrence of a Termination Event, agree the
amount of the Termination Payment or any component
thereof, Anhui Power shall immediately pay to the Joint
Venture on account of Termination Payment an amount equal
to the amount certified by the Facility Agent (as defined
in the US$ Senior Loan Contract) to represent its estimate
of the amount which would be payable under item (ii) in
the definition of Termination Payment. Such amount on
account of Termination Payment paid by Anhui Power shall
be applied first in or towards satisfaction in full of all
amounts due under or in connection with the US$ Senior
Loan Contract and shall be paid without prejudice to the
rights and obligations hereunder of either the Joint
Venture or Anhui Power to subsequently require or make any
necessary adjusting payments between them once the amount
of the Termination Payment is agreed between them.
16.2 Termination by Agreement
Subject as provided in Article 16.1 neither party may
terminate this Contract without the consent of the other
or (in the case or an assignment by any party, whether by
way of security or otherwise) the assignee of the other
party. In any event this Contract shall not be capable of
termination without the consent of the Creditors so long
as the Joint Venture has any obligations, actual or
contingent, pursuant to the FX Financing Contracts.
ARTICLE 17. Law and Dispute Resolution
17.1 Governing Law
This Contract shall be governed and construed in
accordance with the laws of China. If any disputes arise,
they shall be settled according to the laws of China.
17.2 Settlement of Disputes
Any disputes arising from the execution of or in
connection with this Contract shall be settled through
friendly consultations between the parties. In the event
no settlement can be amicably reached through consultation
within 60 days, the disputes shall be submitted to the
China International Economic and Trade Arbitration
Commission in Beijing for arbitration. The arbitration
award shall be final and binding on all parties.
ARTICLE 18. EFFECT AND TERM OF CONTRACT
18.1 Effect of Contract
18.1.1 This Contract will come into effect on the date of
execution by both parties.
18.1.2 Copies of this Contract shall be submitted for record
purposes to the appropriate authorities by Anhui Power.
19
<PAGE>
18.2 Term
This Contract shall remain in force until the expiration
of the Joint Venture term or shall be extended for the
same period as the period affected by Power Plant Force
Majeure.
Article 19. Assignment
19.1 Anhui Power hereby acknowledges and consents to the
assignment by the Joint Venture of any or all of its
rights and benefits under this Contract in favour of any
Creditor(s).
19.2 The terms "Anhui Power", "Joint Venture" and "Party" shall
include their respective successors and permitted assigns.
IN WITNESS WHEREOF, this Contract has been duly executed by the
parties as of the date first above written.
Signatories to this Contract
Wuhu Shaoda Electric Power Development Company Limited
Representative: [Signature Illegible]
Date:_______________1996
Witness: [Signature Illegible]
Anhui Provincial Electric Power Corporation
Representative: [Signature Illegible
Date:________________1996
Witness: [Signature Illegible]
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Appendix I Invoice Format
Invoice for Electricity Fee Payment from Month: Date:
to Month: Date:
Date of Meter Recording:
Date of Table fill-out:
This month is the ____ month of this quarter,
The meter reading of the preceding month was ________,
The meter reading of this month is ________.
The portion of Electricity Fee for this month is ________, being the
price determined pursuant to Article 7 of the Operation and Offtake
Contract.
The on-grid electricity of the first month of this quarter is _____
The on-grid electricity of the second month of this quarter is ____
The on-grid electricity of the third month of this quarter is _____
Sum of money due ____________
Balance due ___________
Amount payable (sum of money due + balance due) ____________
Balance due = unpaid account of the amount payable for the
preceding month + delinquency charge as referred
to in Article 7.6.4
Payments Due:
(a) Payment due in respect of the 1st, 2nd, 4th, 5th,
7th, 8th, 10th and 11th months of each Year:
[***]
(b) Payment due in respect of the 3rd and 9th month
of each Year:
[***]
(c) Payment due in respect of the 6th month of each
Year:
[***]
(d) Payment due in respect of the 12th month of each
Year:
[***]
where
21
<PAGE>
AMPQ is the aggregate of the MPQ of both Units (it will be the
MPQ of Unit I before the Tariff Commencement of Unit II);
T is the Tariff;
AOCP is the AOC Percentage (as determined under Article 7.4);
A is the excess of actual generation (expressed in KWH) from the
beginning of the 1st month to the end of the 6th month over one half
of the AMPQ; (A may never be less than zero); and
C is the excess of actual generation (expressed in KWH) in the Year
over the AMPQ (C may never be less than zero).
22
<PAGE>
Table 2 Operation Cost of the Power Plant
1, Fuel
2, Power Offtake
3, Water
4, Salary
5, Welfare
6, Maintenance
7, Other Costs
Office Work
Water
Travel
Heating
Low-value Consumable Amortization
Labor Protection
Repairs
Transportation
Insurance
Leasing
Sewage
The Worker Union Fee
Staff Education
Testing and Experiment
External Service
Technical Transfer
Unemployment Insurance
Reception
Waste Ash Disposal
Land Use
Audit
Consultant
Afforestation
Stock Products Loss, Damage and
Abandonment
Salary Review
Guard and Fire Fighting
23
<PAGE>
Corporate Membership
Water Conservancy Fund
Price Adjustment Fund
Entrusted O & M Fee
Others
8, Bank Charges
9, Working Capital Adjustment
10, Technical Renovation
24
<PAGE>
Appendix II Metering and Recording of Power Output
1 The KWH meter to record both active and reactive power
quantity supplied by the Power Plant to Power Grid shall
be located at the Breaker No. 1 and the Breaker No. 2 at
the high voltage side of the step-up transformer of the
Power Plant; the KWH meter to record power supply from
Anhui Power Grid to the Power Station shall be located at
the Breaker No. 3 at the high voltage side of the start-up
transformer of the Power Plant.
2 Under normal operation, power from the Power Plant to
Power Grid shall be transmitted through the 220KV step-up
substation of the Power Plant and the 220KV transmission
line.
3 The accuracy of metering equipment shall comply with
accuracy standards for Class 1 metering equipment, namely:
Active Power Meter: Grade 0.5
Reactive Power Meter: Grade 2.0
PT: Grade 0.2
CT: Grade 0.2
The metering equipment shall be managed in accordance with
Regulations for Management of Electric Power Meters,
promulgated by the Ministry of Electric Power.
4 Under normal operation, auxiliary power of the Power Plant
shall be provided by the high-voltage station service
transformer; in case of outage of the station service
transformer, it shall be provided by the start-up
transformer.
5 Power transmitted from the Power Plant to Power Grid shall
be calculated through the following formula:
Qg1 + Qg2
Among these, Qg1 is the active power volume supplied by
the Power Plant to Anhui Electric Power Grid measured by
KWH meter at the Breaker No. 1; Qg2 is the reactive power
volume supplied by the Power Plant to Anhui Electric Power
Grid measured by KWH meter at the Breaker No. 2.
6 Power transmitted from Anhui Power Grid to the Power Plant
shall be calculated as the active power quantity measured
by KWH meter at the Breaker No. 3 at the high voltage side
of the start-up transformer.
7 The Joint Venture and Anhui Power shall jointly appoint a
qualified institution to be responsible for recording of
all KWH meters. At noon of the last day of each month or a
time in the same day as agreed upon by the Parties, the
Joint Venture and Anhui Power shall send representatives
to the site to witness the recording. In case that any one
Party is absent at such an agreed time, the Party present
shall witness the recording alone, and the result of such
recording shall be binding on both Parties.
8 The Joint Venture and Anhui Power shall jointly appoint a
qualified institution to calibrate all meters and their
auxiliary parts every year. At the time when calibration
takes place, the Joint Venture and Anhui Power shall send
representatives to the site to witness the calibration. In
case that any one side is absent at such an agreed time,
the Party present shall witness the calibration alone, and
the result of such calibration shall be binding on both
Parties.
25
<PAGE>
9 If any Party finds, for some reason, that the above
metering equipment may be inaccurate, that Party shall
immediately notify the other Party of the situation. The
inaccurate metering equipment shall be tested and
recalibrated promptly. The power output at the time of
metering inaccuracy shall be calculated at a temporary
metering point determined by both Parties.
26
<PAGE>
Appendix III Pre-Operation and Operation Services
Part I Pre-operation Services
Before the actual date of construction completion of the
units, Anhui Power shall provide the following
pre-operation services:
1 Preparation for Operation
Anhui Power shall
1.1 in consultation with the Joint Venture, draw out maintenance
and the administrative management system for the Power Plant;
1.2 three months prior to the full start-up and interconnection
of the Unit I of the Power Plant, make out and submit to the
Joint Venture operation and safety codes applicable to the
Power Plant (Preliminary Version). Within three months after
commencement of commercial operation of the Power Plant, the
above codes shall be modified and observed during operation
of the Power Plant. Copies of such codes shall be sent to the
Joint Venture for file keeping purpose;
1.3 develop a complete set of training program for the Power
Plants O & M employees for them to become familiar with power
plants and satisfactorily fulfil their responsibility. The
training program shall include seminars, site visits, and
training given by EPC contractors and equipment
manufacturers. The training program shall be based on
technical data and manuals provided by EPC contractors,
including information about start-up, operation, basic
maintenance, fire fighting and safety, etc.;
1.4 in consultation with the Joint Venture, draw out criteria for
recruitment of employees of the Power Plant, and recruit
qualified and experienced employees according to such
criteria;
1.5 assist the Joint Venture in monitoring, operation and tests
of the Power Plant;
1.6 send to the Joint Venture and relevant operation management
departments technical data and final drawings provided by EPC
contractors, the original copy of which shall be kept in the
safest place within the Power Plant;
1.7 in consultation with the Joint Venture, draw out the list of
all consumable, spare parts, tools and materials needed by
the Power Plant, and purchase on behalf of the Power Plant
the above things needed by the Power Plant during the first
year of commercial operation;
1.8 in consultation with the Joint Venture, draw out a detailed
maintenance plan and methods for the first year of commercial
operation of the Power Plant; in consideration of the rights
and obligations of the Joint Venture, draw out an outline
plan for the scheduled overhaul for the first four years of
commercial operation.
2 Start-up, interconnection, commissioning and tests
Anhui Power shall
2.1 provide spare parts, consumable, fuel oil, water, coal and
lubricants necessary for timely, safe and stable start-up of
the Units;
2.2 be responsible for implementing, and guaranteeing the Units
to be in compliance with the interconnection conditions
stipulated in Article 2 of the Interconnection Contract;
27
<PAGE>
2.3 provide qualified and experienced engineers in sufficient
quantities to perform start-up, commissioning,
interconnection and 72- hour and 24 hour performance tests of
the Units;
2.4 provide all necessary power for commissioning of the Power
Plant (including power needed for start-up);
2.5 record in detail and keep all the data of the start-up and
performance tests of the Power Plant;
2.6 provide other necessary services.
Part II Services and Operation
1 Recruitment and training
Anhui Power shall
1.1 guarantee to meet the manning requirement of the Power Plant;
in case of any vacancy, recruit qualified and experienced
staff;
1.2 provide relevant class and site training for new employees,
to train them to be qualified employees for their duties;
1.3 ensure the continuity of training programs, the staff
training shall include safety measures, O & M procedures, and
establish relevant examination and promotion system;
1.4 provide other necessary services related to recruitment and
training.
2 Operation of Power Plant
2.1 Anhui Power shall maintain, operate, commission and inspect
the Power Plant:
1) to enable the Power Plant to be in good condition
during the term of the Joint Venture;
2) to maintain high availability and efficiency of
generation facilities of the Power Plant;
3) to minimize the occurrence of accidents and damages,
and in case of accidents and damages, to minimize
their duration.
2.2 provide to the Joint Venture, on a timely basis and at
regular intervals, reports on operation, repairs, tests,
maintenance and examination of the Units;
2.3 carry out the performance test stipulated by the Ministry of
Electric Power for similar coal-fired power plants;
2.4 guarantee that the Power Plant shall abide by all applicable
laws, regulations, safety rules and other stipulations.
2.5 perform relevant obligations and responsibilities of the
Joint Venture related to operation of the Power Plant as
stipulated in the "Interconnection Contract" and "Dispatch
Contract"; if any reduction of power generation occurs due to
the responsibility of Anhui Power, Anhui Power shall
indemnify the Joint Venture from losses incurred by such
reductions. As an operator of the Power Plant, Anhui Power
shall indemnify the Joint Venture for any penalties under the
relevant provisions of this Contract;
28
<PAGE>
2.6 be responsible for daily maintenance, overhauls and repairs,
and planned or emergency maintenance;
2.7 make annual generation and maintenance plan in accordance
with the "Operation and Offtake Contract" and implement the
same;
2.8 dispose of all the unnecessary materials and wastes of the
Power Plant.
3 Management
Anhui Power shall
3.1 keep the Power Plant in good operation condition and
appropriate level of spare parts reservation according to
good operational practices of similar coal-fired power
plants;
3.2 be responsible for management of maintenance of the Power
Plant;
3.3 in the event of any emergency or unusual event affecting the
normal operation of the Power Plant, take all necessary
actions to minimize injury to persons and damage to the Power
Plant and, immediately report to the Joint Venture the nature
of such emergency or unusual event.
4 Procurement
Anhui Power shall
4.1 check regularly needs of spare parts, consumable and
materials of the Power Plant (considering the designed life
of equipment, actual maintenance records and any technical
specification changes), and, draw out corresponding plans and
do the purchase according to these plans;
4.2 be responsible for organizing the coal supply, and ensure
enough fuel for continuous, steady and safe operation of the
Power Plant, at least to meet the needs of production of the
Minimum Generation Quantity.
5 Statements and reports
Anhui Power shall, before delivery of the first Unit,
provide suggestions on forms of the following daily,
monthly and annual reports, and determine the forms in
consultation with the Joint Venture.
5.1 Daily reports
Anhui Power shall provide the Joint Venture with daily
reports on daily operation of the Power Plant, including
without limitation the following items:
1) net generation volume of each Unit;
2) coal consumption of each Unit;
3) causes for deviation of each Unit from the daily
load curve;
4) description of emergencies or unusual events
resulting in deduction of power generation and
injuries.
5.2 Monthly reports
Anhui Power shall, within the first 10 days of each month,
provide to the Company a monthly report on the performance
of the Units for the previous month. The report shall
include, but not be limited to the following:
29
<PAGE>
1) statistical statement on operation in the form
required by the Ministry of Electric Power;
2) major repair and maintenance activities carried out
during the previous month, and those planned for
the next month;
3) expenses of the previous month and those planned
for the next month;
4) statistical statement of safety record during the
previous month;
5) summary of unusual events and emergencies during
the previous month, and measures already taken by
Anhui Power to mitigate the effects of same.
5.3 Annual Report
Anhui Power shall, within 60 days after the end of each
calendar year, submit to the Joint Venture an annual
report of such calendar year. The annual report shall
include but not be limited to the following:
1) annual operational data;
2) annual repair and maintenance data;
3) annual safety record and statistics of accidents;
4) annual financial statement;
5) summary of any disputes relating to the Power Plant;
6) environmental monitoring;
7) other data at reasonable request of the Joint Venture.
5.4 Other reports
Anhui Power shall provide:
1) a report on safety status of the Power Plant, with
data on personal and material damages, as required by
relevant authority;
2) other reports at reasonable request of the Joint
Venture.
6 Access to the Power Plant
6.1 Anhui Power shall provide all necessary working and living
facilities to the resident representatives of the Joint
Venture in the Power Plant.
6.2 Anhui Power shall allow representatives or consultants from
the Joint Venture to inspect and monitor the operation of the
Power Plant at any time.
6.3 Anhui Power shall, upon request of the Joint Venture, allow
the Joint Venture or its representatives to have access at
any time to any information, data and records held by Anhui
Power.
7 Other responsibility
Anhui Power shall be responsible for responding to other
requests from relevant authorities concerning the Power
Plant.
30
<PAGE>
Appendix IV Coal Specifications and Permissible Deviation Range
Item Spec. Deviation
---- ----- ---------
carbon (%) 52 +/-3
hydrogen (%) 3.2 +/-0.3
nitrogen (%) 1.24 +/-0.1
sulphur (%) 0.45 +/-0.03
oxygen (%) 3.4 +/-0.5
ash (%) 28 +/-4
water content (%) 8.45 +/-0.05
fixed water (%) 1.52 +/-0.20
vaporized substances (%) 16 +/-1
low heat value (Kcal kg) 5000 +/-300
ash melting point t1,t2,t3)1500C t1,t2,t3)1500C
grindability (%) 80 +/-1
Ash Components:
SiO2 47.21 +/-1
TiO2 1.67 +/-1.7
Al2O3 35.37 +/-1
Fe2O3 4.71 +/-0.2
MgO 1.26 +/-0.01
CaO 2.42 +/-0.1
Na2 O1.57 +/-0.12
K2O 1.57 +/-0.03
Dust, Electric Resistance Ratio
27C 5.28x109 ohm/cm
100C 2.44x1012 ohm/cm
120C 3.03x1012 ohm/cm
150C 3.60 x1012 ohm/cm
180C 2.19x1012 ohm/cm
NO IMPURITIES: no impurities shall be contained in the coal delivered,
including without limitation bones, stones, pieces of iron and wood. No oil
or other substances shall be added to the coal in order to change its heat
value without prior consent from the Buyer.
31
<PAGE>
Appendix V Necessary Insurance
1 Third Party Liability
2 Life injury and Medical Care
3 Enterprise Property (Substitute Value)
4 Vehicles (Vehicles and the Third Party Liability)
5 Owner Liability
6 Profit Loss
7 Marine Cargo
8 Construction and Installation
9 Water Transport and Land Transport Cargo
10 Boiler and Machinery (including construction and operation
periods)
32
<PAGE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Appendix VI Common Auxiliary Facilities Utilization and Management
[***]
<PAGE>
Appendix A
List and Description of Common Facilities
1 Coal Pier
2 Coal Transportation Passage
3 Civil Construction of Circulating Pump House and Water Leading Pipe
4 Ash Removal Tunnel and Pipe
5 Civil Construction of the Grid Control Room
6 Water Treatment Chamber
7 Coal Transportation Central Room
8 Coal Pool, Dry Coal Bunker and Impeller
9 Land of Main Production Building
10 Auxiliary Production Facilities
11 Welfare (including Dormitories, Guest House and Dinning Hall)
12 Other Public Facilities (including Bathing Rooms, Nursery, Kindergarten,
Administration Building, Recreation Center and Entry Access)
Exhibit 10.34
DATED 26th June 1996
AES CHINA HOLDING COMPANY (L) LIMITED
and
ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
and
CHINA POWER INTERNATIONAL HOLDING LIMITED
and
WUHU ENERGY DEVELOPMENT COMPANY
together as Sponsors and Subordinated Lenders
and
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Borrower
and
CCIC FINANCE LIMITED
on its own behalf and as facility agent
for the Lenders referred to herein
------------------------------------
UNDERTAKING AND SUBORDINATION DEED
-------------------------------------
Baker & McKenzie
14th Floor Hutchison House
Hong Kong
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Interpretation.........................................................2
2. Project Undertakings...................................................3
3. Subordination of Indebtedness..........................................5
4. Acknowledgement by Borrower............................................9
5. Continuing Security....................................................9
6. Representations and Warranties.........................................9
7. Undertakings..........................................................11
8. Borrower's Representations, Warranties and Undertaking................13
9. Claims by Subordinated Lenders........................................14
10. Taxes and Other Deductions............................................14
11. Costs, Charges and Expenses...........................................14
12. Indemnity.............................................................15
13. Further Assurance.....................................................16
14. Evidence of Debt......................................................16
15. Suspense Account......................................................16
16. Waiver and Severability...............................................17
17. Miscellaneous.........................................................17
18. Assignment............................................................19
19. Notices...............................................................19
20. Governing Law and Jurisdiction........................................21
Execution ...............................................................23
<PAGE>
THIS DEED is made on the 26th day of June 1996
-------- ---------
BETWEEN:
(1) AES CHINA HOLDING COMPANY (L) LIMITED of Lot A, Level 3, Wisma
Oceanic, Jalan Okk Awang Besar, 87007, Federal Territory of Labuan,
Malaysia ("AES");
(2) ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED of No.
415 Wuhu Road, Hefei, Anhui Province, People's Republic of China
("Anhui Liyuan");
(3) CHINA POWER INTERNATIONAL HOLDING LIMITED of Suite 5306, 53/F,
Central Plaza, 18 Harbour Road, Wanchai, Hong Kong ("CPIL");
(4) WUHU ENERGY DEVELOPMENT COMPANY of Commercial Office Building,
Huangshan West Road, Wuhu, Anhui Province, People's Republic of China
("Wuhu");
(AES, Anhui Liyuan, CPIL and Wuhu shall in their respective
capacities as Joint Venture Parties and sponsors of the Project and
as provider of subordinated loans as envisaged in Clause 2.02 of this
Deed, be collectively referred to as the "Sponsors" and, in their
respective capacities as lenders under Subordinated Loan Agreements
only, be collectively referred to as the "Subordinated Lenders");
(5) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
joint venture company formed under the Law of the People's Republic
of China on Joint Ventures Using Chinese and Foreign Investment and
whose registered office is at Commercial Office Building, West
Huangshan Road, Wuhu, Anhui Province, People's Republic of China, as
borrower (the "Borrower"); and
(6) CCIC FINANCE LIMITED of 38th Floor, Bank of China Tower, 1 Garden
Road, Central, Hong Kong on its own behalf and as facility agent for
the Lenders referred to below (in such capacity, the "Facility
Agent").
WHEREAS:
(A) By a loan agreement (the "Loan Agreement") dated 22nd April 1996 made
between (1) the Borrower, (2) CCIC Finance Limited, as arranger (the
"Arranger"), (3) Bank of China, Hong Kong Branch, Cho Hung Bank, DKB
Asia Limited, Dresdner Bank AG Hong Kong Branch, The First National
Bank of Chicago, The Industrial Bank of Japan, Limited, Korea First
Bank and Westdeutsche Landesbank Girozentrale, Hong Kong Branch, as
co-arrangers (the "Co-Arrangers"), (4) the banks and other financial
institutions named therein as lenders (the "Lenders"), (5) Bank of
China, Anhui Branch, as security agent (the "Security Agent") and (6)
the Facility Agent, the Lenders have agreed to make available to the
Borrower a term loan facility of up to sixty-five million Dollars
(US$65,000,000), upon the terms set out therein.
<PAGE>
(B) It is a condition precedent to the Lenders making the Facility
available to the Borrower that the Sponsors, the Subordinated Lenders
and the Borrower enter into this Deed.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.01 Definitions and Construction. In this Deed, unless the context
requires otherwise:
(a) terms and expressions defined in or construed for the
purposes of the Loan Agreement shall have the same meanings
or be construed in the same manner when used in this Deed;
(b) "Committed Subordinated Loan Agreements" shall mean the AES
Loan Agreement, the Anhui Liyuan Loan Agreement and the Wuhu
Loan Agreement;
(c) the expression "Facility Agent" shall mean the Facility
Agent acting on its own behalf and as facility agent for the
Lenders and the expression "Lenders" shall include the
Arranger, the Lead Managers, and the Security Agent in their
respective capacities as such;
(d) "Relevant Percentage" means:
(i) in relation to AES, twenty-five per cent (25%);
(ii) in relation to Anhui Liyuan, twenty per cent (20%);
(iii) in relation to CPIL, forty-five per cent (45%); and
(iv) in relation to Wuhu, ten per cent (10%);
(e) "Secured Indebtedness" means all and any sums (whether
principal, interest, fees or otherwise) which are or at any
time may become payable by the Borrower under the Loan
Agreement or any Security Document to which it is a party
and all other monies hereby secured;
(f) "Subordinated Indebtedness" means all and any sums, in
whatever currency, which are now or may hereafter become
due, owing or incurred by the Borrower to the Subordinated
Lenders, whether in respect of principal, interest or
otherwise, on account of any advance, loan or payment made
to or for the account of the Borrower;
(g) "Subordinated Loan Agreement" means any loan agreement,
facility letter or other document now or hereafter entered
into between the Subordinated Lenders and the Borrower
creating or evidencing the Subordinated Indebtedness (or any
part thereof) including, without limitation, the Committed
Subordinated Loan Agreements.
<PAGE>
1.02 The Subordinated Lenders and the Sponsors. References to the
Subordinated Lenders and the Sponsors shall mean and include each and
every person liable hereunder as Subordinated Lender or Sponsor, as
the case may be (except the Borrower) or, where the context permits,
any one or more of them and all representations, warranties,
undertakings, agreements and obligations of the Subordinated Lenders
and the Sponsors herein expressed or implied shall, unless the
context requires otherwise, be deemed to be made, given or assumed by
each of the Subordinated Lenders and the Sponsors severally.
1.03 Loan Agreement. To the extent applicable and required by relevant
law, the terms and conditions of the Loan Agreement shall be deemed
to be incorporated into this Deed by reference and this Deed shall be
read and construed as if such terms and conditions had been set out
in full herein.
1.04 Successors and Assigns. The expressions "Subordinated Lenders",
"Borrower", "Facility Agent", "Sponsors" and "Lenders" shall where
the context permits include their respective personal
representatives, successors and permitted assigns and any persons
deriving title under them.
1.05 Miscellaneous. In this Deed, unless the context requires otherwise,
references to statutory provisions shall be construed as references
to those provisions as replaced, amended, modified or re-enacted from
time to time; words importing the singular include the plural and
vice versa and words importing a gender include every gender;
references to this Deed, the Loan Agreement, any other Security
Document, any Project Contract or any other document referred to
herein shall be construed as references to such document as the same
may be amended or supplemented (provided that any required consent or
approval for such amendment or supplement has been obtained) from
time to time; unless otherwise stated, references to Clauses are to
clauses of this Deed. Clause headings are inserted for reference only
and shall be ignored in construing this Deed.
2. PROJECT UNDERTAKINGS
2.01 Undertaking. In consideration of the Lenders agreeing to make the
Facility available to the Borrower upon the terms and conditions of
the Loan Agreement and as a continuing security for the due and
punctual payment of the Secured Indebtedness and the due and punctual
performance and observance by the Borrower of all other obligations
of the Borrower contained in the Loan Agreement or any Security
Document to which it is a party, each of the Sponsors hereby
unconditionally and irrevocably undertakes with the Facility Agent
that:
(a) it will use its best efforts to procure that the Borrower
shall proceed with, and complete, the Installation in
accordance with the EPC Contract and the Installation Plan
and any other requirements of the Loan Agreement and that
the Project Completion Date shall occur on or before the
Scheduled Completion Date, provided that its obligation to
advance, or otherwise make available funds to the Borrower
in respect of such obligation shall be limited as set forth
in paragraphs (b) and (c) below;
<PAGE>
(b) from time to time upon the Borrower or the Facility Agent
having determined in accordance with the Loan Agreement that
a Cost Overrun has occurred or is likely to occur it will
pay to or procure that there be paid to the Borrower by way
of further equity contribution to the Borrower, an amount
equal to its Relevant Percentage of each payment required to
be made by the Borrower on account of Installation Costs
which the Borrower is not able or entitled to fund from its
own resources or by means of any advance under any
Subordinated Loan Agreement or an Advance under the
Facility, such payments by the Sponsors to be made in such
amounts and at such times as shall be necessary to ensure
that (assuming each of the Sponsors makes its respective
payment hereunder) the Borrower is able to satisfy those
Installation Costs immediately upon their becoming due;
(c) it will pay to or procure that there be paid to the
Borrower, from time to time, an amount equal to its Relevant
Percentage of each sum required by the Borrower to meet any
Working Capital Deficit and, for this purpose "Working
Capital Deficit" means, for any relevant period, any amount
by which the payment obligations of the Borrower (other than
under the Loan Agreement or any Subordinated Loan Agreement)
during that period exceed the funds available to the
Borrower to satisfy such outgoings during that period
provided that no Working Capital Deficit shall arise prior
to the first Actual Completion Date (as defined in the
Operation and Offtake Contract) to occur of either Unit of
the Power Plant;
(d) procure that the Project is not abandoned or cancelled, in
whole or in part.
2.02 Payments. Each of the Sponsors hereby unconditionally and irrevocably
undertakes with the Facility Agent that it shall make payments or
advances to the Borrower pursuant to Clause 2.01(b) and Clause
2.01(c) above as and when required in writing by the Borrower or the
Facility Agent (accompanied, if the requirement relates to a payment
under Clause 2.01(b) in respect of Cost Overrun, by a certification
from the Technical Consultant that a Cost Overrun has occurred or is
reasonably likely to occur) from time to time so as to enable the
Borrower to meet its relevant liabilities when due. The Sponsors
shall make all payments pursuant to Clause 2.01(b) by way of cash
contribution to the capital of the Borrower (making a corresponding
increase in the registered capital of the Borrower) and shall make
all payments pursuant to Clause 2.01(c) by way of advance of
subordinated debt on terms and in currencies (being Dollars or RMB)
to be agreed between the Sponsors and the Borrower from time to time
(but subject always to the provisions of this Deed).
2.03 Lenders. If any Sponsor (the "Defaulting Sponsor") fails to perform
its obligations under the foregoing provisions of this Clause 2, the
Lenders and/or the Facility Agent may (but shall not be obliged to)
proceed to perform all or any of such obligations on behalf of the
Defaulting Sponsor by procuring completion of the Installation and
the occurrence of the Project Completion Date or by making payment of
amounts payable under the foregoing provisions of this Clause 2, as
appropriate, and the Defaulting Sponsor shall, from time to time,
forthwith upon receiving the Facility Agent's first written demand,
pay to the Facility Agent the amount so paid together with interest
thereon at the rate referred to in clause 16 of the Loan Agreement,
calculated from the date of such payment by the Lenders and/or the
Facility Agent until full reimbursement, both before and after
judgement.
<PAGE>
3. SUBORDINATION OF INDEBTEDNESS
3.01 Subordination. In consideration of the Lenders agreeing to make the
Facility available to the Borrower upon the terms and conditions of
the Loan Agreement and as a continuing security for the due and
punctual payment of the Secured Indebtedness and the due and punctual
performance and observance by the Borrower of all other obligations
of the Borrower contained in the Loan Agreement or any Security
Document to which it is a party, each of the Subordinated Lenders
agrees that throughout the continuance of this Deed and so long as
the Secured Indebtedness or any part thereof remains owing:
(a) subject to Clauses 3.02, 3.05 and 3.07, the Subordinated
Indebtedness owing to it:
(i) is, and shall remain, subordinated and the payment
thereof deferred to all and any rights, claims and
actions which the Facility Agent or any Lender may
now or hereafter have against the Borrower in
respect of the Secured Indebtedness;
(ii) shall not be repaid or repayable, in whole or in
part, except with the prior written consent of
the Majority Lenders;
(iii) may accrue interest, but such interest shall not be
payable;
(iv) is and shall remain unsecured by any Charge over
the whole or any part of the assets of the
Borrower;
(v) is not, and shall not become capable of being,
subject to any right of set-off or counterclaim;
(b) subject to Clauses 3.02, 3.05 and 3.07, it shall not claim,
request, demand, sue for, take or receive (whether by
set-off or in any other manner and whether from the Borrower
or any other person) any money or other property in respect
of the Subordinated Indebtedness or any part thereof;
(c) if any monies (including the proceeds of any set-off or
counterclaim) or other property are received directly or
indirectly in respect of the Subordinated Indebtedness by or
on behalf of it in breach of any of the provisions of this
Deed, it will hold the same upon trust to be applied first
in or towards payment of the Secured Indebtedness and
second, as to any balance remaining after irrevocable and
unconditional payment and discharge in full of the Secured
Indebtedness, in or towards payment of the Subordinated
Indebtedness, upon such terms as the Subordinated Lenders
shall have agreed among themselves;
<PAGE>
(d) subject to Clause 3.07, if any Charge is created as security
for the Subordinated Indebtedness then, immediately on the
creation thereof, the benefit of such Charge shall be
assigned or transferred in favour of the Facility Agent as
security for the Secured Indebtedness and any instrument or
agreement evidencing such Charge shall be deposited with the
Facility Agent;
(e) it shall require the Borrower to, and shall ensure that the
Borrower shall pay to the Facility Agent or as the Facility
Agent may direct any amounts which, if paid to such
Subordinated Lender, would be subject to the trust mentioned
in paragraph (c) above.
3.02 Proceedings for Winding-Up of Borrower. In any proceedings for the
compulsory or voluntary winding-up, liquidation or dissolution of the
Borrower (or any proceedings analogous thereto):
(a) the Facility Agent and the Lenders shall be entitled to
receive payment in full of the Secured Indebtedness before
the Subordinated Lenders shall be entitled to receive any
payment on account of the Subordinated Indebtedness or any
part thereof;
(b) the Subordinated Lenders agree that they will prove for the
full amount of their claims in respect of the Subordinated
Indebtedness and that in accordance with the trust mentioned
in Clause 3.01(c), any amounts payable to the Subordinated
Lenders in respect of the Subordinated Indebtedness shall be
applied in payment or satisfaction of the Secured
Indebtedness until the whole of the Secured Indebtedness
shall have been certified by the Facility Agent as having
been discharged and the remaining balance (if any) may be
applied towards payment of the amounts owing to the
Subordinated Lenders in respect of the Subordinated
Indebtedness, upon such terms as the Subordinated Lenders
shall have agreed among themselves.
3.03 Subordinated Loan Agreements. The Subordinated Lenders agree that:
(a) each and every Subordinated Loan Agreement now or hereafter
entered into shall be subject in every respect to the terms
of this Deed;
(b) insofar as the terms of any Subordinated Loan Agreement or
any transaction in connection therewith are or may be
inconsistent with the terms of this Deed, the terms
contained herein shall prevail;
(c) in respect of any Subordinated Loan Agreement proposed to be
entered into after the date hereof, the prior written
approval of the terms thereof shall first be obtained from
the Facility Agent;
(d) no amendment shall be made to any Subordinated Loan
Agreement except in writing and with the Facility Agent's
prior written approval of the terms thereof, such approval
not to be unreasonably withheld;
<PAGE>
(e) immediately after the execution of any Subordinated Loan
Agreement, or any agreement for the amendment of any
Subordinated Loan Agreement, copies thereof shall be
delivered to the Facility Agent as evidence thereof;
(f) no repayment or prepayment of principal may be made by the
Borrower (or payment in respect thereof accepted by the
Subordinated Lenders) under any Committed Subordinated Loan
Agreement unless if and to the extent that, subject to
Clause 3.01(a)(ii) and the other provisions of this Deed,
contemporaneously with or immediately prior to such
repayment or prepayment to any Subordinated Lender, a
repayment or prepayment of the Loan in at least a rateable
amount is made by the Borrower under the Loan Agreement. For
these purposes, "rateable amount" means an amount equal to
X% of the Loan, where "X" is the proportion, expressed as a
percentage, that the amount of the proposed repayment or
prepayment under the relevant Committed Subordinated Loan
Agreement bears to the total principal amount outstanding
under that Committed Subordinated Loan Agreement.
3.04 Application. All monies and other property received by the Facility
Agent in respect of the Subordinated Indebtedness may be applied by
the Facility Agent in or towards satisfaction of the Secured
Indebtedness in such manner as the Facility Agent (acting on the
instructions of the Majority Lenders) may decide.
3.05 Permitted Payments. The Borrower shall be entitled to make payments
of principal and interest under and in accordance with the terms of
the AES Loan Agreement, the Anhui Liyuan Loan Agreement, the Wuhu
Loan Agreement and the arrangements relating to the other
Subordinated Indebtedness made pursuant to Clause 2.01(c) as
envisaged in clause 14 of the Loan Agreement provided that at the
relevant time no Event of Default or prospective Event of Default has
occurred and is continuing.
3.06 Directions and Authorisations. Each Subordinated Lender hereby
irrevocably:
(a) directs the Borrower to pay to the Facility Agent (or as the
Facility Agent may direct) any amounts which, if paid to
such Subordinated Lender would be subject to the trust
mentioned in Clause 3.01(c);
(b) authorises the Facility Agent, in the event of a compulsory
or voluntary winding up, liquidation or dissolution of the
Borrower (or any proceedings analogous thereto) to ask,
demand, sue or prove for, and take and receive, in the name
of such Subordinated Lender or otherwise, all amounts
payable to such Subordinated Lender on account of any
Subordinated Indebtedness owing by the Borrower, and the
Subordinated Lender further covenants that in such event at
the request of the Facility Agent, it will take all such
action and execute all such documents as the Facility Agent
may reasonable require in order to enable the Facility Agent
to recover such Subordinated Indebtedness or any part
thereof.
<PAGE>
3.07 AES Security and CPIL Security. Notwithstanding any other provision
of this Deed:
(a) the AES Lender(s) shall be entitled to take the benefit of
Charges and other security from the Borrower as security for
the performance of the Borrower's obligations under the AES
Loan Agreement provided that the rights of the AES Lender(s)
in respect of such Charges or other security shall be
subordinated to, and in all respects shall rank in priority
after, the rights of the Agents, the Arranger, the
Co-Arrangers and the Lenders on the terms of this Deed and
the Priority Deed and provided further that each such Charge
or other security (and each document creating or evidencing
the same) shall be dated at least one day after, and (in
respect of each such document to be filed or registered)
shall be filed or registered on and with effect from a day
which is at least one day after, the date of the Charges,
other security and Security Documents in favour of the
Agent(s), the Arranger, the Co-Arrangers and the Lenders (or
any of them);
(b) AES (and any other AES Lender(s)) shall be entitled to
initiate enforcement proceedings under the AES Loan
Agreement or otherwise take action to foreclose any Charges
or other security granted as security therefor in accordance
with its respective terms with the consent of the Majority
Lenders (such consent being required only so long as any
amount remains to be lent under the Loan Agreement or the
Secured Indebtedness or any part thereof remains owing) and
in accordance with the terms of this Deed and the Priority
Deed provided that, in any event, any proceeds of such
enforcement shall be held and dealt with subject to the
terms and conditions of this Deed and the Priority Deed
provided further that, notwithstanding any of the foregoing,
AES may accelerate the due date of all obligations of the
Borrower under the AES Loan Agreement where the Lenders have
accelerated the repayment of the Loan pursuant to Clause
15.02(a) of the Loan Agreement);
(c) CPIL shall be entitled to take the benefit of Charges and
other security from the Borrower as security in connection
with the provision of the Guarantee (subject to the
provisions of the Guarantee) provided that the rights of
CPIL in respect of such Charges or other security shall be
subordinated to, and in all respects shall rank in priority
after, the rights of the Agents, the Arranger, the
Co-Arrangers and the Lenders on the terms of this Deed and
the Priority Deed;
(d) CPIL shall be entitled to initiate enforcement proceedings
under the CPIL Security Documents or otherwise take action
to foreclose any Charges or other security granted thereby
in accordance with its respective terms with the consent of
the Majority Lenders (such consent being required only so
long as any amount remains to be lent under the Loan
Agreement or the Secured Indebtedness or any part thereof
remains owing) and in accordance with the terms of this Deed
and the Priority Deed provided that, in any event, any
proceeds of such enforcement shall be held and dealt with
subject to the terms and conditions of this Deed and the
Priority Deed and provided further that each such Charge or
other security (and each document creating or evidencing the
same) shall be dated at least one day after, and (in respect
of each such document to be filed or registered) shall be
filed or registered on and with effect from a day which is
at least one day after, the date of the Charges, other
security and Security Documents in favour of the Agent(s),
the Arranger, the Co-Arrangers and the Lenders (or any of
them).
<PAGE>
4. ACKNOWLEDGEMENT BY BORROWER
The Borrower acknowledges the subordination of the Subordinated
Indebtedness and warrants and undertakes throughout the continuance
of this Deed and so long as the Secured Indebtedness or any part
thereof remains owing that:
(a) it will make all payments due in respect of the Subordinated
Indebtedness in accordance with the provisions of this Deed
and it will comply with all the other provisions of this
Deed and it will not do, take part in or take the benefit of
anything which would or may breach the provisions of this
Deed;
(b) it will promptly notify the Facility Agent whenever it
incurs any Subordinated Indebtedness;
(c) it has no notice of any prior disposal of or Charge over the
Subordinated Indebtedness or any part thereof to any other
person other than any disposal pursuant to Clause 7.03.
5. CONTINUING SECURITY
This Deed shall be a continuing security and shall remain in full
force and effect until the Secured Indebtedness has been paid in
full, notwithstanding the insolvency, bankruptcy or liquidation or
any incapacity or change in the constitution or status of any of the
Sponsors, the Subordinated Lenders, the Borrower or any other person
or any intermediate settlement of account or other matter whatsoever.
This Deed is in addition to, and independent of, any Charge,
guarantee or other security or right or remedy now or at any time
hereafter held by or available to the Facility Agent or any Lender.
6. REPRESENTATIONS AND WARRANTIES
6.01 Representations and Warranties. Each of the Sponsors and the
Subordinated Lenders represents and warrants severally and for
itself to the Facility Agent that:
(a) it has full power, authority and legal right to enter into
and engage in the transactions contemplated by this Deed and
has taken or obtained all necessary corporate and other
action to authorise the execution and performance of this
Deed;
(b) this Deed constitutes its legal, valid and binding
obligations enforceable in accordance with its terms;
(c) neither the execution of this Deed nor the performance by it
of any of its obligations or the exercise of any of its
rights hereunder will conflict with or result in a breach of
<PAGE>
any law, regulation, judgment, order, authorisation,
agreement or obligation applicable to it or cause any
limitation placed on it to be exceeded or, except as
indicated in Clause 3.07, result in the creation of or
oblige it to create a Charge in respect of the Subordinated
Indebtedness;
(d) all authorisations required from any governmental or other
authority or from any of its shareholders or creditors for
or in connection with the execution, validity and
performance of this Deed have been obtained and are in full
force and effect;
(e) it is not necessary in order to ensure the validity,
enforceability or admissibility in evidence in proceedings
of this Deed in its country of incorporation or any other
relevant jurisdiction that it or any other document be filed
or registered with any authority in its country of
incorporation or elsewhere or that any tax be paid in
respect thereof except as set out in appendix 2 of the Loan
Agreement;
(f) the Sponsors and the Subordinated Lenders are generally
subject to civil and commercial law and to legal proceedings
and neither the Sponsors and the Subordinated Lenders nor
any of their assets or revenues are entitled to any immunity
or privilege (sovereign or otherwise) from any set-off,
judgment, execution, attachment or other legal process;
(g) no material litigation, arbitration or administrative
proceeding is currently taking place or pending or, to the
best of its knowledge, information and belief, threatened
against it or its assets or revenues.
6.02 Additional Representations and Warranties. Each of the Subordinated
Lenders additionally represents and warrants severally and for
itself to the Facility Agent that:
(a) the Subordinated Loan Agreements in existence at the date
hereof are valid and in full force and effect and the
provisions thereof have been fully complied with and the
Borrower is not in default in respect of any provision
thereof;
(b) except as provided in Clause 7.03, each Subordinated Lender
is the sole beneficial owner of the Subordinated
Indebtedness owing to it and no Charge exists over all or
any part of the Subordinated Indebtedness (except as created
under or pursuant to this Deed).
6.03 Continuing Representation and Warranty. Each of the Sponsors and the
Subordinated Lenders also represents and warrants to and undertakes
with the Facility Agent severally and for itself that the foregoing
representations and warranties set out in Clause 6.01 (in the case of
the Sponsors and the Subordinated Lenders) and Clause 6.02 (in the
case of the Subordinated Lenders only) with respect to it will be
true and accurate throughout the continuance of this Deed with
reference to the facts and circumstances subsisting from time to
<PAGE>
time, provided that the representation and warranty in Clause 6.01(b)
shall (where applicable) be subject (as to matters of law only) to
appendix 3 of the Loan Agreement.
7. UNDERTAKINGS
7.01 Affirmative undertakings. Each of the Sponsors severally and for
itself undertakes and agrees with the Facility Agent throughout the
continuance of this Deed and so long as any sum remains owing
hereunder that it will, unless the Majority Lenders otherwise agree
in writing:
(a) supply to the Facility Agent in sufficient number for each
Lender:
(i) as soon as they are available, but in any event
within one hundred and eighty (180) days after the
end of each of its financial years, copies of its
financial statements in respect of such financial
year (including a profit and loss account and
balance sheet) audited and certified without
qualification by (a) in the case of AES and CPIL, a
firm of independent accountants acceptable to the
Facility Agent and (b) in the case of Anhui Liyuan
and Wuhu, an independent public accountant
acceptable to the Facility Agent;
(ii) as soon as they are available, but in any event
within one hundred and twenty (120) days after
the end of each half of each of its financial
years, copies of its unaudited financial
statements (including a profit and loss account
and balance sheet) prepared on a basis consistent
with its audited financial statements together
with a certificate signed by its principal
financial officer to the effect that such financial
statements are true in all material respects
and present fairly its financial position as
at the end of, and the results of its operations
for, such half-year period;
(iii) promptly on request, such additional financial or
other information relating to it as the Facility
Agent may from time to time reasonably request;
(b) keep proper records and books of account in respect of its
business and permit the Facility Agent and/or any
professional consultants appointed by the Facility Agent at
all reasonable times to inspect and examine its records and
books of account;
(c) promptly inform the Facility Agent of the occurrence of any
Event of Default or prospective Event of Default;
(d) maintain its corporate existence and conduct its business in
a proper and efficient manner and in compliance with all
laws, regulations, authorisations, agreements and
obligations applicable to it and pay all taxes imposed on it
when due;
<PAGE>
(e) procure that there is no change of the parties to the Joint
Venture Contract or to the ownership or control (direct or
indirect) of the Borrower and each Sponsor save in
accordance with clause 13.01(f) of the Loan Agreement;
(f) no amendment or supplement shall be made to the Joint
Venture Contract or the articles of incorporation of the
Borrower;
(g) ensure that its obligations under this Deed at all times
rank at least pari passu with all its unsecured obligations
save for obligations that are mandatorily preferred by law;
(h) punctually pay all sums due from it and otherwise comply
with its obligations under this Deed and the other Security
Documents to which it is a party;
(i) do or permit to be done every act or thing which the
Facility Agent may from time to time require for the purpose
of enforcing the rights of the Facility Agent hereunder;
(j) except as expressly permitted by the terms of this Deed not
do or knowingly cause or permit to be done anything which
may in any way depreciate, jeopardise or otherwise prejudice
the value of the Facility Agent's security hereunder.
7.02 Subordination Undertakings. Each Subordinated Lender undertakes and
agrees with the Facility Agent throughout the continuance of this
Deed and so long as the Secured Indebtedness or any part thereof
remains owing that it will, unless the Majority Lenders otherwise
agree in writing:
(a) not create or attempt or agree to create or permit to arise
or exist any Charge over all or any part of the Subordinated
Indebtedness or any interest therein or, subject to Clause
7.03, otherwise assign, deal with or dispose of all or any
part of the Subordinated Indebtedness (except under or
pursuant to this Deed);
(b) subject to the provisions of this Deed, at all times remain
the beneficial owners of the Subordinated Indebtedness;
(c) not vary the liability of the Borrower in relation to the
Subordinated Indebtedness;
(d) upon the request of the Facility Agent, supply to the
Facility Agent such information regarding the amount and
terms of the Subordinated Indebtedness as the Facility Agent
may require;
(e) subject to the provisions of this Deed, duly observe and
perform all its obligations under the Subordinated Loan
Agreements;
<PAGE>
(f) do or permit to be done every act or thing which the
Facility Agent may from time to time require for the purpose
of enforcing the rights of the Facility Agent hereunder;
(g) not do or knowingly cause or permit to be done anything
which may in any way depreciate, jeopardise or otherwise
prejudice the value of the Facility Agent's security
hereunder;
(h) ensure that each date for repayment of principal and payment
of interest under the Committed Subordinated Loan Agreement
to which it is a party shall be an Interest Payment Date;
(i) promptly inform the Facility Agent of any breach of this
Deed known to it;
(j) maintain its corporate existence and conduct its business in
a proper and efficient manner and in compliance with all
laws, regulations, authorisations, agreements and
obligations applicable to it and pay all taxes imposed on it
when due;
(k) ensure that its obligations under this Deed at all times
rank at least pari passu with all its unsecured obligations
save for obligations that are mandatorily preferred by law;
(l) punctually pay all sums due from it and otherwise comply
with its obligations under this Deed and the other Security
Documents (if any) to which it is a party.
7.03 AES Loan Agreement. So long as the AES Loan Agreement remains a
Subordinated Loan Agreement, AES may (i) sub-participate all or any
part of its interest under the AES Loan Agreement and (ii) assign all
or any of its rights under the AES Loan Agreement (with the Facility
Agent's prior written consent, such consent not to be unreasonably
withheld) provided that each such assignee shall accede to this Deed
as a Subordinated Lender and, for avoidance of doubt, not as a
Sponsor, by executing and delivering to the Facility Agent an
accession deed in form and substance acceptable to the Facility
Agent. AES shall not transfer or dispose of all or any part of its
obligations to advance or make available funds to the Borrower under
the AES Loan Agreement or purport to do so.
8. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
8.01 Representations and Warranties. The Borrower represents and warrants
to the Facility Agent in the terms of Clause 6.02(a) and also
represents, warrants and undertakes to the Facility Agent that such
representation and warranty will be true and accurate from time to
time throughout the continuance of this Deed with reference to the
facts and circumstances subsisting from time to time.
8.02 Undertakings. The Borrower undertakes and agrees with the Facility
Agent in the terms of Clause 7.02(d) to (g) inclusive.
<PAGE>
9. CLAIMS BY SUBORDINATED LENDERS
Each Subordinated Lender severally represents to and undertakes with
the Facility Agent that it has not taken and will not take any
security in respect of its liability under this Deed whether from the
Borrower or any other person. So long as any sum remains owing by the
Borrower to the Facility Agent or the Lenders, no Subordinated Lender
shall exercise any right of subrogation, contribution or any other
rights of a surety or enforce any security or other right or claim
against the Borrower (whether in respect of its liability under this
Deed or otherwise) or any other person who has guaranteed or given
any security in respect of the Secured Indebtedness or, subject to
the provisions of this Deed, claim in the insolvency or liquidation
of the Borrower or any such other person in competition with the
Facility Agent or the Lenders. If any Subordinated Lender receives
any payment or benefit in breach of this Clause, it shall hold the
same upon trust for the Facility Agent as a continuing security for
the Secured Indebtedness.
10. TAXES AND OTHER DEDUCTIONS
All sums payable by the Sponsors and the Subordinated Lenders under
this Deed shall be paid in full without set-off or counterclaim or
any restriction or condition and free and clear of any tax (other
than an Excluded Tax) or other deductions or withholdings of any
nature. If the Sponsors or the Subordinated Lenders or any other
person are required by any law or regulation to make any deduction or
withholding (on account of tax (other than an Excluded Tax) or
otherwise) from any payment for the account of any Lender or the
Facility Agent, the relevant Sponsors or Subordinated Lenders shall,
together with such payment, pay such additional amount as will ensure
that such Lender or the Facility Agent receives (free and clear of
any tax (other than an Excluded Tax) or other deductions or
withholdings) the full amount which it would have received if no such
deduction or withholding had been required. The Sponsors and the
Subordinated Lenders shall promptly forward to the Facility Agent
copies of official receipts or other evidence showing that the full
amount of any such deduction or withholding has been paid over to the
relevant taxation or other authority.
11. COSTS, CHARGES AND EXPENSES
Each of the Sponsors and the Subordinated Lenders and the Borrower
shall from time to time forthwith on demand pay to or reimburse the
Facility Agent and the Lenders for:
(a) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Facility Agent or any
Lender in connection with the preparation, execution and
registration of any amendment to or extension of, or the
giving of any consent or waiver in connection with this
Deed; and
(b) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
<PAGE>
expenses) reasonably incurred by the Facility Agent or any
Lender in exercising any of its or their rights or powers
hereunder or in suing for or seeking to recover any sums due
hereunder or otherwise preserving or enforcing its or their
rights hereunder or in defending any claims brought against
it or them in respect of this Deed or in releasing or
re-assigning this Deed upon payment of all monies hereby
secured and until payment of the same in full, all such
costs, charges and expenses shall be secured by this Deed.
The liability of such Sponsor and each Subordinated Lender in respect
of amounts due under this Clause 11 shall be borne severally by them
in the proportions of their Relevant Percentages, provided, that in
the event that any amount becomes payable to the Facility Agent
and/or the Lenders under this Clause 11 solely by virtue of the
action or inaction of certain only of the Sponsors or the
Subordinated Lenders, those relevant Sponsors and/or Subordinated
Lenders shall bear sole liability and responsibility in respect of
such amount so payable and where there is more than one such Sponsor
or Subordinated Lender, so liable and responsible, such liability and
responsibility shall be borne jointly and severally among them. To
the extent practicable, the Facility Agent shall consult the relevant
Sponsor or Subordinated Lender and the Borrower before incurring any
major expenditure.
12. INDEMNITY
12.01 Sponsors' and Subordinated Lenders' General Indemnity. Each Sponsor
and Subordinated Lender shall indemnify the Facility Agent and each
Lender against all losses, liabilities, damages, costs and expenses
incurred by it or them in the execution or performance of the terms
and conditions hereof and against all actions, proceedings, claims,
demands, costs, charges and expenses which may be incurred, sustained
or arise in respect of the non-performance or non-observance of any
of the undertakings and agreements on the part of that Sponsor or
Subordinated Lender herein contained or in respect of any matter or
thing done or omitted by it relating in any way whatsoever to the
Subordinated Indebtedness of that Subordinated Lender.
12.02 Borrower's General Indemnity. The Borrower shall indemnify the
Facility Agent and each Lender against all losses, liabilities,
damages, costs and expenses incurred by it or them in the execution
or performance of the terms and conditions hereof and against all
actions, proceedings, claims, demands, costs, charges and expenses
which may be incurred, sustained or arise in respect of the
non-performance or non-observance of any of the undertakings and
agreements on the part of the Sponsors, the Subordinated Lenders and
the Borrower herein contained or in respect of any matter or thing
done or omitted relating in any way whatsoever to the Subordinated
Indebtedness.
12.03 Currency Indemnity. If an amount due to the Facility Agent from the
Subordinated Lenders, the Sponsors and/or the Borrower in one
currency (the "first currency") is received by the Facility Agent in
another currency (the "second currency"), the obligations of
Subordinated Lenders, the Sponsors and/or the Borrower, as the case
may be, to the Facility Agent in respect of such amount shall only be
discharged to the extent that the Facility Agent may purchase the
<PAGE>
first currency with the second currency in accordance with normal
banking procedures. If the amount of the first currency which may be
so purchased (after deducting any costs of exchange and any other
related costs) is less than the amount so due, the relevant
Subordinated Lender, Sponsor or the Borrower, as the case may be,
shall indemnify the Facility Agent against the shortfall. This
indemnity shall be an obligation of the Subordinated Lenders,
Sponsors and the Borrower independent of and in addition to its other
obligations under this Deed.
12.03 Payment and Security. The Facility Agent may retain and pay out of
any money in the Facility Agent's hands all sums necessary to effect
the indemnity contained in this Clause and all sums payable by the
Sponsors, the Subordinated Lenders and the Borrower under this Clause
shall form part of the monies hereby secured.
13. FURTHER ASSURANCE
13.01 Further Assurance. Each of the Sponsors, the Subordinated Lenders and
the Borrower shall at any time and from time to time (whether before
or after the security hereby created shall have become enforceable)
execute such further legal or other mortgages, charges or assignments
and do all such transfers, assurances, acts and things as the
Facility Agent may require over or in respect of the Subordinated
Indebtedness to secure all monies, obligations and liabilities hereby
covenanted to be paid or hereby secured or for the purposes of
perfecting and completing any assignment of the Facility Agent's
rights, benefits or obligations hereunder and the Sponsors, the
Subordinated Lenders and the Borrower shall also give all notices,
orders and directions which the Facility Agent may require.
13.02 Enforcement of Facility Agent's Rights. Each of the Sponsors, the
Subordinated Lenders and the Borrower will do or permit to be done
everything which the Facility Agent may from time to time require to
be done for the purpose of enforcing the Facility Agent's rights
hereunder and will allow the names of the Sponsors, the Subordinated
Lenders and the Borrower (as the case may be) to be used as and when
required by the Facility Agent for that purpose.
14. EVIDENCE OF DEBT
Any statement of account purporting to show an amount due from the
Borrower under the Loan Agreement or any Security Document to which
it is a party or from any Sponsor or Subordinated Lender under this
Deed and signed as correct by a duly authorised officer of the
Facility Agent shall, in the absence of manifest error, be conclusive
evidence of the amount so due.
15. SUSPENSE ACCOUNT
The Facility Agent may place and keep any monies received by virtue
of this Deed (whether before or after the insolvency, bankruptcy or
liquidation of any of the Sponsors, Subordinated Lenders or the
Borrower) to the credit of a suspense account for so long as the
Facility Agent may think fit in order to preserve the rights of the
<PAGE>
Facility Agent or any Lender to sue or prove for the whole amount of
its claims against the Sponsors, the Subordinated Lenders, the
Borrower or any other person.
16. WAIVER AND SEVERABILITY
No failure or delay by the Facility Agent or any Lender in exercising
any right, power or remedy hereunder shall impair such right, power
or remedy or operate as a waiver thereof, nor shall any single or
partial exercise of the same preclude any further exercise thereof or
the exercise of any other right, power or remedy. The rights, powers
and remedies herein provided are cumulative and do not exclude any
other rights, powers and remedies provided by law. If at any time any
provision of this Deed is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, the
legality, validity and enforceability of such provision under the law
of any other jurisdiction, and of the remaining provisions of this
Deed, shall not be affected or impaired thereby.
17. MISCELLANEOUS
17.01 Continuing Obligations. The liabilities and obligations of the
Sponsors, the Subordinated Lenders and the Borrower under this Deed
shall remain in force notwithstanding any act, omission, event or
circumstance whatsoever, until full, proper and valid payment of the
Secured Indebtedness.
17.02 Protective Clauses. Without limiting Clause 17.01, neither the
liability of the Sponsors, the Subordinated Lenders or the
Borrower nor the validity or enforceability of this Deed shall
be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Borrower or
any other person;
(b) any variation or modification of the Loan Agreement, any of
the Security Documents or any other document referred to
therein;
(c) the invalidity or unenforceability of any obligation or
liability of the Borrower under the Loan Agreement or any of
the Security Documents to which it is a party;
(d) any invalidity or irregularity in the execution of the Loan
Agreement or this Deed or any of the other Security
Documents;
(e) any deficiency in the powers of the Borrower to enter into
or perform any of its obligations under the Loan Agreement
or any of the Security Documents to which it is party or any
irregularity in the exercise thereof or any lack of
authority by any person purporting to act on behalf of the
Borrower;
(f) the insolvency, bankruptcy or liquidation or any incapacity,
disability or limitation or any change in the constitution
or status of the Borrower or any of the Sponsors or
Subordinated Lenders;
<PAGE>
(g) any other Security Document, Charge, guarantee or other
security or right or remedy being or becoming held by or
available to the Facility Agent or any Lender or by any of
the same being or becoming wholly or partly void, voidable,
unenforceable or impaired or by the Facility Agent or any
Lender at any time releasing, refraining from enforcing,
varying or in any other way dealing with any of the same or
any power, right or remedy the Facility Agent or any Lender
may now or hereafter have from or against the Borrower or
any other person;
(h) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Borrower or any
other person or any compromise, arrangement or settlement
with any of the same;
(i) any act, omission, event or circumstance which would or may
but for this provision operate to prejudice, affect or
discharge this Deed or the liability of the Sponsors and the
Subordinated Lenders or the Borrower hereunder,
and each of the Subordinated Lenders and Sponsors hereby consents to
all acts and omissions of any Agent and the Lenders pertaining to the
above.
17.03 Binding Nature of Deed. Each of the Sponsors and the Subordinated
Lenders agrees to be bound by this Deed notwithstanding that any
other person who was intended to sign or be bound by this Deed fails,
for any reason, so to sign or be bound or that this Deed is for any
reason invalid or unenforceable against such person.
17.04 Release of Sponsors/Subordinated Lenders. Without prejudice to the
generality of Clause 17.02, the Facility Agent or any Lender may
release any of the Sponsors and/or the Subordinated Lenders from
liability under this Deed or vary or modify the obligations of or
grant any time or indulgence to or make any other arrangements with
any of the Sponsors and/or the Subordinated Lenders without affecting
or discharging its rights against the other Sponsors and/or
Subordinated Lenders.
17.05 Unrestricted Right of Enforcement. This Deed may be enforced without
the Facility Agent or any Lender first having recourse to any other
security or rights or taking any other steps or proceedings against
the Sponsors, the Subordinated Lenders, the Borrower or any other
person or may be enforced for any balance due after resorting to any
one or more other means of obtaining payment or discharge of the
monies obligations and liabilities hereby secured.
17.06 Discharges and Releases. Notwithstanding any discharge, release or
settlement from time to time between the Facility Agent or any Lender
and the Sponsors, the Subordinated Lenders or the Borrower, if any
security, disposition or payment granted or made to the Facility
Agent or any Lender in respect of the Secured Indebtedness by the
Sponsors, the Subordinated Lenders, the Borrower or any other person
is avoided or set aside or ordered to be surrendered, paid away,
refunded or reduced by virtue of any provision, law or enactment
relating to bankruptcy, insolvency, liquidation, winding-up,
composition or arrangement for the time being in force or for any
other reason, the Facility Agent shall be entitled hereafter to
enforce this Deed as if no such discharge, release or settlement had
occurred.
<PAGE>
17.07 Amendment. Any amendment or waiver of any provision of this Deed and
any waiver of any default under this Deed shall only be effective if
made in writing and signed by the Facility Agent.
18. ASSIGNMENT
18.01 The Sponsors, the Subordinated Lenders and the Borrower.
Subject to Clause 7.03, none of the Sponsors, the Subordinated
Lenders and the Borrower shall assign any of their rights hereunder.
18.02 The Lenders. The Lenders may assign or grant participations in all or
any part of their rights under this Deed and make disclosures in
accordance with the provisions of clause 22 of the Loan Agreement but
as if references therein to the Borrower were references to the
Sponsors, the Subordinated Lenders or the Borrower (as the case may
be).
19. NOTICES
19.01 Delivery. Each notice, demand or other communication to be given or
made under this Deed shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the AES China Holding Company (L) Limited
Subordinated c/o AES China Generating Co. Ltd.
9/F., Allied Capital Resources Building
32-38 Ice House Street
Central
Hong Kong
Fax Number: (852) 2530 1673
Attention : Jeffery A. Safford,
Chief Financial Officer
Anhui Liyuan Electric Power Development
Company Limited
No.415 Wuhu Road
Hefei
Anhui Province
People's Republic of China
Fax Number: (0551) 363 7642
Attention : Long Wen Ming/Suan Jie/Chen
Liang Bao
<PAGE>
China Power International Holding Limited
Suite 5306, 53/F, Central Plaza
18 Harbour Road
Wanchai
Hong Kong
Fax Number: (852) 2802 3922
Attention : Zhao Xin Yan/Wang Zi Chao
Wuhu Energy Development Company
Commercial Office Building
Huangshan West Road
Wuhu
Anhui Province
People's Republic of China
Fax Number: (0553) 382 3224
Attention : Zhai Dao Ping
To the Borrower: Wuhu Shaoda Electric Power Development Company Limited
Commercial Office Building
West Huangshan Road
Wuhu
Anhui Province
People's Republic of China
Fax Number: (0553) 382 3224
Attention : Zhai Dao Ping
To the Facility CCIC Finance Limited
Agent: 38th Floor
Bank of China Tower
1 Garden Road
Central
Hong Kong
Telex Number: 61931
Answerback : CCICX HX
Fax Number : (852) 2877 2105
Attention : Loans Administration Department
19.02 Deemed Delivery. Any notice, demand or other communication so
addressed to the relevant party shall be deemed to have been
delivered (a) if given or made by letter, when actually delivered to
the relevant address; (b) if given or made by telex, when despatched
with confirmed answerback and (c) if given or made by fax, when
despatched.
<PAGE>
20. GOVERNING LAW AND JURISDICTION
20.01 Law. This Deed and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with
the laws of England.
20.02 Jurisdiction. Each of the Sponsors, the Subordinated Lenders and the
Borrower agrees that any legal action or proceeding arising out of or
relating to this Deed may be brought in the courts of England and
irrevocably submits to the non-exclusive jurisdiction of such courts.
20.03 Process Agent. Each of the Sponsors, the Subordinated Lenders and the
Borrower irrevocably appoints Messrs. Rowe & Maw (attention: Mr.
Bernd Ratzke, Ref 26866/0001) of 20 Blackfriars Lane, London EC4V
6HT, England as their agent to receive and acknowledge on their
behalf service of any writ, summons, order, judgment or other notice
of legal process in England. If for any reason the agent named above
(or its successor) no longer serves as agent of any Sponsor,
Subordinated Lender or the Borrower for this purpose, the relevant
Sponsor, Subordinated Lender or the Borrower (as the case may be)
shall promptly appoint a successor agent satisfactory to the Facility
Agent and notify the Facility Agent thereof provided that until the
Facility Agent receives such notification, it shall be entitled to
treat the agent named above (or its said successor) as the agent of
such Sponsor, Subordinated Lender and/or the Borrower (as the case
may be) for the purposes of this Clause. The Sponsors, the
Subordinated Lenders and the Borrower agree that any such legal
process shall be sufficiently served on them if delivered to such
agent for service at its address for the time being in England
whether or not such agent gives notice thereof to the Sponsors, the
Subordinated Lenders and the Borrower.
20.04 No Limitation on Right of Action. Nothing herein shall limit the
right of the Facility Agent and the Lenders to commence any legal
action against the Sponsors, the Subordinated Lenders or the Borrower
and/or their property in any other jurisdiction or to serve process
in any manner permitted by law, and the taking of proceedings in any
jurisdiction shall not preclude the taking of proceedings in any
other jurisdiction whether concurrently or not.
20.05 Waiver; Final Judgment Conclusive. Each of the Sponsors, the
Subordinated Lenders and the Borrower irrevocably and unconditionally
waives any objection which it may now or hereafter have to the choice
of England as the venue of any legal action arising out of or
relating to this Deed. The Sponsors, the Subordinated Lenders and the
Borrower also agree that a final judgment against them in any such
legal action shall be final and conclusive and may be enforced in any
other jurisdiction, and that a certified or otherwise duly
authenticated copy of the judgment shall be conclusive evidence of
the fact and amount of their indebtedness.
20.06 Waiver of Immunity. Each of the Sponsors, the Subordinated Lenders
and the Borrower irrevocably waives any immunity to which it or its
property may at any time be or become entitled, whether characterised
as sovereign immunity or otherwise, from any set-off or legal action
in England or elsewhere, including immunity from service of process,
immunity from jurisdiction of any court or tribunal, and immunity of
any of its property from attachment prior to judgment or from
execution of a judgment.
<PAGE>
IN WITNESS whereof the Sponsors, the Subordinated Lenders and the Borrower have
executed this Deed on the day and year first above written.
THE SPONSORS AND THE SUBORDINATED LENDERS
- -----------------------------------------
THE COMMON SEAL of )
AES CHINA HOLDING COMPANY )
(L) LIMITED ) /s/Edward C. Hall, III
was hereunto affixed ) /s/Jeffery A. Safford
in the presence of: )
[Signature Illegible]
EXECUTED as, and DELIVERED as, a Deed )
by ANHUI LIYUAN ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED ) [Signature Illegible]
)
acting by its authorised signatory )
in the presence of: )
/s/David W. Platt
David W. Platt
Solicitor
Hong Kong
THE COMMON SEAL of )
CHINA POWER INTERNATIONAL )
HOLDING LIMITED ) [Signature Illegible]
was hereunto affixed )
in the presence of: )
/s/David W. Platt
David W. Platt
Solicitor
Hong Kong
EXECUTED as, and DELIVERED as, a Deed )
by WUHU ENERGY DEVELOPMENT )
COMPANY ) [Signature Illegible]
acting by its authorised signatory )
in the presence of: )
/s/David W. Platt
David W. Platt
Solicitor
Hong Kong
<PAGE>
THE BORROWER
- ------------
EXECUTED as, and DELIVERED as, a Deed )
by WUHU SHAODA ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
) [Signature Illegible]
acting by its authorised signatory )
in the presence of: )
/s/David W. Platt
David W. Platt
Hong Kong
THE FACILITY AGENT
- ------------------
SIGNED for and on behalf of )
CCIC FINANCE LIMITED ) [Signature Illegible]
by )
TO ALL TO WHOM these presents shall come, I, MARK JONATHAN ROBERTS Notary Public
by authority duly admitted and practising at do hereby certify that on the 14TH
day of MAY 1996 at 4TH FLOOR ALEXANDRA HOUSE, HONG KONG aforesaid there
personally came before me JEFFERY ATWOOD SAFFORD and EDWARD C. HALL III the
subscribing witnesses to the foregoing instrument who declared and said that
they were present and did see the affixation of the Common Seal of AES CHINA
HOLDING COMPANY (L) LIMITED thereto in accordance with the Memorandum and
Articles of Association of AES CHINA HOLDING COMPANY (L) LIMITED.
IN FAITH AND TESTIMONY whereof I have hereunto set my hand and seal of office at
HONG KONG this 14TH day of MAY in the year one thousand nine hundred and
ninety-SIX (1996).
/s/ Mark Roberts
-----------------------
Signature
Mark Jonathan Roberts
Notary Public
3rd - 6th Floors
Alexandra House
Hong Kong
CHINA POWER INTERNATIONAL HOLDING LIMITED
as Guarantor and a Sponsor
and
AES CHINA HOLDING COMPANY (L) LIMITED
as Junior Lender and a Sponsor
and
ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
and
WUHU ENERGY DEVELOPMENT COMPANY
together as Junior Subordinated Lenders and Sponsors
and
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Borrower
JUNIOR SUBORDINATION AGREEMENT
CHADBOURNE & PARKE LLP
AMERICAN ATTORNEYS AT LAW
SUITE 3704, PEREGRINE TOWER
LIPPO CENTRE, 89 QUEENSWAY
HONG KONG
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Interpretation.....................................................2
2. Subordination of Indebtedness......................................5
3. Permitted Payments................................................15
4. Further Acknowledgments...........................................15
5. Acknowledgment by Borrower........................................16
6. Continuing Security...............................................17
7. Representations and Warranties....................................17
8. Undertakings......................................................18
9 Borrower's Representations, Warranties and Undertakings...........20
10. Claims by Junior Creditors........................................21
11. Taxes and Other Deductions........................................21
12. Costs, Charges and Expenses.......................................21
13. Indemnity.........................................................22
14. Further Assurance.................................................23
15. Suspense Account..................................................23
16. Waiver and Severability...........................................23
17. Miscellaneous.....................................................24
18. Assignment........................................................25
19. Notices...........................................................26
20. Governing Law and Jurisdiction....................................27
Execution Block
<PAGE>
THIS DEED is made on the day of 1996
-------------- ----------------------
AMONG:
(1) CHINA POWER INTERNATIONAL HOLDING LIMITED of Suite 5306, Central Plaza,
18 Harbour Road, Wanchai, Hong Kong (in its capacity as guarantor of
the obligations of the Borrower under the Senior Loan Agreement, the
Guarantor, and in its capacity as a sponsor of the Project and as a
provider of subordinated loans under clause 2.02 of the Senior
Subordination Agreement, a "Sponsor");
(2) AES CHINA HOLDING COMPANY (L) LIMITED of Lot A, Level 3, Wisma Oceanic,
Jalan OKK Awang Besar, 87007, Federal Territory of Labuan, Malaysia (in
its capacity as a lender under the AES Loan Agreement, the "Junior
Lender", and in its capacity as a sponsor of the Project and as a
provider of subordinated loans under clause 2.02 of the Senior
Subordination Agreement, a "Sponsor");
(3) ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED of No. 415 Wuhu
Road, Hefei, Anhui Province, People's Republic of China ("Anhui
Liyuan");
(4) WUHU ENERGY DEVELOPMENT COMPANY of Commercial Office Building, West
Huangshan Road, Wuhu, Anhui Province, People's Republic of China
("Wuhu");
(Anhui Liyuan and Wuhu shall, in their capacities as lenders under
their respective Committed Junior Subordinated Loan Agreements, be
collectively referred to as the "Junior Subordinated Lenders", and in
their capacities as sponsors of the Project and as providers of
subordinated loans under clause 2.02 of the Senior Subordination
Agreement, "Sponsors"); and
(5) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity joint
venture company formed under the Law of the People's Republic of China
on Joint Ventures Using Chinese and Foreign Investment and whose
registered office is at Commercial Office Building, West Huangshan
Road, Wuhu, Anhui Province, People's Republic of China, as borrower
(the "Borrower").
WHEREAS:
(A) By a guarantee (the "CPIL Guarantee") executed, or to be executed, by
(1) the Guarantor and (2) the Facility Agent, the Guarantor has agreed
to guarantee the payment obligations of the Borrower under the Senior
Loan Agreement, upon the terms set out therein.
(B) By a loan agreement (the "AES Loan Agreement") executed, or to be
executed, by (1) the Borrower and (2) the Junior Lender, the Junior
Lender has agreed to make available to the Borrower a term loan
facility of up to eighteen million Dollars (US$18,000,000) (the "AES
Loan"), upon the terms set out therein.
(C) By a loan agreement (the "Anhui Liyuan Loan Agreement") executed, or to
be executed, by (1) the Borrower and (2) Anhui Liyuan, Anhui Liyuan has
agreed to make available to the Borrower a term loan facility upon the
terms set out therein.
(D) By a loan agreement (the "Wuhu Loan Agreement") executed, or to be
executed, by (1) the Borrower and (2) Wuhu, Wuhu has agreed to make
available to the Borrower a term loan facility upon the terms set out
therein.
(E) By an undertaking and subordination deed (the "Senior Subordination
Agreement") executed, or to be executed, by (1) the Borrower, (2) the
Facility Agent and (3) the Sponsors, the Sponsors have agreed, among
other things, to make subordinated loans available to the Borrower to
meet Working Capital Deficits (as defined in the Senior Subordination
Agreement), upon the terms set out therein.
(F) It is a condition precedent to the Junior Lender making the Facility
available to the Borrower that each of the parties hereto enter into
this Deed.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.01 Definitions and Construction. In this Deed, unless the context requires
otherwise:
(a) terms and expressions defined in or construed for the purposes
of the AES Loan Agreement shall have the same meanings or be
construed in the same manner when used in this Deed;
(b) "Class A Indebtedness" means all and any sums now or hereafter
due and owing by the Borrower to the Guarantor by way of
subrogation, set-off, counterclaim or otherwise against the
Borrower in respect of any payment made by the Guarantor under
the Guarantee, provided that such Class A Indebtedness shall
not exceed sixty-five million Dollars (US$65,000,000);
(c) "Class B Indebtedness" means all and any sums (whether
principal, interest, fees or otherwise) now or hereafter due
and owing by the Borrower to the Junior Lender under the AES
Loan Agreement or any Subordinated Security Document to which
the Borrower is a party and all other monies thereby secured;
(d) "Class C Indebtedness" means all and any sums (whether
principal, interest, fees or otherwise) now or hereafter due
and owing by the Borrower to the Junior Subordinated Lenders
under the Committed Junior Subordinated Loan Agreements;
(e) "Class D Indebtedness" means all and any sums (whether
principal, interest, fees or otherwise) now or hereafter due
and owing by the Borrower to the Sponsors under the Sponsor
Subordinated Loan Agreements;
(f) "Committed Junior Subordinated Loan Agreements" means the
Anhui Liyuan Loan Agreement and the Wuhu Loan Agreement;
(g) "Committed Junior Subordinated Loans" means the loans made
under the Committed Junior Subordinated Loan Agreements;
(h) "Event of Default" means, with respect to each class of
indebtedness, any occurrence of any event of default in any
document evidencing any Senior Indebtedness; and "prospective
Event of Default" means any event or circumstance which with
the giving of notice and/or the passage of time and/or the
making of any relevant determination and/or the forming of any
necessary opinion would be an Event of Default;
(i) A "holder" of any class of indebtedness means the holder of
the specified class of indebtedness, as such, for purposes of
determining rights and obligations hereunder, without regard
to any other class of indebtedness that may also be held by
such holder.
(j) "Junior Creditor" means any holder of Junior Indebtedness, as
such.
(k) "Junior Indebtedness" means, with respect to any class of
indebtedness subject to this Deed, another class of
indebtedness which is subordinated in right of payment as
provided in Clause 2, and
(i) with respect to Class A Indebtedness, Junior
Indebtedness means Class B, C and D Indebtedness;
(ii) with respect to Class B Indebtedness, Junior
Indebtedness means Class C and D Indebtedness; and
(iii) with respect to Class C Indebtedness, Junior
Indebtedness means Class D Indebtedness;
(l) "Senior Creditor" means any holder of Senior Indebtedness, as
such.
(m) "Senior Indebtedness" means, with respect to any class of
indebtedness subject to this Deed, another class of
indebtedness which has priority in right of payment as
provided in Clause 2, and
(i) with respect to Class D Indebtedness, Senior
Indebtedness means Class A, B and C Indebtedness;
(ii) with respect to Class C Indebtedness, Senior
Indebtedness means Class A and B Indebtedness; and
(iii) with respect to Class B Indebtedness, Senior
Indebtedness means Class A Indebtedness;
(n) "Sponsor Subordinated Loan Agreements" means all loan
agreements, facility letters or other documents now or
hereafter entered into between the Sponsors and the Borrower
creating or evidencing all loans made pursuant to clause 2 of
the Senior Subordination Agreement;
(o) "Subordinated Indebtedness" means the Class A, B, C and D
Indebtedness; and
(p) "Subordinated Loan Agreements" means all loan agreements,
facility letters or other documents now or hereafter entered
into between the holders of Class B, C and D Indebtedness and
the Borrower.
1.02 The Junior Creditors. References to the Junior Creditors shall mean and
include each and every person liable hereunder as a Junior Creditor or,
where the context permits, any one or more of them and all
representations, warranties, undertakings, agreements and obligations
of the Junior Creditors herein expressed or implied shall, unless the
context requires otherwise, be deemed to be made, given or assumed by
each of the Junior Creditors severally.
1.03 Successors and Assigns. The expressions "Guarantor", "Sponsors",
"Junior Subordinated Lenders", "Borrower", "Junior Lender", "Anhui
Liyuan", "Wuhu", "holder", "Junior Creditor" and "Senior Creditor"
shall where the context permits include their respective personal
representatives, successors and permitted assigns and any persons
deriving title under them.
1.04 Miscellaneous. In this Deed, unless the context requires otherwise,
references to statutory provisions shall be construed as references to
those provisions as replaced, amended, modified or re-enacted from time
to time; words importing the singular include the plural and vice versa
and words importing a gender include every gender; references to any
document referred to herein shall be construed as references to such
document as the same may be amended or supplemented (provided that any
required consent or approval for such amendment or supplement has been
obtained) from time to time; unless otherwise stated, references to
Clauses are to clauses of this Deed. Clause headings are inserted for
reference only and shall be ignored in construing this Deed.
2. SUBORDINATION OF INDEBTEDNESS
2.01 Class A Indebtedness.
(a) Subordination. In consideration of the holder of Class A
Indebtedness agreeing to guarantee the obligations of the
Borrower under the Senior Loan Agreement and as a continuing
security for the due and punctual payment of the Class A
Indebtedness and the due and punctual performance and
observance by the Borrower of all obligations of the Borrower
contained in any security document in favor of the Guarantor
to which the Borrower is a party, each of the holders of Class
B, C and D Indebtedness agrees that throughout the continuance
of this Deed and so long as the Class A Indebtedness or any
part thereof remains owing:
(i) except as provided in Clause 3, the Class B, C
and D Indebtedness, as applicable, owing to it:
(A) is, and shall remain, subordinated and the
payment thereof deferred to all and any
rights, claims and actions which the holder
of Class A Indebtedness may now or hereafter
have against the Borrower in respect of the
Class A Indebtedness;
(B) shall not be repaid or repayable, in whole
or in part, except with the prior written
consent of the holder of Class A
Indebtedness in the event of the winding-up,
liquidation or dissolution of the Borrower
(or any proceedings analogous thereto);
(C) may accrue interest, but such interest shall
not be payable;
(D) except for the Class B Indebtedness, is
and shall remain unsecured by any
Charge over the whole or any part of the
assets of the Borrower; and
(E) is not, and shall not become capable of
being, subject to any right of set-off
or counterclaim;
(ii) except as provided in Clause 3, it shall not claim,
request, demand, sue for, take or receive (whether by
set-off or in any other manner and whether from the
Borrower or any other person) any money or other
property in respect of the Class B, C or D
Indebtedness or any part thereof;
(iii) if any monies (including the proceeds of any
set-off or counterclaim) or other property are
received directly or indirectly in respect of
any Class B, C or D Indebtedness by or on behalf
of it in breach of any of the provisions of this
Deed, it will hold the same upon trust to be
applied first in or towards payment of Class A
Indebtedness and second, as to any balance
remaining after irrevocable and unconditional
payment and discharge in full of the Class A
Indebtedness, in or towards payment of the Class B,
C and D Indebtedness in accordance with the
provisions of this Deed;
(iv) if any Charge is created as security for the Class C
or D Indebtedness then, immediately on the creation
thereof, the benefit of such Charge shall be assigned
or transferred in favor of the holder of Class A
Indebtedness as security for the Class A Indebtedness
and any instrument or agreement evidencing such
Charge shall be deposited with the holder of Class A
indebtedness; and
(v) it shall require the Borrower to, and shall ensure
that the Borrower shall pay to the holder of Class A
Indebtedness or as the holder of Class A Indebtedness
may direct any amounts which, if paid to such holder
of Class B, C or D Indebtedness, would be subject to
the trust mentioned in paragraph (iii) above.
(b) Proceedings for Winding-Up of Borrower. In any proceedings for
the compulsory or voluntary winding-up, liquidation or
dissolution of the Borrower (or any proceedings analogous
thereto):
(i) the holder of Class A Indebtedness shall be entitled
to receive payment in full of the Class A
Indebtedness before the holders of Class B, C and D
Indebtedness shall be entitled to receive any payment
on account of the Class B, C or D Indebtedness or any
part thereof; and
(ii) the holders of Class B, C and D Indebtedness agree
that they will prove for the full amount of their
claims in respect of their respective Class B, C
and D Indebtedness and that in accordance with the
trust mentioned in Clause 2.01(a)(iii), any amounts
payable to the holders of Class B, C and D
Indebtedness in respect of the Class B, C and D
Indebtedness shall be applied in payment or
satisfaction of the Class A Indebtedness until
the whole of the Class A Indebtedness shall have
been certified by the holder of Class A Indebtedness
as having been discharged and the remaining balance
(if any) may be applied towards payment of the
Class B, C and D Indebtedness in accordance with
the provisions of this Deed.
(c) Subordinated Loan Agreements. Each of the holders of Class B,
C and D Indebtedness agree that:
(i) each and every Subordinated Loan Agreement entered
into by it shall be subject in every respect to the
terms of this Deed;
(ii) insofar as the terms of any Subordinated Loan
Agreement entered into by it or any transaction in
connection therewith are or may be inconsistent with
the terms of this Deed, the terms contained herein
shall prevail;
(iii) in respect of any Subordinated Loan Agreement
proposed to be entered into by it after the date
hereof, the prior written approval of the terms
thereof shall first be obtained from the holder of
Class A Indebtedness;
(iv) no amendment shall be made to any Subordinated Loan
Agreement entered into by it except in writing and
with the prior written approval of the terms thereof
by the holder of Class A Indebtedness, such approval
not to be unreasonably withheld;
(v) immediately after the execution of any Subordinated
Loan Agreement entered into by it, or any agreement
for the amendment of any Subordinated Loan Agreement
entered into by it, copies thereof shall be delivered
to the holder of Class Indebtedness as evidence
thereof; and
(vi) no prepayment of principal may be made by the
Borrower to the holders of Class C or D Indebtedness
(or payment in respect thereof accepted by the
holders of Class C or D Indebtedness) under any
Subordinated Loan Agreement entered into by the
holders of Class C or D Indebtedness.
(d) Application. All monies and other property received by the
holder of Class A Indebtedness in respect of the Class B, C or
D Indebtedness may be applied in or towards satisfaction of
the Class A Indebtedness due and owing in such manner as the
holder of Class A Indebtedness may decide, provided that:
(i) any excess after the Class A Indebtedness has been
paid in full shall be paid or delivered to the holder
of Class B Indebtedness and may be applied in or
towards satisfaction of the Class B Indebtedness due
and owing in such manner as the holder of Class B
Indebtedness may decide;
(ii) any excess after the Class B Indebtedness has been
paid in full shall be paid or delivered to the
holders of Class C Indebtedness and may be applied in
or towards satisfaction of the Class C Indebtedness
due and owing in such manner as the holders of Class
C Indebtedness may decide; and
(iii) any excess after the Class C Indebtedness has been
paid in full shall be paid or delivered to the
holders of Class D Indebtedness and may be applied in
or towards satisfaction of the Class D Indebtedness
due and owing in such manner as the holders of Class
D Indebtedness may decide.
(e) Directions and Authorizations. Each holder of Class B, C and D
Indebtedness hereby irrevocably:
(i) directs the Borrower to pay to the holder of Class A
Indebtedness (or as the holder of Class A
Indebtedness may direct) any amounts which, if paid
to such holder of Class B, C or D Indebtedness would
be subject to the trust mentioned in Clause
2.01(a)(iii); and
(ii) authorizes the holder of Class A Indebtedness, in
the event of a compulsory or voluntary winding up,
liquidation or dissolution of the Borrower (or any
proceedings analogous thereto) to ask, demand, sue
or prove for, and take and receive, in the name of
such holder of Class B, C or D Indebtedness or
otherwise, all amounts payable to such holder of
Class B, C or D Indebtedness on account of any Class
B, C or D Indebtedness owing by the Borrower, and
each of the holders of Class B, C and D Indebtedness
further covenants that in such event at the request
of the holder of Class A Indebtedness, it will take
all such action and execute all such documents as
the holder of Class A Indebtedness may reasonably
require in order to enable the holder of Class A
Indebtedness to recover such Class B, C or D
Indebtedness or any part thereof.
2.02 Class B Indebtedness.
(a) Subordination. In consideration of the holder of Class B
Indebtedness agreeing to make the AES Loan available to the
Borrower upon the terms and conditions of the AES Loan
Agreement and as a continuing security for the due and
punctual payment of the Class B Indebtedness and the due and
punctual performance and observance by the Borrower of all
other obligations of the Borrower contained in the AES Loan
Agreement or any Subordinated Security Document or any other
security document related thereto to which it is a party, each
of the holders of Class C and D Indebtedness agrees that
throughout the continuance of this Deed and so long as the
Class B Indebtedness or any part thereof remains owing:
(i) except as provided in Clause 3, the Class C and D
Indebtedness, as applicable, owing to it:
(A) is, and shall remain, subordinated and the
payment thereof deferred to all and any
rights, claims and actions which the holder
of Class B Indebtedness may now or hereafter
have against the Borrower in respect of the
Class B Indebtedness;
(B) shall not be repaid or repayable, in whole
or in part, except with the prior written
consent of the holder of Class B
Indebtedness in the event of the winding-up,
liquidation or dissolution of the Borrower
(or any proceedings analogous thereto);
(C) may accrue interest, but such interest shall
not be payable;
(D) is and shall remain unsecured by any Charge
over the whole or any part of the assets of
the Borrower; and
(E) is not, and shall not become capable of
being, subject to any right of set-off
or counterclaim;
(ii) except as provided in Clause 3, it shall not claim,
request, demand, sue for, take or receive (whether by
set-off or in any other manner and whether from the
Borrower or any other person) any money or other
property in respect of the Class C or D Indebtedness
or any part thereof;
(iii) if any monies (including the proceeds of any set-off
or counterclaim) or other property are received
directly or indirectly in respect of any Class C or
D Indebtedness by or on behalf of it in breach of
any of the provisions of this Deed, it will hold the
same upon trust to be applied first in or towards
payment of Class B Indebtedness and second, as to
any balance remaining after irrevocable and
unconditional payment and discharge in full of the
Class B Indebtedness, in or towards payment of the
Class C and D Indebtedness in accordance with the
provisions of this Deed;
(iv) if any Charge is created as security for the Class C
or D Indebtedness then, immediately on the creation
thereof, the benefit of such Charge shall be assigned
or transferred in favor of the holder of Class B
Indebtedness as security for the Class B Indebtedness
and any instrument or agreement evidencing such
Charge shall be deposited with the holder of Class B
indebtedness; and
(v) it shall require the Borrower to, and shall ensure
that the Borrower shall pay to the holder of Class B
Indebtedness or as the holder of Class B Indebtedness
may direct any amounts which, if paid to such holder
of Class C or D Indebtedness, would be subject to the
trust mentioned in paragraph (iii) above.
(b) Proceedings for Winding-Up of Borrower. In any proceedings for
the compulsory or voluntary winding-up, liquidation or
dissolution of the Borrower (or any proceedings analogous
thereto):
(i) the holder of Class B Indebtedness shall be entitled
to receive payment in full of the Class B
Indebtedness before the holders of Class C and D
Indebtedness shall be entitled to receive any payment
on account of the Class C or D Indebtedness or any
part thereof; and
(ii) the holders of Class C and D Indebtedness agree that
they will prove for the full amount of their claims
in respect of their respective Class C and D
Indebtedness and that in accordance with the trust
mentioned in Clause 2.02(a)(iii), any amounts
payable to the holders of Class C and D Indebtedness
in respect of the Class C and D Indebtedness shall
be applied in payment or satisfaction of the Class B
Indebtedness until the whole of the Class B
Indebtedness shall have been certified by the holder
of Class B Indebtedness as having been discharged
and the remaining balance (if any) may be applied
towards payment of the Class C and D Indebtedness in
accordance with the provisions of this Deed.
(c) Subordinated Loan Agreements. Each of the holders of Class C
and D Indebtedness agrees that:
(i) each and every Subordinated Loan Agreement
entered into by it shall be subject in
every respect to the terms of this Deed;
(ii) insofar as the terms of any Subordinated Loan
Agreement entered into by it or any transaction in
connection therewith are or may be inconsistent with
the terms of this Deed, the terms contained herein
shall prevail;
(iii) in respect of any Subordinated Loan Agreement
proposed to be entered into by it after the date
hereof, the prior written approval of the terms
thereof shall first be obtained from the holder of
Class B Indebtedness;
(iv) no amendment shall be made to any Subordinated Loan
Agreement entered into by it except in writing and
with the prior written approval of the terms thereof
by the holder of Class B Indebtedness, such approval
not to be unreasonably withheld;
(v) immediately after the execution of any Subordinated
Loan Agreement entered into by it, or any agreement
for the amendment of any Subordinated Loan Agreement
entered into by it, copies thereof shall be delivered
to the holder of Class B Indebtedness as evidence
thereof; and
(vi) no prepayment of principal may be made by the
Borrower to the holders of Class C or D Indebtedness
(or payment in respect thereof accepted by the
holders of Class C or D Indebtedness) under any
Subordinated Loan Agreement entered into by it.
(d) Application. All monies and other property received by the
holder of Class B Indebtedness in respect of the Class C or D
Indebtedness may be applied in or towards satisfaction of the
Class B Indebtedness due and owing in such manner as the
holder of Class B Indebtedness may decide, provided that:
(i) any excess after the Class B Indebtedness has been
paid in full shall be paid or delivered to the
holders of Class C Indebtedness and may be applied in
or towards satisfaction of the Class C Indebtedness
due and owing in such manner as the holders of Class
C Indebtedness may decide; and
(ii) any excess after the Class C Indebtedness has been
paid in full shall be paid or delivered to the
holders of Class D Indebtedness and may be applied in
or towards satisfaction of the Class D Indebtedness
due and owing in such manner as the holders of Class
D Indebtedness may decide.
(e) Directions and Authorizations. Each holder of Class C and D
Indebtedness hereby irrevocably:
(i) directs the Borrower to pay to the holder of Class B
Indebtedness (or as the holder of Class B
Indebtedness may direct) any amounts which, if paid
to such holder of Class C or D Indebtedness would be
subject to the trust mentioned in Clause
2.02(a)(iii); and
(ii) authorizes the holder of Class B Indebtedness, in
the event of a compulsory or voluntary winding up,
liquidation or dissolution of the Borrower (or any
proceedings analogous thereto) to ask, demand, sue
or prove for, and take and receive, in the name of
such holder of Class C or D Indebtedness or
otherwise, all amounts payable to such holder of
Class C or D Indebtedness on account of any Class C
or D Indebtedness owing by the Borrower, and each of
the holders of Class C and D Indebtedness further
covenants that in such event at the request of the
holder of Class B Indebtedness, it will take all
such action and execute all such documents as the
holder of Class B Indebtedness may reasonably
require in order to enable the holder of Class B
Indebtedness to recover such Class C or D
Indebtedness or any part thereof.
2.03 Class C Indebtedness.
(a) Subordination. In consideration of the holders of Class C
Indebtedness agreeing to make their respective Committed
Junior Subordinated Loans available to the Borrower upon the
terms and conditions of the Committed Junior Subordinated Loan
Agreements and as a continuing security for the due and
punctual payment of the Class C Indebtedness and the due and
punctual performance and observance by the Borrower of all
other obligations of the Borrower contained in the Committed
Junior Subordinated Loan Agreements, the holders of Class D
Indebtedness agree that throughout the continuance of this
Deed and so long as the Class C Indebtedness or any part
thereof remains owing:
(i) except as provided in Clause 3, the Class D Indebtedness owing
to it:
(A) is, and shall remain, subordinated and the
payment thereof deferred to all and any
rights, claims and actions which the holders
of Class C Indebtedness may now or hereafter
have against the Borrower in respect of the
Class C Indebtedness;
(B) shall not be repaid or repayable, in whole
or in part, except with the prior written
consent of the holders of Class C
Indebtedness in the event of the winding-up,
liquidation or dissolution of the Borrower
(or any proceedings analogous thereto);
(C) may accrue interest, but such interest shall
not be payable;
(D) is and shall remain unsecured by any
Charge over the whole or any part of the
assets of the Borrower; and
(E) is not, and shall not become capable of
being, subject to any right of set-off
or counterclaim;
(ii) except as provided in Clause 3, it shall not claim,
request, demand, sue for, take or receive (whether by
set-off or in any other manner and whether from the
Borrower or any other person) any money or other
property in respect of the Class D Indebtedness or
any part thereof;
(iii) if any monies (including the proceeds of any set-off
or counterclaim) or other property are received
directly or indirectly in respect of any Class D
Indebtedness by or on behalf of it in breach of any
of the provisions of this Deed, it will hold the same
upon trust to be applied first in or towards payment
of Class C Indebtedness and second, as to any balance
remaining after irrevocable and unconditional payment
and discharge in full of the Class C Indebtedness, in
or towards payment of the Class D Indebtedness in
accordance with the provisions of this Deed;
(iv) if any Charge is created as security for the Class D
Indebtedness then, immediately on the creation
thereof, the benefit of such Charge shall be assigned
or transferred in favor of the holder of Class C
Indebtedness as security for the Class C Indebtedness
and any instrument or agreement evidencing such
Charge shall be deposited with the holder of Class C
indebtedness; and
(v) it shall require the Borrower to, and shall ensure
that the Borrower shall pay to the holder of Class C
Indebtedness or as the holder of Class C Indebtedness
may direct any amounts which, if paid to such holder
of Class D Indebtedness, would be subject to the
trust mentioned in paragraph (iii) above.
(b) Proceedings for Winding-Up of Borrower. In any proceedings for
the compulsory or voluntary winding-up, liquidation or
dissolution of the Borrower (or any proceedings analogous
thereto):
(i) the holders of Class C Indebtedness shall be entitled
to receive payment in full of the Class C
Indebtedness before the holders of Class D
Indebtedness shall be entitled to receive any payment
on account of the Class D Indebtedness or any part
thereof; and
(ii) the holders of Class D Indebtedness agree that they
will prove for the full amount of their claims in
respect of their Class D Indebtedness and that in
accordance with the trust mentioned in Clause
2.03(a)(iii), any amounts payable to the holders of
Class D Indebtedness in respect of the Class D
Indebtedness shall be applied in payment or
satisfaction of the Class C Indebtedness until the
whole of the Class C Indebtedness shall have been
certified by the holder of Class C Indebtedness as
having been discharged and the remaining balance (if
any) may be applied towards payment of the Class D
Indebtedness in accordance with the provisions of
this Deed.
(c) Subordinated Loan Agreements. Each of the holders of Class D
Indebtedness agrees that:
(i) each and every Subordinated Loan Agreement entered
into by it in respect of Class D Indebtedness shall
be subject in every respect to the terms of this
Deed;
(ii) insofar as the terms of any Subordinated Loan
Agreement entered into by it in respect of Class D
Indebtedness or any transaction in connection
therewith are or may be inconsistent with the terms
of this Deed, the terms contained herein shall
prevail;
(iii) in respect of any Subordinated Loan Agreement
proposed to be entered into by it in respect of Class
D Indebtedness after the date hereof, the prior
written approval of the terms thereof shall first be
obtained from the holders of Class C Indebtedness;
(iv) no amendment shall be made to any Subordinated Loan
Agreement entered into by it in respect of Class D
Indebtedness except in writing and with the prior
written approval of the terms thereof by the holders
of Class C Indebtedness, such approval not to be
unreasonably withheld;
(v) immediately after the execution of any Subordinated
Loan Agreement entered into by it in respect of Class
D Indebtedness, or any agreement for the amendment of
any Subordinated Loan Agreement entered into by it in
respect of Class D Indebtedness, copies thereof shall
be delivered to the holders of Class C Indebtedness
as evidence thereof; and
(vi) no prepayment of principal may be made by the
Borrower to the holders of Class D Indebtedness (or
payment in respect thereof accepted by the holders of
Class D Indebtedness) under any Subordinated Loan
Agreement entered into by it in respect of Class D
Indebtedness.
(d) Application. All monies and other property received by the
holder of Class C Indebtedness in respect of the Class D
Indebtedness may be applied by the holders of Class C
Indebtedness in or towards satisfaction of the Class C
Indebtedness due and owing in such manner as the holders of
Class C Indebtedness may decide, provided that any excess
after the Class C Indebtedness has been paid in full shall be
paid or delivered to the holders of Class D Indebtedness and
may be applied in or towards satisfaction of the Class D
Indebtedness due and owing in such manner as the holders of
Class D Indebtedness may decide.
(e) Directions and Authorizations. Each holder of Class D
Indebtedness hereby irrevocably:
(i) directs the Borrower to pay to the holders of Class C
Indebtedness (or as the holders of Class C
Indebtedness may direct) any amounts which, if paid
to such holders of Class C Indebtedness would be
subject to the trust mentioned in Clause
2.03(a)(iii); and
(ii) authorizes the holders of Class C Indebtedness, in
the event of a compulsory or voluntary winding up,
liquidation or dissolution of the Borrower (or any
proceedings analogous thereto) to ask, demand, sue
or prove for, and take and receive, in the name of
such holder of Class D Indebtedness or otherwise,
all amounts payable to such holder of Class D
Indebtedness on account of any Class D Indebtedness
owing by the Borrower, and each of the holders of
Class D Indebtedness further covenants that in such
event at the request of the holder of Class C
Indebtedness, it will take all such action and
execute all such documents as the holders of Class C
Indebtedness may reasonably require in order to
enable the holders of Class C Indebtedness to
recover such Class D Indebtedness or any part
thereof.
3. PERMITTED PAYMENTS
Notwithstanding the terms of Clause 2, the Borrower shall be entitled
to make scheduled payments of principal and interest to each holder of
Class B, C and D Indebtedness under and in accordance with the terms of
their respective Subordinated Loan Agreements, and clause 14 of the
Senior Loan Agreement until such time as the Class A Indebtedness has
been paid in full, and clause 14 of the AES Loan Agreement thereafter,
provided that, with respect to each class, at the relevant time no
Event of Default or prospective Event of Default has occurred and is
continuing.
4. FURTHER ACKNOWLEDGMENTS
4.01 Relationship between the Senior and Junior Subordination Agreements.
Each of the holders of Class A, B, C and D Indebtedness acknowledges
that the Class A, B, C and D Indebtedness are subordinated to any and
all amounts owed by the Borrower to the Senior Financing Parties under
the Senior Loan Agreement and the Security Documents (as defined in the
Senior Loan Agreement) (the "Senior Bank Debt") in accordance with the
terms of the Senior Subordination Agreement; that the Class B, C and D
Indebtedness is subordinated to the Class A Indebtedness, the Class C
and D Indebtedness is subordinated to the Class B Indebtedness and the
Class D Indebtedness is subordinated to the Class C Indebtedness, all
in accordance with the terms of this Deed; and that, in the event of
any inconsistencies between the provisions of the Senior Subordination
Agreement and this Deed, the provisions of the Senior Subordination
Agreement shall govern as between the Senior Financing Parties of the
one part and the holders of the Class A, B, C and D Indebtedness of the
other part, and the provisions of this Deed shall govern as between or
among the parties signatory hereto.
4.02 Indebtedness in Same Class. Each of the holders of Class A, B, C and D
Indebtedness acknowledges that all indebtedness in the same class of
indebtedness shall rank pari passu in right of payment and any payment
to any class of indebtedness made hereunder shall be made pro rata to
all holders of the indebtedness of such class.
4.03 Purpose of Subordination. Each of the holders of Class A, B, C and D
Indebtedness acknowledges that the provisions of this Deed are and are
intended solely for the purpose of defining the relative rights of such
holders of indebtedness of the Borrower. Nothing contained in this Deed
shall or is intended to impair, as between the Borrower and any holder
of indebtedness subject to this Deed, the obligation of the Borrower,
which is unconditional and absolute, to pay to such holder any amounts
in respect of its indebtedness as and when the same shall become due in
accordance with its terms.
4.04 AES Loan Agreement. Each of the holders of Class A, C and D
Indebtedness acknowledges that AES may, without the consent of any such
holders, (a) sub-participate all or any part of its interest under the
AES Loan Agreement to any person and (ii) assign all or any of its
rights under the AES Loan Agreement to any person, provided that each
such assignee shall accede to this Deed as a holder of Class B
Indebtedness.
5. ACKNOWLEDGMENT BY BORROWER
The Borrower acknowledges the subordination of the Class B, C and D
Indebtedness and warrants and undertakes throughout the continuance of
this Deed and so long as the Class A, B, C or D Indebtedness or any
part thereof remains owing that:
(a) it will make all payments due in respect of the Class B, C and
D Indebtedness in accordance with the provisions of the Senior
Subordination Agreement and this Deed and it will comply with
all the other provisions of the Senior Subordination Agreement
and this Deed and it will not do, take part in or take the
benefit of anything which would or may breach the provisions
of the Senior Subordination Agreement or this Deed;
(b) it will promptly notify the Senior Creditors prior to
incurring any Class B, C or D Indebtedness; and
(c) it has no notice of any prior disposal of or Charge over the
Class B, C or D Indebtedness or any part thereof to any other
person.
6. CONTINUING SECURITY
This Deed shall be a continuing security and shall remain in full force
and effect until the Class A, B and C Indebtedness have been paid in
full, notwithstanding the insolvency, bankruptcy or liquidation or any
incapacity or change in the constitution or status of any of the
holders of Class B, C or D Indebtedness, the Borrower or any other
person or any intermediate settlement of account or other matter
whatsoever. This Deed is in addition to, and independent of, any
Charge, guarantee or other security or right or remedy now or at any
time hereafter held by or available to the holders of Class A and B
Indebtedness.
7. REPRESENTATIONS AND WARRANTIES
7.01 Representations and Warranties. Each of the Junior Creditors
represents and warrants severally and for itself to the Senior
Creditors that:
(a) it has full power, authority and legal right to enter into and
engage in the transactions contemplated by this Deed and has
taken or obtained all necessary corporate and other action to
authorize the execution and performance of this Deed;
(b) this Deed constitutes its legal, valid and binding obligation
enforceable in accordance with its terms;
(c) neither the execution of this Deed nor the performance by it
of any of its obligations or the exercise of any of its rights
hereunder will conflict with or result in a breach of any law,
regulation, judgment, order, authorization, agreement or
obligation applicable to it or cause any limitation placed on
it to be exceeded or result in the creation of or oblige it to
create a Charge in respect of the Class C or D Indebtedness;
(d) all authorizations required from any governmental or other
authority or from any of its shareholders or creditors for or
in connection with the execution, validity and performance of
this Deed have been obtained and are in full force and effect;
(e) it is not necessary in order to ensure the validity,
enforceability or admissibility in evidence in proceedings of
this Deed in its country of incorporation or any other
relevant jurisdiction that it or any other document be filed
or registered with any authority in its country of
incorporation or elsewhere or that any tax be paid in respect
thereof except as set out in appendix 2 of the AES Loan
Agreement;
(f) it is generally subject to civil and commercial law and to
legal proceedings and neither it nor any of its assets or
revenues are entitled to any immunity or privilege (sovereign
or otherwise) from any set-off, judgment, execution,
attachment or other legal process;
(g) its Subordinated Loan Agreement in existence at the date
hereof is valid and in full force and effect, the provisions
thereof have been fully complied with, the Borrower is not in
default in respect of any provision thereof and it has
provided true and complete copies thereof to the Senior
Creditors;
(h) except as provided in Clause 4.04, it is the sole beneficial
owner of the Subordinated Indebtedness owing to it; and
(i) no Charge exists over all or any part of its Subordinated
Indebtedness (except as created under or pursuant to this
Deed).
7.02 Continuing Representation and Warranty. Each of the Junior Creditors
also represents and warrants to and undertakes with the Senior
Creditors severally and for itself that the foregoing representations
and warranties set out in Clause 7.01 with respect to it will be true
and accurate throughout the continuance of this Deed with reference to
the facts and circumstances existing from time to time, provided that
each representation and warranty in Clause 7.01(b) shall (where
applicable) be subject (as to matters of law only) to Schedule 3 of the
AES Loan Agreement.
7.03 Qualification of Representations and Warranties. Each representation
and warranty in Clauses 7.01(a) through (d) inclusive shall (where
applicable) be subject (as to matters of law only) to the
qualifications specified in Schedule 3 of the AES Loan Agreement.
8. UNDERTAKINGS
8.01 Affirmative undertakings. Each of the holders of Class C and D
Indebtedness severally and for itself undertakes and agrees with the
holder of Class B Indebtedness throughout the continuance of this Deed
and so long as the Class B Indebtedness or any part thereof remains
owing that it will, unless the holder of Class B Indebtedness otherwise
agrees in writing:
(a) supply to the holder of Class B Indebtedness:
(i) as soon as they are available, but in any event
within one hundred and eighty (180) days after the
end of each of its financial years, copies of its
financial statements in respect of such financial
year (including a profit and loss account and balance
sheet) audited and certified by an independent public
accountant acceptable to the holder of Class B
Indebtedness;
(ii) as soon as they are available, but in any event
within one hundred and twenty (120) days after the
end of each half of each of its financial years,
copies of its unaudited financial statements
(including a profit and loss account and balance
sheet) prepared on a basis consistent with its
audited financial statements together with a
certificate signed by its principal financial
officer to the effect that such financial statements
are true in all material respects and present fairly
its financial position as at the end of, and the
results of its operations for, such half-year
period; and
(iii) promptly on request, such additional financial or
other information relating to it as the holder of
Class B Indebtedness may from time to time reasonably
request;
(b) keep proper records and books of account in respect of its
business and permit the holder of Class B Indebtedness and/or
any professional consultants appointed by the holder of Class
B Indebtedness at all reasonable times to inspect and examine
its records and books of account;
(c) promptly inform the holder of Class B Indebtedness of the
occurrence of any Event of Default or prospective Event of
Default;
(d) maintain its corporate existence and conduct its business in a
proper and efficient manner and in compliance with all laws,
regulations, authorizations, agreements and obligations
applicable to it and pay all taxes imposed on it when due;
(e) punctually pay all sums due from it and otherwise comply with
its obligations under this Deed;
(f) do or permit to be done every act or thing which the holder of
Class B Indebtedness may from time to time reasonably require
for the purpose of enforcing the rights of the holder of Class
B Indebtedness hereunder;
(g) not do or knowingly cause or permit to be done anything which
may in any way depreciate, jeopardize or otherwise prejudice
the value of the security of the holder of Class B
Indebtedness hereunder;
(h) not create or attempt or agree to create or permit to arise or
exist any Charge over all or any part of its Subordinated
Indebtedness or any interest therein or otherwise assign, deal
with or dispose of all or any part of its Subordinated
Indebtedness (except under or pursuant to this Deed);
(i) at all times remain the beneficial owners of its Subordinated
Indebtedness;
(j) not vary the liability of the Borrower in relation to its
Subordinated Indebtedness;
(k) upon the request of the holder of Class B Indebtedness, supply
to the holder of Class B Indebtedness such information
regarding the amount and terms of the Junior Indebtedness as
the holder of Class B Indebtedness may require;
(l) subject to the provisions of this Deed, duly observe and
perform all its obligations under any Subordinated Loan
Agreement to which it is a party;
(m) ensure that each date for repayment of principal and payment
of interest under any Subordinated Loan Agreement to which it
is a party shall be an Interest Payment Date; and
(n) promptly inform the holder of Class B Indebtedness of any
breach of this Deed known to it.
9. BORROWER'S REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
9.01 Representations and Warranties. The Borrower represents and warrants to
the holder of Class A, B, C and D Indebtedness in the terms of Clause
7.01(g) and also represents, warrants and undertakes to the Senior
Creditors that such representation and warranty will be true and
accurate from time to time throughout the continuance of this Deed with
reference to the facts and circumstances existing from time to time.
9.02 Undertakings. The Borrower undertakes and agrees with the Senior
Creditors in the terms of Clause 8.01(f), (g), (n) and (o).
10. CLAIMS BY JUNIOR CREDITORS
Each Junior Creditor severally represents to and undertakes with the
Senior Creditors that it has not taken and will not take any security
in respect of obligations owing to it under this Deed whether from the
Borrower or any other person. So long as any sum remains owing by the
Borrower to the Senior Creditors, no Junior Creditor shall exercise any
right of subrogation, contribution or any other rights of a surety or
enforce any security or other right or claim against the Borrower
(whether in respect of its liability under this Deed or otherwise) or
any other person who has guaranteed or given any security in respect of
the Senior Indebtedness or, subject to the provisions of this Deed,
claim in the insolvency or liquidation of the Borrower or any such
other person in competition with the Senior Creditors. If any Junior
Creditor receives any payment or benefit in breach of this Clause 10,
it shall hold the same upon trust for the Senior Creditors as a
continuing security for the Senior Indebtedness.
11. TAXES AND OTHER DEDUCTIONS
All sums payable by the Junior Creditors under this Deed shall be paid
in full without set-off or counterclaim or any restriction or condition
and free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings of any nature. If any Junior Creditor or any
other person are required by any law or regulation to make any
deduction or withholding (on account of tax (other than an Excluded
Tax) or otherwise) from any payment for the account of the Senior
Creditors, the relevant Junior Creditor shall, together with such
payment, pay such additional amount as will ensure that the Senior
Creditors receive (free and clear of any tax (other than an Excluded
Tax) or other deductions or withholdings) the full amount which they
would have received if no such deduction or withholding had been
required. The Junior Creditors shall promptly forward to the Senior
Creditors copies of official receipts or other evidence showing that
the full amount of any such deduction or withholding has been paid over
to the relevant taxation or other authority.
12. COSTS, CHARGES AND EXPENSES
Each of the holders of Class C Indebtedness and the Borrower shall from
time to time forthwith on demand pay to or reimburse the holders of
Class B Indebtedness for:
(a) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the holders of Class B
Indebtedness in connection with the preparation, execution and
registration of any amendment to or extension of, or the
giving of any consent or waiver in connection with this Deed;
and
(b) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the holders of Class B
Indebtedness in exercising any of their rights or powers
hereunder or in suing for or seeking to recover any sums due
hereunder or otherwise preserving or enforcing their rights
hereunder or in defending any claims brought against them in
respect of this Deed or in releasing or re-assigning this Deed
upon payment of all monies hereby secured and until payment of
the same in full, all such costs, charges and expenses shall
be secured by this Deed.
The liability of the holders of Class C Indebtedness in respect of
amounts due under this Clause 12 shall be borne severally by them,
provided that, in the event that any amount becomes payable to the
holders of Class B Indebtedness under this Clause 12 solely by virtue
of the action or inaction of certain holders of Class C Indebtedness,
those relevant holders of Class C Indebtedness shall bear sole
liability and responsibility in respect of such amount so payable. To
the extent practicable, the Senior Creditors shall consult the Junior
Creditors and the Borrower before incurring any major expenditure.
13. INDEMNITY
13.01 Junior Creditors' General Indemnity. Each Junior Creditor shall
indemnify the Senior Creditors against all losses, liabilities,
damages, costs and expenses incurred by them in the execution or
performance of the terms and conditions hereof and against all actions,
proceedings, claims, demands, costs, charges and expenses which may be
incurred, sustained or arise in respect of the non-performance or
non-observance of any of the undertakings and agreements on the part of
that Junior Creditor herein contained or in respect of any matter or
thing done or omitted by it relating in any way whatsoever to the
Subordinated Indebtedness of that Junior Creditor.
13.02 Borrower's General Indemnity. The Borrower shall indemnify the Senior
Creditors against all losses, liabilities, damages, costs and expenses
incurred by them in the execution or performance of the terms and
conditions hereof and against all actions, proceedings, claims,
demands, costs, charges and expenses which may be incurred, sustained
or arise in respect of the non-performance or non-observance of any of
the undertakings and agreements on the part of the Junior Creditors and
the Borrower herein contained or in respect of any matter or thing done
or omitted relating in any way whatsoever to the Subordinated
Indebtedness.
13.03 Payment and Security. The Senior Creditors may retain and pay out of
any money in the Senior Creditors' hands all sums necessary to effect
the indemnity contained in this Clause 13 and all sums payable by the
Junior Creditors and the Borrower under this Clause 13 shall form part
of the monies hereby secured.
14. FURTHER ASSURANCE
14.01 Further Assurance. Each of the Junior Creditors and the Borrower shall
at any time and from time to time (whether before or after the security
hereby created shall have become enforceable) execute such further
legal or other mortgages, charges or assignments and do all such
transfers, assurances, acts and things as the Senior Creditors may
require over or in respect of the Subordinated Indebtedness to secure
all monies, obligations and liabilities hereby covenanted to be paid or
hereby secured or for the purposes of perfecting and completing any
assignment of the Senior Creditor's rights, benefits or obligations
hereunder and the Junior Creditors and the Borrower shall also give all
notices, orders and directions which the Senior Creditors may require.
14.02 Enforcement of Senior Creditors' Rights. Each of the Junior Creditors
and the Borrower will do or permit to be done everything which the
Senior Creditors may from time to time require to be done for the
purpose of enforcing the Senior Creditors' rights hereunder and will
allow the names of the Junior Creditors and the Borrower (as the case
may be) to be used as and when required by the Senior Creditors for
that purpose.
15. SUSPENSE ACCOUNT
Any Senior Creditor may place and keep any monies received by virtue of
this Deed (whether before or after the insolvency, bankruptcy or
liquidation of any of the Junior Creditors or the Borrower) to the
credit of a suspense account for so long as the Senior Creditor may
think fit in order to preserve the rights of such Senior Creditor to
sue or prove for the whole amount of its claims against the Junior
Creditors, the Borrower or any other person.
16. WAIVER AND SEVERABILITY
No failure or delay by any Senior Creditor in exercising any right,
power or remedy hereunder shall impair such right, power or remedy or
operate as a waiver thereof, nor shall any single or partial exercise
of the same preclude any further exercise thereof or the exercise of
any other right, power or remedy. The rights, powers and remedies
herein provided are cumulative and do not exclude any other rights,
powers and remedies provided by law. If at any time any provision of
this Deed is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other
jurisdiction, and of the remaining provisions of this Deed, shall not
be affected or impaired thereby.
17. MISCELLANEOUS
17.01 Continuing Obligations. The liabilities and obligations of the Junior
Creditors and the Borrower under this Deed shall remain in force
notwithstanding any act, omission, event or circumstance whatsoever,
until full, proper and valid payment of the Senior Indebtedness.
17.02 Protective Clauses. Without limiting Clause 17.01, neither the
liability of the Junior Creditors or the Borrower nor the validity or
enforceability of this Deed shall be prejudiced, affected or discharged
by:
(a) the granting of any time or indulgence to the Borrower or any
other person;
(b) any variation or modification of any document evidencing or
securing the Senior Indebtedness;
(c) the invalidity or unenforceability of any obligation or
liability of the Borrower under any document evidencing or
securing the Senior Indebtedness to which it is a party;
(d) any invalidity or irregularity in the execution of any
document evidencing or securing the Senior Indebtedness;
(e) any deficiency in the powers of the Borrower to enter into or
perform any of its obligations under any document evidencing
or securing the Senior Indebtedness to which it is party or
any irregularity in the exercise thereof or any lack of
authority by any person purporting to act on behalf of the
Borrower;
(f) the insolvency, bankruptcy or liquidation or any incapacity,
disability or limitation or any change in the constitution or
status of the Borrower or any of the Junior Creditors;
(g) any document evidencing security, Charge, guarantee or other
security or right or remedy being or becoming held by or
available to any Senior Creditor or by any of the same being
or becoming wholly or partly void, voidable, unenforceable or
impaired, or by any Senior Creditor at any time releasing,
refraining from enforcing, varying or in any other way dealing
with any of the same or any power, right or remedy such Senior
Creditor may now or hereafter have from or against the
Borrower or any other person;
(h) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Borrower or any
other person or any compromise, arrangement or settlement with
any of the same; and
(i) any act, omission, event or circumstance which would or may,
but for this provision, operate to prejudice, affect or
discharge this Deed or the liability of the Junior Creditors
or the Borrower hereunder.
17.03 Binding Nature of Deed. The Borrower and each of the Junior Creditors
agrees to be bound by this Deed notwithstanding that any other person
who was intended to sign or be bound by this Deed fails, for any
reason, so to sign or be bound or that this Deed is for any reason
invalid or unenforceable against such person.
17.04 Unrestricted Right of Enforcement. This Deed may be enforced without
the Senior Creditors first having recourse to any other security or
rights or taking any other steps or proceedings against the Junior
Creditors, the Borrower or any other person or may be enforced for any
balance due after resorting to any one or more other means of obtaining
payment or discharge of the monies, obligations and liabilities hereby
secured.
17.05 Discharges and Releases. Notwithstanding any discharge, release or
settlement from time to time between or among any or all the Senior
Creditors and the Junior Creditors or the Borrower, if any security,
disposition or payment granted or made to any Senior Creditor in
respect of the Subordinated Indebtedness by any Junior Creditor, the
Borrower or any other person is avoided or set aside or ordered to be
surrendered, paid away, refunded or reduced by virtue of any provision,
law or enactment relating to bankruptcy, insolvency, liquidation,
winding-up, composition or arrangement for the time being in force or
for any other reason, each of the Senior Creditors shall be entitled
hereafter to enforce this Deed as if no such discharge, release or
settlement had occurred.
17.06 Amendment. Any amendment or waiver of any provision of this Deed and
any waiver of any default under this Deed shall only be effective if
made in writing and signed by or on behalf of the party against whom
enforcement of the amendment or waiver is asserted.
18. ASSIGNMENT
18.01 The Holders of Class A, C and D Indebtedness and the Borrower. None of
the holders of Class A, C and D Indebtedness and the Borrower shall
assign any of their rights hereunder.
18.02 The Holder of Class B Indebtedness. The holder of Class B Indebtedness
may assign or grant participations in all or any part of its rights
under this Deed and make disclosures in accordance with the provisions
of clause 19 of the AES Loan Agreement as if references therein to the
Borrower were references to the holders of Class A, C or D Indebtedness
or the Borrower (as the case may be) and any assignee of or participant
in Class B Indebtedness may further so assign or grant participations
in all or any part of its rights under this Deed.
19. NOTICES
19.01 Delivery. Each notice, demand or other communication to be given or
made under this Deed shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the Guarantor China Power International Holding Limited
and Sponsor: Suite 5306, Central Plaza
18 Harbour Road
Wanchai, Hong Kong
Fax Number: (852) 2802-3922
Attention: Zhao Xin Yan/
Wang Zi Chao
To the Junior AES China Holding Company (L) Limited
Lender and 9th Floor, Allied Capital Resources Building
Sponsor: 32-38 Ice House Street
Central, Hong Kong
Fax Number: (852) 2530-1673
Attention: Jeff Safford
Chief Financial Officer
To the Junior Anhui Liyuan Electric Power Limited
Subordinated No. 415 Wuhu Road
Lenders Hefei
and Sponsors: Anhui Province
People's Republic of China
Fax Number: (86-551) 363-7642
Attention: Long Wen Ming/
Susan Jie/
Chen Liang Bao
Wuhu Energy Development Company
Commercial Office Building
West Huangshan Road
Wuhu
Anhui Province
People's Republic of China
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
To the Borrower: Wuhu Shaoda Electric Power Development
Company Limited
Commercial Office Building
West Huangshan Road
Wuhu
Anhui Province
People's Republic of China
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
19.02 Deemed Delivery. Any notice, demand or other communication so addressed
to the relevant party shall be deemed to have been delivered (a) if
given or made by letter, when actually delivered to the relevant
address; (b) if given or made by telex, when dispatched with confirmed
answerback and (c) if given or made by fax, when dispatched.
20. GOVERNING LAW AND JURISDICTION
20.01 Law. This Deed and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of
England.
20.02 Jurisdiction. Each of the Junior Creditors and the Borrower agrees that
any legal action or proceeding arising out of or relating to this Deed
may be brought in the courts of England and irrevocably submit to the
non-exclusive jurisdiction of such courts.
20.03 Process Agent. Each of the Junior Creditors and the Borrower
irrevocably appoints Rowe & Maw (Attention: Mr. Bernd Ratzke) of 20
Blackfriars Lane London EC4V 6HT, England as its agent to receive and
acknowledge on its behalf service of any writ, summons, order, judgment
or other notice of legal process in England. If for any reason the
agent named above (or its successor) no longer serves as agent of any
Junior Creditor or the Borrower for this purpose, the relevant Junior
Creditor or the Borrower (as the case may be) shall promptly appoint a
successor agent satisfactory to the Senior Creditors and notify the
Senior Creditors thereof, provided that until the Senior Creditors
receive such notification, they shall be entitled to treat the agent
named above (or its said successor) as the agent of such Junior
Creditor and/or the Borrower (as the case may be) for the purposes of
this Clause 20.03. Each of the Junior Creditors and the Borrower agrees
that any such legal process shall be sufficiently served on it if
delivered to such agent for service at its address for the time being
in England whether or not such agent gives notice thereof to such
Junior Creditor or the Borrower as applicable.
20.04 No Limitation on Right of Action. Nothing herein shall limit the right
of the Senior Creditors to commence any legal action against the Junior
Creditors or the Borrower and/or their property in any other
jurisdiction or to serve process in any manner permitted by law, and
the initiation of proceedings in any jurisdiction shall not preclude
the initiation of proceedings in any other jurisdiction whether
concurrently or not.
20.05 Waiver; Final Judgment Conclusive. Each of the Junior Creditors and the
Borrower irrevocably and unconditionally waives any objection which it
may now or hereafter have to the choice of England as the venue of any
legal action arising out of or relating to this Deed. Each of the
Junior Creditors and the Borrower also agrees that a final judgment
against it in any such legal action shall be final and conclusive and
may be enforced in any other jurisdiction, and that a certified or
otherwise duly authenticated copy of the judgment shall be conclusive
evidence of the fact and amount of its indebtedness.
20.06 Waiver of Immunity. Each of the Junior Creditors and the Borrower
irrevocably waives any immunity to which it or its property may at any
time be or become entitled, whether characterized as sovereign immunity
or otherwise, from any set-off or legal action in England or elsewhere,
including immunity from service of process, immunity from jurisdiction
of any court or tribunal, and immunity of any of its property from
attachment prior to judgment or from execution of a judgment.
IN WITNESS whereof each of the parties hereto have executed this Deed on the day
and year first above written.
<PAGE>
THE GUARANTOR AND A SPONSOR
- ---------------------------
THE COMMON SEAL of )
CHINA POWER INTERNATIONAL )
HOLDING LIMITED )
was hereunto affixed )
in the presence of: )
THE JUNIOR LENDER AND A SPONSOR
- -------------------------------
THE COMMON SEAL of )
AES CHINA HOLDING )
COMPANY (L) LIMITED )
was hereunto affixed )
in the presence of: )
THE JUNIOR SUBORDINATED LENDERS AND SPONSORS
- --------------------------------------------
EXECUTED as, and DELIVERED as, a Deed )
by ANHUI LIYUAN ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
acting by its authorized signatory )
in the presence of: )
EXECUTED as, and DELIVERED as, a Deed )
by WUHU ENERGY DEVELOPMENT COMPANY )
acting by its authorized signatory )
in the presence of: )
THE BORROWER
- ------------
EXECUTED as, and DELIVERED as, a Deed )
by WUHU SHAODA ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
acting by its authorized signatory )
in the presence of: )
0
Exhibit 10.36
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Borrower
and
AES CHINA HOLDINGS COMPANY (L) LIMITED
as Junior Lender
SUBORDINATED INSURANCE ASSIGNMENT
CHADBOURNE & PARKE LLP
AMERICAN ATTORNEYS AT LAW
SUITE 3704, PEREGRINE TOWER
LIPPO CENTRE, 89 QUEENSWAY
HONG KONG
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Interpretation.....................................................1
2. Assignment of Insurances...........................................2
3. Continuing Security................................................3
4. Representations and Warranties.....................................3
5. Undertakings.......................................................4
6. Borrower's Liability...............................................6
7. Proceeds of Insurances.............................................6
8. Taxes and Other Deductions.........................................7
9. Costs, Charges and Expenses........................................7
10. Indemnity..........................................................8
11. Further Assurance..................................................8
12. Power of Attorney..................................................9
13. Suspense Account...................................................9
14. Waiver and Severability............................................9
15. Miscellaneous.....................................................10
16. Assignment........................................................11
17. Notices...........................................................11
18. Governing Law and Jurisdiction....................................12
19. Subordinated Security.............................................13
Schedule 1 Form of Notice................................................14
Schedule 2 Form of Loss Payable and Notice of Cancellation Clause........16
Execution Block
<PAGE>
THIS DEED is made on the day of 1996
---------------- ------------------------
BETWEEN:
(1) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
joint venture company formed under the Law of the People's Republic
of China on Joint Ventures Using Chinese and Foreign Investment, with
its registered office at Commercial Office Building, West Huangshan
Road, Wuhu, Anhui Province, People's Republic of China (the
"Borrower"); and
(2) AES CHINA HOLDINGS COMPANY (L) LIMITED, a Labuan company of Lot A,
Level 3, Wisma Oceanic, Jalan OKK Awang Besar, 87007, Federal
Territory of Labuan, Malaysia (the "Junior Lender").
WHEREAS:
(A) By the AES Loan Agreement (as defined below), the Junior Lender has
agreed to make available to the Borrower a term loan facility of up
to eighteen million Dollars (US$18,000,000), upon the terms set out
therein.
(B) It is a condition precedent to the Junior Lender making the Facility
available to the Borrower that the Borrower enters into this Deed.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.01 Definitions and Construction. In this Deed, unless the context
requires otherwise:
(a) terms and expressions defined in or construed for the
purposes of the AES Loan Agreement shall have the same
meanings or be construed in the same manner when used in
this Deed;
(b) "AES Loan Agreement" means the loan agreement dated --------
1996 and made between the Junior Lender and the Borrower;
(c) "Insurances" means all policies or contracts of insurance
which are now or may hereafter be effected in respect of the
Insured Assets or any part thereof (but expressly excluding
any third party liability insurances and any other
insurances arranged solely for the benefit of third parties)
and all benefits and proceeds thereof, including all claims
of whatever nature and returns of premiums;
1
<PAGE>
(d) "Insured Assets" means the buildings, plant, equipment,
machinery, spare parts and other assets owned by the
Borrower and used in connection with the Project; and
(e) "Junior Secured Indebtedness" means all and any sums
(whether principal, interest, fees or otherwise) which are
or at any time may become payable by the Borrower under the
AES Loan Agreement or any Subordinated Security Document to
which it is a party and all other monies hereby secured.
1.02 Successors and Assigns. The expressions "Borrower" and "Junior
Lender" shall where the context permits include their respective
successors and permitted assigns and any persons deriving title under
them.
1.03 AES Loan Agreement. To the extent applicable and required by relevant
law, the terms and conditions of the AES Loan Agreement shall be
deemed to be incorporated into this Deed by reference and this Deed
shall be read and construed as if such terms and conditions had been
set out in full herein.
1.04 Miscellaneous. In this Deed, unless the context requires otherwise,
references to statutory provisions shall be construed as references
to those provisions as replaced, amended, modified or re-enacted from
time to time; words importing the singular include the plural and
vice versa and words importing a gender include every gender;
references to this Deed, the AES Loan Agreement, any other
Subordinated Security Document or any other document referred to
herein shall be construed as references to such document as the same
may be amended or supplemented (provided that any required consent or
approval for such amendment or supplement has been obtained) from
time to time; unless otherwise stated, references to Clauses are to
clauses of this Deed. Clause headings are inserted for reference only
and shall be ignored in construing this Deed.
2. ASSIGNMENT OF INSURANCES
2.01 Charge and Assignment. In consideration of the Facility being made
available by the Junior Lender to the Borrower upon the terms and
conditions of the AES Loan Agreement, the Borrower with full title
guarantee assigns and grants to the Junior Lender a third-priority
security interest in absolutely all the Borrower's right, title,
interest and benefit in and to the Insurances upon the terms herein
set out as a continuing security for the due and punctual payment of
the Junior Secured Indebtedness and the due and punctual performance
and observance by the Borrower of all other obligations of the
Borrower contained in the AES Loan Agreement or any Subordinated
Security Document to which it is a party. THIS ASSIGNMENT IS
SUBORDINATE IN RIGHT TO THE CHARGES CREATED TO SECURE THE OBLIGATIONS
OF THE
2
<PAGE>
BORROWER UNDER THE SENIOR LOAN AGREEMENT, AND THE ENFORCEMENT
OF THIS ASSIGNMENT SHALL BE LIMITED IN ACCORDANCE WITH THE PROVISIONS
OF THE SENIOR SUBORDINATION AGREEMENT AND THE PRIORITY DEED.
2.02 Notice. The Borrower will, forthwith upon the execution of this Deed
(or, if later, upon any policy or contract of insurance comprised in
the Insurances coming into force), give notice of the assignment
herein contained to and obtain an acknowledgment from the relevant
insurers substantially in the form set out in Schedule 1 or, if not
in that form, in a form satisfactory to the Junior Lender.
2.03 Dealings with Parties. Notwithstanding the assignment herein
contained but otherwise subject to the terms of this Deed, the Junior
Lender authorizes the Borrower to continue to deal with the other
parties to the Insurances and each of them in relation thereto as if
the Borrower remained solely entitled to all the rights, title,
interest and benefits thereunder but, save as herein provided, not
directly to receive any moneys payable under the Insurances, provided
that if an Event of Default or prospective Event of Default occurs
and the Junior Lender gives written notice thereof to the Borrower
the foregoing authority shall immediately cease to have effect.
3. CONTINUING SECURITY
This Deed shall be a continuing security and shall remain in full
force and effect until the Junior Secured Indebtedness has been paid
in full, notwithstanding the insolvency or liquidation or any
incapacity or change in the constitution or status of the Borrower or
any other person or any intermediate settlement of account or other
matter whatsoever. This Deed is in addition to, and independent of,
any Charge, guarantee or other security or right or remedy now or at
any time hereafter held by or available to the Junior Lender.
4. REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties. The Borrower represents and warrants
to the Junior Lender that:
(a) the Insurances are beneficially owned by the Borrower free
from any Charge except as created (i) under or pursuant to
this Deed, (ii) to secure the obligations of the Borrower
under the Senior Loan Agreement and (iii) in respect of the
Guarantee;
(b) the Insurances are valid and in full force and effect and
are not void or voidable; and
3
<PAGE>
(c) all premiums and other monies (if any) payable in respect of
the Insurances have been duly paid and all covenants, terms
and conditions contained in the Insurances have been duly
observed and performed.
4.02 Continuing Representation and Warranty. The Borrower also represents
and warrants to and undertakes with the Junior Lender that the
foregoing representations and warranties will be true and accurate
throughout the continuance of this Deed with reference to the facts
and circumstances existing from time to time.
5. UNDERTAKINGS
The Borrower undertakes and agrees with the Junior Lender throughout
the continuance of this Deed and so long as the Junior Secured
Indebtedness or any part thereof remains owing that the Borrower
will, unless the Junior Lender otherwise agrees in writing:
(a) procure that a loss payable and notice of cancellation
clause, substantially in the form of Schedule 2, and in any
event in a form satisfactory to the Junior Lender, is
included in each of the policies or contracts of insurance
comprised in the Insurances;
(b) procure that, on or prior to any policy or contract of
insurance comprised in the Insurances coming into force (or,
if later, the execution of this Deed), the insurance brokers
and insurers in respect of such insurance give their written
consent to the assignment pursuant to this Deed and their
written undertaking to the Junior Lender:
(i) promptly to advise the Junior Lender:
(a) if any insurer cancels, purports to cancel
or gives notice of cancellation of such
insurance;
(b) of any purported or actual alteration in
or termination or expiry of such
insurance;
(c) of any default in the payment of any
premium or call; and
(d) of any act or omission or of any event of
which that broker or insurer has
knowledge which might invalidate or render
unenforceable in whole or in part
such insurance; and
(ii) to make any payments in respect of such insurance
in accordance with the loss payable
provisions set out in Schedule 2; and
4
<PAGE>
(iii) to hold all policies, cover notes and other
relevant documents issued or hereafter to be issued
in respect of such insurance for the benefit of the
Junior Lender;
(c) pay all premiums and other amounts due in respect of the
Insurances (and provide the Junior Lender with receipts
therefor) and deliver to the Junior Lender copies of all
policies, cover notes and other relevant documents relating
to the Insurances, provided that the Borrower shall arrange
for the delivery of the originals of such documents to the
Junior Lender as soon as all amounts owed to the Senior
Financing Parties under the Senior Loan Agreement have been
paid in full;
(d) take all steps which may be necessary or expedient to keep
the Insurances in full force and effect and protect the
interests of the Borrower and the Junior Lender in the
Insurances;
(e) renew all policies or contracts of insurance comprised in
the Insurances no later than fourteen (14) days before the
expiry of such policies or contracts;
(f) reimburse on demand to the Junior Lender any amount paid by
the Junior Lender to any insurer of any of the Insurances in
respect of any premium or other amount due to such insurer
in respect of the Insurances, together with interest thereon
from the date of payment to the date of reimbursement at the
rate calculated in accordance with clause 15 of the AES Loan
Agreement;
(g) do or permit to be done every act or thing which the Junior
Lender may from time to time require for the purpose of
enforcing the rights of the Junior Lender hereunder;
(h) contemporaneously with the making of any claim in excess of
fifty thousand Dollars (US$50,000) under the Insurances,
notify the Junior Lender in writing of the same, such
notification to be accompanied by a certified true copy of
any form(s) and document(s) submitted to the relevant
insurer(s) in respect of such claim and provide such other
details in connection with the claim as the Junior Lender
may request;
(i) not, without the prior written consent of the Junior Lender,
waive, release, settle, compromise or abandon any claim
under the Insurances or do or omit to do any other act or
thing whereby the recovery in full of any amounts in respect
of the Insurances as and when they become payable may be
impeded;
(j) not create or attempt or agree to create or permit to arise
or exist any Charge over all or any part of the Insurances
or any interest therein or otherwise assign, deal with or
dispose of all or any part
5
<PAGE>
of the Insurances (except under
or pursuant to this Deed and to secure the obligations of
the Borrower under the Senior Loan Agreement and the CPIL
Security);
(k) except for the relevant Charges created to secure the
obligations of the Borrower under the Senior Loan Agreement
and the CPIL Security, not do or cause or permit to be done
anything which may in any way depreciate, jeopardize or
otherwise prejudice the value of the Junior Lender's
security hereunder.
6. BORROWER'S LIABILITY
Notwithstanding the assignment herein contained, the Borrower shall
remain liable under the Insurances to observe and perform all the
obligations assumed by it thereunder and the Junior Lender shall have
no obligation or liability thereunder. The Junior Lender shall not be
obliged to make any enquiry as to the nature or sufficiency of any
payment received by it or to make any claim or take any other action
to collect any monies or to enforce any rights and benefits hereby
assigned.
7. PROCEEDS OF INSURANCES
If at the time when any insurance proceeds become due and payable,
any Event of Default or prospective Event of Default has occurred,
the Junior Lender shall have the right to apply such proceeds in or
towards satisfaction of the Junior Secured Indebtedness in such
manner as it may determine. If no Event of Default or prospective
Event of Default has then occurred:
(a) the proceeds of insurance in respect of a claim for an
amount not exceeding five hundred thousand Dollars
(US$500,000) (or the equivalent in any other currency) shall
be payable to the Borrower or (if so required under the
terms of the relevant policy) to Anhui Power and shall be
applied by the Borrower or Anhui Power, as the case may be,
in fully repairing, rebuilding or reinstating that part of
the Insured Assets destroyed or damaged and, in any event,
the Borrower shall be responsible for ensuring that such
proceeds are so applied; and
(b) the proceeds of insurance in respect of a claim for an
amount exceeding five hundred thousand Dollars (US$500,000)
(or the equivalent in any other currency) shall be payable
to the Security Agent until such time as all amounts owed
under the Senior Loan Agreement have been paid in full and
to the Junior Lender thereafter. The Security Agent or the
Junior Lender, as the case may be, shall release such
proceeds to the Borrower for the purpose of repairing or
reinstating the loss or damage in respect of which such
proceeds were paid or, at the option of the Security
6
<PAGE>
Agent or the Junior Lender, as the case may be, such
proceeds shall be paid directly to the person who has made
or is to make such repairs or reinstatement against invoices
therefor.
8. TAXES AND OTHER DEDUCTIONS
All sums payable by the Borrower under this Deed shall be paid in
full without set-off or counterclaim or any restriction or condition
and free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings of any nature. If the Borrower or any
other person is required by any law or regulation to make any
deduction or withholding (on account of tax (other than an Excluded
Tax) or otherwise) from any payment for the account of the Junior
Lender, the Borrower shall, together with such payment, pay such
additional amount as will ensure that the Junior Lender receives
(free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings) the full amount which it would have
received if no such deduction or withholding had been required. The
Borrower shall promptly forward to the Junior Lender copies of
official receipts or other evidence showing that the full amount of
any such deduction or withholding has been paid over to the relevant
taxation or other authority.
9. COSTS, CHARGES AND EXPENSES
The Borrower shall from time to time forthwith on demand pay to or
reimburse the Junior Lender for:
(a) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
connection with the preparation, execution and registration
of any amendment to or extension of, or the giving of any
consent or waiver in connection with this Deed; and
(b) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
exercising any of its rights or powers hereunder or in suing
for or seeking to recover any sums due hereunder or
otherwise preserving or enforcing its rights hereunder or in
defending any claims brought against it in respect of this
Deed or in releasing or re-assigning this Deed upon payment
of all monies hereby secured and until payment of the same
in full, all such costs, charges and expenses shall be
secured by this Deed.
To the extent practicable, the Junior Lender shall consult the
Borrower before incurring any major expenditure.
7
<PAGE>
10. INDEMNITY
10.01 General Indemnity. The Borrower shall indemnify the Junior Lender
against all losses, liabilities, damages, costs and expenses incurred
by it in the execution or performance of the terms and conditions
hereof and against all actions, proceedings, claims, demands, costs,
charges and expenses which may be incurred, sustained or arise in
respect of the non-performance or non-observance of any of the
undertakings and agreements on the part of the Borrower herein
contained or in respect of any matter or thing done or omitted, on
the part of the Borrower, relating in any way whatsoever to the
Insurances.
10.02 Currency Indemnity. Dollars shall be the currency of account and of
payment in respect of sums payable under this Deed. If an amount is
received in another currency, pursuant to a judgment or order or in
the liquidation of the Borrower or otherwise, the Borrower's
obligations under this Deed shall be discharged only to the extent
that the Junior Lender may purchase Dollars with such other currency
in accordance with normal banking procedures upon receipt of such
amount. If the amount in Dollars which may be so purchased, after
deducting any costs of exchange and any other related costs, is less
than the relevant sum payable under this Deed, the Borrower shall
indemnify the Junior Lender against the shortfall. This indemnity
shall be an obligation of the Borrower independent of and in addition
to its other obligations under this Deed and shall take effect
notwithstanding any time or other concession granted to the Borrower
or any judgment or order being obtained or the filing of any claim in
the liquidation, dissolution or bankruptcy (or analogous process) of
the Borrower.
10.03 Payment and Security. The Junior Lender may retain and pay out of any
money in the Junior Lender's hands all sums necessary to effect the
indemnity contained in this Clause 10.03 and all sums payable by the
Borrower under this Clause 10.03 shall form part of the monies hereby
secured.
11. FURTHER ASSURANCE
11.01 Further Assurance. The Borrower shall at any time and from time to
time (whether before or after the security hereby created shall have
become enforceable) execute such further legal or other mortgages,
charges or assignments and do all such transfers, assurances, acts
and things as the Junior Lender may require over or in respect of the
Insurances to secure all monies, obligations and liabilities hereby
covenanted to be paid or hereby secured or for the purposes of
perfecting and completing any assignment of the Junior Lender's
rights, benefits or obligations hereunder and the Borrower shall also
give all notices, orders and directions which the Junior Lender may
require.
8
<PAGE>
11.02 Enforcement of Junior Lender's Rights. Subject to the Senior
Subordination Agreement and the Priority Deed, the Borrower will do
or permit to be done everything which the Junior Lender may from time
to time require to be done for the purpose of enforcing the Junior
Lender's rights hereunder and will allow the name of the Borrower to
be used as and when required by the Junior Lender for that purpose.
12. POWER OF ATTORNEY
The Borrower irrevocably appoints the Junior Lender by way of
security to be its attorney-in-fact (with full power of substitution)
and in its name or otherwise on its behalf and as its act and deed to
sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required or which the Junior Lender
shall think proper or expedient for carrying out any obligations
imposed on the Borrower hereunder or for exercising any of the powers
hereby conferred or for giving to the Junior Lender the full benefit
of this security and so that the appointment hereby made shall
operate to confer on the Junior Lender authority to do on behalf of
the Borrower anything which it can lawfully do by an
attorney-in-fact. The Borrower ratifies and confirms and agrees to
ratify and confirm any deed, instrument, act or thing which such
attorney-in-fact or substitute may execute or do.
13. SUSPENSE ACCOUNT
The Junior Lender may place and keep any monies received by virtue of
this Deed (whether before or after the insolvency or liquidation of
the Borrower) to the credit of a suspense account for so long as the
Junior Lender may think fit in order to preserve the rights of the
Junior Lender to sue or prove for the whole amount of its claims
against the Borrower or any other person.
14. WAIVER AND SEVERABILITY
No failure or delay by the Junior Lender in exercising any right,
power or remedy hereunder shall impair such right, power or remedy or
operate as a waiver thereof, nor shall any single or partial exercise
of the same preclude any further exercise thereof or the exercise of
any other right, power or remedy. The rights, powers and remedies
herein provided are cumulative and do not exclude any other rights,
powers and remedies provided by law. If at any time any provision of
this Deed is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other
jurisdiction, and of the remaining provisions of this Deed, shall not
be affected or impaired thereby.
9
<PAGE>
15. MISCELLANEOUS
15.01 Continuing Obligations. The liabilities and obligations of the
Borrower under this Deed shall remain in force notwithstanding any
act, omission, event or circumstance whatsoever, until full, proper
and valid payment of the Junior Secured Indebtedness.
15.02 Protective Clauses. Without limiting Clause 15.01, neither the
liability of the Borrower nor the validity or enforceability of
this Deed shall be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Borrower or
any other person;
(b) any variation or modification of the AES Loan Agreement, any
of the Subordinated Security Documents or any other document
referred to therein;
(c) the invalidity or unenforceability of any obligation or
liability of the Borrower under the AES Loan Agreement or
any of the Subordinated Security Documents to which it is a
party;
(d) any invalidity or irregularity in the execution of this Deed
or the AES Loan Agreement or any of the other Subordinated
Security Documents;
(e) any deficiency in the powers of the Borrower to enter into
or perform any of its obligations hereunder or under the AES
Loan Agreement or any of the other Subordinated Security
Documents to which it is a party or any irregularity in the
exercise thereof or any lack of authority by any person
purporting to act on behalf of the Borrower;
(f) any other Security Document, Charge, guarantee or other
security or right or remedy being or becoming held by or
available to the Junior Lender or by any of the same being
or becoming wholly or partly void, voidable, unenforceable
or impaired or by the Junior Lender at any time releasing,
refraining from enforcing, varying or in any other way
dealing with any of the same or any power, right or remedy
the Junior Lender may now or hereafter have from or against
the Borrower or any other person;
(g) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Borrower or any
other person or any compromise, arrangement or settlement
with any of the same; or
(h) any act, omission, event or circumstance which would or may
but for this provision operate to prejudice, affect or
discharge this Deed or the liability of the Borrower
hereunder.
10
<PAGE>
15.03 Unrestricted Right of Enforcement. Subject to the Senior
Subordination Agreement and the Priority Deed, this Deed may be
enforced without the Junior Lender first having recourse to any other
security or rights or taking any other steps or proceedings against
the Borrower or any other person or may be enforced for any balance
due after resorting to any one or more other means of obtaining
payment or discharge of the monies obligations and liabilities hereby
secured.
15.04 Discharges and Releases. Notwithstanding any discharge, release or
settlement from time to time between the Junior Lender and the
Borrower, if any security, disposition or payment granted or made to
the Junior Lender in respect of the Junior Secured Indebtedness by
the Borrower or any other person is avoided or set aside or ordered
to be surrendered, paid away, refunded or reduced by virtue of any
provision, law or enactment relating to bankruptcy, insolvency,
liquidation, winding-up, composition or arrangement for the time
being in force or for any other reason, the Junior Lender shall be
entitled hereafter to enforce this Deed as if no such discharge,
release or settlement had occurred.
15.05 Amendment. Any amendment or waiver of any provision of this Deed and
any waiver of any default under this Deed shall only be effective if
made in writing and signed by or on behalf of the party against whom
the amendment or waiver is asserted.
16. ASSIGNMENT
16.01 The Borrower. The Borrower shall not assign any of its rights or
obligations hereunder.
16.02 The Junior Lender. The Junior Lender may assign or grant
participations in all or any part of their rights under this Deed
in accordance with the provisions of clause 20 of the AES Loan
Agreement.
17. NOTICES
17.01 Delivery. Each notice, demand or other communication to be given or
made under this Deed shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the Borrower: Wuhu Shaoda Electric Power Development
Company Limited
Commercial Office Building
West Huangshan Road
Wuhu, Anhui Province
People's Republic of China
11
<PAGE>
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
To the Junior Lender: AES China Holdings Company (L) Limited
9th Floor, Allied Capital Resources Building
32-38 Ice House Street
Central, Hong Kong
Fax Number: (852) 2530-1673
Attention: Jeff Safford
Chief Financial Officer
17.02 Deemed Delivery. Any notice, demand or other communication so
addressed to the relevant party shall be deemed to have been
delivered (a) if given or made by letter, when actually delivered to
the relevant address; (b) if given or made by telex, when dispatched
with confirmed answerback and (c) if given or made by fax, when
dispatched.
18. GOVERNING LAW AND JURISDICTION
18.01 Law. This Deed and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with
the laws of England.
18.02 Jurisdiction. The Borrower agrees that any legal action or proceeding
arising out of or relating to this Deed may be brought in the courts
of England and irrevocably submits to the non-exclusive jurisdiction
of such courts.
18.03 Process Agent. The Borrower irrevocably appoints Rowe & Maw
(Attention: Mr. Bernd Ratzke) of 20 Blackfriars Lane, London EC4V
6HT, England as its agent to receive and acknowledge on its behalf
service of any writ, summons, order, judgment or other notice of
legal process in England. If for any reason the agent named above (or
its successor) no longer serves as agent of the Borrower for this
purpose, the Borrower shall promptly appoint a successor agent
satisfactory to the Junior Lender and notify the Junior Lender
thereof, provided that until the Junior Lender receives such
notification, it shall be entitled to treat the agent named above (or
its said successor) as the agent of the Borrower for the purposes of
this Clause 18.03. The Borrower agrees that any such legal process
shall be sufficiently served on it if delivered to such agent for
service at its address for the time being in England whether or not
such agent gives notice thereof to the Borrower.
18.04 No Limitation on Right of Action. Nothing herein shall limit the
right of the Junior Lender to commence any legal action against the
Borrower and/or its property in any other jurisdiction or to serve
process in any manner
12
<PAGE>
permitted by law, and the taking of proceedings
in any jurisdiction shall not preclude the taking of proceedings in
any other jurisdiction whether concurrently or not.
18.05 Waiver; Final Judgment Conclusive. The Borrower irrevocably and
unconditionally waives any objection which it may now or hereafter
have to the choice of England as the venue of any legal action
arising out of or relating to this Deed. The Borrower also agrees
that a final judgment against it in any such legal action shall be
final and conclusive and may be enforced in any other jurisdiction,
and that a certified or otherwise duly authenticated copy of the
judgment shall be conclusive evidence of the fact and amount of its
indebtedness.
18.06 Waiver of Immunity. The Borrower irrevocably waives any immunity to
which it or its property may at any time be or become entitled,
whether characterized as sovereign immunity or otherwise, from any
set-off or legal action in England or elsewhere, including immunity
from service of process, immunity from jurisdiction of any court or
tribunal, and immunity of any of its property from attachment prior
to judgment or from execution of a judgment.
19. SUBORDINATED SECURITY
Notwithstanding any other provision to the contrary, this Deed must
be read and construed in all respects, and the exercise of any rights
under this Deed and the enforcement of any rights under this Deed
must be subject in each case to the terms of the:
(a) Senior Subordination Agreement; and
(b) Priority Deed.
In the event of any conflict or inconsistency between the terms of
this Deed of the one part and the Senior Subordination Agreement or
the Priority Deed of the other part, the latter documents will
prevail.
IN WITNESS whereof the parties hereto have executed this Deed on the day and
year first above written.
13
<PAGE>
Schedule 1
Form of Notice
To: [Name of Insurer]
[Date]
Dear Sirs,
Re: [Specify relevant policy or contract of insurance]
We refer to the above insurances (the "Insurances") effected by you in favor of
Wuhu Shaoda Electric Power Development Company Limited and which are the subject
of a Subordinated Insurance Assignment (the "Assignment") dated , 1996, a copy
of which is attached hereto.
We give you notice that by the Assignment we have assigned and granted to AES
China Holdings Company (L) Limited (the "Junior Lender") (as that term is
defined in the Assignment) a third-priority security interest in all our right,
title, interest and benefit in and to the Insurances and all payments to be made
by you thereunder.
As stated above, this is a third-priority security interest and the Junior
Lender's rights are subordinated and expressly subject to the Senior
Subordinated Agreement and the Priority Deed.
We instruct you that until further notice all payments in respect of any claim
for an amount which you may be required to make pursuant to the terms of the
Insurances should be made in accordance with the terms set out in the enclosed
form of loss payable and notice of cancellation clause.
These instructions may not be altered or revoked by us without the prior written
consent of the Junior Lender.
Please acknowledge these instructions by signing as indicated and returning to
the Junior Lender the enclosed duplicate of this notice.
Yours faithfully,
For and on behalf of
Wuhu Shaoda Electric Power Development Company Limited
[Enclose form of Loss Payable and Notice of Cancellation Clause]
14
<PAGE>
[on duplicate]
To: AES China Holdings Company (L) Limited
9th Floor, Allied Capital Resources Building
32-38 Ice House Street
Central, Hong Kong
Attn: Mr. Jeff Safford
(as Junior Lender)
We acknowledge receipt of the above notice and confirm that a loss payable and
notice of cancellation clause in the form enclosed with the notice has been
included in the Insurances and that we will comply with the instructions
contained therein.
Dated .
For and on behalf of
[name of insurer]
Authorized Signature(s)
15
<PAGE>
Schedule 2
Form of Loss Payable and
Notice of Cancellation Clause
By an insurance assignment dated 1996 (the "Subordinated Insurance Assignment"),
Wuhu Shaoda Electric Power Development Company Limited (the "Borrower") assigned
and granted a third-priority security interest (which is subject to the Senior
Subordination Agreement and the Priority Deed) in all its right, title, interest
and benefit in and to this policy/contract of insurance and the benefits and
proceeds hereof including all claims of whatever nature to AES China Holdings
Company (L) Limited (the "Junior Lender"). Terms defined in the Subordinated
Insurance Assignment shall have the same meanings hereunder.
Until notice in writing to the contrary is received by the insurer or the
insurance broker hereunder from the Security Agent, all proceeds of:
(i) any settlements of claims hereunder in respect of an actual or
constructive or compromised or arranged total loss of the Power Plant
shall be paid to the Security Agent;
(ii) any other settlements of such claims hereunder which do not exceed
US$500,000 in any one case shall be paid to the claimant or its order
(unless the Security Agent otherwise instructs the Company in writing),
or the Security Agent or its order if the Security Agent shall notify
the Company in writing that an event of default has occurred under the
Agreement; and
(iii) any other settlements of such claims hereunder exceeding US$500,000
in any one case shall be paid to the Security Agent.
For the purposes of (ii) and (iii) above any claim or number of claims arising
from the same occurrence shall be regarded as one claim.
Until notice in writing to the contrary is received by the insurer or the
insurance broker hereunder from the Junior Lender, the Junior Lender shall be
advised:
(i) if any insurer under this policy/contract gives notice of cancellation
of any insurance hereunder, at least thirty (30) days before any such
cancellation is to take effect;
(ii) of any proposed alteration in or termination or expiry of any such
insurance at least thirty (30) days before such alteration, termination
or expiry is to take effect;
(iii) promptly of any default in the payment of any premium or call; and
(iv) promptly of any act or omission or of any event of which any insurer
hereunder has knowledge and which might invalidate or render
unenforceable in whole or in part such insurance.
16
<PAGE>
No cancellation, termination or expiry of or alteration to any insurance
hereunder shall be effective as against the Junior Lender unless the relevant
provision of this clause have been complied with in full.
The rights of the Junior Lender under this policy/contract of insurance shall
not be prejudiced by any act or neglect of the Borrower or any other person nor
by any proceedings in relation to the Insured Assets.
17
<PAGE>
THE BORROWER
- ------------
EXECUTED and DELIVERED as a Deed )
for and on behalf of )
WUHU SHAODA ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
by )
in the presence of: /s/ [SIGNATURE ILLEGIBLE] )
/s/ [SIGNATURE ILLEGIBLE]
THE JUNIOR LENDER
- -----------------
SIGNED for and on behalf of )
AES CHINA HOLDINGS )
COMPANY (L) LIMITED )
by )
in the presence of: /s/ [SIGNATURE ILLEGIBLE] )
/s/ [SIGNATURE ILLEGIBLE]
18
Exhibit 10.37
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Borrower
and
AES CHINA HOLDINGS COMPANY (L) LIMITED
as Junior Lender
SUBORDINATED BORROWER CHARGE OVER ACCOUNTS
CHADBOURNE & PARKE LLP
AMERICAN ATTORNEYS AT LAW
SUITE 3704, PEREGRINE TOWER
LIPPO CENTRE, 89 QUEENSWAY
HONG KONG
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Interpretation..................................................1
2. Charge..........................................................2
3. Continuing Security.............................................3
4. Representations and Warranties..................................3
5. Undertakings....................................................3
6. Condition of Deposits...........................................4
7. Enforcement.....................................................4
8. Taxes and Other Deductions......................................5
9. Costs, Charges and Expenses.....................................5
10. Set-off.........................................................6
11. Indemnity.......................................................6
12. Further Assurance...............................................7
13. Power of Attorney...............................................7
14. Suspense Account................................................8
15. Waiver and Severability.........................................8
16. Miscellaneous...................................................8
17. Assignment.....................................................10
18. Notices........................................................10
19. Governing Law and Jurisdiction.................................10
20. Subordinated Security..........................................11
Schedule 1 Charged Accounts.......................................13
Schedule 2 Form of Notice and Acknowledgement.....................14
Execution Block
<PAGE>
THIS DEED is made on the day of 1996
------------- -------------------------
BETWEEN:
(1) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
joint venture company formed under the Law of the People's Republic
of China on Joint Ventures Using Chinese and Foreign Investment, with
its registered office at Commercial Office Building, West Huangshan
Road, Wuhu, Anhui Province, People's Republic of China (the
"Borrower"); and
(2) AES CHINA HOLDINGS COMPANY (L) LIMITED, a Labuan company of Lot A,
Level 3, Wisma Oceanic, Jalan OKK Awang, 87007, Federal Territory of
Labuan, Malaysia (the "Junior Lender").
WHEREAS:
(A) By the AES Loan Agreement (as defined below), the Junior Lender has
agreed to make available to the Borrower a term loan facility of up
to eighteen million Dollars (US$18,000,000), upon the terms set out
therein.
(B) It is a condition precedent to the Junior Lender making the Facility
available to the Borrower that the Borrower enters into this Deed.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.01 Definitions and Construction. In this Deed, unless the context
requires otherwise:
(a) terms and expressions defined in or construed for the
purposes of the AES Loan Agreement shall have the same
meanings or be construed in the same manner when used in
this Deed;
(b) "AES Loan Agreement" means the loan agreement dated -------
1996 and made between the Junior Lender and the Borrower;
(c) "Bank" means Bank of China, Wuhu Branch at 233 Jiuhuashan
Road, Wuhu, China;
(d) the expression "Charge" shall include any right of set-off;
(e) "Charged Accounts" means the Borrower RMB Revenue Account,
the Borrower Dollar Retention Account and the Borrower
Special Dividends Account (as defined in the Senior Loan
Agreement), each held in the name of the Borrower with the
Bank and as more particularly
1
<PAGE>
described in Schedule 1, and
all sums now or hereafter deposited in such accounts and all
additions to or renewals or replacements of all or any part
thereof (in whatever currency) and all interest or other
sums which may accrue from time to time thereon;
(f) "Junior Secured Indebtedness" means all and any sums
(whether principal, interest, fees or otherwise) which are
or at any time may become payable by the Borrower under the
AES Loan Agreement or any Subordinated Security Document to
which it is a party and all other monies hereby secured.
1.02 Successors and Assigns. The expressions "Borrower", "Security Agent"
and "Junior Lender" shall where the context permits include their
respective successors and permitted assigns and any persons deriving
title under them.
1.03 AES Loan Agreement. To the extent applicable and required by relevant
law, the terms and conditions of the AES Loan Agreement shall be
deemed to be incorporated into this Deed by reference and this Deed
shall be read and construed as if such terms and conditions had been
set out in full herein.
1.04 Miscellaneous. In this Deed, unless the context requires otherwise,
references to statutory provisions shall be construed as references
to those provisions as replaced, amended, modified or re-enacted from
time to time; words importing the singular include the plural and
vice versa and words importing a gender include every gender;
references to this Deed, the AES Loan Agreement, any other
Subordinated Security Document or any other document referred to
herein shall be construed as references to such document as the same
may be amended or supplemented (provided that any required consent or
approval for such amendment or supplement has been obtained) from
time to time; unless otherwise stated, references to Clauses and the
Schedules are to clauses of and the schedules to this Deed. Clause
headings are inserted for reference only and shall be ignored in
construing this Deed.
2. CHARGE
2.01 Charge and Assignment. In consideration of the Facility being made
available by the Junior Lender to the Borrower upon the terms and
conditions of the AES Loan Agreement, the Borrower with full title
guarantee charges to the Junior Lender by way of third fixed charge
and grants a third-priority security interest to the Junior Lender in
each of the Charged Accounts as a continuing security for the due and
punctual payment of the Junior Secured Indebtedness and the due and
punctual performance and observance by the Borrower of all other
obligations of the Borrower contained in the AES Loan Agreement or
any Subordinated Security Document to which it is a party. THIS
CHARGE IS SUBORDINATE IN RIGHT TO THE CHARGES CREATED TO SECURE THE
OBLIGATIONS
2
<PAGE>
OF THE BORROWER UNDER THE SENIOR LOAN AGREEMENT, AND THE
ENFORCEMENT OF THIS CHARGE SHALL BE LIMITED IN ACCORDANCE WITH THE
PROVISIONS OF THE SENIOR SUBORDINATION AGREEMENT AND THE PRIORITY
DEED.
2.02 Notice to Bank. The Borrower will, forthwith upon execution of this
Deed, give notice to and obtain an acknowledgement from the Bank in
the form set out in Schedule 2.
3. CONTINUING SECURITY
This Deed shall be a continuing security and shall remain in full
force and effect until the Junior Secured Indebtedness has been paid
in full, notwithstanding the insolvency or liquidation or any
incapacity or change in the constitution or status of the Borrower or
any other person or any intermediate settlement of account or other
matter whatsoever. This Deed is in addition to, and independent of,
any Charge, guarantee or other security or right or remedy now or at
any time hereafter held by or available to the Junior Lender.
4. REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties. The Borrower represents and warrants
to the Junior Lender that:
(a) each of the Charged Accounts is beneficially owned by the
Borrower free from any Charge except as created (i) under or
pursuant to this Deed, (ii) to secure the obligations of the
Borrower under the Senior Loan Agreement or (iii) in respect
of the Guarantee, subject to any rights arising by operation
of law; and
(b) the particulars of each of the Charged Accounts set out in
Schedule 1 are accurate.
4.02 Continuing Representation and Warranty. The Borrower also represents
and warrants to and undertakes with the Junior Lender that the
foregoing representations and warranties will be true and accurate
throughout the continuance of this Deed with reference to the facts
and circumstances subsisting from time to time.
5. UNDERTAKINGS
The Borrower undertakes and agrees with the Junior Lender throughout
the continuance of this Deed and so long as the Junior Secured
Indebtedness or any part thereof remains owing that the Borrower will
not, unless the Junior Lender otherwise agrees in writing:
3
<PAGE>
(a) withdraw or attempt to or be entitled to withdraw all or any
part of the monies in each of the Charged Accounts except in
accordance with the terms of the AES Loan Agreement;
(b) create or attempt or agree to create or permit to arise or
exist any Charge over all or any part of the Charged
Accounts or any interest therein or otherwise assign, deal
with or dispose of all or any part of the Charged Accounts
(except as created (i) under or pursuant to this Deed, (ii)
to secure the obligations of the Borrower under the Senior
Loan Agreement and (iii) in respect of the Guarantee); and
(c) do or cause or permit to be done anything which may in any
way depreciate, jeopardize or otherwise prejudice the value
of the Junior Lender's security hereunder except as
permitted by the terms of this Deed and as created to secure
the obligations of the Borrower under the Senior Loan
Agreement and the CPIL Security.
6. CONDITION OF DEPOSIT
Notwithstanding any other terms upon which monies may have been
deposited in each of the Charged Accounts, throughout the continuance
of this Deed it is a condition of such deposit that no monies shall
be capable of being withdrawn from such Charged Accounts, neither the
Charged Accounts nor any part thereof shall in any way be assignable
or transferable and no Charge shall be capable of being created over
or in respect of any of the Charged Accounts other than, in each
case, in accordance with the terms of the AES Loan Agreement and the
Senior Loan Agreement.
7. ENFORCEMENT
7.01 Events of Default. For the purposes of this Clause, each of the
following events and circumstances shall be an Event of Default:
(a) any event or circumstance which would constitute an Event of
Default as that term is defined in the AES Loan Agreement;
and
(b) if the Borrower purports or attempts to create any Charge
(except under this Deed or to secure the obligations of the
Borrower under the Senior Loan Agreement) over all or any
part of any of the Charged Accounts or any third party
asserts a claim in respect thereof.
7.02 Enforcement of Security. Upon the occurrence of an Event of Default,
the Junior Lender may, subject to Clause 7.03 and the provisions of
the Senior Subordination Agreement and the Priority Deed, at any time
or times thereafter and without further notice or restriction,
procure the appropriation, transfer or set off all or any part of the
monies in any
4
<PAGE>
Charged Account in or towards the payment or discharge
of the Junior Secured Indebtedness in such manner as the Junior
Lender may think fit and, for this purpose, the Junior Lender may, at
the expense of the Borrower, convert all or any part of such monies
into other currencies. The above provisions apply notwithstanding
that any such monies may have been deposited for a fixed period or be
subject to a period of notice and that the fixed period or period of
notice may not have expired or that notice or sufficient notice may
not have been given.
7.03 No Change in Name. Notwithstanding any other provision in this Deed,
the Charged Accounts shall at all times be held in the name of the
Borrower and the Junior Lender shall not at any time before or after
enforcement or otherwise be entitled or otherwise able to change, or
procure any change which would result in, any of the Charged Accounts
being held otherwise than in the Borrower's name from time to time.
8. TAXES AND OTHER DEDUCTIONS
All sums payable by the Borrower under this Deed shall be paid in
full without set-off or counterclaim or any restriction or condition
and free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings of any nature. If the Borrower or any
other person is required by any law or regulation to make any
deduction or withholding (on account of tax (other than an Excluded
Tax) or otherwise) from any payment for the account of the Junior
Lender, the Borrower shall, together with such payment, pay such
additional amount as will ensure that the Junior Lender receives
(free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings) the full amount which it would have
received if no such deduction or withholding had been required. The
Borrower shall promptly forward to the Junior Lender copies of
official receipts or other evidence showing that the full amount of
any such deduction or withholding has been paid over to the relevant
taxation or other authority.
9. COSTS, CHARGES AND EXPENSES
The Borrower shall from time to time forthwith on demand pay to or
reimburse the Junior Lender for:
(a) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
connection with the preparation, execution and registration
of any amendment to or extension of, or the giving of any
consent or waiver in connection with this Deed; and
(b) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
exercising any of its
5
<PAGE>
rights or powers hereunder or in suing
for or seeking to recover any sums due hereunder or
otherwise preserving or enforcing its rights hereunder or in
defending any claims brought against it in respect of this
Deed or in releasing or re-assigning this Deed upon payment
of all monies hereby secured and until payment of the same
in full, all such costs, charges and expenses shall be
secured by this Deed.
To the extent practicable, the Junior Lender shall consult the
Borrower before incurring any major expenditure.
10. SET-OFF
Notwithstanding Clause 7 and/or any provision hereof, the Borrower
agrees that the Junior Lender shall (without prejudice to any general
or lender's lien, right of set-off or any other right to which it may
be entitled) have the right, without notice to the Borrower or any
other person, at any time to set off and apply any credit balance on
any Charged Account (whether subject to notice or not and whether
matured or not and in whatever currency) and any other indebtedness
owing by the Junior Lender to the Borrower, against the Junior
Secured Indebtedness in accordance with the provisions of clause
16.03 of the AES Loan Agreement and the Junior Lender is authorized
to purchase with the monies standing to the credit of any such
accounts such other currencies as may be necessary for this purpose.
11. INDEMNITY
11.01 General Indemnity. The Borrower shall indemnify the Junior Lender
against all losses, liabilities, damages, costs and expenses incurred
by it in the execution or performance of the terms and conditions
hereof and against all actions, proceedings, claims, demands, costs,
charges and expenses which maybe incurred, sustained or arise in
respect of the non-performance or non-observance of any of the
undertakings and agreements on the part of the Borrower herein
contained or in respect of any matter or thing done or omitted
relating in any way whatsoever to the Charged Accounts.
11.02 Currency Indemnity. Dollars shall be the currency of account and of
payment in respect of sums payable under this Deed. If an amount is
received in another currency, pursuant to a judgment or order or in
the liquidation of the Borrower or otherwise, the Borrower's
obligations under this Deed shall be discharged only to the extent
that the Junior Lender may purchase Dollars with such other currency
in accordance with normal banking procedures upon receipt of such
amount. If the amount in Dollars which may be so purchased, after
deducting any costs of exchange and any other related costs, is less
than the relevant sum payable under this Deed, the Borrower shall
indemnify the Junior Lender against the shortfall. This indemnity
shall be an obligation of the Borrower independent of and
6
<PAGE>
in addition
to its other obligations under this Deed and shall take effect
notwithstanding any time or other concession granted to the Borrower
or any judgment or order being obtained or the filing of any claim in
the liquidation, dissolution or bankruptcy (or analogous process) of
the Borrower.
11.03 Payment and Security. The Junior Lender may retain and pay out of any
money in the Junior Lender's hands all sums necessary to effect the
indemnity contained in this Clause 11 and all sums payable by the
Borrower under this Clause 11 shall form part of the monies hereby
secured.
12. FURTHER ASSURANCE
12.01 Further Assurance. The Borrower shall at any time and from time to
time (whether before or after the security hereby created shall have
become enforceable) execute such further legal or other mortgages,
charges or assignments and do all such transfers, assurances, acts
and things as the Junior Lender may require over or in respect of the
Charged Accounts to secure all monies, obligations and liabilities
hereby covenanted to be paid or hereby secured or for the purposes of
perfecting and completing any assignment of the Junior Lender's
rights, benefits or obligations hereunder and the Borrower shall also
give all notices, orders and directions which the Junior Lender may
require.
12.02 Enforcement of Junior Lender's Rights. Subject to the Senior
Subordination Agreement and the Priority Deed, the Borrower will do
or permit to be done everything which the Junior Lender may from time
to time require to be done for the purpose of enforcing the Junior
Lender's rights hereunder and will allow the name of the Borrower to
be used as and when required by the Junior Lender for that purpose.
13. POWER OF ATTORNEY
The Borrower irrevocably appoints the Junior Lender by way of
security to be its attorney-in-fact (with full power of substitution)
and in its name or otherwise on its behalf and as its act and deed to
sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required or which the Junior Lender
shall think proper or expedient for carrying out any obligations
imposed on the Borrower hereunder or for exercising any of the powers
hereby conferred or for giving to the Junior Lender the full benefit
of this security and so that the appointment hereby made shall
operate to confer on the Junior Lender authority to do on behalf of
the Borrower anything which it can lawfully do by an
attorney-in-fact. The Borrower ratifies and confirms and agrees to
ratify and confirm any deed, instrument, act or thing which such
attorney-in-fact or substitute may execute or do.
7
<PAGE>
14. SUSPENSE ACCOUNT
The Junior Lender may place and keep any monies received by virtue of
this Deed (whether before or after the insolvency or liquidation of
the Borrower) to the credit of a suspense account for so long as the
Junior Lender may think fit in order to preserve the rights of the
Junior Lender to sue or prove for the whole amount of its claims
against the Borrower or any other person.
15. WAIVER AND SEVERABILITY
No failure or delay by the Junior Lender in exercising any right,
power or remedy hereunder shall impair such right, power or remedy or
operate as a waiver thereof, nor shall any single or partial exercise
of the same preclude any further exercise thereof or the exercise of
any other right, power or remedy. The rights, powers and remedies
herein provided are cumulative and do not exclude any other rights,
powers and remedies provided by law. If at any time any provision of
this Deed is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other
jurisdiction, and of the remaining provisions of this Deed, shall not
be affected or impaired thereby.
16. MISCELLANEOUS
16.01 Continuing Obligations. The liabilities and obligations of the
Borrower under this Deed shall remain in force notwithstanding any
act, omission, event or circumstance whatsoever, until full, proper
and valid payment of the Junior Secured Indebtedness.
16.02 Protective Clauses. Without limiting Clause 16.01, neither the
liability of the Borrower nor the validity or enforceability of this
Deed shall be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Borrower or
any other person;
(b) any variation or modification of the AES Loan Agreement, any
of the Subordinated Security Documents or any other document
referred to therein;
(c) the invalidity or unenforceability of any obligation or
liability of the Borrower under the AES Loan Agreement or
this Deed or any of the Subordinated Security Documents to
which it is a party;
(d) any invalidity or irregularity in the execution of this Deed
or the AES Loan Agreement or any of the other Subordinated
Security Documents;
8
<PAGE>
(e) any deficiency in the powers of the Borrower to enter into
or perform any of its obligations under the AES Loan
Agreement or any of the other Subordinated Security
Documents to which it is a party or any irregularity in the
exercise thereof or any lack of authority by any person
purporting to act on behalf of the Borrower;
(f) any other Subordinated Security Document, Charge, guarantee
or other security or right or remedy being or becoming held
by or available to the Junior Lender or by any of the same
being or becoming wholly or partly void, voidable,
unenforceable or impaired or by the Junior Lender at any
time releasing, refraining from enforcing, varying or in any
other way dealing with any of the same or any power, right
or remedy the Junior Lender may now or hereafter have from
or against the Borrower or any other person;
(g) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Borrower or any
other person or any compromise, arrangement or settlement
with any of the same;
(h) any act, omission, event or circumstance which would or may
but for this provision operate to prejudice, affect or
discharge this Deed or the liability of the Borrower
hereunder.
16.03 Unrestricted Right of Enforcement. Subject to the Senior
Subordination Agreement and the Priority Deed, this Deed may be
enforced without the Junior Lender first having recourse to any other
security or rights or taking any other steps or proceedings against
the Borrower or any other person or may be enforced for any balance
due after resorting to any one or more other means of obtaining
payment or discharge of the monies obligations and liabilities hereby
secured.
16.04 Discharges and Releases. Notwithstanding any discharge, release or
settlement from time to time between the Junior Lender and the
Borrower, if any security, disposition or payment granted or made to
the Junior Lender in respect of the Junior Secured Indebtedness by
the Borrower or any other person is avoided or set aside or ordered
to be surrendered, paid away, refunded or reduced by virtue of any
provision, law or enactment relating to bankruptcy, insolvency,
liquidation, winding-up, composition or arrangement for the time
being in force or for any other reason, the Junior Lender shall be
entitled hereafter to enforce this Deed as if no such discharge,
release or settlement had occurred.
16.05 Amendment. Any amendment or waiver of any provision of this Deed and
any waiver of any default under this Deed shall only be effective if
made in writing and signed by or on behalf of the party against whom
the amendment or waiver is asserted.
9
<PAGE>
17. ASSIGNMENT
17.01 The Borrower. The Borrower shall not assign any of its rights or
obligations hereunder.
17.02 The Junior Lender. The Junior Lender may assign or grant
participations in all or any part of its rights under this Deed in
accordance with the provisions of clause 20 of the AES Loan
Agreement.
18. NOTICES
18.01 Delivery. Each notice, demand or other communication to be given or
made under this Deed shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the Borrower: Wuhu Shaoda Electric Power Development
Company Limited
Commercial Office Building
West Huangshan Road
Wuhu, Anhui Province
People's Republic of China
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
To the Junior Lender: AES China Holdings Company (L) Limited
9th Floor, Allied Capital Resources Building
32-38 Ice House Street
Central, Hong Kong
Fax Number: (852) 2530-1673
Attention: Jeff Safford
Chief Financial Officer
18.02 Deemed Delivery. Any notice, demand or other communication so
addressed to the relevant party shall be deemed to have been
delivered (a) if given or made by letter, when actually delivered to
the relevant address; (b) if given or made by telex, when dispatched
with confirmed answerback and (c) if given or made by fax, when
dispatched.
19. GOVERNING LAW AND JURISDICTION
19.01 Law. This Deed and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with
the laws of England.
10
<PAGE>
19.02 Jurisdiction. The Borrower agrees that any legal action or proceeding
arising out of or relating to this Deed may be brought in the courts
of England and irrevocably submits to the non-exclusive jurisdiction
of such courts.
19.03 Process Agent. The Borrower irrevocably appoints Messrs. Rowe & Maw
(Attention: Mr. Bernd Ratzke) of 20 Blackfriars Lane, London EC4V
6HT, England as its agent to receive and acknowledge on its behalf
service of any writ, summons, order, judgment or other notice of
legal process in England. If for any reason the agent named above (or
its successor) no longer serves as agent of the Borrower for this
purpose, the Borrower shall promptly appoint a successor agent
satisfactory to the Junior Lender and notify the Junior Lender
thereof, provided that until the Junior Lender receives such
notification, it shall be entitled to treat the agent named above (or
its said successor) as the agent of the Borrower for the purposes of
this Clause 19.03. The Borrower agrees that any such legal process
shall be sufficiently served on it if delivered to such agent for
service at its address for the time being in England whether or not
such agent gives notice thereof to the Borrower.
19.04 No Limitation on Right of Action. Nothing herein shall limit the
right of the Junior Lender to commence any legal action against the
Borrower and/or its property in any other jurisdiction or to serve
process in any manner permitted by law, and the taking of proceedings
in any jurisdiction shall not preclude the taking of proceedings in
any other jurisdiction whether concurrently or not.
19.05 Waiver; Final Judgment Conclusive. The Borrower irrevocably and
unconditionally waives any objection which it may now or hereafter
have to the choice of England as the venue of any legal action
arising out of or relating to this Deed. The Borrower also agrees
that a final judgment against it in any such legal action shall be
final and conclusive and may be enforced in any other jurisdiction,
and that a certified or otherwise duly authenticated copy of the
judgment shall be conclusive evidence of the fact and amount of its
indebtedness.
19.06 Waiver of Immunity. The Borrower irrevocably waives any immunity to
which it or its property may at any time be or become entitled,
whether characterized as sovereign immunity or otherwise, from any
set-off or legal action in England or elsewhere, including immunity
from service of process, immunity from jurisdiction of any court or
tribunal, and immunity of any of its property from attachment prior
to judgment or from execution of a judgment.
20. SUBORDINATED SECURITY
Notwithstanding any other provision to the contrary, this Deed must
be read and construed in all respects, and the exercise of any rights
under
11
<PAGE>
this Deed and the enforcement of any rights under this Deed
must be subject in each case to the terms of the:
(a) Senior Subordination Agreement; and
(b) Priority Deed.
In the event of any conflict or inconsistency between the terms of
this Deed of the one part and the Senior Subordination Agreement or
the Priority Deed of the other part, the latter documents will
prevail.
IN WITNESS whereof the parties hereto have executed this Deed on the day and
year first above written.
12
<PAGE>
Schedule 1
Charged Accounts
Borrower RMB Revenue Account 018250012407
Borrower Dollar Retention Account 148250028606
Borrower Special Dividends Account 148250032607
13
<PAGE>
Schedule 2
Form of Notice and Acknowledgement
To: Bank of China, Wuhu Branch
Dear Sirs,
Re: Account Nos. [ ]
We give you notice that by a subordinated charge over bank account dated-------
1996 (the "Charge") we have charged and assigned by way of a third fixed charge
in favour of AES China Holdings Company (L) Limited (the "Junior Lender") the
above accounts (the "Charged Accounts") and a third-priority security interest
in all our right, title, interest and benefit therein and thereto upon the terms
and conditions therein contained. This charge is subordinated and is a third
ranking security. All the rights of the Junior Lender under this Charge are
subject to the Senior Subordination Agreement and the Senior Priority Deed.
We enclose a copy of the Charge with this notice. Please note that under the
terms of the Charge, we are not entitled to withdraw any monies from any Charged
Account except in accordance with the terms of the AES Loan Agreement.
Until notice in writing to the contrary is provided by the Security Agent, we
authorize and instruct you from time to time, upon receipt of instructions from
the Security Agent and subject to the Senior Subordination Agreement and the
Priority Deed:
(a) to pay to the Security Agent, or as it may direct, any or all monies
standing to the credit of any Charged Account in accordance with such
instructions;
(b) to disclose to the Security Agent such information relating to any
Charged Account as the Security Agent may request.
We agree that you shall not be bound to enquire whether the right of the
Security Agent to withdraw any monies from any Charged Account has arisen or be
concerned with the propriety or regularity of the exercise thereof or be
concerned with notice to the contrary or be concerned with or responsible for
the application of any monies received by the Security Agent.
These instructions shall not be revoked or varied without the prior written
consent of the Junior Lender.
14
<PAGE>
Please acknowledge this notice by signing as indicated and returning to the
Junior Lender the enclosed duplicate of this notice.
Yours faithfully,
For and on behalf of
Wuhu Shaoda Electric Power Development Company Limited
Name:
Title:
15
<PAGE>
[on duplicate]
To: Bank of China, Anhui Branch
on its own behalf and as security agent for the Senior Financing Parties
We acknowledge receipt of the above notice and confirm that we will comply with
the terms thereof.
We agree that we will neither claim to set off to your prejudice any monies
standing to the credit of any Charged Account against any claim we may have
against Wuhu Shaoda Electric Power Development Company Limited howsoever arising
nor exercise or attempt to exercise any right of set-off or consolidation or
combination of accounts or similar right in respect of or in relation to any
Charged Account unless, in each case, at your instructions or with your consent.
Dated:
For and on behalf of
Bank of China, Wuhu Branch
Name:
Title:
16
<PAGE>
THE BORROWER
- ------------
EXECUTED as and DELIVERED as a Deed )
by )
WUHU SHAODA ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
( ) )
acting by its authorized signatory )
in the presence of: /s/ [SIGNATURE ILLEGIBLE] )
/s/ [SIGNATURE ILLEGIBLE]
THE JUNIOR LENDER
- -----------------
SIGNED for and on behalf of )
AES CHINA HOLDINGS )
COMPANY (L) LIMITED )
by )
in the presence of: /s/ [SIGNATURE ILLEGIBLE] )
/s/ [SIGNATURE ILLEGIBLE]
17
Exhibit 10.38
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Borrower
and
AES CHINA HOLDINGS COMPANY (L) LIMITED
as Junior Lender
SUBORDINATED PROJECT CONTRACTS ASSIGNMENT
CHADBOURNE & PARKE LLP
AMERICAN ATTORNEYS AT LAW
SUITE 3704, PEREGRINE TOWER
LIPPO CENTRE, 89 QUEENSWAY
HONG KONG
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Interpretation......................................................1
2. Assignment of Project Contracts.....................................3
3. Continuing Security.................................................4
4. Representations and Warranties......................................4
5. Undertakings........................................................4
6. Borrower's Liability................................................5
7. Events of Default...................................................5
8. Application of Receipts.............................................6
9. Taxes and Other Deductions..........................................6
10. Costs, Charges and Expenses.........................................6
11. Indemnity...........................................................7
12. Further Assurance...................................................8
13. Power of Attorney...................................................8
14. Suspense Account....................................................8
15. Waiver and Severability.............................................9
16. Miscellaneous.......................................................9
17. Assignment.........................................................10
18. Notices............................................................11
19. Governing Law and Jurisdiction.....................................11
20. Subordinated Security..............................................12
Schedule Form of Notice............................................14
Execution Block
<PAGE>
THIS DEED is made on the day of 1996
----------- -------------------------
BETWEEN:
(1) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
joint venture company formed under the Law of the People's Republic
of China on Joint Ventures Using Chinese and Foreign Investment, with
its registered office at Commercial Office Building, West Huangshan
Road, Wuhu, Anhui Province, People's Republic of China (the
"Borrower"); and
(2) AES CHINA HOLDINGS COMPANY (L) LIMITED, a Labuan company of Lot A,
Level 3, Wisma Oceanic, Jalan OKK Awang, 87007, Federal Territory of
Labuan, Malaysia (the "Junior Lender").
WHEREAS:
(A) By the AES Loan Agreement (as defined below), the Junior Lender has
agreed to make available to the Borrower a term loan facility of up
to eighteen million Dollars (US$18,000,000), upon the terms set out
therein.
(B) It is a condition precedent to the Junior Lender making the Facility
available to the Borrower that the Borrower enters into this Deed.
NOW THIS DEED WITNESSES as follows:
1. INTERPRETATION
1.01 Definitions and Construction. In this Deed, unless the context requires
otherwise:
(a) terms and expressions defined in or construed for the
purposes of the AES Loan Agreement shall have the same
meanings or be construed in the same manner when used in
this Deed;
(b) "AES Chigen Limited Guarantee" means the limited guarantee
dated April 22, 1996 issued by AES Chigen in favor of the
Borrower;
(c) "AES Loan Agreement" means the loan agreement dated --------
1996 and made between the Junior Lender and the Borrower;
(d) "Anhui Liyuan Loan Agreement" means the loan agreement dated
April 22, 1996 and made between Anhui Liyuan and the
Borrower;
(e) "Conversion Agreement" means the agreement dated April 22,
1996 and made between the Borrower and the Conversion Bank;
1
<PAGE>
(f) "EPC Contract" means the engineering, procurement and
construction services contract dated April 22, 1996 and made
between the Borrower and Anhui Power in connection with the
Power Plant;
(g) "Event of Default" means any event specified as such in
Clause 7; and "prospective Event of Default" means any event
with which the giving of notice and/or the passage of time
and/or the fulfilment of any other condition would be an
Event of Default;
(h) "Interconnection Contract" means the contract dated April
22, 1996 and made between the Borrower and Anhui Power for
the purpose of connecting the Power Plant to the Anhui grid;
(i) "Junior Secured Indebtedness" means all and any sums
(whether principal, interest, fees or otherwise) which are
or at any time may become payable by the Borrower under the
AES Loan Agreement or any Subordinated Security Document to
which it is a party and all other monies hereby secured;
(j) "Operation and Offtake Contract" means the contract dated
April 22, 1996 and made between the Borrower and Anhui Power
for the operation of the Power Plant and the sale and
purchase of electricity;
(k) "Performance Guarantee" means the performance guarantee
dated April 22, 1996 issued by East China Power in
connection with Anhui Power's obligations under the EPC
Contract;
(l) "Project Contracts" means the EPC Contract, the Operation
and Offtake Agreement, the Interconnection Agreement, the
Performance Guarantee, the Anhui Liyuan Loan Agreement, the
Wuhu Loan Agreement, the AES Chigen Limited Guarantee and
the Conversion Agreement, including all enclosures,
amendments and supplements thereto and all benefits thereof
including, without limitation:
(i) the right to receive any and all moneys due or to become due
to the Borrower under or pursuant to the Project Contracts;
(ii) all claims in respect of any breach of the Project
Contracts;
(iii)the right (but not the obligation) of the Borrower to
perform and to compel performance of the Project Contracts;
and
(iv) any right of the Borrower to rescind or otherwise terminate
the Project Contracts; and
(m) "Wuhu Loan Agreement" means the loan agreement dated April
22, 1996 and made between Wuhu and the Borrower.
2
<PAGE>
1.02 Successors and Assigns. The expressions "Borrower" and "Junior
Lender" shall where the context permits include their respective
successors and permitted assigns and any persons deriving title under
them.
1.03 AES Loan Agreement. To the extent applicable and required by relevant
law, the terms and conditions of the AES Loan Agreement shall be
deemed to be incorporated into this Deed by reference and this Deed
shall be read and construed as if such terms and conditions had been
set out in full herein.
1.04 Miscellaneous. In this Deed, unless the context requires otherwise,
references to statutory provisions shall be construed as references
to those provisions as replaced, amended, modified or re-enacted from
time to time; words importing the singular include the plural and
vice versa and words importing a gender include every gender;
references to this Deed, the AES Loan Agreement, any other
Subordinated Security Document, any Project Contract or any other
document referred to herein shall be construed as references to such
document as the same may be amended or supplemented (provided that
any required consent or approval for such amendment or supplement has
been obtained) from time to time; unless otherwise stated, references
to Clauses and Schedules are to clauses of and schedules to this
Deed. Clause headings are inserted for reference only and shall be
ignored in construing this Deed.
2. ASSIGNMENT OF PROJECT CONTRACTS
2.01 Charge and Assignment. In consideration of the Facility being made
available by the Junior Lender to the Borrower upon the terms and
conditions of the AES Loan Agreement, the Borrower with full title
guarantee assigns and grants to the Junior Lender a third-priority
security interest in absolutely all the Borrower's right, title,
interest and benefit in and to the Project Contracts upon the terms
herein set out as a continuing security for the due and punctual
payment of the Junior Secured Indebtedness and the due and punctual
performance and observance by the Borrower of all other obligations
of the Borrower contained in the AES Loan Agreement or any
Subordinated Security Document to which it is a party. THIS
ASSIGNMENT IS SUBORDINATE IN RIGHT TO THE CHARGES CREATED TO SECURE
THE OBLIGATIONS OF THE BORROWER UNDER THE SENIOR LOAN AGREEMENT, AND
THE ENFORCEMENT OF THIS ASSIGNMENT SHALL BE LIMITED IN ACCORDANCE
WITH THE PROVISIONS OF THE SENIOR SUBORDINATION AGREEMENT AND THE
PRIORITY DEED.
2.02 Notice. The Borrower will, forthwith upon the execution of this Deed,
give notice of the assignment herein contained to and obtain an
acknowledgment from each of the other parties to the Project
Contracts in
3
<PAGE>
the form set out in the Schedule or, if not in that
form, in a form satisfactory to the Junior Lender.
2.03 Dealing with Parties. Notwithstanding the assignment herein contained
but otherwise subject to the terms of this Deed, the Junior Lender
hereby authorizes the Borrower to continue to deal with the other
parties to the Project Contracts in relation to the Project Contracts
as if the Borrower remained solely entitled to all the rights, title,
interest and benefits thereunder but, save as herein provided, not
directly to waive, amend, vary or otherwise modify any provision of
any Project Contract, provided that if an Event of Default or
prospective Event of Default occurs the foregoing authority shall
immediately cease to have effect.
3. CONTINUING SECURITY
This Deed shall be a continuing security and shall remain in full
force and effect until the Junior Secured Indebtedness has been paid
in full, notwithstanding the insolvency or liquidation or any
incapacity or change in the constitution or status of the Borrower or
any other person or any intermediate settlement of account or other
matter whatsoever. This Deed is in addition to, and independent of,
any Charge, guarantee or other security or right or remedy now or at
any time hereafter held by or available to the Junior Lender.
4. REPRESENTATIONS AND WARRANTIES
4.01 Representation and Warranty. Except for the relevant Charges created
under this Deed and to secure the obligations of the Borrower under
the Senior Loan Agreement and the CPIL Security, the Borrower hereby
represents and warrants to the Junior Lender that no Charge exists,
and the Borrower has not created or agreed to create any Charge over,
all or any of its rights, title and interest in and to the Project
Contracts other than rights arising by operation of law.
4.02 Continuing Representation and Warranty. The Borrower also represents
and warrants to and undertakes with the Junior Lender that the
foregoing representation and warranty will be true and accurate
throughout the continuance of this Deed with reference to the facts
and circumstances existing from time to time.
5. UNDERTAKINGS
The Borrower undertakes and agrees with the Junior Lender throughout
the continuance of this Deed and so long as the Junior Secured
Indebtedness or any part thereof remains owing that the Borrower
will, unless the Junior Lender otherwise agrees in writing:
4
<PAGE>
(a) take all steps which may be necessary or expedient to keep
the Project Contracts in full force and effect and protect
the interests of the Borrower and the Junior Lender therein
and shall do or permit to be done every act or thing which
the Junior Lender may from time to time require for the
purpose of enforcing the rights of the Junior Lender
hereunder;
(b) not waive, release, settle, compromise or abandon any claim
or the liability of any person under the Project Contracts
or do or omit to do any other act or thing whereby the
recovery in full of any moneys payable thereunder as and
when they become payable may be impeded;
(c) not amend, vary or otherwise modify any provision of any
Project Contract;
(d) except for the relevant Charges created under this Deed and
to secure the obligations of the Borrower under the Senior
Loan Agreement and the CPIL Security, not hereafter create
or agree to create or permit to arise or exist any Charge
over the Project Contracts; and
(e) provide to the Junior Lender copies of all material notices
and material documents issued by the other parties to the
Project Contracts relating to the Project Contracts
forthwith upon the Borrower receiving the same.
6. BORROWER'S LIABILITY
Notwithstanding the assignment herein contained, the Borrower shall
remain liable to observe and perform all the obligations assumed by
it in relation to the Project Contracts and the Junior Lender shall
have no obligation or liability thereunder. The Junior Lender shall
not be obliged to make any enquiry as to the nature or sufficiency of
any payment received by it or to make any claim or take any other
action to collect any moneys or to enforce any rights and benefits
hereby assigned.
7. EVENTS OF DEFAULT
Each of the following events and circumstances shall be an Event of
Default:
(a) any event or circumstance which would constitute an Event of
Default as that term is defined in the AES Loan Agreement;
(b) the Borrower purports or attempts to create any Charge over
all or any part of the Project Contracts or any third party
asserts a claim
5
<PAGE>
(other than a frivolous or vexatious claim)
in respect thereof unless contested in good faith and
through appropriate means; and
(c) the security hereby created or any part thereof fails or
ceases for any reason to be in full force and effect or is
terminated or jeopardized or becomes invalid or
unenforceable or if there is any dispute regarding the same
or if there is any purported termination of the same or it
becomes impossible or unlawful for the Borrower to perform
any of its obligations hereunder or for the Junior Lender to
exercise all or any of its rights, powers and remedies
hereunder.
8. APPLICATION OF RECEIPTS
After the occurrence of an Event of Default, all monies received by
the Junior Lender hereunder may be applied in or towards satisfaction
of the Junior Secured Indebtedness in such manner as is provided for
in the AES Loan Agreement and subject to the provisions of the Senior
Subordination Agreement and the Priority Deed.
9. TAXES AND OTHER DEDUCTIONS
All sums payable by the Borrower under this Deed shall be paid in
full without set-off or counterclaim or any restriction or condition
and free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings of any nature. If the Borrower or any
other person is required by any law or regulation to make any
deduction or withholding (on account of tax (other than an Excluded
Tax) or otherwise) from any payment for the account of the Junior
Lender, the Borrower shall, together with such payment, pay such
additional amount as will ensure that the Junior Lender receives
(free and clear of any tax (other than an Excluded Tax) or other
deductions or withholdings) the full amount which it would have
received if no such deduction or withholding had been required. The
Borrower shall promptly forward to the Junior Lender copies of
official receipts or other evidence showing that the full amount of
any such deduction or withholding has been paid over to the relevant
taxation or other authority.
10. COSTS, CHARGES AND EXPENSES
The Borrower shall from time to time forthwith on demand pay to or
reimburse the Junior Lender for:
(a) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
connection with the preparation, execution and registration
of any amendment to or extension of, or the giving of any
consent or waiver in connection with this Deed; and
6
<PAGE>
(b) all reasonable costs, charges and expenses (including legal
and other fees on a full indemnity basis and out of pocket
expenses) reasonably incurred by the Junior Lender in
exercising any of its rights or powers hereunder or in suing
for or seeking to recover any sums due hereunder or
otherwise preserving or enforcing its rights hereunder or in
defending any claims brought against it in respect of this
Deed or in releasing or re-assigning this Deed upon payment
of all monies hereby secured and until payment of the same
in full, all such costs, charges and expenses shall be
secured by this Deed.
To the extent practicable, the Junior Lender shall consult the
Borrower before incurring any major expenditure.
11. INDEMNITY
11.01 General Indemnity. The Borrower shall indemnify the Junior Lender
against all losses, liabilities, damages, costs and expenses incurred
by it in the execution or performance of the terms and conditions
hereof and against all actions, proceedings, claims, demands, costs,
charges and expenses which may be incurred, sustained or arise in
respect of the non-performance or non-observance of any of the
undertakings and agreements on the part of the Borrower herein
contained or in respect of any matter or thing done or omitted, on
the part of the Borrower, relating in any way whatsoever to the
Project Contracts.
11.02 Currency Indemnity. Dollars shall be the currency of account and of
payment in respect of sums payable under this Deed. If an amount is
received in another currency, pursuant to a judgment or order or in
the liquidation of the Borrower or otherwise, the Borrower's
obligations under this Deed shall be discharged only to the extent
that the Junior Lender may purchase Dollars with such other currency
in accordance with normal banking procedures upon receipt of such
amount. If the amount in Dollars which may be so purchased, after
deducting any costs of exchange and any other related costs, is less
than the relevant sum payable under this Deed, the Borrower shall
indemnify the Junior Lender against the shortfall. This indemnity
shall be an obligation of the Borrower independent of an in addition
to its other obligations under this Deed and shall take effect
notwithstanding any time or other concession granted to the Borrower
or any judgment or order being obtained or the filing of any claim in
the liquidation, dissolution or bankruptcy (or analogous process) of
the Borrower.
11.03 Payment and Security. The Junior Lender may retain and pay out of any
money in the Junior Lender's hands all sums necessary to effect the
indemnity contained in this Clause 11 and all sums payable by the
Borrower under this Clause 11 shall form part of the monies hereby
secured.
7
<PAGE>
12. FURTHER ASSURANCE
12.01 Further Assurance. Subject to the Senior Subordination Agreement and
the Priority Deed, the Borrower shall at any time and from time to
time (whether before or after the security hereby created shall have
become enforceable) execute such further legal or other mortgages,
charges or assignments and do all such transfers, assurances, acts
and things as the Junior Lender may require over or in respect of the
Project Contracts to secure all monies, obligations and liabilities
hereby covenanted to be paid or hereby secured or for the purposes of
perfecting and completing any assignment of the Junior Lender's
rights, benefits or obligations hereunder and the Borrower shall also
give all notices, orders and directions which the Junior Lender may
require.
12.02 Enforcement of the Junior Lender's Rights. The Borrower will do or
permit to be done everything which the Junior Lender may from time to
time require to be done for the purpose of enforcing the Junior
Lender's rights hereunder and will allow the name of the Borrower to
be used as and when required by the Junior Lender for that purpose.
13. POWER OF ATTORNEY
The Borrower irrevocably appoints the Junior Lender by way of
security to be its attorney-in-fact (with full power of substitution)
and in its name or otherwise on its behalf and as its act and deed to
sign, seal, execute, deliver, perfect and do all deeds, instruments,
acts and things which may be required or which the Junior Lender
shall think proper or expedient for carrying out any obligations
imposed on the Borrower hereunder or for exercising any of the powers
hereby conferred or for giving to the Junior Lender the full benefit
of this security and so that the appointment hereby made shall
operate to confer on the Junior Lender authority to do on behalf of
the Borrower anything which it can lawfully do by an
attorney-in-fact. The Borrower ratifies and confirms and agrees to
ratify and confirm any deed, instrument, act or thing which such
attorney-in-fact or substitute may execute or do.
14. SUSPENSE ACCOUNT
The Junior Lender may place and keep any monies received by virtue of
this Deed (whether before or after the insolvency or liquidation of
the Borrower) to the credit of a suspense account for so long as the
Junior Lender may think fit in order to preserve the rights of the
Junior Lender to sue or prove for the whole amount of its claims
against the Borrower or any other person.
8
<PAGE>
15. WAIVER AND SEVERABILITY
No failure or delay by the Junior Lender in exercising any right,
power or remedy hereunder shall impair such right, power or remedy or
operate as a waiver thereof, nor shall any single or partial exercise
of the same preclude any further exercise thereof or the exercise of
any other right, power or remedy. The rights, powers and remedies
herein provided are cumulative and do not exclude any other rights,
powers and remedies provided by law. If at any time any provision of
this Deed is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other
jurisdiction, and of the remaining provisions of this Deed, shall not
be affected or impaired thereby.
16. MISCELLANEOUS
16.01 Continuing Obligations. The liabilities and obligations of the
Borrower under this Deed shall remain in force notwithstanding any
act, omission, event or circumstance whatsoever, until full, proper
and valid payment of the Junior Secured Indebtedness.
16.02 Protective Clauses. Without limiting Clause 16.01, neither the
liability of the Borrower nor the validity or enforceability of this
Deed shall be prejudiced, affected or discharged by:
(a) the granting of any time or indulgence to the Borrower or
any other person;
(b) any variation or modification of the AES Loan Agreement, any
of the Subordinated Security Documents or any other document
referred to therein;
(c) the invalidity or unenforceability of any obligation or
liability of the Borrower under the AES Loan Agreement or
any of the Subordinated Security Documents to which it is a
party;
(d) any invalidity or irregularity in the execution of this Deed
or the AES Loan Agreement or any of the other Subordinated
Security Documents;
(e) any deficiency in the powers of the Borrower to enter into
or perform any of its obligations under the AES Loan
Agreement or any of the other Subordinated Security
Documents to which it is a party or any irregularity in the
exercise thereof or any lack of authority by any person
purporting to act on behalf of the Borrower;
(f) any other Security Document, Charge, guarantee or other
security or right or remedy being or becoming held by or
available to the Junior Lender or by any of the same being
or becoming wholly or partly
9
<PAGE>
void, voidable, unenforceable
or impaired or by the Junior Lender at any time releasing,
refraining from enforcing, varying or in any other way
dealing with any of the same or any power, right or remedy
the Junior Lender may now or hereafter have from or against
the Borrower or any other person;
(g) any waiver, exercise, omission to exercise, compromise,
renewal or release of any rights against the Borrower or any
other person or any compromise, arrangement or settlement
with any of the same; or
(h) any act, omission, event or circumstance which would or may
but for this provision operate to prejudice, affect or
discharge this Deed or the liability of the Borrower
hereunder.
16.03 Unrestricted Right of Enforcement. Subject to the Senior
Subordination Agreement and the Priority Deed, this Deed may be
enforced without the Junior Lender first having recourse to any other
security or rights or taking any other steps or proceedings against
the Borrower or any other person or may be enforced for any balance
due after resorting to any one or more other means of obtaining
payment or discharge of the monies obligations and liabilities hereby
secured.
16.04 Discharges and Releases. Notwithstanding any discharge, release or
settlement from time to time between the Junior Lender and the
Borrower, if any security, disposition or payment granted or made to
the Junior Lender in respect of the Junior Secured Indebtedness by
the Borrower or any other person is avoided or set aside or ordered
to be surrendered, paid away, refunded or reduced by virtue of any
provision, law or enactment relating to bankruptcy, insolvency,
liquidation, winding-up, composition or arrangement for the time
being in force or for any other reason, the Junior Lender shall be
entitled hereafter to enforce this Deed as if no such discharge,
release or settlement had occurred.
16.05 Amendment. Any amendment or waiver of any provision of this Deed and
any waiver of any default under this Deed shall only be effective if
made in writing and signed by or on behalf of the party against whom
the amendment or waiver is asserted.
17. ASSIGNMENT
17.01 The Borrower. The Borrower shall not assign any of its rights or
obligations hereunder.
17.02 The Junior Lender. The Junior Lender may assign or grant
participations in all or any part of their rights under this Deed in
accordance with the provisions of clause 20 of the AES Loan
Agreement.
10
<PAGE>
18. NOTICES
18.01 Delivery. Each notice, demand or other communication to be given or
made under this Deed shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the Borrower: Wuhu Shaoda Electric Power Development
Company Limited
Commercial Office Building
West Huangshan Road
Wuhu, Anhui Province
People's Republic of China
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
To the Junior Lender: AES China Holdings Company (L) Limited
9th Floor, Allied Capital Resources Building
32-38 Ice House Street
Central, Hong Kong
Fax Number: (852) 2530-1673
Attention: Jeff Safford
Chief Financial Officer
18.02 Deemed Delivery. Any notice, demand or other communication so
addressed to the relevant party shall be deemed to have been
delivered (a) if given or made by letter, when actually delivered to
the relevant address; (b) if given or made by telex, when dispatched
with confirmed answerback and (c) if given or made by fax, when
dispatched.
19. GOVERNING LAW AND JURISDICTION
19.01 Law. This Deed and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the
laws of England.
19.02 Jurisdiction. The Borrower agrees that any legal action or proceeding
arising out of or relating to this Deed may be brought in the courts
of England and irrevocably submits to the non-exclusive jurisdiction
of such courts.
19.03 Process Agent. The Borrower irrevocably appoints Rowe & Maw
(Attention: Mr. Bernd Ratzke) of 20 Blackfriars Lane, London EC4V
6HT, England as its agent to receive and acknowledge on its behalf
service of any writ, summons, order, judgment or other notice of
legal process in England. If
11
<PAGE>
for any reason the agent named above (or
its successor) no longer serves as agent of the Borrower for this
purpose, the Borrower shall promptly appoint a successor agent
satisfactory to the Junior Lender and notify the Junior Lender
thereof provided that until the Junior Lender receives such
notification, it shall be entitled to treat the agent named above (or
its said successor) as the agent of the Borrower for the purposes of
this Clause 19.03. The Borrower agrees that any such legal process
shall be sufficiently served on it if delivered to such agent for
service at its address for the time being in England whether or not
such agent gives notice thereof to the Borrower.
19.04 No Limitation on Right of Action. Nothing herein shall limit the
right of the Junior Lender to commence any legal action against the
Borrower and/or its property in any other jurisdiction or to serve
process in any manner permitted by law, and the taking of proceedings
in any jurisdiction shall not preclude the taking of proceedings in
any other jurisdiction whether concurrently or not.
19.05 Waiver; Final Judgment Conclusive. The Borrower irrevocably and
unconditionally waives any objection which it may now or hereafter
have to the choice of England as the venue of any legal action
arising out of or relating to this Deed. The Borrower also agrees
that a final judgment against it in any such legal action shall be
final and conclusive and may be enforced in any other jurisdiction,
and that a certified or otherwise duly authenticated copy of the
judgment shall be conclusive evidence of the fact and amount of its
indebtedness.
19.06 Waiver of Immunity. The Borrower irrevocably waives any immunity to
which it or its property may at any time be or become entitled,
whether characterized as sovereign immunity or otherwise, from any
set-off or legal action in England or elsewhere, including immunity
from service of process, immunity from jurisdiction of any court or
tribunal, and immunity of any of its property from attachment prior
to judgment or from execution of a judgment.
20. SUBORDINATED SECURITY
Notwithstanding any other provision to the contrary this Deed must be
read and construed in all respects, and the exercise of any rights
under this Deed and the enforcement of any rights under this Deed
must be subject in each case to the terms of the:
(a) Senior Subordination Agreement; and
(b) Priority Deed.
12
<PAGE>
In the event of any conflict or inconsistency between the terms of
this Deed of the one part and the Senior Subordinated Agreement or
the Priority Deed of the other part, the latter documents will
prevail.
IN WITNESS WHEREOF the parties hereto have executed this Deed on the day and
year first above written.
13
<PAGE>
Schedule
Form of Notice
To: [ ]
[Date]
Dear Sirs,
Re: [Name of Contract(s)]
We hereby give you notice that by an assignment dated -----------1996 we have
assigned and granted to AES China Holdings Company (L) Limited (the "Junior
Lender") a third-priority security interest in all our rights, title and
interest in and to the above [name of Contract(s)] and all benefits and proceeds
thereof.
We hereby instruct you that upon receiving written notice from the Junior
Lender, all payments which you may be required to make under the [name of
Contract(s)] are to be made directly to the Junior Lender. Until such notice is
received, you shall make all such payments in accordance with the terms of the
[name of Contract(s)].
In all other respects, and until you receive written notice to the contrary from
the Junior Lender, you shall continue to deal with us in respect of the above
[name of Contract(s)], save that no waiver shall be given and no amendment,
variation or other modification shall occur with respect to any provision of any
Project Contracts without the consent of the Junior Lender.
Please acknowledge this notice by signing as indicated and returning to the
Junior Lender the enclosed duplicate of this notice.
Yours faithfully,
for and on behalf of
Wuhu Shaoda Electric Power Development Company Limited
14
<PAGE>
[on duplicate:]
To: [ ]
We acknowledge receipt of the above notice.
We confirm that we consent to the assignment referred to above, that we have no
notice of any existing Charge over the [name of Contract(s)] and that we will
comply with the terms of the above notice.
Dated:
Authorized Signature(s)
[ ]
15
<PAGE>
THE BORROWER
- ------------
EXECUTED and DELIVERED )
for and on behalf of )
WUHU SHAODA ELECTRIC POWER )
DEVELOPMENT COMPANY LIMITED )
by )
in the presence of: [SIGNATURE ILLEGIBLE] )
[SIGNATURE ILLEGIBLE]
THE JUNIOR LENDER
- -----------------
SIGNED for and on behalf of )
AES CHINA HOLDINGS )
COMPANY (L) LIMITED )
by )
in the presence of: [SIGNATURE ILLEGIBLE] )
[SIGNATURE ILLEGIBLE]
16
Exhibit 10.39
WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
as Mortgagor
and
AES CHINA HOLDINGS COMPANY (L) LIMITED
as Mortgagee
SUBORDINATED MORTGAGE CONTRACT
CHADBOURNE & PARKE LLP
AMERICAN ATTORNEYS AT LAW
SUITE 3704, PEREGRINE TOWER
LIPPO CENTRE, 89 QUEENSWAY
HONG KONG
<PAGE>
CONTENTS
Number Clause Heading Page
- ------ -------------- ----
1. Definitions.....................................................1
2. Loan............................................................2
3. Interest........................................................2
4. Repayment and Term..............................................3
5. Charge..........................................................3
6. Custody of Title Documents......................................3
7. Management of the Equipment.....................................4
8. Insurance of the Equipment......................................4
9. Discharge of Mortgage...........................................5
10. Mortgagor's Representations and Warranties......................5
11. Further Assurance...............................................6
12. Mortgagor's Undertakings........................................6
13. Events of Default...............................................8
14. Disposition of the Charged Assets...............................8
15. Indemnities....................................................10
16. Deduction......................................................10
17. Evidence of Debt...............................................11
18. Suspense Account...............................................11
19. Expenses.......................................................11
20. Power of Attorney..............................................12
21. Notice.........................................................12
22. Governing Law and Dispute Settlement...........................13
23. Miscellaneous..................................................13
24. Validity of Contract...........................................14
25. Subordinated Security..........................................14
Execution Block
Appendix 1 Equipment.............................................16
Appendix 2 Buildings.............................................17
<PAGE>
THIS SUBORDINATED MORTGAGE CONTRACT (hereinafter referred to as the
"Contract") is made on the day of 1996
-------- --------------------
BETWEEN:
(1) WUHU SHAODA ELECTRIC POWER DEVELOPMENT COMPANY LIMITED, an equity
joint venture company formed under the laws of the People's Republic
of China, with its legal address at Commercial Office Building, West
Huangshan Road, Wuhu, Anhui Province, People's Republic of China
(hereinafter referred to as the "Mortgagor"); and
(2) AES CHINA HOLDINGS COMPANY (L) LIMITED, a Labuan company of Lot A,
Level 3, Wisma Oceanic, Jalan OKK Awang Besar, 87007, Federal
Territory of Labuan, Malaysia (hereinafter referred to as the
"Mortgagee").
WHEREAS:
(1) By the AES Loan Agreement (as defined below), the Mortgagee has
agreed to make available to the Mortgagor a loan facility of up to
US$18,000,000, the proceeds of which shall be used by the Mortgagor
in accordance with the purposes set out in clause 2 of the AES Loan
Agreement.
(2) It is a condition precedent to the Mortgagee making the Facility
available to the Mortgagor that the Mortgagor enters into this
Contract with the Mortgagee.
IN WITNESS WHEREOF, the Mortgagor and the Mortgagee shall enter into this
Contract to set forth the respective rights and obligations of both parties.
1. DEFINITIONS
1.01 Unless the context requires otherwise, the following terms and
expressions used in this Contract shall have the same meanings as
follows:
(1) "AES Loan Agreement" means the US$18,000,000 loan agreement
entered into between the Mortgagor and the Mortgagee dated
the date hereof;
(2) "Cash" means the currency of any country from time to time
held by the Mortgagor, including cash and deposits of any
kind (including interest) that are kept in a bank or other
financial institution in China or any other country;
1
<PAGE>
(3) "Charged Assets" means all or any part of the property,
assets and rights of the Mortgagor hereby charged including,
without limitation, the Receivables, Cash, Equipment,
buildings (see Appendix 2 for details) and Inventory;
(4) "Equipment" means all items of equipment purchased or from
time to time purchased by the Mortgagor including, without
limitation, all equipment listed in Appendix 1, all
equipment purchased, imported or installed by the Mortgagor
and any additions, unused components and users' manuals and
technical documents relating to any of the foregoing;
(5) "Event of Default" means any event of default specified
under Clause 13 herein;
(6) "Inventory" means raw materials purchased for the production
of electricity by the Mortgagor;
(7) "Junior Secured Indebtedness" means all or any sums (whether
principal, interest, fees or other expenses) now or at any
time hereafter due, owing or incurred by the Mortgagor under
the AES Loan Agreement or any Subordinated Security Document
to which it is a party and all other monies hereby secured;
(8) "Receivables" means the payment arising from time to time in
the ordinary course of business but are still due and owing
to the Mortgagor; and
(9) "Subordinated Security Documents" means all or any security
document defined under the AES Loan Agreement.
1.02 Unless defined herein otherwise or the context herein requires
otherwise, the terms and expressions used in this Contract shall have
the same meanings as those in the AES Loan Agreement.
2. LOAN
The Mortgagee shall provide the Mortgagor with a loan facility not
exceeding US$18,000,000 the terms of which shall be governed in all
respects by the AES Loan Agreement.
3. INTEREST
The Mortgagor undertakes to pay interest on the loan fully and
punctually in accordance with the AES Loan Agreement. Details on the
calculation and payment of interest shall be governed by the AES Loan
Agreement.
2
<PAGE>
4. REPAYMENT AND TERM
The Mortgagor undertakes to repay the loan principal and to pay all
other amounts due and owing under the AES Loan Agreement fully and
punctually in accordance with the AES Loan Agreement. Details on the
timing and amounts of principal repayments and other payments shall
be governed by the AES Loan Agreement.
5. CHARGE
5.01 In consideration of the Mortgagee agreeing to make the Facility
available to the Mortgagor upon the terms and conditions of the AES
Loan Agreement and the punctual observance and performance by the
Mortgagor of all other obligations of the Mortgagor contained in the
AES Loan Agreement or any Subordinated Security Document to which it
is a party, the Mortgagor as sole legal beneficial owner grants to
the Mortgagee a third-priority mortgage of and security interest in
all the undertakings, property, assets and rights of the Mortgagor
whatsoever and wheresoever both present and future including, without
limitation, the Receivables, Cash, Equipment, Inventory and buildings
and all its related rights and its uncalled capital for the due and
punctual payment of the Junior Secured Indebtedness in full when due.
THIS MORTGAGE IS SUBORDINATE IN RIGHT TO THE CHARGES CREATED TO
SECURE THE OBLIGATIONS OF THE BORROWER UNDER THE SENIOR LOAN
AGREEMENT, AND THE ENFORCEMENT OF THIS MORTGAGE SHALL BE LIMITED IN
ACCORDANCE WITH THE PROVISIONS OF THE SENIOR SUBORDINATION AGREEMENT
AND THE PRIORITY DEED.
5.02 This Contract shall be a continuing security and shall remain in full
force and effect until the Junior Secured Indebtedness has been paid
in full, notwithstanding the change in the constitution or status of
the Mortgagor, insolvency or liquidation or any incapacity to act as
a company or any intermediate settlement of account or other matter
whatsoever. This Contract is in addition to (and independent of) any
Charge, guarantee or other right or claim now or at any time
hereafter held by the Mortgagee. This Contract shall not be rendered
ineffective by any change or amendment made between the Mortgagor and
Mortgagee to the AES Loan Agreement.
6. CUSTODY OF TITLE DOCUMENTS
The Mortgagor shall deliver to the Facility Agent with copies to the
Mortgagee the purchase contract(s) for the Equipment, warranties from
the manufacturers, insurance receipts, import and customs clearing
documents and any other subsidiary documents reasonably requested by
the Mortgagee for safekeeping and custody, provided that the
Mortgagor
3
<PAGE>
shall arrange for the delivery of the originals of such
documents to the Mortgagee as soon as all amounts owed to the Senior
Financing Parties under the Senior Loan Agreement have been paid in
full. All relevant and reasonable custody fees shall be borne by the
Mortgagor.
7. MANAGEMENT OF THE EQUIPMENT
7.01 The Equipment shall be possessed, owned and used by the Mortgagor.
The Mortgagor shall use the Equipment reasonably and the Equipment
shall be used in a way permitted by the laws of the People's Republic
of China and the provisions of the AES Loan Agreement.
7.02 Without written consent from the Mortgagee, the Mortgagor shall not
structurally change, disassemble or remove any Equipment, except for
daily maintenance. Any additional facilities and installations made
to the Equipment in contravention of this sub-clause shall
automatically become part of the Equipment.
7.03 The Mortgagee shall not be responsible for any loss or damage arising
from any defect (whether apparent or latent) of the Equipment. The
Mortgagee shall not bear any responsibility if a third party claims
against the Mortgagor for loss or damage. If the Mortgagee suffers
any loss, the Mortgagor shall forthwith compensate the Mortgagee for
such loss.
8. INSURANCE OF THE EQUIPMENT
8.01 Prior to the first drawing under the AES Loan Agreement, the
Mortgagor shall insure the Equipment on such terms and in amounts as
specified in the Subordinated Insurance Assignment, in each case with
such insurance company as appointed or agreed by the Mortgagee. The
benefits of the policies shall be assigned to the Mortgagee until the
Junior Secured Indebtedness is paid in full. Prior to the repayment
of the Junior Secured Indebtedness, the Mortgagor shall not for
whatsoever reason discontinue or materially change the insurance. If
the Mortgagor discontinues or materially changes the insurance, the
Mortgagee shall have the right but not the obligation to insure the
same on its behalf, any reasonable fee or actual loss arising shall
be unconditionally reimbursed by the Mortgagor.
8.02 The originals of the insurance policies shall be delivered to the
Facility Agent for safe-keeping, the cost of which shall be borne by
the Mortgagor, provided that the Mortgagor shall arrange for the
delivery of such originals to the Mortgagee as soon as all amounts
owed to the Senior Financing Parties under the Senior Loan Agreement
have been paid in full.
8.03 In accordance with the Subordinated Insurance Assignment, the
Mortgagor shall irrevocably appoint the Facility Agent as its duly
authorized
4
<PAGE>
representative to receive and handle the compensation
monies paid under the insurances until all amounts owed to the Senior
Financing Parties under the Senior Loan Agreement have been paid in
full.
8.04 If any Event of Default occurs or is still existing and the aforesaid
compensation monies under the insurances are not sufficient to cover
the Junior Secured Indebtedness, the Mortgagee shall have the right
of recourse to the Mortgagor until the Mortgagor repays all its
indebtedness in full.
9. DISCHARGE OF MORTGAGE
Upon payment in full of all the Junior Secured Indebtedness and
performance of all the obligations and responsibilities hereunder and
under the AES Loan Agreement and the Subordinated Security Documents,
the Mortgagee shall, at the request of the Mortgagor and at a
reasonable fee to be paid by the Mortgagor, discharge the security
over the Charged Assets created by this Contract and assist the
Mortgagor to cancel the registration of the Charge hereunder at the
appropriate inland customs office and other relevant departments and
return all the title documents of the relevant Charged Assets
possessed by the Mortgagee for safe-keeping to the Mortgagor.
10. MORTGAGOR'S REPRESENTATIONS AND WARRANTIES
10.01 The Mortgagor represents and warrants to the Mortgagee that:
(1) the obligations of the Mortgagor under this Contract are
legal, valid and binding;
(2) the Mortgagor is the sole legal and beneficial owner of the
Charged Assets and has full power to mortgage the same to
the Mortgagee. Except for (i) the relevant Charges created
to secure the obligations of the Borrower under the Senior
Loan Agreement, (ii) the Charge created herein, (iii) the
CPIL Security, (iv) any lien set up to provide goods for the
Mortgagor, (v) any lien arising from the exercise of legal
rights in the ordinary course of business and (vi) any
Charge that has been notified to the Mortgagee in writing
and which has been approved by the Mortgagee, the Charged
Assets are free from any Charge or other guarantee. The
Charged Assets are also free from any third party's lease,
right to use or other rights;
(3) the Mortgagor has already obtained all necessary approvals
and permits, if any, from the relevant government
authorities in the People's Republic of China for or in
connection with the execution and performance of this
Contract;
5
<PAGE>
(4) the whole purchase price, maintenance fees and other tax and
fees of the Charged Assets have been punctually paid in
full;
(5) the Mortgagor is not in default under any law, regulation or
contractual terms in relation to the Charged Assets; and
(6) no litigation, arbitration or administrative proceeding is
currently taking place or pending or threatened in relation
to the Charged Assets.
10.02 The Mortgagor also represents and warrants to the Mortgagee that the
foregoing representations and warranties will be true and accurate
throughout the continuance of this Contract.
11. FURTHER ASSURANCE
11.01 In performance or satisfaction of the Charge hereunder enjoyed by the
Mortgagee over the Charged Assets or to facilitate the assignment of
its rights and obligations hereunder by the Mortgagee, the Mortgagor
undertakes to comply with all reasonable instructions of the
Mortgagee in full (whether the Charge hereunder has been effective).
The relevant assignment fees shall be borne by the Mortgagor.
11.02 The Mortgagor undertakes to comply with all reasonable instructions
from the Mortgagee to handle at any time relevant matters that are
necessary for the rights hereunder (or suffers the Mortgagee to
handle the same) and the Mortgagor also undertakes that the Mortgagee
can act at any time in the name of the Mortgagor in accordance with
the laws and the provisions of this Contract.
12. MORTGAGOR'S UNDERTAKINGS
12.01 Unless the Mortgagee otherwise agrees in writing, the Mortgagor
undertakes:
(1) to keep all its Charged Assets in good repair and in good
working condition; if there is any damage (wear and tear
excepted), the Mortgagor shall forthwith notify the
Mortgagee and carry out repairs to its best endeavors, and
prevent further damage;
(2) to comply with all the relevant laws and provisions of this
Contract in connection with the proper use of the Charged
Assets and the Mortgagor shall, upon the request of the
Mortgagee, forthwith reimburse the Mortgagee for any
reasonable sums and fees for the performance of the
aforesaid obligations;
6
<PAGE>
(3) to permit the Mortgagee or any other person appointed by the
Mortgagee at all reasonable times to view the state and
condition of the Charged Assets;
(4) the Mortgagee may, upon the occurrence of an Event of
Default, appoint a valuer to appraise the value of any asset
at all reasonable times, the reasonable cost of which shall
be borne by the Mortgagor;
(5) upon receipt of any notice, order or other documents issued
by the Chinese government authorities in connection with the
Charged Assets, the Mortgagor shall take every necessary
steps to comply with the aforesaid notice, order or other
documents within the time limit set out by law or fourteen
(14) days after the receipt of such documents (whichever is
earlier), and take all necessary steps to send a copy of
such document to the Mortgagee within the aforesaid period
of time;
(6) to promptly inform the Mortgagee of the occurrence of any
Event of Default and any litigation, arbitration or
administrative proceeding (including any actual or
prospective litigation, arbitration or administrative
proceeding);
(7) to pay all the taxes, management fee and other fees in
connection with the Charged Asset in accordance with the
relevant laws and the provisions of this Contract;
(8) in accordance with all the reasonable instructions of the
Mortgagee, assist the Mortgagee in handling the approvals,
consents and relevant legal procedures in connection with
this Contract;
(9) to notify the Mortgagee within fourteen (14) days of the
purchase of new Equipment; and
(10) promptly register this Contract as a third-priority mortgage
with all appropriate governmental authorities in China and
maintain all such registration(s).
12.02 Unless the Mortgagee otherwise agrees in writing, the Mortgagor
undertakes not to do any of the following:
(1) except for (i) the relevant Charges created to secure the
obligations of the Borrower under the Senior Loan Agreement,
(ii) the Charge created herein, (iii) the CPIL Security,
(iv) any lien set up to provide goods for the Mortgagor and
(v) any lien arising from the exercise of legal rights in
the ordinary course of business and bearing no relationship
to borrowings, mortgage or charge over the Charged Assets or
any part thereof (whether or not in priority over the Charge
hereunder);
7
<PAGE>
(2) with or without consideration, lease, sub-let, license,
share, sell, assign, appoint a trustee or in any other way
deal with the Charged Assets or any part thereof;
(3) use the Charged Assets for purposes other than the ordinary
course of business;
(4) do or cause to be done any act (including negligent
behavior) which may in any way significantly increase the
insurance premium or render the insurance invalid; and
(5) permit the use of the Charged Assets to do any act which is
contrary to the relevant laws and the provisions of this
Contract.
13. EVENTS OF DEFAULT
13.01 Each of the following events shall be an Event of Default:
(1) the Mortgagor fails to pay any sum payable under this
Contract or any other Subordinated Security Document to
which it is a party when due or otherwise in accordance with
the provisions hereof or thereof;
(2) the Mortgagor fails duly and punctually to perform or comply
with any of its other obligations or undertakings hereunder
or under any of the other Subordinated Security Documents;
and
(3) an Event of Default or prospective Event of Default has
occurred and is continuing under the AES Loan Agreement.
13.02 If any Event of Default under Clause 13.01 herein has occurred, the
Mortgagee shall have the right to request the Mortgagor to repay
forthwith the whole Junior Secured Indebtedness and shall also have
the right to dispose of the Charged Assets in accordance with laws
and provisions of this Contract and subject to the provisions of the
Senior Subordination Agreement. Any losses to the Mortgagor arising
from the exercise of the aforesaid rights of the Mortgagee shall not
be borne by the Mortgagee.
14. DISPOSITION OF THE CHARGED ASSETS
14.01 Subject to the provisions of the Senior Subordination Agreement and
the Priority Deed, upon the occurrence of any Event of Default under
Clause 13 herein, the Mortgagee shall forthwith have all the rights
and power under the laws of the People's Republic of China and this
Contract, including (without limitation) the right to:
8
<PAGE>
(1) immediately possess and enjoy the Charged Assets or any part
thereof in accordance with laws;
(2) sell by public auction or sell or lease the Charged Assets
or any part thereof by any means legally permissible and
receive reasonable rent or proceeds and, with respect to
leasing, for a term as determined by the actual market
situation with respect to the Charged Assets; and
(3) employ a receiver to deal with the aforesaid matter, such
receiver's reasonable salary and remuneration for the
account of the Mortgagor. Such receiver shall be regarded as
the agent of the Mortgagor and the Mortgagor shall be wholly
responsible for the acts and omissions of such receiver.
14.02 In accordance with laws, the receiver may:
(1) request the tenant to pay the rent or the use fees, issue
effective leases and receipts or litigate, initiate legal
proceedings, detain assets or use other means to recover
rent or fees; such requests, receipts and claims shall be
issued in the name of the Mortgagor or Mortgagee and no
enquiry as to the scope of power of the receiver is required
for payment to the receiver; and
(2) upon written notice from the Mortgagee, apply the monies
received under any insurance in respect of the Charged
Assets towards its repair or continued operation.
14.03 Upon the occurrence of an Event of Default and subject to the
provisions of the Senior Subordination Agreement and the Priority
Deed, the Mortgagee shall have the power to dispose of any Charged
Assets or any part thereof in accordance with laws without the
consent of the Mortgagor or other persons. The Mortgagee shall have
the power to execute all documents relating to the sale and lease of
the Charged Assets (including the related cancellation document) and
any loss arising shall not be borne by the Mortgagee.
14.04 The Mortgagee can dispose of the Charged Assets or appoint a receiver
to dispose of the Charged Assets in accordance with this Clause 14
and, subject to the provisions of the Senior Subordination Agreement
and the Priority Deed, can apply the monies received from the
disposition of Charged Assets in the following order of priority:
(1) firstly, in payment of all reasonable costs in the
disposition of the Charged Assets, including (but without
limitation) the fees and remuneration of the receiver;
(2) secondly, in payment of all the custom duties and other
taxes required by law in connection with the Charged Assets;
9
<PAGE>
(3) thirdly, in satisfaction of the Junior Secured Indebtedness;
and the remaining balance, after the above deductions, shall be paid
to the Mortgagor and other persons entitled to the above sum in full
by the Mortgagee. If the monies received by the Mortgagee from the
disposal of the Charged Assets does not satisfy the Junior Secured
Indebtedness in full, the Mortgagor shall reimburse the Mortgagee for
any shortfall.
14.05 The Mortgagee shall not be responsible for any loss to the Mortgagor
arising from the exercise of the Mortgagee's powers and rights in
accordance with law or the provisions of this Contract.
15. INDEMNITIES
15.01 The Mortgagor shall bear, pay for and compensate the Mortgagee for
all fees, damages, expenditures, legal responsibilities, legal costs
and other claims of the Mortgagee arising from an Event of Default
under Clause 13 herein. The Mortgagor's indemnity undertaking shall
be separated from this Contract and shall be independent from the
obligations hereunder. This obligation shall be effective
notwithstanding any judgment or order obtained by the Mortgagor
during winding-up, liquidation or bankruptcy and notwithstanding any
relaxation of the time limit or concession made in respect of any
claim.
15.02 Payment hereunder shall be in US Dollars. If a judgment or order or
part payment received during the winding up of the Mortgagor is not
paid in US Dollars, the Mortgagee may, on receipt of such payment,
purchase US Dollars through normal banking procedures with such
payments received.
15.03 If the amount of the US Dollars which may be so purchased (after
deducting any costs of exchange and any other related costs) is less
than the amount due, the Mortgagor shall indemnify the Mortgagee
against the shortfall.
16. DEDUCTION
All sums payable by the Mortgagor under this Contract shall be paid
in full without set-off, deduction or counterclaim or any restriction
or condition and free and clear of any tax (other than an Excluded
Tax) or other deductions or withholdings of any nature. The Mortgagor
shall be responsible for paying the full amount of any such deduction
or withholding to the relevant taxation or other authority. If the
Mortgagor is required by any law or regulation to make any deduction
or withholding, the Mortgagor shall compensate for such additional
amount as will ensure that the Mortgagee receives the full amount
which it would have received if no such deduction or withholding had
been required.
10
<PAGE>
17. EVIDENCE OF DEBT
Any statement of account showing a sum payable by the Mortgagor
hereunder and signed as correct by an authorized officer of the
Mortgagee shall, in the absence of manifest error, be conclusive
evidence of the amount so due.
18. SUSPENSE ACCOUNT
18.01 The Mortgagee may place and keep any monies received hereunder to the
credit of a suspense account for a period not exceeding six (6)
months (or if the liquidation or winding-up proceeding has been
commenced by the Mortgagor who is liable for such payment, the period
shall be so long as the Mortgagee may think fit) in order to preserve
the rights of the Mortgagee to sue or prove for the whole amount of
its claims against the Mortgagor. Prior to actual use of such sums
for the repayment of the Junior Secured Indebtedness in full or in
part, no interest shall be payable for such sums that are placed to
the credit of the suspense account.
19. EXPENSES
19.01 The Mortgagor shall pay or be required to pay all the stamp duty,
other taxes, notary fees and registration (including registration of
mortgage) fees and all other similar fees under this Contract or
documents referred to under this Contract, and the Mortgagor shall,
upon the request of the Mortgagee, reimburse the Mortgagee for all
the reasonable expenses (including legal fees, translation fees,
travelling or other miscellaneous expenses) in connection with the
negotiation, preparation, execution of this Contract, the exercise of
its right and power hereunder and enforcement of this Contract.
19.02 If the Mortgagor does not punctually repay the Junior Secured
Indebtedness in full, the Mortgagor shall be responsible for all
reasonable expenses incurred by the Mortgagee in enforcing its rights
hereunder (including, without limitation, any administration fee,
management fee, insurance fee or any other cost related to the
disposition of the Charged Assets).
19.03 In the event the Mortgagor has not paid any tax or fee in accordance
with the AES Loan Agreement or this Contract and the Mortgagee elects
to make payment thereof on behalf of the Mortgagor, the Mortgagor
shall repay such sum and pay interest on such sum to the Mortgagor,
and the interest shall be calculated in accordance with clause 15.01
of the AES Loan Agreement from the time the payment is due to the
time the Mortgagee receives such payment in full.
11
<PAGE>
20. POWER OF ATTORNEY
The Mortgagor irrevocably appoints the Mortgagee to be its
attorney-in-fact. At the time any Event of Default specified under
Clause 13 herein occurs and subject to the provisions of the Senior
Subordination Agreement, the Mortgagee shall sign any document or do
any act in the name of or otherwise on behalf of the Mortgagor that
the Mortgagee reasonably considers necessary to carry out any
obligations imposed on the Mortgagor hereunder or to exercise any of
the powers hereby conferred or in connection with any disposition of
the Charged Assets or the exercise of any rights in respect thereof
or to give to the Mortgagee the full benefit of this security. The
Mortgagor ratifies and confirms and agrees to ratify and confirm any
instrument and act which such attorney-in-fact may execute or do.
21. NOTICE
21.01 Each notice, demand or other communication to be given or made under
this Contract shall be in writing and delivered or sent to the
relevant party at its address or telex number or fax number set out
below (or such other address or telex number or fax number as the
addressee has by five (5) days' prior written notice specified to the
other party):
To the Mortgagor: Wuhu Shaoda Electric Power Development
Company Limited
Commercial Office Building
West Huangshan Road
Wuhu, Anhui Province
People's Republic of China
Fax Number: (86-553) 382-3224
Attention: Zhai Dao Ping
To the Mortgagee: AES China Holdings Company (L) Limited
9th Floor, Allied Capital Resources Building
32-38 Ice House Street
Central, Hong Kong
Fax Number: (852) 2530-1673
Attention: Jeff Safford
Chief Financial Officer
Any notice, demand or other communication so addressed to the
relevant party shall be deemed to have been delivered (1) if given or
made by telex, when dispatched with confirmed answerback, (2) if
given or made by letter, when actually delivered to the relevant
address and (3) if given or made by
12
<PAGE>
fax, when dispatched.
21.02 Any correspondence and documents between the Mortgagee and the
Mortgagor shall be written in English.
22. GOVERNING LAW AND DISPUTE SETTLEMENT
22.01 This Contract and its Appendix shall be governed by and construed in
accordance with the laws of the People's Republic of China.
22.02 The Mortgagee shall have the right to dispose of the Charged Assets
and request payment from the Mortgagor through litigation or
enforcement of a judgment in Hong Kong, China or any other
jurisdictions where the Mortgagor has a place of business or owns
assets. The Mortgagor acknowledges that this Contract is protected
under the laws of the People's Republic of China and at the same time
protected under the jurisdictions aforesaid.
22.03 The Borrower irrevocably waives any immunity to which it or its
property may at any time be or become entitled (whether characterized
as sovereign immunity or otherwise) from any set-off or legal action
in China or elsewhere, including immunity from service of process,
immunity from jurisdiction of any court of tribunal, and immunity of
any of its property from attachment prior to judgment or from
execution of a judgment.
23. MISCELLANEOUS
23.01 Any amendment, alteration, supplement or cancellation of the
provisions of this Contract shall not be made orally unless it is
confirmed and signed by both the Mortgagee and the Mortgagor.
23.02 No failure or delay by the Mortgagee in exercising any right, power
or remedy hereunder shall impair such right, power or remedy or
operate as a waiver thereof, nor shall any single or partial exercise
of the same preclude any further exercise thereof or the exercise of
any other right, power or remedy. The exercise of the aforesaid
rights, powers and remedies herein provided by the Mortgagee may be
at the same time, separate or cumulative, and the Mortgagee may
exercise any other rights, powers and remedies provided by law.
23.03 The Mortgagee shall have the right to assign all or part of its
interests hereunder to another party without the consent of the
Mortgagor. The Mortgagor shall not assign any of its rights and
obligations hereunder.
23.04 The Mortgagee shall include its successors and assignees. The
Mortgagor shall include its successors and permitted assignees.
13
<PAGE>
23.05 The illegality, invalidity and unenforceability of any provisions of
this Contract shall not affect the validity of any other provision of
this Contract. The Mortgagor agrees to perform all of its obligations
under this Contract. In the event that such situation arises, the
Mortgagee has the right to terminate this Contract and forthwith
request payment for the Junior Secured Indebtedness.
24. VALIDITY OF CONTRACT
24.01 This Contract shall be signed by the authorized representatives of
each party at-------------- Municipality.
24.02 This Contract is executed in Chinese in six (6) originals of each,
all of which are equally effective; three (3) copies of which shall
be given to the Mortgagee, one (1) copy to the Mortgagor and one (1)
each to a notary public in Beijing and Beijing Inland Customs.
25. SUBORDINATED SECURITY
Notwithstanding any other provision to the contrary, this Deed must
be read and construed in all respects, and the exercise of any rights
under this Deed and the enforcement of any rights under this Deed
must be subject in each case to the terms of the:
(a) Senior Subordination Agreement; and
(b) Priority Deed.
14
<PAGE>
In the event of any conflict or inconsistency between the terms of
this Deed of the one part and the Senior Subordinated Agreement or
the Senior Priority Deed of the other part, the latter documents will
prevail.
Mortgagor: Wuhu Shaoda Electric Power Development Company
Limited
Signature: /s/ [SIGNATURE ILLEGIBLE] Company Chop:
Representative:
Occupation:
Date:
Witness: /s/ [SIGNATURE ILLEGIBLE]
Mortgagee: AES China Holdings Company (L) Limited
Signature: /s/ [SIGNATURE ILLEGIBLE] Company Chop:
Representative:
Occupation:
Date:
Witness: /s/ [SIGNATURE ILLEGIBLE]
15
<PAGE>
Appendix 1
Equipment
[Please see attached.]
16
<PAGE>
Appendix 2
Buildings
[Please see attached.]
17
Exhibit 11a
AES CHINA GENERATING CO. LTD.
STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
Three Months Ended Three Months Ended
August 31, 1996 August 31, 1995
------------------------ -----------------------
<S> <C> <C>
PRIMARY
Weighted Average Number of Shares of Common
Stock Outstanding 15,634 17,299
Net Effect of Dilutive Stock
Options
Based on the Treasury Stock Method Using 30 -
Average Market Price
------------------------ -----------------------
Weighted Average Shares Outstanding 15,664 17,299
======================== =======================
Net Income US$ 1,037 576
======================== =======================
Per Share Amount US$ 0.06 0.03
======================== =======================
FULLY DILUTED
Weighted Average Number of Shares of Common 15,634 17,299
Stock Outstanding
Net Effect of Dilutive Stock Options Based on
the Treasury Stock Method Using Ending Market
Price 30 -
------------------------ -----------------------
Weighted Average Shares Outstanding 15,664 17,299
======================== =======================
Net Income US$ 1,037 576
======================== =======================
Per Share Amount US$ 0.06 0.03
======================== =======================
</TABLE>
<PAGE>
Exhibit 11b
AES CHINA GENERATING CO. LTD.
STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
Nine Months Ended Nine Months Ended
August 31, 1996 August 31, 1995
------------------------ -----------------------
<S> <C> <C>
PRIMARY
Weighted Average Number of Shares of Common
Stock Outstanding 15,638 17,487
Net Effect of Dilutive Stock
Options
Based on the Treasury Stock Method Using 11 -
Average Market Price
------------------------ -----------------------
Weighted Average Shares Outstanding 15,649 17,487
======================== =======================
Net Income US$ 1,947 1,569
======================== =======================
Per Share Amount US$ 0.12 0.09
======================== =======================
FULLY DILUTED
Weighted Average Number of Shares of Common 15,638 17,487
Stock Outstanding
Net Effect of Dilutive Stock Options Based on
the Treasury Stock Method Using Ending Market
Price 11 -
------------------------ -----------------------
Weighted Average Shares Outstanding 15,649 17,487
======================== =======================
Net Income US$ 1,947 1,569
======================== =======================
Per Share Amount US$ 0.12 0.09
======================== =======================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED AUGUST
31, 1996 AND THE CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> AUG-31-1996
<CASH> 92,043
<SECURITIES> 12,568
<RECEIVABLES> 139
<ALLOWANCES> 0
<INVENTORY> 956
<CURRENT-ASSETS> 111,415
<PP&E> 136,005
<DEPRECIATION> 2,221
<TOTAL-ASSETS> 270,302
<CURRENT-LIABILITIES> 14,400
<BONDS> 33,982
0
0
<COMMON> 156
<OTHER-SE> 187,964
<TOTAL-LIABILITY-AND-EQUITY> 270,302
<SALES> 6,553
<TOTAL-REVENUES> 6,953
<CGS> 3,867
<TOTAL-COSTS> 3,867
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 679
<INCOME-PRETAX> 2,620
<INCOME-TAX> 455
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,947
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0
</TABLE>
