UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1996
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 (I.R.S. Employer
incorporation or organization) Identification No.)
3/F(W), Golden Bridge Plaza
No. 1 (A) Jianguomenwai Avenue
Beijing 100020
People's Republic of China Not Applicable
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 8610-6508-9619
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $0.01 per share (NASDAQ National Market System)
(Title of each class)
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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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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The aggregate market value of Registrant's voting stock held by
non-affiliates of Registrant, at February 18, 1997, was approximately
$150,930,474.
The number of shares outstanding of Registrant's Class A Common Stock,
par value $0.01 per share, at February 18, 1997 was 8,171,268. The number of
shares outstanding of Registrant's Class B Common Stock, par value $0.01 per
share, at February 18, 1997 was 7,500,000.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
Item 1. Business
(a) General Development of Business
The Registrant (hereinafter referred to as the "Company" or
"AES Chigen"), a Bermuda Company, is a leading independent power generation
company in the People's Republic of China (the "PRC" or "China") and one of the
few international developers that has successfully completed the development of
electric power projects in the country. AES Chigen was founded in December 1993
by The AES Corporation ("AES") to serve as the exclusive vehicle for AES to
develop, acquire, finance, construct, own and operate electric power generation
facilities in the PRC. AES currently holds 48% of the equity capital of AES
Chigen and AES, as the holder of all of the Company's Class B Common Stock (the
"Class B Common Stock" or "AES Chigen Class B Common Stock"), has the right to
elect one half of the Board of Directors of AES Chigen. Thus, AES may be deemed
to control the management and operation of AES Chigen.
To respond to significant opportunities in China, AES, through
a wholly owned subsidiary, opened an office in Hong Kong in early 1993.
Following the incorporation of AES Chigen, AES purchased shares of AES Chigen
Class B Common Stock for $50.0 million and, in early 1994, AES Chigen completed
an initial public offering of shares of its Class A Common Stock (the "Class A
Common Stock" or "AES Chigen Class A Common Stock"), which provided AES Chigen
with net proceeds, after underwriting commissions and discounts, of $151.9
million.
Since commencing business, AES Chigen has committed $259.6
million and as of January 31, 1997 has invested $165.7 million in eight power
projects in operation or under construction in the PRC, having an aggregate
nameplate capacity (the full load continuous rating of a generator, prime mover
or other electrical equipment under specified conditions as designated by its
manufacturer) of approximately 818 megawatts ("MW") (approximately 422 MW of
which is attributable to AES Chigen's interests in certain joint venture
enterprises (the "Joint Ventures")). These Joint Ventures' projects include
coal, oil and natural gas-fired and hydropower plants located in six different
provinces in China. These projects are referred to as the "Current Projects."
AES Chigen plans to build upon its position as a leading
independent power producer in China through the continued development of and
investment in electric power projects. AES Chigen has signed joint venture
contracts and is in various stages of negotiation to develop three additional
power projects with an aggregate nameplate capacity of approximately 2,900 MW
(approximately 805 MW of which is attributable to the Company's interests in the
proposed project companies). These projects are referred to as the "Potential
Projects."
With a presence in over 35 countries, AES is a global power
company committed to supplying electricity to customers world-wide in a socially
responsible way. AES, based in Arlington, Virginia, markets power principally
from electric generating facilities that it develops, owns and operates. AES was
one of the original entrants in the independent power market and today is one of
the world's largest global power companies, based on net equity ownership of
generating capacity (in megawatts) in operation or under construction.
The Company and AES have entered into an Amended and Restated
Agreement and Plan of Amalgamation, dated as of November 12, 1996 (the
"Amalgamation Agreement"), providing for among other things the Company to
become a wholly owned subsidiary of AES (the "Amalgamation"). The Amalgamation
is subject to various conditions, including approval by the holders of the AES
Chigen Class A Common Stock, and there can be no assurance that the Amalgamation
will be consummated. Following the Amalgamation, AES Chigen would become a
subsidiary of AES, and AES would be entitled to elect the entire Board of
Directors of AES Chigen. AES Chigen's success in project development and the
quality of construction management and operations and maintenance services
provided by AES Chigen in many cases will depend to a large extent on the
capabilities and expertise of AES.
Although the Company is not currently affected by covenants
contained in various AES debt agreements (the "AES Debt Covenants"), as a result
of the Amalgamation, the Company will become a subsidiary of AES and intends to
comply with limitations contained in the AES Debt Covenants applicable to other
AES subsidiaries. Among other things, the AES Debt Covenants would effectively
limit the Company's further investment in power plant projects to funds
currently held by the Company, plus the net proceeds of the 2006 Notes (as
defined below) remaining after the funding of the debt service reserve accounts
for the 2006 Notes. Assuming the Company makes investments equal to the full
amount of its existing investment commitments to its current projects, upon
consummation of the Amalgamation, a maximum amount of approximately $95.0
million would be available to fund the Company's future projects. Additional
investments in future projects could only be made by other investors, including
AES. After the Amalgamation, the ability of the Company to make investments in
the Potential Projects would be substantially limited by the AES Debt Covenants.
Accordingly, prior to the Amalgamation, the Company intends to transfer its
direct ownership interests in certain of the Potential Projects to wholly owned
subsidiaries, each of which, after the transfer, will be the ownership vehicle
for the Company's investment in these projects. In the case of each of these
projects, the consent of the Company's partners in such project and the approval
of the relevant PRC Government authorities are required to effect the transfers
of the Company's interests. Although the Company has no reason to believe that
such consents and approvals cannot be obtained, there is no assurance that such
consents and approvals can be obtained in order to permit investments in these
projects to be made following the Amalgamation.
If the Amalgamation is not consummated or the AES Debt
Covenants otherwise do not apply, the Company would expect to incur additional
commitments in the future in connection with the development, acquisition,
construction, ownership and operation of additional electric power plants and
related facilities in China.
On December 19, 1996, AES Chigen completed a $180 million
public offering of its 10 1/8% Notes due December 2006 (the "2006 Notes") and
received net proceeds of approximately $173.9 million. Pursuant to the terms of
the indenture under which the 2006 Notes were issued (the "Indenture"), AES
Chigen was required to deposit approximately $27.1 million in an interim reserve
account to make interest payments on the 2006 Notes through June 15, 1998, and
approximately $9.1 million in a debt payment reserve. The 2006 Notes are
redeemable at the option of AES Chigen on or after December 15, 2001. The 2006
Notes have been rated BB- by Standard & Poor's Rating Group and Ba3 by Moody's
Investors Service. Net proceeds from the offering of the 2006 Notes will be used
to fund investments in AES Chigen's Current Projects together with its
investments in a portion of one or more of the Potential Projects or other
future projects and for general corporate purposes. AES Chigen's ability to make
investments in projects will be subject to limitations after the Amalgamation.
The proceeds of the Notes together with the Company's existing
cash and cash equivalents are expected to be sufficient to enable it to fund its
commitments to existing Joint Ventures together with its investment in a portion
of one or more of its projects under development. In addition, the Company
expects to obtain additional funds from operating activities (which the Company
will receive as shareholder loan repayments, dividend (profit) distributions and
capital repayments) as more of its electric power plants become operational. If
the Amalgamation is not consummated or the AES Debt Covenants otherwise do not
apply, the Company may raise additional equity or debt, if needed, to fund
future investment opportunities subject to its ability to raise debt financing
under certain covenants governing the 2006 Notes.
(b) Financial Information About Industry Segments.
The Company operates in only one industry segment: independent
electric power generation.
(c) Narrative Description of Business.
Business Strategy
The Company's mission is to help meet China's need for
electricity in a socially responsible manner, balancing the interests of
customers, partners, communities, suppliers, investors and its people. After the
Amalgamation, the Company's operations will be subject to certain limitations
under the AES Debt Covenants.
The Company's business strategy focuses on:
Experience in the China Market. The Company currently employs
47 people in the PRC with 25 people in Beijing and 22 people
in other parts of the country. The Company's principal office
is in Beijing. The Company also maintains an office in Hong
Kong with 22 people. This commitment to the PRC has enabled
the Company to build an expertise in the China power market.
Diversified Project Portfolio. The Company believes that
national diversification of projects in different provinces
reduces the risk of being overly dependent on a single power
purchaser or the demand for power in a single region. The
Company's Current Projects are located in six provinces.
Certain of the Company's Current Projects include smaller
projects that have been developed on a rapid time schedule.
These projects have enabled the Company to establish its
position in the market, develop strategic relationships and
generate immediate cash flow. Certain other of the Current
Projects and the Potential Projects have high visibility and
the support of the national government of the PRC and its
various ministries, agencies and commissions ("Central
Government"). These projects are expected to generate
substantial cash flow following the commencement of their
operation.
Strategic Relationships with Strong Partners. The Company
believes that its presence in China, its available capital and
the well-regarded reputation of AES have allowed the Company
to develop strategic relationships with key Chinese partners.
The Company has included ministry level companies and
affiliates of provincial and local economic commissions as
well as affiliates of regional, provincial and local power
bureaus as partners in its Joint Ventures. These partners
participate in the construction and operation of the Company's
Current Projects, expedite the approval process and mitigate
project construction, operation and tariff adjustment risks.
Similarly, the Company will seek to develop the Potential
Projects and other future projects in the PRC in cooperation
with strong Chinese business partners that have comparable
economic interests and a variety of complementary strengths,
including business experience and political relationships.
In a number of cases, AES Chigen's partner in a Joint Venture
controls or is affiliated with the power purchaser,
contractor, operator and/or fuel supplier of the project. It
is possible, in these cases, that such arrangements may result
in one or more of these parties having a conflict of interest
in a project, which could have an adverse effect on the Joint
Ventures' operations.
Location in Regions of High Power Demand. The Company believes
that its Current Projects and the Potential Projects are
located in regions of high power demand. In the course of
developing its projects, the Company carefully reviews the
regional and local demand and supply for power. In addition,
in the course of project development, the Company evaluates
the proposed power purchaser, usually a provincial or local
government power bureau, to determine its economic resources
and credit profile. One important criterion for any project
developed by the Company is that the tariff to be charged by
the proposed project must be affordable in light of the
overall rates charged in the region, while also being
competitive with the cost of new electric power.
Some regions or cities in the PRC have experienced slower
economic development in recent years. As a consequence, load
growth in the PRC, while generally increasing in the country
overall, has exhibited uneven development. Some of the Joint
Ventures' power plants are designed to provide peaking power.
Such plants are dispatched only after base load power stations
have been brought on-line and reached maximum capacity. If
electric power demand proves less than expected in an area,
additional peak or base load power may not be required in the
area or may be required at lower than expected levels. AES
Chigen's Joint Ventures seek to mitigate this risk by entering
into take-or-pay power purchase arrangements and by entering
into dispatch contracts with PRC electric power dispatching
authorities which obligate the dispatchers to dispatch the
power plants at their full capacity for a minimum number of
hours each year. There can be no assurance, however, that the
Joint Ventures will not experience difficulty in enforcing
take or pay contract obligations or such dispatch contract
obligations if electric power in an area proves not to be
needed by the affected power purchaser and dispatcher. The
term "dispatch" refers to the schedule of production for all
the generating units on a power system, which generally varies
from moment to moment to match production with demand. As a
verb, "dispatch" means to direct a plant to run.
Significant Participation in Operational Management. The
Company seeks to obtain, and has obtained in the case of the
Current Projects and the Potential Projects, significant
rights to participate in major decisions of the project
companies that own the power plants. The Company typically
exerts its influence through directors appointed to the board
of directors of the project companies and by appointing either
the general manager of the power plants and/or a deputy
general manager in charge of finance or operations for the
power plants. Several of the Company's officers have
significant prior experience with AES in the development and
operation of power plants in other countries. The Company is
also developing a core group of local managers who will be
focused on constructing and operating projects in China.
AES's Capabilities. The Company draws on AES's people and
expertise in development, construction oversight and operation
of independent electric power generation projects. In
particular, the Company draws on AES's extensive experience
operating coal-fired power plants around the world. The
Company believes this relationship has provided it with a
competitive advantage in the China power market, which relies
primarily on coal-fired power plants.
Principles and Practices
A core part of the AES Chigen culture is a commitment to
"shared principles." The Company tries to adhere to these principles -- even
though doing so might result in diminished or foregone opportunities.
These principles are:
Integrity - The Company will strive to act with integrity, or
"wholeness." The Company will seek to honor its commitments.
The goal is that the things people say and do in all parts of
the Company should fit together with truth and consistency.
Fairness - The Company wants to treat fairly its people, its
customers, its suppliers, its shareholders, governments and
the communities in which it operates. Defining what is fair is
often difficult, but the Company believes it is helpful to
routinely question the relative fairness of alternative
courses of action.
Fun - The Company desires that people employed by the Company
and those people with whom the Company interacts have fun in
their work. The Company's goal is to create and maintain an
environment in which each person can flourish in the use of
his or her gifts and skills and thereby enjoy the time spent
at the Company.
Social Responsibility - The Company believes that the Company
has a responsibility to be involved in projects that provide
social benefits, such as lower costs to customers, a high
degree of safety and reliability, increased employment and a
cleaner environment.
The Company and AES seek to adhere to these principles not as
a means to achieve economic success, but because adherence is a worthwhile goal
in and of itself. However, if the Company and AES perceive a conflict between
these principles and profits, the Company and AES will try to adhere to these
principles -- even though doing so might result in diminished or foregone
opportunities.
Project Specific Strategies
Subject to the limitations that would be imposed by the AES
Debt Covenants following the Amalgamation, the Company will continue to seek,
when evaluating or developing project opportunities in the PRC, to utilize
project structures and contractual terms which generally have been proven to be
effective in international independent power projects for reducing risks,
obtaining financing and achieving commercially sound projects. The Company
realizes, however, that projects in China will often differ significantly from
the typical project finance model. In addition, the Company recognizes that,
because foreign investment in PRC power projects is in its early stages, in
order to finalize binding contractual documentation with respect to any project,
the Company is sometimes required or elects to assume certain risks not
typically assumed by project sponsors in an international independent power
project. These risks may be associated with construction (such as completion
risk), operations (such as fuel supply or transportation risks), foreign
exchange convertibility and, to the extent that the Company cannot negotiate
contracts that adjust its revenues for changes in exchange rates, exchange rate
fluctuations. Accordingly, while the Company utilizes, where possible, the
strategies summarized below, it also seeks to maintain flexibility in
negotiations and to adopt alternative strategies where appropriate.
Long-Term Power Purchase. It is planned that each project
company in which the Company invests will sell electricity
under one or more long-term power purchase contracts to
regional, provincial, municipal or county electric power
organizations, including power bureaus and electricity
management offices, or industrial customers which the Company
believes will be able to perform their obligations under the
power purchase contracts. It is planned that the power
purchaser will be required to purchase a specified minimum
amount of electricity generated by the plant during the term
of the power purchase contract based on an agreed pricing
formula. These tariff formulas are designed, based on the
minimum take obligation of the power purchaser, to be
sufficient to pay the operating expenses and the financing
costs of the project and to enable the Company to realize a
return on its investment. The Company attempts to negotiate
power purchase contracts that contain provisions requiring the
purchaser to purchase a specified minimum number of kilowatt
hours ("kWh") or to make specified minimum payments even if
the power is not dispatched. The Company seeks to include in
its power purchase contracts incentives to encourage the
purchase of additional kWh over an agreed minimum amount. The
Company attempts, whenever possible, to structure changes in
the revenue component of a power purchase contract to
correspond, as closely as possible, to changes in operating
(primarily fuel) and capital costs of a power plant and
fluctuations in foreign exchange rates.
Construction and Equipment Procurement. The Company seeks to
arrange construction and equipment procurement contracts with
experienced, creditworthy international or Chinese contractors
and suppliers. In a typical international independent power
project one contractor assumes responsibility under a
fixed-price, fixed-schedule turnkey contract for the design,
engineering, equipment procurement, construction,
installation, commissioning, staff training and start-up of a
project. While the Company seeks this type of arrangement when
possible, such a turnkey arrangement is often not available
for PRC power projects. Therefore, where possible, the Company
seeks to have its project companies enter into arrangements
with construction and equipment procurement consortiums in
which the various major responsibilities typically assumed by
one turnkey contractor in the international model are
allocated to individual members of the consortium. The Company
seeks to negotiate contracts pursuant to which equipment
suppliers and contractors agree to pay liquidated damages for
delays and non-performance. The Company also attempts, where
appropriate, to utilize established foreign equipment
manufacturers who are able to provide warranties and service
contracts for their equipment as well as to utilize proven
Chinese technology from well-established Chinese equipment
manufacturers. In some cases, the Company may elect to have
its Joint Ventures manage the construction directly, possibly
with the assistance of reputable Chinese or international
engineering companies.
The construction of an electric power generation plant,
including its ancillary facilities such as a transmission line
or substation, may be adversely affected by many factors
commonly associated with the construction of infrastructure
projects, including shortages of equipment, materials and
labor, as well as labor disputes, adverse weather conditions,
natural disasters, accidents and other unforeseen
circumstances and problems. Any of these could cause
completion delays and cost overruns. Delays in obtaining
requisite licenses, permits or approvals from government
agencies or authorities could also increase the cost or delay
or prevent the commercial operation of a project. Construction
delays can result in the loss or delayed receipt of revenues
and, if completion is delayed beyond the completion date
specified in the power purchase contract, the payment of
penalties. Additionally, the failure to complete construction
according to specifications can result in reduced plant
efficiency, higher operating costs and reduced or delayed
earnings.
AES Chigen's Joint Ventures all rely on PRC contractors for
the construction of their electric power plants. While there
are a number of PRC contractors with substantial construction
experience, there are only a limited number that have
experience constructing plants on a turnkey basis. In only a
few cases has AES Chigen been able to enter into a turnkey
contract with a Chinese contractor which includes a guaranteed
fixed price and/or contractor obligations to pay liquidated
damages for delays in completion or for shortfalls in
performance. In the case of one project, AES Chigen's Joint
Venture has experienced delays in installation and defects in
the quality of equipment. The delays have been mitigated by
the payment of damages by the contractor. AES Chigen seeks to
mitigate construction risk in a number of ways: carefully
choosing its contractors; closely supervising the construction
of its projects or retaining internationally recognized
construction managers to supervise construction; and, in some
cases, by utilizing established foreign equipment
manufacturers and vendors who are able to directly pass
through to the Joint Ventures their equipment and performance
warranties or, where appropriate, by utilizing proven Chinese
equipment and technology. Despite such mitigation efforts, no
assurance can be given that AES Chigen's Joint Ventures will
not experience construction delays or difficulties, or that
any such delays or difficulties will not have a material
adverse effect on the operations of AES Chigen's Joint
Ventures.
Fuel Supply. Whenever possible, fuel for the Company's
operating plants is purchased under long-term supply contracts
with suppliers that have sufficient, and preferably dedicated,
reserves of fuel stock to meet the project's operating
requirements and that have economic interests aligned with the
joint venture partners. In certain circumstances, including
where a plant is located in close proximity to a reliable fuel
source, the Company may deem it advisable for a project
company to purchase its fuel on the spot market in order to
take advantage of lower fuel prices. In such circumstances,
the Company may contract with fuel brokers or government
companies with appropriate guarantees or other performance
supports. In other circumstances, the power purchaser may be
obligated to supply a project's fuel requirements. The Company
attempts, when possible, to have its fuel supply contracts set
out delivery and testing procedures and penalties for delays
or non-performance. Approval of a project by the State
Planning Commission of the Central Government ("State Planning
Commission" or "SPC"), which is required for larger projects,
ordinarily includes a provision for the allocation of fuel,
which reduces the fuel supply risk for such projects.
Most of the Joint Ventures' power projects utilize coal, fuel
oils or natural gas for the generation of electricity. The
power purchase contracts which have been entered into by the
Joint Ventures provide for a pass-through to the power
purchasers of increases in the cost of fuel. In the case of
most of the Joint Ventures, under normal circumstances, the
procedures of the local government pricing bureaus allow
tariff adjustments reflecting fuel cost changes to be made
only once a year. As a result, in these cases AES Chigen's
Joint Ventures may not be able to receive compensation for
increased fuel costs until sometime after the date they are
incurred.
Fuel Transportation. Whenever possible, the Company arranges
with a carrier for transportation of fuel from the fuel source
to the Company's operating plants under long-term
transportation contracts or the Company will obtain
satisfactory assurances that transportation services will be
available to the project. Due to the underdeveloped
transportation infrastructure in China, the Company sometimes
considers more favorably projects located in fuel-rich
regions, such as projects located near coal mines. Approval of
a project by the State Planning Commission, which is required
for larger projects, ordinarily includes a provision for fuel
transportation, which reduces the fuel transportation risk for
such projects.
For coal projects which are not "mine mouth" projects, coal
must be supplied to the project site from the interior
provinces of China. The affected Joint Ventures seek to
mitigate this transportation risk by entering into long term
contracts for the transportation of coal. However, where rail
is utilized as the means of coal transportation, the coal
transporters may experience significant delays due to the
limited capacity of the PRC's rail system. Because of this
lack of capacity, the Central Government rations the
allocation of rail cars. In one project which requires the
transportation of coal by rail, AES Chigen's Joint Venture has
obtained an administrative allocation of rail cars from the
Central Government. However, there can be no assurance that a
satisfactory allocation of rail cars will be available in all
future cases to ensure that the coal supply requirements of
the affected projects will be timely met.
Electricity Transmission. The Chinese electric power
transmission system is not fully interconnected. Some parts of
the transmission system contain isolated grids. Three of AES
Chigen's Joint Ventures are located in areas served by
isolated transmission grids. As a result, if demand in these
areas is less than forecasted, it may be difficult or
impossible for the affected Joint Venture to transmit the
project's available power to a region which has a demand for
it. The Company does not intend to bear the risk of the
construction of transmission lines. Although PRC law prohibits
foreign investment enterprises from constructing, owning or
maintaining a transmission line, in many cases, it may be
necessary for a project company to finance the construction of
the transmission line which is required to connect the power
plant to a nearby electric power grid. In these cases, in
addition to providing financing, the Company will seek to
structure its power purchase contracts in a manner which
places the risk of delays and failure to complete the
construction of the transmission line on the power purchaser.
In order to take advantage of a broader market and an
additional power purchaser, one of the Joint Ventures is
planning to incur additional costs to build a low-voltage
local transmission line to interconnect its power plant with a
larger grid.
Government Approvals. The Company seeks to ensure that its
joint ventures and joint venture partners obtain and comply
with all PRC approvals and laws and regulations and that
project budgets reflect compliance with all then-existing and
applicable PRC environmental protection laws and regulations.
In each case prior to funding its equity portion of the
registered capital of a joint venture, the Company seeks to
obtain a legal opinion from counsel qualified to practice PRC
law regarding, among other things, the validity and
sufficiency of all approvals for the project and joint
venture. The Company also seeks to receive letters of support
from the local governments in areas in which its projects are
located.
Foreign Exchange. The Company attempts to mitigate its foreign
exchange risks by structuring its joint venture contracts and
power purchase contracts to include hedges which provide for
adjustments in equity distributions to joint venture partners
and in electricity payments for changes in the exchange rate
between the Renminbi Yuan, the lawful currency of the PRC
("Renminbi," and "RMB(Y)"), and the US dollar. In instances in
which the Company seeks State Planning Commission approvals
for a project, the Company will also seek to receive an
approval which includes an allocation of foreign exchange to
the project.
Power Plant Management. The Company wants its power plants to
be managed efficiently, as well as in a manner consistent with
Company principles and practices. In pursuit of this goal, the
Company seeks to appoint experienced general managers and/or
deputy general managers with significant decision making
authority at the power plants and to install operating systems
at the power plants which are consistent with AES's operating
approach. The Company also seeks to have key members of a
plant's management team, including the general manager and
deputy general manager, acquire specific AES experience by
working at AES facilities worldwide.
The operation of an electric power generation plant may be
adversely affected by many factors such as the breakdown or
failure of equipment or processes, performance below expected
levels of output or efficiency, labor disputes, operational
errors, natural disasters, and the need to comply with the
directions of the relevant government authorities, the
dispatcher and power purchaser of a power plant. In addition,
such operation may be hampered by insufficient or poor quality
fuel caused by either inadequate supply or transportation or
arrangements therefor.
AES Chigen is not the operator of any of its power plants
either directly or by means of traditional operation and
maintenance agreements with internationally recognized power
plant operators. In some cases, AES Chigen's Joint Ventures
have contracted with the power purchaser to operate a power
plant. In such instances, the power purchaser is obligated
under the power purchase contract to purchase the annual
minimum quantity of electric power regardless of the power
plant being unavailable due to the fault of the operator. In
other cases, the Joint Ventures themselves are operating the
plant. In these instances, AES Chigen may affect the operation
of a power plant through the appointment of a general manager
and/or deputy general manager of the plant.
Insurance. The Company seeks to obtain insurance for its
projects from reputable insurance companies permitted to
insure projects in China for risks during construction and
operation, including business interruption insurance. The
Company typically retains an international insurance
consultant to advise the Company on the insurance coverage and
limits which are appropriate for the relevant hazards. Where
appropriate, the Company may seek to obtain Multilateral
Investment Guarantee Agency insurance coverage of certain
political risks associated with the PRC.
Water Usage Rights. The Company seeks to obtain long-term
water usage rights for the Company's operating plants.
In all of its projects, AES Chigen and its Joint Ventures are
relying on the reliability and creditworthiness of PRC entities such as its
partners, contractors, customers, suppliers, operators, guarantors, lenders and
others who are parties to agreements with AES Chigen or its Joint Ventures.
While AES Chigen believes that these counterparties have the ability to perform
and will perform their obligations, the reliability and creditworthiness of PRC
entities are difficult to ascertain. In most cases, AES Chigen, in assessing the
reliability and credit standing of counterparties, is relying on financial or
other information provided to AES Chigen or its Joint Ventures by such parties
or others, or from information and sources publicly available in the PRC. AES
Chigen can offer no assurance that this information is accurate or that these
counterparties will meet their contractual obligations. The failure of any one
of these counterparties to fulfill its obligations to a Joint Venture could have
a substantial negative impact on such Joint Venture's operations.
The People's Republic of China
The statistics set out in this section have been extracted
from various international organization, government and private publications.
The Company makes no representation as to the accuracy of the information
contained in this section. Furthermore, no representation is made that any
correlation exists between China or its economy in general and the performance
of the Company or the Company's Joint Ventures. Although statistics with respect
to the economy of China generally accord with observed economic trends, some
statistics may not correspond to Western measures, or may be flawed by
ineffective collection methods or other problems. Due to such factors,
statistical information regarding the economy of China may be inaccurate or not
comparable to statistical information with respect to other economies.
General
Since 1978, the Central Government and local governments of
China (together with the Central Government, the "PRC Government") have been
implementing market oriented economic reforms in an effort to revitalize the
PRC's economy and improve its citizens' standard of living. The reforms have
marked a shift from a more rigid, centrally-planned economy to a more mixed
economy in which market forces play an increased role and the government has a
reduced role. Enterprises owned or under the administrative control of the
Central Government ("State-owned") still constitute the largest sector of the
economy, but implementation of the economic reforms has led to, among other
things, the delegation to managers of enterprises of more decision-making powers
and responsibilities regarding matters such as production, marketing, use of
funds and employment of people. Other reform measures have included the
conversion of selected State-owned enterprises into joint stock limited
companies which have issued shares to the public and private investors
(including their employees); the gradual reduction of PRC Government control
over producer prices; and the designation of certain coastal areas and cities as
special economic development zones with greater local autonomy. The PRC
Government has also implemented policies designed to attract foreign investment
and technology. The PRC Government's reforms have resulted in significant
economic growth. The gross domestic product of China increased at an average
annual rate of 12.1% during the period from 1991 to 1995. The growth rate of
gross domestic product was 9.7%.
General economic conditions in the PRC could have a
significant impact on the business prospects of AES Chigen. The economy of the
PRC differs from the economies of most countries belonging to the Organization
for Economic Co-operation and Development in such respects as structure,
government involvement, level of development, growth rate, capital reinvestment,
allocation of resources, self-sufficiency, rate of inflation and balance of
payments position, among others. For over 40 years, the economy of the PRC has
been primarily a planned economy characterized by state ownership and control of
productive assets and the management of such assets through a series of economic
and social development plans. Although the majority of the PRC's productive
assets are still owned by the PRC Government, the adoption of economic reform
policies since 1978 has resulted in a gradual reduction in the role of state
economic plans in the allocation of resources, pricing and management of such
assets, an increased emphasis on the utilization of market forces, and rapid
growth in the PRC economy. However, such growth has been uneven among various
regions of the country and among various sectors of the economy. The success of
AES Chigen depends in part on the continued economic growth of the regions where
the Joint Ventures are located. At times, the economic reform measures adopted
by the PRC Government may be inconsistent or ineffectual, and therefore the
Joint Ventures may not be able to enjoy the potential benefits of such reforms.
Further, these measures may be adjusted or modified in particular ways in
particular areas, possibly resulting in such economic liberalization measures
being inconsistent from time to time or from industry to industry or across
different regions of the PRC.
AES Chigen may also be adversely affected by changes in the
political and social conditions in the PRC, and by changes in governmental
policies with respect to laws and regulations, methods to address inflation,
currency conversion, rates and methods of taxation, or the method by which
electricity tariffs are set and approved, among other things. While the PRC
Government is expected to continue its economic reform policies, many of the
reforms are new or experimental and may be refined or changed. It is also
possible that a change in the PRC Government leadership could lead to changes in
economic policy.
The PRC economy has experienced rapid growth in the past five
years. This growth has also been accompanied by rising inflation, which reached
an annual rate of 21.7% in 1994. The PRC Government has implemented policies
from time to time to restrain the rate of such economic growth and control
inflation in order to achieve coordinated economic development. In July 1993,
the Central Government began implementation of a number of austerity measures to
control economic growth and curb inflation, including increasing interest rates
on bank loans and deposits and postponing certain planned price reforms. While
inflation has since moderated to 6.1% for 1996, there can be no assurance that
such austerity measures will will not be discontinued or result in future severe
dislocations in the PRC economy. Austerity measures intended to slow economic
growth may affect the demand for electricity and the prospects for the financing
of some of the Joint Ventures. Depending on the nature and implementation of
such additional measures, the Joint Ventures' economic prospects at times may be
adversely affected through, among other possible measures, placing additional
controls on the increase of electric power rates. Any such development could
also adversely affect the Joint Ventures' operations or the ability of the Joint
Ventures' customers to honor their obligations under their power purchase
contracts, which could adversely affect AES Chigen.
A significant portion of the economic activity in the PRC is
related to exports and may therefore be affected by developments in the
economies of the PRC's principal trading partners. Trade sanctions imposed by
the PRC's main trading partners, including the revocation or conditional
extension by the United States of China's Most Favored Nation trading status,
could adversely affect the trade and economic development of the PRC and the
ability of the Joint Ventures' customers to honor their obligations under their
power purchase contracts with the Joint Ventures. In addition, current or future
disputes between the PRC and its main trading partners over specific trade
issues, such as intellectual property, the balance of trade or other political
issues, such as regional affairs or arms sales policies, could lead to the
imposition of trade or other sanctions which could adversely affect the demand
for power in the PRC.
China's legal system is relatively new, and the government is
still in the process of developing a comprehensive system of laws, a process
that has been ongoing since 1979. Considerable progress has been made in the
promulgation of laws and regulations dealing with economic matters such as
corporate organization and governance, foreign investment, commerce, taxation
and trade. Such legislation has significantly enhanced the protection afforded
to foreign investors. However, foreign investors may be adversely affected by
new laws, changes to existing laws (or interpretations thereof) and preemption
of provincial or local regulations by national laws or regulations. Moreover,
experience with respect to the implementation, interpretation and enforcement of
such laws and regulations is limited. Such administrative and judicial
interpretation and implementation and the enforcement of commercial claims and
resolution of commercial disputes may be subject to the exercise of considerable
discretion by both administrative and judicial organs and may be influenced by
external forces unrelated to the legal merits of a particular matter or dispute.
Even where adequate laws exist and contractual terms are clearly stated, there
can be no assurance that AES Chigen or a Joint Venture will obtain swift and
equitable enforcement of its rights.
The China Power Market
At the end of 1995, China had an aggregate installed electric
power generation capacity of approximately 217,220 MW, making China's electric
power generation capacity the second largest in the world. In 1995, about 17,323
MW of installed capacity was added. China's electric power industry produced
approximately 1,007 terawatt (one million megawatts) hours ("TWh") of
electricity in 1995. This represents an addition of nearly 80 TWh from 1994,
making China's electricity industry one of the fastest growing in the world.
Despite its size, China's electric power system is inadequate to meet current
and expected demand, and the consequent shortage is one of the major obstacles
to economic growth in the PRC. In addition, approximately 110 million people do
not yet have access to electricity. The following table highlights this
situation on a comparative basis, indicating with respect to the PRC that, while
its economic growth rate is among the highest of the countries mentioned, the
PRC is considerably below average in installed capacity and consumption of
electricity.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1994 1994
Per Capita Per Capita Per Capita
Installed Electricity GDP --
Capacity(1) Consumption(1) Nominal Real GDP Growth Rate% (3)
--------------------------------------------------------------
(Watts) (kWh) US$(2) 1991 1992 1993 1994 1995 1996
-------------- -------------- ----------- ---- ---- ---- ---- ---- ----
(projected)
- --------------
U.S 2,812 11,256 25,850 (1.0) 2.7 2.7 3.5 2.0 2.4
- --------------
Japan 1,552 6,837 36,845 4.0 1.1 1.1 0.5 0.9 3.5
- --------------
Singapore 1,222 5,696 16,700 6.7 6.0 10.1 10.1 8.9 7.5
- --------------
Hong Kong 1,492 4,546 21,750 5.1 6.3 6.4 5.4 5.0 5.0
- --------------
South Korea 687 3,261 8,528 9.1 5.1 5.8 8.6 9.0 7.2
- --------------
Malaysia 352 1,669 3,627 8.6 7.8 8.3 9.2 9.5 8.8
- --------------
Thailand 233 1,080 2,423 8.1 8.1 8.3 8.8 8.7 8.3
- --------------
PRC 153 671 430 9.3 14.2 13.5 12.6 10.2 9.0
- --------------
Philippines 101 290 937 (0.6) 0.3 2.1 4.4 4.8 5.9
- --------------
Indonesia 83 278 874 8.9 7.2 7.3 7.5 8.1 7.8
</TABLE>
- ---------------------------
Sources:
(1) U.S. Department of Energy, Energy Information Administration, Office of
Energy Markets and End Use, International Database (August 1996).
(2) U.S. Department of Commerce, Economics and Statistics Administration,
Office of Business Analysis, National Data Bank (August 1996).
(3) International Monetary Fund, World Economic Outlook (October 1996).
Developments in the PRC's Power Industry
Under the PRC's Eighth Five-Year Plan (1991-1995), increasing
demands for electricity resulted in the rapid increase in the PRC's total annual
electricity generation. A total of 65,747 MW of electric power generating
capacity was installed during the five-year period from 1991-1995, representing
an average annual increase of more than 16,000 MW. Notwithstanding such
increase, the PRC's average annual growth rate for electricity generation
between 1991 and 1995 (approximately 10.4%) did not keep pace with the average
annual growth rate of the PRC's Gross Domestic Product ("GDP") (approximately
12.1%) during such time. The following table sets forth figures for installed
capacity, increases in installed capacity, electricity generation and percentage
increases in electric power generation in China for the years 1986 to 1995.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Increase in Increase in
Installed Installed Electricity Electricity
Capacity Capacity Generation Generation
Year (MW) (MW) (TWh) (%)
------------------- ---------- ----------- ----------- -------------
1986 93,818.5 6,795.3 449.6 9.5%
1987 102,897.0 9,078.5 497.3 10.6
1988 115,497.1 12,600.1 545.2 9.6
1989 126,638.6 11,141.5 584.8 7.3
1990 137,890.0 11,251.4 621.2 6.3
1991 151,473.1 13,583.1 677.5 9.0
1992 166,532.4 15,059.3 754.2 11.3
1993 182,910.7 16,378.3 836.4 10.9
1994 199,897.2 16,986.5 927.9 10.9
1995 (estimated)(1) 217,220.0 17,322.8 1,007.0 8.5
</TABLE>
- ---------------------------
Source: Ministry of Electric Power, Electric Power Industry in China (1996).
(1) Based on various published statements from MOEP officials.
Based on statements by the Ministry of Electric Power ("MOEP"
or the "Ministry of Electric Power"), China will need an average of
approximately 16,000 MW of new electric generating capacity annually through the
year 2000 (or an aggregate of approximately 80,000 MW of new electric generating
capacity in the Ninth Five-Year Plan period ending 2000). Since domestic savings
are insufficient to fund the PRC's requirements, the Ministry of Electric Power
has adopted plans to attract foreign capital and projects that 20% of the
capital for power industry development will come from foreign investors, 40%
from local governments and enterprises and the remaining 40% from the Central
Government during the five-year period ending December 31, 2000. MOEP estimates
that approximately $20 billion of overseas investment will be needed to reach
the MOEP's target of increasing installed capacity to 290,000 MW by 2000.
Energy Resources
China's main energy resources for power generation, coal and
hydropower, are not evenly dispersed geographically. Two-thirds of China's coal
reserves are located in the northern provinces of Shanxi, Shaanxi and the Inner
Mongolia Autonomous Region, and more than 90% of the PRC's hydropower resources
are concentrated in the western part of the country. Because China's
economically developed regions are principally located in the eastern and
southern coastal areas, the Ministry of Electric Power plans to expand the
interconnected power networks by installing high voltage transmission lines to
facilitate the transmission of power from the west to the east, as well as from
the north to the south. The Ministry of Electric Power has also indicated that
an increased focus should be placed on coal-fired electric power generating
projects which are located in close proximity to coal mines. The Company's
proposed Yangcheng Sun City power plant is an example of such a project. See
"Description of the Potential Projects -- Yangcheng Sun City."
China is rich in coal resources, with proven coal reserves of
966.7 billion tons. The PRC leads the world in coal production, with 1995
production of approximately 1.3 billion tons. Coal accounted for approximately
75% of electricity production in 1995, and approximately 77% of aggregate
domestic commercial energy consumption. The PRC intends to continue to rely on
coal as its primary fuel resource for electric power generation. However, the
PRC is also increasing its utilization of other fuels. Of the 16,987 MW of
electric power generation capacity added in 1994, hydropower accounted for
approximately 24.0%, nuclear power accounted for approximately 14.0% and fossil
fuels accounted for approximately 61.0%.
Organization of the PRC's Electric Power Industry
The PRC's electricity industry is controlled by the Ministry
of Electric Power, which was established by the Eighth National People's
Congress at its first session held in March 1993. Prior to March 1993, the
electric power industry was under the jurisdiction of the Ministry of Energy,
which itself was created in 1988 from parts of the former ministries which
oversaw the coal industry, the nuclear industry, the petroleum industry, water
resources and electric power.
The Ministry of Electric Power is responsible for formulating
development strategies and policies, including: investment, technical and
production and consumption policies relating to electric power development;
formulating unified electric power industry planning in collaboration with the
State Planning Commission and other government agencies; overseeing the
implementation of such planning; supervising the implementation of related
national policies, decrees and plans; and providing services to electric power
enterprises.
The Ministry of Electric Power manages five interprovincial
power groups ("Regional Power Groups") and ten provincial power bureaus. The
Regional Power Groups (i) manage their respective regional power grids, (ii)
dispatch, either directly or indirectly through lower level power bureaus, the
power plants connected to such grids and (iii) supervise the power bureaus at
lower administrative levels (primarily provincial but also certain large
municipalities and other areas). The Regional Power Groups also act through
power companies which develop, construct, own and operate certain power plants
and transmission facilities within their respective jurisdictions.
A similar structure exists for the provincial power bureaus
under the Regional Power Groups and the ten provincial power bureaus directly
managed by the Ministry of Electric Power. Each provincial power bureau manages
its provincial power grid and dispatches the power plants connected to such grid
to meet local demand. Many provincial power bureaus also act through power
companies which operate certain power plants and transmission facilities within
their respective provinces. Counties and municipalities directly under the
administration of the provinces may have power bureaus which perform, under the
administration of the power bureau at the next higher level of government,
similar functions within their respective jurisdictions.
The key personnel of the Regional Power Groups are appointed
by the Ministry of Electric Power, and the key personnel of the provincial power
bureaus are appointed by the provincial governments in consultation with the
Ministry of Electric Power.
In January 1996, the China National Power Corporation ("CNPC")
and the China Federation of Power Enterprises ("CFPE") were established pursuant
to the Central Government's policy to separate the regulatory and commercial
functions of the electric power industry. The PRC Government has announced plans
that the Ministry of Electric Power will be dissolved and its functions
transferred to CFPE and CNPC. CFPE will assume the Ministry of Electric Power's
regulatory functions. CNPC will serve as the PRC's principal investor in and/or
operator of wholly or partially State-owned facilities in the electric power
industry. CNPC also will be responsible for the operation of interregional
transmission facilities and the development of a national power grid.
Investment in the Electric Power Industry
Prior to 1985, virtually all investment in China's electric
power industry was financed by the Central Government. In 1985, the Central
Government began to implement a policy of using a variety of financing methods
to develop the PRC's electric power industry. Such policies included: (i)
allowing local governments to participate in the development and ownership of
power generating facilities in their areas, (ii) loaning (as opposed to directly
allocating) funds to local and provincial power bureaus for the development and
construction of such projects, and (iii) permitting foreign investment and
participation in the development and operation of power plants in China. Hong
Kong investment companies and developers were the first foreign companies to
invest in the industry. More recently, however, developers and investors from
other countries have begun pursuing investment opportunities in various electric
power projects in China. Between 1979 and 1995, 77 large and medium-sized
foreign-invested power projects were constructed, with a total installed
capacity of 49,740 MW, of which 24,290 MW had been put into operation by the end
of 1995. The total contracted foreign investment in power projects has reached
$17.2 billion, of which $11.5 billion had been invested by the end of 1995. In
1995, China launched the first Central Government sponsored pilot build, own and
transfer program to attract foreign investment in infrastructure projects. The
first project under this competitive bidding program is the proposed $600
million, 700 MW coal-fired Laibin project in Laibin County, Guangxi Zhuang
Autonomous Region.
In 1988, as part of the system of investment reform in power
development, the State Council of the PRC (the "State Council"), the highest
administrative organ of the Central Government, organized the State Energy
Investment Corporation (the "SEIC") to represent the PRC Government in the
development and financing of large power plants. Also in 1988, the China Huaneng
Group was formed primarily as a developer and operator of power plants. In March
1994, the State Council announced the absorption of the SEIC into the State
Development Bank ("State Development Bank"), as well as its intention to
transfer the SEIC's personnel to various Central Government enterprises and to
the State Development Investment Company under the State Development Bank.
To finance the expansion of the electric power industry, the
State Council, in 1995, approved the establishment of China Power Investment
Corporation ("CPIC") in China and China Power International Holdings Limited
("CPI"), CPIC's wholly owned subsidiary, in Hong Kong. CPIC was established by
the Ministry of Electric Power to raise funds in the international capital
markets to invest in PRC power projects. CPI has been authorized to sell
interests in State-owned power utilities, issue debt, establish investment funds
for the electric power industry and raise foreign funds for investment in the
electric power industry. CPI is one of the Company's Joint Venture partners in
the Wuhu Grassy Lake project and one of the Company's project partners in the
Nanpu Southern Delta project. See "Description of the Current Projects" and
"Description of the Potential Projects."
With appropriate PRC Government approvals, power bureaus may
form directly managed power companies, which may develop, construct, own and
operate power plants in their respective territories.
Tariff Setting Mechanisms
For power plants that the Ministry of Electric Power directly
or indirectly manages, the tariff is generally set under the plans devised and
implemented by the PRC Government in relation to the economic and social
development of the PRC ("State Plan"). The tariff varies according to the
category and location of the users. Thus, most electricity has been purchased
from power plants at State Plan tariffs. These State Plan tariffs have been
maintained at a low level, due to subsidization by the PRC Government. One of
the stated goals of the Ministry of Electric Power is to reform power pricing
consistent with the development of the market economy in the PRC. The Ministry
of Electric Power has commenced the trial implementation of a pricing policy
which charges consumers higher tariffs for peak load periods and lower tariffs
for off-peak load periods. Allowing the market to influence the setting of power
tariffs is intended to provide incentives for greater efficiency in energy
production, reduction of energy use per unit of industrial output and promotion
of conservation technologies. As of 1994, more than ten power grids have
implemented this pricing policy.
The tariffs of sino-foreign joint venture power projects
generally have been established by negotiations among the sino-foreign joint
ventures, the prospective power purchasers, the relevant local governments,
planning commissions, pricing bureaus and power bureaus. The tariffs or tariff
formulas are typically set forth in power purchase contracts. The pricing
bureaus are responsible for approving and adjusting the tariffs, usually on an
annual basis.
Electric Power Law
In April 1996, a new national law governing the electric power
sector in the PRC came into effect. The law is intended to protect the
legitimate interests of investors, operators and consumers. It provides a
framework within which the PRC Government intends to guide investment in the
electric power sector. The law also establishes, among other things, broad
principles with respect to the methodology of calculating and setting electric
power tariffs. The principles state that electricity tariffs shall be based on
reasonable compensation for the costs of generation and payment of taxes, the
recovery of reasonable profits and the promotion of the construction of electric
power generating facilities. Detailed regulation with respect to tariff
calculation and tariff setting are expected to be promulgated by the Ministry of
Electric Power in the near future. The impact of the new law will depend on its
implementing regulations and the manner in which the law is interpreted.
Transmission and Dispatch
The main system for the dispatch, transmission and
distribution of electric power in China consists of the five interprovincial
power grids managed by their respective Regional Power Groups, one
interprovincial power grid, which consists of four semi-independent provincial
grids managed by their respective four provincial power bureaus, and the six
independent provincial power grids managed by their respective provincial power
bureaus. The table below shows the aggregate installed capacity of the power
plants connected to the grids managed by such power bureaus and the total
electricity generated on those grids in 1994.
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1994
Installed Total Electricity
Capacity Generation
Power Grids (MW) (TWh)
--------------------------- --------- ------------------
East China Power Grid 31,673.2 164.358
Northeast Power Grid 26,534.4 124.531
Central China Power Grid 27,602.2 132.047
North China Power Grid 27,146.4 140.087
Northwest Power Grid 11,483.0 60.423
Guangdong Power Grid(1) 19,009.7 73.916
Shandong Power Grid 11,518.2 67.183
Sichuan Power Grid 10,095.8 47.328
Guangxi Power Grid(1) 4,230.7 16.854
Fujian Power Grid 4,960.3 21.605
Yunnan Power Grid(1) 4,082.9 16.939
Guizhou Power Grid(1) 3,253.8 15.206
Xinjiang Autonomous Region 2,865.1 10.617
Hainan Power Grid 1,057.3 2.869
Tibet Autonomous Region 176.6 0.427
</TABLE>
- ---------------------------
Source: Ministry of Electric Power, Electric Power Industry in China (1996).
(1) Part of the Southern Interconnected Power Grid established in 1993.
In 1994, the PRC had almost 540,000 kilometers of transmission
lines with a capacity of 35 kilovolts ("kV") or greater. The power grids
primarily use 500, 330, 220 and 110 kV transmission lines.
All electricity produced in China is dispatched by the power
bureaus, except for that generated by units not connected to a grid. The grids
and the electric power dispatched to each grid are administered by dispatch
centers ("Dispatch Centers") operated by the power bureaus. In November 1993,
the State Council issued the Administrative Regulations Concerning Grid Dispatch
("Dispatch Regulations"), the first nationwide regulations in China governing
the dispatch of electric power. The Dispatch Regulations are intended to help
the PRC achieve a more efficient and rational dispatch of electric power. Under
the Dispatch Regulations, Dispatch Centers were established at each of five
levels: the National Dispatch Center, the Dispatch Centers of the Regional Power
Groups, the Dispatch Centers of the provincial power bureaus, the Dispatch
Centers of the power bureaus of municipalities under provinces and the Dispatch
Centers of the county power bureaus. Pursuant to the principles of unified
dispatch, set forth in the Dispatch Regulations, Dispatch Centers at lower
levels are required to comply with the dispatch instructions of higher level
Dispatch Centers.
Dispatch Centers are charged with setting production levels
for the various power plants connected to the grid. To effect this
determination, each power plant receives daily from its local Dispatch Center an
expected hour-by-hour output schedule for the following day, based on expected
demand, the weather and other factors. The Dispatch Centers must dispatch
electric power according to, among other things, (i) power supply agreements
entered into between a power bureau and certain large or primary electricity
customers, where such agreements take into account the electric power generation
and consumption plans formulated annually by the PRC Government and set forth in
the State Plan, (ii) agreements entered into between a Dispatch Center and each
power plant subject to its dispatch, (iii) interconnection agreements between
power bureaus, and (iv) the actual conditions of the grid, including equipment
capabilities and safety reserve margins.
Peak and Seasonal Demands
The demand for electric power experiences fairly predictable
daily and other periodic cycles. The peak periods of power use in China are in
the early morning and evening when industrial, commercial and residential use is
highest. Peak power is in great demand in many cities which have rapid economic
growth. Because the PRC has a significant shortage of electric generating
capacity, the Dispatch Centers restrict the access to electricity of certain
users during peak periods of demand. As a result, the peak load demand in China
does not accurately reflect the extent of the total demand for power. While
power plants operate at less than full capacity during off-peak periods,
virtually all available power plants operate at or near full capacity during
peak periods, subject to grid-wide safety reserve margins. Four of the Joint
Ventures' power plants currently in operation or under construction -- Chengdu
Lotus City, Hefei Prosperity Lake, Wuxi Tin Hill and Yangchun Sun Spring -- are
designed to provide peaking power. The Company believes that each of these
plants will be able to take advantage of the demand for peak power in its
region. However, such plants are typically dispatched only after base load power
plants have been brought on-line and reached maximum capacity. If electric power
demand proves less than expected in an area, additional peak or base load power
may not be required in the area or may be required at lower than expected
levels.
Because the combustion of coal provides most of China's
space-heating needs and because air conditioning is not yet prevalent in most
regions of China, seasonal variations in the demand for electricity are less
than in many developed countries.
Joint Venture Companies
Foreign investment in the PRC may take a number of forms,
including joint ventures, wholly foreign-owned enterprises, branches of foreign
companies and shareholdings in limited liability companies and joint stock
limited companies. The Company currently invests through the joint venture
structure. The Company's current joint venture partners are PRC entities. The
Company anticipates that its future joint venture partners will be PRC entities
although non-Chinese partners may be included as partners, if appropriate. Joint
ventures between Chinese and foreign parties in the PRC take two basic forms:
equity joint ventures and cooperative joint ventures. Equity joint ventures are
governed by the Law of the People's Republic of China on Joint Ventures Using
Chinese and Foreign Investment and the implementing regulations related thereto.
Cooperative joint ventures are governed by the Law of the People's Republic of
China on Chinese and Foreign Cooperative Joint Venture Enterprises and the
implementing regulations related thereto ("Cooperative Joint Venture Law").
A cooperative joint venture may be structured as an entity
similar to a partnership (in which case it will not be separately qualified as a
legal person under Chinese law) or it may be structured as a limited liability
company (in which case it will be qualified as a legal person under Chinese
law). In most cases, cooperative joint ventures are formed as limited liability
companies. Cooperative joint ventures allow more flexibility than equity joint
ventures in structuring the terms of the joint venture arrangement. For example,
in a cooperative joint venture the rights of a party to share in the profits of
the joint venture need not correspond to its contributions to the registered
capital (equity) of the joint venture relative to other parties. In addition,
subject to government approval, the Cooperative Joint Venture Law permits
recovery of the foreign party's registered capital during the venture term.
However, the Cooperative Joint Venture Law requires that the fixed assets of the
joint venture be transferred to the Chinese parties without charge at the end of
the venture term if the foreign party recovers all of its equity capital during
the term of the venture. Cooperative joint ventures are subject to laws and
regulations with respect to such matters as the contribution of registered
capital, debt-equity leverage ratios, accounting, taxation, foreign exchange,
labor and liquidation and dissolution. Transfer of an interest in a cooperative
joint venture requires government approval and unanimous agreement among the
parties.
An equity joint venture enterprise is a distinct legal entity
established and registered as a limited liability company. The parties to an
equity joint venture have rights to share in the profits of the joint venture in
proportion to their respective contributions to the registered capital of the
joint venture. The operations of equity joint ventures are subject to many of
the same laws and regulations as cooperative joint ventures. Transfer of an
interest in an equity joint venture requires government approval and unanimous
agreement among the parties. In addition, in an equity joint venture, the
parties may not reduce the amount of their registered capital until the
expiration of the term of the joint venture or its dissolution in accordance
with PRC law.
Typically, dividends are paid by a joint venture in accordance
with the profit distribution plan adopted by the joint venture's board of
directors. Except as mentioned above, PRC laws and regulations provide that only
accounting profits (after payment of taxes, provision for losses for prior years
and contributions to special funds for enterprise expansion, employee welfare
and bonuses and a general reserve) are available for dividend distributions to
the parties of a joint venture.
In addition to contributions of registered capital, joint
ventures may be financed by debt, including shareholder loans. Foreign currency
loans to a joint venture, however, must be registered with the local branch of
the State Administration of Foreign Exchange of the Central Government ("State
Administration of Foreign Exchange" or "SAFE") in the location in which the
joint venture is situated.
Foreign investment enterprises are permitted under PRC laws
and regulations to convert their Renminbi earnings into foreign exchange for
certain purposes, including to pay their foreign currency obligations, to pay
dividends and other distributions to foreign shareholders and to make payment of
interest and principal with respect to foreign currency loans (both third party
and shareholder debt) incurred by the joint venture. To effect such conversions,
joint ventures must comply with certain procedures required by PRC laws and
regulations.
Government Approvals
China's electric power industry is highly regulated, both in
terms of operating existing power plants and developing new power projects. All
electric power projects in China and all foreign investments are required to
obtain approvals from one or more central, provincial or local government
authorities. While the regulations governing and the procedures for obtaining
approvals for foreign investment projects are generally well-understood, the
specific regulations and procedures for the approval of electric power projects
with foreign investment in the PRC and associated foreign investment enterprises
are not entirely transparent. Project approvals and foreign investment approvals
are required, but follow separate procedures. At the highest level, the right to
approve projects in the PRC is vested in the State Council. The State Council
has reserved to itself the authority to approve any project with a total
investment which exceeds $100 million. Pursuant to various internal PRC
Government notices, the State Council has delegated the authority to approve any
project with a total investment of less than $100 million to various ministries
and ministry level entities, including the SPC. The SPC and certain ministries
and other ministry level entities have, in turn, adopted a policy, also by
internal directives, of further delegating authority to approve projects with a
total investment of less than $30 million to provincial governments, provincial
level bureaus of the Central Government and certain municipalities. The project
approval authority of local governments is, therefore, generally limited to not
more than $30 million. Separate from project approval, foreign investment must
be approved by The Ministry of Foreign Trade and Economic Cooperation of the
Central Government ("Ministry of Foreign Trade and Economic Cooperation or
"MOFTEC"), or one of its departments at the provincial or local government
level, should the total investment amount be below $30 million. Accordingly,
foreign investment enterprises proposing to undertake projects must obtain
approvals for the projects from the appropriate government level planning
authorities and approvals for the foreign investment from a similar level
department of MOFTEC.
Generally, the approval process can be divided into three
major stages. First, following preliminary planning by the Chinese party and, in
some instances, initial negotiations with the foreign party and the execution of
a letter of intent by the parties, a project proposal (including a preliminary
feasibility study report and an environmental impact report) is submitted to the
appropriate level planning authorities for approval.
In the second stage, a more detailed joint feasibility study
report and a more detailed environmental impact report will be prepared. During
this stage, the foreign and local parties will negotiate and execute a legally
binding joint venture contract and articles of association. The approval of the
local government authorities for both the project and the foreign investment is
required. Additionally, as stated above, depending on the amount of total
investment in the proposed project and joint venture, the approval of the
Central Government may be required. Approval may also be required from other
central, provincial and local government ministries and agencies, with respect
to, among other matters, foreign exchange plans, allocations of fuel supplies
and related transportation, land use, tax preferences, electricity pricing, grid
access, operations and maintenance arrangements, loan and guarantee arrangements
and design and engineering arrangements.
In the final stage, following approval of the joint venture by
the relevant department of MOFTEC, the joint venture must register with and
obtain a preliminary business license from the State Administration of Industry
and Commerce ("SAIC") or a branch thereof. Following the completion of these
formalities, the parties are required to contribute their agreed upon registered
capital and, upon verification thereof, the joint venture is issued a permanent
business license by the SAIC.
The approval process outlined above could take several years.
Therefore, in some instances, the Company may pursue opportunities for
investments in power projects that are in advanced stages of development or for
which significant approvals have already been obtained or construction has
commenced or been completed.
Two of AES Chigen's power plants have been structured as
multiple projects and joint ventures, each project and joint venture with a
total investment below the $30 million threshold, and have obtained local
government approvals on this basis. It is possible that projects structured in
this fashion could be viewed by the Central Government approval authorities as a
single project. In several other cases, AES Chigen's projects and Joint Ventures
have obtained local government approvals on the basis of anticipated total
investments which were less than $30 million at the time the approvals were
obtained, but will, when construction is completed, exceed the $30 million
approval threshold. While it is common in the PRC for projects and joint
ventures such as these to obtain and rely on only local government approvals, it
is unclear whether such approvals are sufficient. There can be no assurance,
therefore, that the absence of Central Government approvals will not adversely
affect the Joint Ventures and their projects in any of such cases.
In addition to such project and foreign investment approvals,
the tariffs payable under the relevant power purchase contract is established on
the basis of a tariff formula agreed upon through discussions among the Company,
its partners, the prospective power purchaser, the relevant local government,
the relevant pricing bureaus and the relevant planning commission. Once
established, the tariffs are subject to annual review by the relevant local
pricing bureaus and adjustment in accordance with the formula. The tariff
formulas contained in the power purchase contracts entered into by AES Chigen's
Joint Ventures are structured to permit the Joint Ventures to pay the operating
expenses of the plant, the financing costs of each particular project and to
enable AES Chigen to realize a return on its investment. While the relevant PRC
pricing bureaus have committed to utilize the Joint Ventures' formulas in
establishing and adjusting tariffs, there can be no assurance that the relevant
pricing bureaus will calculate and adjust tariffs in accordance with these
tariff formulas. On April 1, 1996, a new law governing the electric power sector
in the PRC came into effect. The law establishes, among other things, broad
principles with respect to the methodology of calculating and setting electric
power tariffs. Detailed regulations with respect to tariff calculation and
tariff setting are expected to be promulgated in the near future by the Central
Government. There can be no assurance that such regulations, when promulgated,
will not adversely affect the tariff structures which AES Chigen's Joint
Ventures have adopted.
Environmental Regulation
The Joint Ventures are subject to various PRC environmental
laws and regulations which are administered by both Central Government and local
government environmental protection bureaus. Approval or review by the relevant
environmental protection bureaus is required at each of the project proposal,
feasibility study, design and commissioning stages of a project. Filing of an
environmental impact statement or, in some cases, an environmental impact
assessment outline is required before the planning commission for the same level
of government can issue its approval. The filing must demonstrate that the
project conforms to applicable environmental standards. Approvals and permits
generally have been issued for projects utilizing modern pollution control
technology. Pollution sources are also required to report their pollution
discharges in terms of types and amounts of pollutants discharged into the water
and air, and to secure discharge permits for their wastewater discharges,
airborne emissions and, from April 1, 1996, solid waste shipments to ensure
compliance with relevant emissions standards.
The PRC's environmental laws and regulations establish
standards for the discharge of emissions into the air and water. The rules set
forth schedules of base-level discharge fees for various polluting substances
and specify that, if such levels are exceeded, the polluting entity will be
required to pay an excess discharge fee to the local government. The local
environmental rules do not make it a violation to exceed these limits, but
rather set forth a set of graduated scale of fees that are required for each
incremental unit of excess discharge. Up to a certain level, as the discharge
levels increase, the fee per unit also increases. Above a certain limit, local
governments may issue orders to cease or reduce such discharge levels which, if
not complied with, will after three years from the date of the order, result in
an annual increase of 5% in the pollution fees assessed. Where pollution is
causing environmental damage, the local governments also have the authority to
issue orders requiring the polluting entities to cure the problem within a
certain period of time. Non-compliance with such orders may result in the
entities being shut down.
The PRC is a party to the Climate Change Convention ("Climate
Change Convention"), which is intended to limit or capture emissions of
greenhouse gases, such as carbon dioxide. Ceilings on such emissions could limit
the production of electricity from fossil fuels, particularly coal, or increase
the costs of such production. Ceilings on the emissions of greenhouse gases have
not been assigned to developing countries such as the PRC under the Climate
Change Convention and the PRC has objected to the possibility of the imposition
of such ceilings. If the PRC were to agree to such ceilings, or otherwise reduce
its reliance on coal-fired power plants, the business prospects of AES Chigen
could be adversely affected. Under the Air Pollution Prevention and Control Law
of the PRC, as amended in 1995, regulatory preferences are given to the use of
low sulfur-content, low ash coal, and to plants in urban areas that generate
steam as well as electricity. The SPC also has stated that it favors the
construction of more plants relying on clean fuels.
MOEP has established technical standards for environmental
monitoring and exercises certain disciplinary functions with regard to
environmental compliance in connection with the construction and operation of
power plants. Environmental protection equipment is required to be designed,
installed and commissioned in tandem with the design, construction and
commissioning of the generator or plant. Before commencing operations, each
plant or generator must be tested and qualified with regard to emissions levels
and abatement equipment. The Company believes the environmental protection
systems and facilities of its Current Projects are in compliance with applicable
PRC national and local environmental protection requirements.
AES Chigen's Joint Ventures with power plants in operation
have received the environmental approvals from the PRC Government environmental
authorities required for them to operate their respective electric power plants.
Inasmuch as the Joint Ventures' electric power plants currently under
construction are typically among the most modern in the areas in which they are
located, AES Chigen believes that these plants will also receive all required
environmental approvals. There can be no assurance, however, that the
requirements to obtain such approvals may not be made more stringent in the
future. If such a change in policy occurs, there can be no assurance that all
such requirements will be met and that future approvals for existing or
potential projects will be granted. If a change in environmental requirements
leads to an increase in costs, an affected Joint Venture is able to receive an
adjustment in the tariff it charges for electric power pursuant to its power
purchase contract.
Description of the Current Projects
The following table presents certain summary information on
the Company's Current Projects.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
The Current Projects
Company
Company Investment
Location Capacity Interest Commitment
Project (Province) (MW) (MW) (%) Fuel Status
- ------------------ ---------- -------- -------- ---------- ---- -------------------------------
Jiaozuo Aluminum Henan 250 175 70 Coal Under construction (first
Power unit scheduled to be in
operation by the second
quarter of 1997; second unit
scheduled to be in operation
by the second quarter of 1998)
Wuhu Grassy Lake Anhui 250 62.5 25 Coal First unit in operation
(second unit scheduled to be
in operation by the second
quarter of 1997)
Hefei Prosperity Anhui 115.2 80.6 70 Oil Under construction (simple
Lake cycle unit scheduled to be in
operation by the third
quarter of 1997; combined
cycle unit scheduled to be in
operation in the third
quarter of 1998)
Wuxi Tin Hill Jiangsu 63 34.7 55 Oil In operation
Aixi Heart River Sichuan 50 35 70 Coal Under construction (scheduled
to be in operation in
February 1998)
Chengdu Lotus City Sichuan 48 16.8 35 Natural Under construction (scheduled
Gas to be in operation in the
third quarter of 1997)
Cili Misty Mountain Hunan 26.2 13.4 51 Hydro In operation
Yangchun Sun Spring Guangdong 15.1 3.8 25 Oil In operation
------ ------
TOTAL 817.5 421.8
====== ======
</TABLE>
Overview
The Company, directly or through one of its wholly owned
offshore subsidiaries, has formed sino-foreign joint ventures, each with one or
more Chinese entities as partners, to develop, construct, own and operate each
of the electric power plants described in this section. Two of the power plants
- -- Cili Misty Mountain and Yangchun Sun Spring -- are financed solely with
registered capital (equity). Four of the power plants -- Aixi Heart River,
Jiaozuo Aluminum Power, Chengdu Lotus City and Wuxi Tin Hill -- are financed
with a combination of registered capital and shareholder loans. One of the power
plants -- Wuhu Grassy Lake -- is financed by registered capital, shareholder
loans and third party debt. One other project -- Hefei Prosperity Lake -- which
is currently financed by registered capital and shareholder loans, may also be
in the future financed by third party debt.
All of the Company's power plants are owned by cooperative
joint ventures, except for one of the projects -- Wuhu Grassy Lake -- which is
owned by an equity joint venture. The joint venture contracts for three of the
cooperative joint ventures -- Wuxi Tin Hill, Aixi Heart River and Chengdu Lotus
City -- provide for the liquidation of the project assets at the end of the term
of the Joint Venture. The cooperative joint venture contracts relating to the
remaining four projects provide for the transfer of all of the fixed assets of
the Joint Venture to the Chinese partners without charge at the end of the Joint
Venture term. Three of these four provide for the recovery of the Company's
registered capital during the term of the Joint Venture.
Revenues from the power plants are generally used to pay
operating expenses, taxes and financing costs and allocated to provide reserves
for employee social welfare benefits and other matters as required by law.
Repayment of principal and interest of third party loans (if any) and
shareholder loans (if any) of the Joint Ventures has priority over distributions
of profit to the Joint Venture partners. Dividends are generally distributed to
the Company and its partners by the Joint Ventures pursuant to board
resolutions. In a number of cases with respect to the Joint Ventures described
in this section, the Company has a priority in the payment of dividends over the
Chinese partners to the Joint Venture. In certain cases, where the Company is
not entitled to appoint a majority of the board of directors of a Joint Venture,
the declaration of dividends or other equity distributions by such Joint Venture
may depend on the assent of the other directors of the Joint Venture.
Pursuant to certain shareholder loan contracts, the Company
has committed to provide shareholder loans to several of the Joint Ventures. In
each case the applicable Joint Venture has either registered the shareholder
loan with the relevant branch of the SAFE if the loan has been drawn, or the
Joint Venture will register the shareholder loan with the relevant branch of the
SAFE when the loan is drawn by the Joint Venture. The payment of principal and
interest to the Company with respect to its shareholder loans to the Joint
Ventures is made in accordance with schedules established by the relevant
shareholder loan contracts.
Each of the Joint Ventures described in this section has
entered into one or more power purchase contracts for the sale of the
electricity from its power plant on a minimum take-or-pay basis. The power
purchase contracts generally require that the power purchaser purchase a
specified annual minimum amount of electricity generated by the power plant
during the term of the power purchase contract at a fixed price or pursuant to a
tariff formula set forth in the power purchase contract. In all but two cases --
Cili Misty Mountain and Yangchun Sun Spring -- the power purchase contracts also
contain incentives to encourage the power purchaser to purchase greater than the
agreed minimum amount of electricity. Payments for electricity sold under the
power purchase contracts are generally made to the Joint Ventures on a monthly
basis.
All of the power purchase contracts have tariff formulas and
other pricing provisions which 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. These tariff formulas are indexed to hedge against US dollar
and Renminbi exchange rate fluctuation risks relating to repayment of principal
and interest on debt and the conversion to US dollars of the Company's profits.
In the event of a change in law which increases the Joint Ventures' costs, the
power purchase contracts typically require an adjustment to the tariff formulas
in order to pass through such increased costs.
The Joint Ventures in all cases except one -- Cili Misty
Mountain -- have entered, or, it is anticipated will enter, into dispatch
contracts with the relevant dispatching entity for its power plant pursuant to
which the dispatcher has agreed or plans to agree to dispatch the power plant at
least the annual minimum amount of hours required under the power purchase
contract. For the one case, the power purchaser, which is also the dispatcher,
is responsible for dispatching the power plant.
Each of the joint venture contracts for the projects described
in this section may be terminated early, including on account of a termination
of the relevant power purchase contract. In all cases except one -- Jiaozuo
Aluminum Power -- in the event of an early termination of a power purchase
contract which results from a default of a power purchaser, the Company is
entitled under the applicable power purchase contract to receive from the power
purchaser payment intended to compensate the Joint Venture for the return it
would have received had the power purchase contract continued to the end of its
term.
In two cases -- Yangchun Sun Spring and Wuxi Tin Hill --
projects directly managed by the Joint Ventures have been successfully
constructed on time. For three of the Company's projects currently under
construction -- Jiaozuo Aluminum Power, Cili Misty Mountain, and Chengdu Lotus
City -- the respective Joint Venture also directly manages the construction of
the power plant. In these instances the Joint Venture has entered into
arrangements with various construction and equipment procurement consortiums,
including established foreign equipment manufacturers, in which certain
responsibilities relating to construction and procurement have been allocated to
members of the consortium. For the remaining three projects currently under
construction, each relevant Joint Venture has entered into a fixed price, fixed
schedule construction contract, one of which is a turnkey arrangement. In all of
the projects described in this section, the electrical transmission and
interconnection facilities are being financed by interest bearing loans from the
Joint Venture to the relevant power purchaser who is responsible for
constructing, owning, operating and maintaining the facilities. In the case of
Wuhu Grassy Lake, Hefei Prosperity Lake and Chengdu Lotus City, the power
purchasers have also agreed in the power purchase contracts to begin making
payments under their respective power purchase contracts on a specified date if
the power plant is completed, but cannot deliver electricity due to a delay in
completing the transmission and interconnection facilities.
Five of the eight power plants are or will be operated
directly by the Joint Ventures -- Cili Misty Mountain, Wuxi Tin Hill, Aixi Heart
River, Jiaozuo Aluminum Power and Chengdu Lotus City -- and three -- Yangchun
Sun Spring, Hefei Prosperity Lake and Wuhu Grassy Lake -- will be operated by
the relevant power purchasers. Fuel for most of the power plants has been
contracted for under long term fuel supply contracts with fuel suppliers or will
be supplied by the power purchasers. In the latter case, the relevant power
purchaser is not excused from its payment obligations under its power purchase
contract if it is unable to provide fuel to the power plant.
The power projects which are currently in operation or under
construction have obtained insurance coverage for property loss and damage
(including damage arising from natural calamities) and third party liability.
Most force majeure risks which can be categorized as natural calamities are
covered under the insurance policies. The Joint Ventures are in all cases
relieved of their obligation to deliver electricity under their power purchase
contracts for the power plants described in this section in the event of force
majeure, including an event of force majeure caused by the PRC Government. In
the case of all projects, except Wuhu Grassy Lake and Hefei Prosperity Lake, the
power purchaser is not relieved of its obligations under its applicable power
purchase contract, including the obligation to make payments to the Company in
such circumstances. In these two projects, the power purchaser is relieved of
its obligation to purchase the minimum amount of electric power under its
respective power purchase contract during periods in which the power plant is
unable to generate electric power due to events of force majeure, including
events of force majeure caused by the PRC Government.
In the case of all of the power plants described in this
section, the Company and its Joint Venture partners have applied for and
received PRC approvals for the project and for the establishment of the related
foreign investment enterprise. In the case of two power plants -- Jiaozuo
Aluminum Power and Wuhu Grassy Lake -- the power plants have received project
approvals at the Central Government level from the State Planning Commission and
have received approvals from MOFTEC for the establishment of their related Joint
Venture. Each of the remaining six power plants has received its project
approval and foreign investment approval from provincial and local government
entities.
Two of the Company's power plants currently in operation or
under construction -- Wuxi Tin Hill and Hefei Prosperity Lake -- have been
structured as multiple projects and Joint Ventures, with each project and Joint
Venture having a total investment not exceeding the $30 million approval
authority threshold generally applicable to provincial and local governments. In
two other cases -- Aixi Heart River and Chengdu Lotus City -- the Company's
projects and Joint Ventures have obtained local government approvals on the
basis of anticipated total investments which did not exceed $30 million at the
time the approvals were obtained, but will, when construction is completed,
exceed the $30 million approval threshold. See "Governmental Approvals."
The tariff formulas set forth in the power purchase contracts
of the Joint Ventures described in this section have been either approved or
confirmed by the relevant provincial and local government pricing bureaus
responsible for reviewing such tariffs.
All of the joint venture contracts and project contracts of
the Joint Ventures are governed by PRC law. Some of the joint venture contracts
provide for arbitration of a dispute arising under the joint venture contracts
in locations outside of the PRC, while some provide for arbitration in the PRC
by PRC arbitration bodies. Most of the project contracts, including the power
purchase contracts, provide for arbitration of disputes in the PRC by PRC
arbitration bodies.
Jiaozuo Aluminum Power
The Power Plant. The Jiaozuo Aluminum Power power plant is a 2
x 125 MW coal-fired power plant located adjacent to the Jiaozuo Aluminum Mill
("Jiaozuo Mill") aluminum production mills in Jiaozuo, Henan Province.
Construction of the power plant commenced in the first quarter of 1995. The
first unit of the power plant is scheduled to commence commercial operation by
the second quarter of 1997. The second unit is scheduled to commence commercial
operation in the second quarter of 1998.
Joint Venture. The Jiaozuo Aluminum Power power plant is owned
by Jiaozuo Wan Fang Power Company Ltd. ("Jiaozuo Wan Fang"), a 23-year
cooperative joint venture formed by Jiaozuo Mill and a wholly owned subsidiary
of the Company. Pursuant to the joint venture contract the Company is entitled
to recover its registered capital (equity) during the term of the Joint Venture.
The Company, as the majority shareholder of Jiaozuo Wan Fang, is entitled to
appoint four of the six members of the board of directors of the Joint Venture,
including the chairman of the board and the general manager. Pursuant to a
co-development agreement, an entity unaffiliated with the Company is entitled to
no more than ten percent of the Company's equity distributions from Jiaozuo Wan
Fang.
Financing. The approved total investment in Jiaozuo Wan Fang
is $151.3 million. The Joint Venture's approved registered capital is $53.7
million. As of November 30, 1996, it is estimated that the total cost of Jiaozuo
Aluminum Power will be approximately $161.3 million. Any difference between the
approved total investment and the actual total cost will be funded by additional
equity or loans to be contributed pro rata by the shareholders of Jiaozuo Wan
Fang. The Company has committed to contribute $37.6 million to the registered
capital of the Joint Venture. Jiaozuo Mill has committed to contribute $16.1
million in land use rights and certain fixed assets to the registered capital of
the Joint Venture.
Power Purchase. Jiaozuo Wan Fang and Jiaozuo Mill have entered
into a 23-year power purchase contract effective April 26, 1996. Pursuant to the
power purchase contract, Jiaozuo Mill has agreed to purchase from Jiaozuo Wan
Fang at least 5,500 hours each calendar year at 75 MW up to the amount required
to operate Jiaozuo Mill's aluminum mill. Any remaining electricity from the
power plant, but no less than 5,500 hours at 155 MW, will be purchased by the
Henan Electric Power Corporation ("Henan Power") under a 23-year power purchase
contract between Jiaozuo Wan Fang and Henan Power. Both power purchase contracts
require the purchasers to pay for a minimum amount of electricity generated
every calendar year and to compensate the Joint Venture for any shortfalls in
purchases of such minimum amount based on the most recent approved tariff for
power less fuel costs. Both power purchase contracts allow the Joint Venture to
adjust the minimum amount of electricity required to be purchased by the power
purchasers and Jiaozuo Mill may request the Joint Venture to adjust the minimum
amount of electricity required to be purchased by Jiaozuo Mill, in all cases,
upon prior notice.
There are no specific provisions regarding liquidated damages
upon early termination of either power purchase contract. However, in the case
of early termination due to Henan Power's default, Henan Power is obligated
under the power purchase contract, to the extent permitted by law, to transmit
electricity generated by the Joint Venture's power plant to any entity
designated by the Joint Venture which is interconnected with Henan Power.
Construction. Jiaozuo Wan Fang is directly managing the
construction of the power plant. Jiaozuo Wan Fang has hired the Henan Power
Design Institute for the project design and Henan Provincial No. 1 Power
Construction Company and Henan Provincial No. 2 Power Construction Company as
contractors for civil and installation work. Although no heat rate (the term
"heat rate" refers to a power plant's thermal efficiency), output or completion
guarantees are being provided by the contractors, these two contractors have
built a number of similar power plants. In addition, more than 100 of such 125
MW units have been delivered by their manufacturer, Shanghai Electric
Corporation ("Shanghai Electric"), which is providing a limited two-year
warranty of the units. An independent engineering company, Bechtel Power
Corporation, has been retained by Jiaozuo Wan Fang to manage scheduling and
procurement. The construction risk in the case of this project is also mitigated
by the tariff formula set forth in the power purchase contract which provides
for an increase in the tariff payable by the power purchaser sufficient to
compensate the Joint Venture for any reduction in heat rate and capacity
resulting from the contractor's performance failure.
Interconnection and Dispatch. The interconnection facilities
are being constructed by Henan Power. Jiaozuo Wan Fang has agreed to provide a
loan in the amount of approximately $9.9 million to Henan Power for the design
and construction of the interconnection facilities. When in commercial
operation, the power plant will be dispatched by Henan Power. The Joint Venture
is required under its dispatch contract with Henan Power to cause the power
plant to maintain an annual minimum availability. If this annual minimum
availability is not met, the minimum amount required to be purchased by Henan
Power may be reduced proportionately.
Fuel. Jiaozuo Wan Fang plans to enter into one-year fuel
supply contracts for the purchase of anthracite coal from mines in Jiaozuo and
mines located approximately 120 kilometers from the power plant. The price for
coal is to be negotiated periodically with the mine owners. Jiaozuo Wan Fang
will arrange for the transportation of the coal by truck to the power plant.
Operation. Jiaozuo Wan Fang will operate the power plant.
Wuhu Grassy Lake
The Power Plant. The Wuhu Grassy Lake power plant is a 2 x 125
MW coal-fired power plant located near Wuhu, Anhui Province. It is the phase IV
expansion of an existing 325 MW coal-fired power station. The first unit of the
power plant commenced commercial operation in September 1996. The second unit is
scheduled to commence commercial operation in the second quarter of 1997.
Joint Venture. The Wuhu Grassy Lake power plant is owned by
Wuhu Shaoda Electric Power Development Company Ltd. ("Wuhu Shaoda"), a 20-year
equity joint venture formed by CPI, Anhui Liyuan Electric Power Development
Company Limited ("Anhui Liyuan"), Wuhu Energy Development Company Limited ("Wuhu
Energy") and a wholly owned subsidiary of the Company. The board of directors of
Wuhu Shaoda consists of nine directors, of which two are appointed by the
Company. The Company also appoints one of the two vice chairmen and the deputy
general manager responsible for supervising the operation and maintenance of the
power plant.
Financing. The approved total investment in the Joint Venture
is $118.4 million. The Joint Venture's approved registered capital is $30.0
million. The Joint Venture partners of Wuhu Shaoda have committed to contribute
their registered capital according to their respective ownership interests as
follows: (i) CPI, $13.5 million (45%), (ii) the Company, $7.5 million (25%),
(iii) Anhui Liyuan, $6.0 million (20%) and (iv) Wuhu Energy, $3.0 million (10%).
As of November 30, 1996, the estimated total cost of this project was in line
with the approved total investment. The difference between the total investment
and the registered capital of Wuhu Shaoda has been financed through a bank
facility and shareholder loans arranged by the Joint Venture partners. Wuhu
Shaoda has entered into a $65.0 million term loan facility (the "Term Loan")
with a syndicate of lenders. The first drawdown of the Term Loan took place in
August 1996. The Term Loan is to be repaid in 11 successive semi-annual
installments beginning April 22, 1998. In addition to the Term Loan, the Company
has committed to provide an $18.0 million subordinated loan (the "AES Loan") and
Anhui Liyuan has committed to provide up to $4.6 million and Wuhu Energy has
committed to provide up to $2.3 million in subordinated shareholders' loans to
the Joint Venture. The Company has guaranteed to the lenders of the Term Loan
certain obligations of its wholly owned subsidiary under the joint venture
contract, including the obligation to fund the AES Loan and certain
other liabilities which, in the aggregate, do not exceed $6.0 million.
Dividend payments are subject to certain restrictions under
the Term Loan. No dividend distributions by the Joint Venture are permitted if
certain debt service coverage ratios are not met.
Power Purchase. The electric power from the power plant will
be purchased by Anhui Provincial Electric Power Corporation ("Anhui Power")
pursuant to a 20-year operation and offtake contract dated as of July 5, 1996,
between Wuhu Shaoda and Anhui Power. Under the power purchase contract, Anhui
Power has agreed to purchase a minimum amount of electricity at a price
calculated based upon an agreed tariff formula. In the event that the power
plant fails to generate electricity for a period in excess of that permitted for
maintenance and repair in the operation and offtake contract and such failure is
a result of force majeure or Wuhu Shaoda's failure to perform its obligations
under the operation and offtake contract, the minimum amount required to be
purchased by Anhui Power may be reduced in proportion to such excess shutdown
period, provided that in no event will the electricity payments to be made under
the operation and offtake contract be reduced below the amount necessary to
allow Wuhu Shaoda to pay all applicable financing costs under the Term Loan, the
AES Loan and the other shareholder loans.
Construction. The power plant is being designed, engineered
and constructed pursuant to a fixed price construction contract between Wuhu
Shaoda and Anhui Power. Pursuant to the construction contract, Anhui Power is
the principal contractor and is responsible for the timely and successful
completion of the power plant. Anhui Power has sub-contracted the design,
construction, installation and commissioning work to several of its
subsidiaries. Anhui Power is eligible for a bonus in the event of early
completion of a unit. If the power plant is not completed by August 1997, Anhui
Power is required by the operation and offtake contract nonetheless to commence
purchases of the minimum amount of electricity. The construction contract does
not obligate Anhui Power to provide guarantees of heat rate or capacity.
However, in the event that Anhui Power fails to achieve the design heat rate or
nameplate capacity of the power plant, the tariff formula set forth in the
operation and offtake contract increases the tariff payable by Anhui Power in a
manner that compensates Wuhu Shaoda for the reduction in heat rate and capacity.
An independent engineering company, Stone and Webster Management Consultants,
has been retained by the lenders of the Term Loan to monitor construction.
Interconnection and Dispatch. The power plant is
interconnected to the Anhui power grid and is subject to dispatch by Anhui Power
pursuant to an interconnection contract between Wuhu Shaoda and Anhui Power.
Fuel. As part of its obligations under the operation and
offtake contract, Anhui Power is required to supply such fuel as may be
necessary to allow the power plant to generate electricity purchased under the
operation and offtake contract.
Operation. Pursuant to the operation and offtake contract,
Anhui Power is responsible for the operation, maintenance and management of the
power plant. Anhui Power is responsible for ensuring that the power plant
generates the minimum amount of electricity required to be purchased by Anhui
Power and is required to compensate Wuhu Shaoda for any resulting shortfall in
such minimum amount, unless, as indicated above, the shortfall is the result of
force majeure or the failure of Wuhu Shaoda to perform its obligations under the
operation and offtake contract.
Hefei Prosperity Lake
The Power Plant. The Hefei Prosperity Lake power plant is an
oil-fired combined cycle power plant consisting of 2 x 38.2 MW gas turbine
generating units ("gas turbine unit") and a 1 x 38.8 MW heat recovery steam
turbine generating unit ("steam turbine unit"). It is located within the
boundaries of an existing 325 MW coal fired power plant in Hefei, Anhui
Province. Construction of the power plant commenced in November 1996. The gas
turbine unit is scheduled to commence commercial operation in the third quarter
of 1997 and the steam turbine unit is scheduled to commence commercial operation
in the third quarter of 1998.
Joint Ventures. The Hefei Prosperity Lake power plant is owned
by Anhui Liyuan AES Power Company Ltd. ("Liyuan-AES") and Hefei Zhongli Energy
Company Ltd. ("Zhongli Energy"), two 16-year cooperative joint ventures formed
among a wholly owned subsidiary of the Company, Hefei Municipal Construction and
Investment Company ("Hefei Construction") and Anhui Liyuan. In accordance with
the joint venture contracts, the Company is entitled to appoint four of the
seven members of the board of directors and the general manager of each of the
Joint Ventures.
Financing. The approved total investment in each of Liyuan-AES
and Zhongli Energy is $30.0 million. The approved registered capital of each of
Liyuan-AES and Zhongli Energy is $15.0 million. The Joint Venture partners in
Liyuan-AES and Zhongli Energy have committed to contribute registered capital to
each Joint Venture according to their respective ownership interests as follows:
(i) Anhui Liyuan, $3.0 million (20%), (ii) the Company, $10.5 million (70%) and
(iii) Hefei Construction, $1.5 million (10%). As of November 30, 1996, it is
estimated that the total cost of Hefei Prosperity Lake will be approximately
$64.7 million. The difference between the estimated total cost and the
registered capital of each Joint Venture will be financed through shareholder
loans or third party debt arranged by the Joint Venture partners. The Company
has entered into shareholder loan contracts with Liyuan-AES and with Zhongli
Energy pursuant to which the Company has committed to provide loans to the Joint
Ventures in an aggregate amount not to exceed $16.0 million.
Power Purchase. The power generated by the power plant is
purchased by Anhui Power pursuant to a 16-year operation and offtake contract,
dated September 26, 1996, between Liyuan-AES and Zhongli Energy, as the sellers,
and Anhui Power as power purchaser. Under the operation and offtake contract,
Anhui Power has agreed to purchase a minimum amount of electricity at an agreed
upon tariff formula or to compensate the Joint Ventures for any shortfall in
purchases of such minimum amount based on an approved tariff less approved
generation costs. Anhui Power's minimum take obligation under the operation and
offtake contract may be reduced in proportion to periods of power plant shutdown
or curtailment of generation due to events of force majeure or breach of the
operation and offtake contract by the Joint Ventures, provided that in no event
will the payments to be made under the operation and offtake contract be reduced
below the amount necessary to allow the Joint Ventures to pay all applicable
financing costs under the Joint Ventures' loan agreements.
Construction. The power plant is being designed, engineered
and constructed pursuant to a fixed-price construction contract between the
Joint Ventures and Anhui Mingda Power EPC Contract Company ("Mingda"), a wholly
owned subsidiary of Anhui Power. Pursuant to the construction contract, Anhui
Power is the principal contractor and is responsible for the timely and
successful completion of the power plant. Mingda is eligible for a bonus in the
event of early or on-time completion of the gas turbine unit and the steam
turbine unit but must pay penalties in the event of late completion or not
meeting performance guarantees, including heat rate and capacity guarantees. The
gas turbine unit and steam turbine unit have been ordered from GEC Alsthom
Centrales Energetiques S.A. ("GEC Alsthom"). GEC Alsthom will also provide the
conceptual design as a subcontractor to Mingda. If Mingda fails to complete the
gas turbine unit by August 1, 1997 and the steam turbine unit by July 1, 1998,
Anhui Power's minimum take or pay obligation for the minimum amount under the
operation and offtake contract nonetheless commences. An independent engineering
company, Black & Veatch International Company, has been retained by the Joint
Ventures to monitor construction.
Interconnection and Dispatch. The power plant is
interconnected to the Anhui power grid and is subject to dispatch by Anhui Power
pursuant to an interconnection contract between the Joint Ventures and Anhui
Power. Under the operation and offtake contract, Anhui Power, as the operator,
is required to indemnify the Joint Ventures for any loss or cost as a result of
the breach of the interconnection contract.
Fuel. As part of its obligations under the operation and
offtake contract, Anhui Power is required to supply such fuel as may be
necessary to allow the power plant to generate electricity to be purchased under
the operation and offtake contract.
Operations. Pursuant to the operation and offtake contract,
Anhui Power is responsible for the operation, maintenance and management of the
power plant. Anhui Power is responsible for ensuring that the power plant
generates the minimum amount and is required to compensate the Joint Ventures
for any resulting shortfall in the minimum amount, unless, as indicated above,
the shortfall is a result of force majeure or the failure of the Joint Ventures
to perform their obligations under the operation and offtake contract.
Wuxi Tin Hill
The Power Plant. The Wuxi Tin Hill power plant is an oil-fired
combined cycle power plant which consists of a 2 x 24 MW gas turbine generating
plant and a 15 MW heat recovery steam turbine generating plant located in Xishan
(previously known as Wuxi County), Jiangsu Province. The gas turbine generating
plant was completed and commenced commercial operation in March 1996 and the
heat recovery steam turbine generating plant commenced commercial operation in
the first quarter of 1997.
Joint Ventures. The Wuxi Tin Hill power plant is owned by
Wuxi-AES-CAREC Gas Turbine Power Company Ltd. ("Wuxi-AES-CAREC") and
Wuxi-AES-Zhonghang Power Co. Ltd. ("Wuxi-AES-Zhonghang"), two 16-year
cooperative joint ventures formed among the Company, China National Aero-Engine
Corporation ("CAREC") and Wuxi Power Industry Company ("Wuxi Power"). In
accordance with the joint venture contracts, the Company is entitled to appoint
four of the eight members of the board of directors, including the chairman of
the board, for each of the Joint Ventures, while CAREC and Wuxi Power each is
entitled to appoint two members. The chairman of the board of directors of each
Joint Venture has the right to break any tie board votes.
Financing. The approved total investment in Wuxi-AES-CAREC is
$29.5 million. The approved total investment in Wuxi-AES-Zhonghang is $10.5
million. The approved registered capital of Wuxi-AES-CAREC is $11.8 million and
the approved registered capital of Wuxi-AES-Zhonghang is $5.0 million. As of
November 30, 1996, the estimated total cost of this project was in line with the
approved total investment. The Company has contributed $6.5 million to the
registered capital of Wuxi-AES-CAREC and $2.8 million to the registered capital
of Wuxi AES-Zhonghang. CAREC and Wuxi Power each has contributed $2.7 million to
the registered capital of Wuxi-AES-CAREC and each has contributed $1.1 million
to the registered capital of Wuxi-AES-Zhonghang. The Company, CAREC and Wuxi
Power have entered into shareholder loan agreements with the Joint Ventures
pursuant to which they have provided loans to the two Joint Ventures pro rata in
accordance with their ownership interests.
Power Purchase. Power generated by the power plant is
purchased by the Xishan Electricity Management Office ("Xishan Office") under a
16-year power purchase contract, effective May 1995, between Wuxi-AES-CAREC and
Xishan Office. Wuxi-AES-CAREC sells the electricity generated by the steam
generating plant to Xishan Office on behalf of Wuxi-AES-Zhonghang under a
services agreement with Wuxi-AES-CAREC.
The power purchase contract requires Xishan Office to purchase
a minimum amount of 186 gigawatt hours ("GWh") of electricity per calendar year
from the power plant and to compensate the Joint Ventures for any shortfalls in
the purchase of such minimum amount based on the most recent tariff for
electricity less fuel costs. Pursuant to the power purchase contract, the
minimum amount of electricity which Xishan Office is required to purchase from
the Joint Ventures may be reduced by the number of peak time shutdown hours
which exceeds an agreed number of hours permitted for outages related to the
power plant.
During 1996, Xishan Office did not purchase the required
minimum amount of electricity under the power purchase contract and,
accordingly, is required to compensate the Joint Venture for the shortfall. The
parties have a disagreement over the amount of the required minimum take. Xishan
Office has paid 88% of the amount the Joint Venture believes is due but disputes
the balance. The parties also have a disagreement over the amount of
construction-period interest that is due in respect of shareholder loans
provided to the Joint Venture by its respective partners. The Company believes
that the amount at issue in these disagreements is not material to the financial
results of the Company.
Construction. The construction of the power plant has been
managed by the Joint Ventures. The gas turbines were supplied by United
Technologies Inc. ("United Technologies"). Pursuant to a maintenance contract
with the Joint Ventures, United Technologies will provide 10 years of service
and maintenance for the gas turbines. The balance of the plant has been provided
by Chinese manufacturers.
Interconnection and Dispatch. The interconnection facilities
were completed in March 1996 and the power plant is connected to the East China
Power Grid. The power plant is currently dispatched under an agreement between
Wuxi AES-CAREC and Xishan Power Supply Bureau. A dispatch contract between the
Joint Ventures and Jiangsu Provincial Power Bureau Dispatch Center for the
dispatch of the power plant is under negotiation.
Fuel. Wuxi-AES-CAREC has signed 16-year fuel oil supply
contracts with two local State-owned oil companies under the administrative
control of the Xishan municipal government. The fuel suppliers are obligated,
under the contracts, to pay damages for any failure to supply the power plant
with adequate quantities of fuel or fuel not meeting certain specifications. The
price of fuel oil to be supplied under these supply contracts is to be
negotiated annually. The oil companies are obligated to arrange for the
transportation of the fuel to the power plant.
Operation. The power plant is operated by Wuxi-AES-CAREC.
Aixi Heart River
The Power Plant. The Aixi Heart River power plant is a 50 MW
coal-fired circulating fluidized bed power plant located in Nanchuan, Sichuan
Province. Construction of the power plant commenced in February 1996, and is
expected to be completed in February 1998.
Joint Venture. The Aixi Heart River power plant is owned by
Sichuan Fuling Aixi Power Company Ltd. ("Fuling Aixi"), a 25-year cooperative
joint venture formed by Sichuan Fuling Banxi Colliery ("Banxi Colliery") and a
wholly owned subsidiary of the Company. The Company appoints three of the five
members of the board of directors as well as the chairman, the general manager
and financial controller.
Financing. The approved total investment in the Joint Venture
is $30.4 million ($30.0 million based on the Renminbi to US dollar exchange rate
at the time the approval was granted). The Joint Venture's approved registered
capital is $12.1 million. As of November 30, 1996, it is estimated that the
total cost of Aixi Heart River will be approximately $39.1 million. The Company
has committed to contribute $8.5 million to the registered capital of Fuling
Aixi and Banxi Colliery has committed to contribute $3.6 million to the Joint
Venture's registered capital. Pursuant to the construction and term loan
agreement with Fuling Aixi, the Company has committed to provide a loan in the
principal amount of up to $23.5 million to Fuling Aixi. Any difference between
the estimated total cost and the committed shareholder loan and approved
registered capital will be funded by additional equity contributed pro rata by
the shareholders.
Power Purchase. Electricity generated by the power plant will
be sold to Sichuan Fuling Power Company ("Sichuan Power") under a 25-year power
purchase contract. The power purchase contract requires Sichuan Power to
purchase a minimum of 270 GWh of electricity per calendar year. In the event
that Sichuan Power fails in any calendar year to purchase such minimum amount,
Sichuan Power is required by the power purchase contract to make payment for any
shortfall at the then current power price less fuel costs. Pursuant to the power
purchase contract, if Fuling Aixi fails to deliver electricity to Sichuan Power
by the construction completion date specified in the construction contract, it
is obligated to pay a penalty to Sichuan Power for each day of delay.
Construction. Fuling Aixi has entered into a construction
contract with Shanghai Electric to construct the power plant. Certain critical
components of the equipment of the power plant (including the coal fluidized bed
boilers and their design) are being supplied by Pyropower, Inc. ("Pyropower")
pursuant to a supply contract between Shanghai Electric and Pyropower. The
balance of the plant is being provided by Chinese manufacturers. Shanghai
Electric will provide a one-year warranty of its work. If Shanghai Electric
fails to complete construction of the power plant by the guaranteed completion
date, the contractor will be required to pay liquidated damages to Fuling Aixi
for each day of delay in an amount sufficient to compensate the Joint Venture
for penalties due to Sichuan Power under the power purchase contract for delayed
commercial operation of the power plant. Under the construction contract,
Shanghai Electric has guaranteed all the performance specifications of the power
plant, including output, heat rate and emissions. If the power plant fails to
achieve the performance specifications, Shanghai Electric will be obligated to
pay liquidated performance damages to Fuling Aixi.
Interconnection and Dispatch. Sichuan Power is responsible for
construction, and has guaranteed the completion, of the interconnection facility
by the power plant's performance testing date. If a delay in the completion of
the interconnection facility results in delays in commencement of the commercial
operation of the power plant, Sichuan Power is obligated to pay Fuling Aixi a
penalty for each day of delay. The dispatcher of the power plant has agreed to
dispatch the power plant at 100% of its operational capacity during peak hours
and at 75% of its operational capacity during off-peak hours.
Fuel. Fuling Aixi has entered into a 25-year coal supply
contract with Banxi Colliery. Any increase in the price of coal to be paid by
Fuling Aixi will only become effective under the coal supply contract when the
price of electricity payable by Sichuan Power has been increased to reflect the
increased coal cost. The occurrence of a force majeure event will not excuse
Banxi Colliery's obligations under the coal supply contract. Banxi Colliery is
also obligated to supply coal to the power plant in the case of non-payment by
Fuling Aixi for such coal if such non-payment was caused by a failure of Sichuan
Power to make a payment to Fuling Aixi under the power purchase contract. If the
coal supply contract is terminated by Fuling Aixi on account of Banxi Colliery's
default, Banxi Colliery is required to pay a termination charge to Fuling Aixi.
Operation. Fuling Aixi will operate the power plant.
Chengdu Lotus City
The Power Plant. The Chengdu Lotus City power plant is a 2 x
24 MW natural gas-fired power plant located in Chengdu, Sichuan Province.
Construction of the power plant commenced in September 1996 and is scheduled to
take 334 days.
Joint Venture. The Chengdu Lotus City power plant is owned by
Chengdu-AES-Kaihua Gas Turbine Power Co. Ltd. ("Chengdu AES-Kaihua"), a 16-year
cooperative joint venture formed by the Company, Chengdu Huaxi Electric Power
(Group) Shareholding Company Ltd. ("Huaxi"), Huachuan Petroleum & Natural Gas
Exploration Company ("Huachuan") and CAREC. The Company is entitled to appoint
three members of the nine-member board of directors of Chengdu AES-Kaihua and
the general manager.
Financing. The approved total investment in the Joint Venture
is $29.8 million. The Joint Venture's approved registered capital is $11.9
million. As of November 30, 1996, it is estimated that the total cost of Chengdu
Lotus City will be approximately $37.4 million. The Company has committed to
contribute $4.2 million to the registered capital of Chengdu AES-Kaihua. The
Company's joint venture partners have committed to contribute the following
amounts to the registered capital of the Joint Venture: Huaxi has committed to
contribute $3.0 million; Huachuan has committed to contribute $1.2 million; and
CAREC has committed to contribute $3.6 million. The Company, Huaxi and CAREC
have entered into support contracts with Chengdu AES-Kaihua pursuant to which
they have committed to arrange loans for Chengdu AES-Kaihua in the principal
amount of $25.3 million to fund the difference between their registered capital
contributions and the estimated total cost of the Joint Venture.
Power Purchase. Electricity generated by the power plant is to
be sold to Huaxi under a 15-year power purchase contract. The power purchase
contract requires Huaxi to purchase, in each calendar year, 3,000 hours of
electric power based on the net station capacity of the power plant declared by
Chengdu AES-Kaihua to be available in such year. If Huaxi fails, for any reason
(including due to the failure of the interconnection facilities or natural gas
pipeline to be completed), to accept electric power which is made available by
Chengdu AES-Kaihua, Huaxi is required by the power purchase contract to pay
Chengdu AES-Kaihua for the electricity made available at the then current power
price less fuel costs.
The tariff payable by Huaxi under the power purchase contract
is established annually by the board of directors of Chengdu AES-Kaihua in
accordance with a budget which estimates the costs of generating the minimum
amount in the following year. The estimated power price becomes the price
payable by Huaxi in such following year after its approval by the Chengdu
pricing bureau. Any differences between the estimated power price and the actual
costs per kWh incurred by Chengdu AES-Kaihua are recovered each year by means of
a true-up mechanism.
Construction. Chengdu AES-Kaihua has entered into a
construction contract with CAREC to construct the power plant. The principal
equipment for the power plant, the gas turbine generator sets, is being provided
to Chengdu AES-Kaihua pursuant to a supply contract between CAREC and United
Technologies. All performance guarantees (including damages for failures to meet
heat rate and output guarantees) and warranties of United Technologies under the
supply contract have been assigned by CAREC to Chengdu AES-Kaihua. The balance
of the plant is being provided by Chinese manufacturers. An independent
engineering company, Duke/Fluor Daniel International, has been retained by the
Joint Venture to manage scheduling and to ensure equipment performance
compliance.
Interconnection and Dispatch. The interconnection facility is
to be constructed by Huaxi. Chengdu AES-Kaihua has agreed to provide Huaxi with
a loan of RMB(Y)15.0 million for the construction of the interconnection
facilities. The Joint Venture has entered into a dispatch contract with the
Sichuan Dispatch Center, pursuant to which the dispatcher of the power plant has
agreed to dispatch the power plant.
Fuel. Chengdu AES-Kaihua has entered into a 15-year gas supply
contract with Huachuan for the supply of natural gas to the power plant. The gas
supply contract requires Huachuan to provide a minimum annual quantity of
natural gas to the Chengdu facility which meets certain specifications at a
price set by the Chengdu municipal pricing bureau. Any increase in the price of
gas to be paid by Chengdu AES-Kaihua will only become effective under the gas
supply contract when the price of electricity payable by Huaxi under its power
purchase contract has been increased to reflect the increased cost. If Huachuan
fails, on any occasion, to deliver gas in the quantities and specifications
required by Chengdu AES-Kaihua, Huachuan is obligated under the gas supply
contract to indemnify Chengdu AES-Kaihua for the total revenue lost by Chengdu
AES-Kaihua due to such failure. Huachuan is also obligated to continue supplying
natural gas to the power plant in the case of non-payment by Chengdu AES-Kaihua
for such natural gas if such non-payment was caused by a failure of Huaxi to
make payment to Chengdu AES-Kaihua under the power purchase contract.
Chengdu AES-Kaihua may terminate the gas supply contract for
Huachuan's breach of contract, including its failure to deliver natural gas. If
Chengdu AES-Kaihua terminates the contract, Huachuan must pay a termination
charge similar to the termination charge payable under the power purchase
contract. If Huachuan pays this termination charge, the termination charge for
which Huaxi would be liable under the power purchase contract as a consequence
of Huachuan's default is not applicable. Upon any such payment, Chengdu
AES-Kaihua is obligated to transfer the power plant and related gas
interconnection facility to Huachuan.
Operation. Chengdu AES-Kaihua will operate the power plant.
Cili Misty Mountain
The Power Plant. The Cili Misty Mountain power plant, located
in Cili County, Hunan Province, consists of a 5.2 MW hydroelectric generating
unit ("unit 1"), and two 10.5 MW hydroelectric generating units ("unit 2" and
"unit 3"). Unit 1, the original power plant, has been in commercial operation
since 1979. Unit 2 went into commercial operation in May 1996 and unit 3 went
into commercial operation in February 1997.
Joint Venture. The Cili Misty Mountain power plant is owned by
Hunan Xiangci-AES Hydro Power Company Ltd. ("Xiangci-AES"), a 25-year joint
venture formed by Hunan Cili Electric Power Company ("Cili Electric Power") and
the Company. The Company appoints three of the five members of the Joint
Venture's board of directors, and appoints the general manager.
Financing. The approved total investment and approved
registered capital of Xiangci-AES is $14.7 million. The Company contributed $7.5
million to the registered capital of Xiangci-AES and Cili Electric Power
contributed all of the assets of the previously existing and operating unit 1
and all of the equipment and materials purchased for the construction of unit 2
and unit 3 which, at the time of the Company's equity contribution to
Xiangci-AES, were being incorporated into the project by Cili Electric Power.
All liabilities of the power plant incurred prior to the establishment of
Xiangci-AES are the sole obligation of Cili Electric Power. As of November 30,
1996, the estimated total cost of this project was in line with the approved
total investment.
Power Purchase. Electricity generated by the power plant is
sold by Xiangci-AES to Cili Electric Power pursuant to a 25-year power purchase
contract. Cili Electric Power is required by the terms of the power purchase
contract to purchase all of the electricity generated by the power plant and to
use its best efforts to purchase electricity in excess of 120 GWh. Since the
power plant utilizes hydro power, the extent to which the power plant is able to
generate electric power depends upon the flow of river water. Due to a drought
in the area, the power plant was not able to generate 120 GWh in 1996.
Additionally, Cili Electric Power has indicated to the Joint Venture that load
growth in Cili County is likely to be less than anticipated in the near future.
Because the power plant is located in an area served by an isolated transmission
grid, the Joint Venture is planning to incur additional costs to build a 36
kilometer low voltage transmission line to connect the power plant with the
Hunan provincial grid and the larger market it serves. The power purchase
contract provides that payment for electricity purchased by Cili Electric Power
is based on a tariff which is the higher of a minimum rate and a market rate.
Construction. Pursuant to the terms of the joint venture
contract, all of the capital contributed by the Company to Xiangci-AES is to be
used to complete construction of unit 2 and unit 3. Cili Electric Power was
responsible under the terms of the joint venture contract for completing the
construction of unit 2 and unit 3. Work on unit 2 and unit 3 began in September
1991, with completion originally targeted for June 1995. Construction of unit 2
was completed and it began commercial operation in May 1996. However, due to
problems with installation and an equipment defect, construction of unit 3 was
delayed. Xiangci-AES has entered into an agreement with Cili Electric Power
pursuant to which the Joint Venture directly assumed the work of completing the
construction of unit 3. Cili Electric Power has been discharged from any further
obligation to complete the power plant.
Interconnection and Dispatch. The power plant is
interconnected to the Cili County power grid. The power plant is dispatched by
Cili Electric Power.
Operation. Xiangci-AES operates the power plant.
Yangchun Sun Spring
The Power Plant. The Yangchun Sun Spring power plant, located
in Yangchun, Guangdong Province, consists of one existing 8.6 MW diesel engine
generating facility which was constructed prior to the Company's involvement,
and another 6.5 MW Stork-Wartsila diesel engine generating facility which
commenced commercial operation in April 1996.
Joint Venture. Yangchun Sun Spring is owned by Yangchun Fuyang
Diesel Engine Power Co. Ltd. ("Yangchun Fuyang"), a 12-year cooperative joint
venture formed by Yangchun Municipal Power Supply Company ("Yangchun Power
Supply"), Shenzhen Futian Gas Turbine Power Co., Ltd. ("Shenzhen Futian") and a
wholly owned subsidiary of the Company. The Company has the right to appoint one
of the four members of the board of directors of the Joint Venture.
Financing. The Company and Shenzhen Futian each has
contributed $2.3 million in cash to Yangchun Fuyang for their respective 25%
ownership interests. Yangchun Power Supply has contributed land use rights, and
all the fixed assets of the existing plant and all the equipment and materials
purchased for the unit then under construction as its registered capital for a
50% ownership interest in Yangchun Fuyang.
Power Purchase. The electricity generated from the power plant
is purchased by Yangchun Municipal Power Supply Bureau ("Yangchun Power Bureau")
under a 12.5-year power purchase contract. The Yangchun Power Bureau is required
by the power purchase contract to purchase at least 34.4 GWh each year
commencing on January 1, 1995 and at least 58 GWh each year after December 31,
1995. The Yangchun Power Bureau is required to pay for such minimum amounts of
electricity even if it does not or cannot purchase such minimum amounts. The
Yangchun Power Bureau's payment obligation is secured by a pledge of the annual
profit from a 13 MW hydro power plant owned by the Yangchun City People's
Government.
Construction and Management. Yangchun Fuyang and Yangchun
Power Supply have entered into a 12.5-year construction and management contract.
The contract calls for Yangchun Power Supply to assume full responsibility for
the operation and maintenance of the power plant on behalf of Yangchun Fuyang in
compliance with the power purchase contract, and to supply fuel to the power
plant. The construction and management contract provides for scheduled
distributions to the Company and Shenzhen Futian beginning on March 31, 1996 and
continuing on a semi-annual basis for the remainder of the contract term. The
amounts are adjusted if the foreign exchange rate between the U.S. dollar and
Renminbi exceeds or falls below specified thresholds. Yangchun Power Supply has
pledged its registered capital interest in Yangchun Fuyang as security for its
obligations to make scheduled distributions to the Company and Shenzhen Futian
under the construction and management contract.
Interconnection and Dispatch. The power plant is
interconnected to the Yangchun municipal power grid. The power plant is
dispatched by the Yangchun Electric Dispatch Office pursuant to a dispatch
contract between the Joint Venture and the Yangchun Power Bureau.
Fuel. Fuel oil required for the power plant is supplied by
Yangchun Power Supply.
Operation. Yangchun Fuyang operates the power plant.
Description of the Potential Projects
This section contains descriptions of projects, other than the
Current Projects, for which the Company has signed a joint venture contract.
However, in none of the following projects has the Company funded its equity
contribution to the registered capital of the joint venture. After the
Amalgamation, the ability of the Company to make investments in the Potential
Projects would be substantially limited by the AES Debt Covenants.
Under PRC law, joint venture contracts only become effective
after issuance of certain required government approvals. Some of the Company's
joint venture contracts and project contracts for projects in development are
also subject to the satisfaction or waiver of certain significant contractual
conditions precedent. The conditions precedent specified in such contracts must
be satisfied before the Company will contribute to the registered capital of the
applicable joint venture. These conditions precedent may include the negotiation
and execution of further substantial project contracts or the receipt of certain
government approvals.
Some of the required government approvals have not been
obtained for each of the projects described in this section and receipt of such
approvals is not certain. In addition, substantial uncertainties exist with
regard to the ability of the parties to the joint venture contracts and other
project contracts to satisfy the conditions precedent in those documents.
Certain of these conditions involve subjective determinations by one or more
parties enabling the parties, by the terms of the contracts, to exercise
considerable discretion in making such determinations. No assurances can be
given that governmental approvals will be received, conditions precedent will be
satisfied, or that the joint ventures described in this section will be funded.
The projects described in this section are at various stages
of negotiation and discussion. The Company and PRC Government authorities,
including power bureaus, pricing bureaus, industrial customers and other third
parties, must still reach agreement on a number of commercial and technical
issues. There can be no certainty that the parties to these negotiations will
reach agreement with the Company and that the projects described in this section
will be completed. Moreover, the final terms of the contracts relating to these
projects may differ materially from the terms described below, and the terms may
be revised even after a joint venture contract or other project contract has
been signed or becomes effective. The Company may also decide from time to time
to change its investment strategies regarding development of the projects
described in this section. Among other things, the Company may increase the
levels of registered capital contemplated for such projects. Furthermore, the
Company may in the future be unable to, or elect not to, proceed with one or
more, or any, of the projects described in this section. The Company in the past
has signed a number of joint venture contracts for projects that it is no longer
pursuing.
Yangcheng Sun City
The Yangcheng Sun City power plant is a 6 x 350 MW coal-fired
power plant to be located near Yangcheng, Shanxi Province. The Yangcheng Sun
City power plant is to be owned by Yangcheng International Power Generating
Company Ltd. ("Yangcheng International Power"), a 20-year cooperative joint
venture formed by North China Electric Power Group Corporation ("North China
Power"), Jiangsu Province Investment Corporation ("Jiangsu Investment"), Shanxi
Energy Enterprise (Group) Company ("Shanxi Energy"), Shanxi Provincial Power
Company ("Shanxi Power"), Jiangsu Provincial Power Company ("Jiangsu Power") and
the Company.
The approved total investment in Yangcheng International Power
is approximately $1.6 billion. The approved registered capital of Yangcheng
International Power is 25% of the total investment, equal to $392.9 million. The
respective ownership interests of the shareholders in Yangcheng International
Power are as follows: the Company-25%, North China Power-25%, Jiangsu
Investment-20%, Shanxi Energy-16%, Shanxi Power-10% and Jiangsu Power-4%. Hence,
the Company's registered capital contribution will be approximately $98.2
million. The difference between the total investment and the total registered
capital of the joint venture is expected to be financed through debt arranged or
guaranteed by the Chinese parties. It is anticipated that export credit agency
loan guarantees from the Export-Import Bank of the United States and Hermes
Kreditversicherungs-Aktiengesellschaft of approximately $800 million will be
provided to Yangcheng International Power. The export credit agency loan
guarantees are expected to be supported by guarantees from the Construction Bank
of China.
Pursuant to the joint venture contract, the Company is
entitled to appoint two members of the nine-member board of directors of
Yangcheng International Power, one of the three vice chairmen, and a deputy
general manager of the power plant.
Preliminary work on the site has begun. Equipment supply
contracts were executed in Beijing in September 1996 with Siemens Ltd., which
will supply the turbines and generators, and with Foster Wheeler Energy
International, which will supply the boilers. Shanxi Power has been selected as
the turnkey contractor, and negotiations are currently underway with Shanxi
Power on the engineering, procurement and construction contract.
It is anticipated that the power plant will require five years to be completed.
The power plant will primarily utilize local sources of
low-cost anthracite coal. The coal is available from several coal mines owned
and operated by Shanxi provincial government entities located within 30
kilometers of the power plant site. Long-term fuel supply contract negotiations
with Shanxi Provincial Coal Sales and Transportation Company will commence in
the near future. It is anticipated that the project will also be operated by
Yangcheng International Power.
Electric power from the plant will be transmitted over a 730
kilometer transmission line to Jiangsu Power in Jiangsu Province, on the eastern
coast of China. The construction of the transmission line is not part of the
investment of the joint venture. It will be constructed and financed by the
Chinese shareholders in Yangcheng International Power pursuant to a separate
arrangement.
Following State Planning Commission approval of the project
feasibility study in March 1996, negotiations commenced on the principal project
agreements.
The ability of the Company to make an investment in the
Yangcheng Sun City project following the Amalgamation is contingent on, among
other things, the consent of the Company's partners in such project and the
approval of the relevant PRC Government authorities.
Other Potential Projects
Tianjin TEDA. The Tianjin TEDA power project, to be located in
the Tianjin Economic-Technological Development Area near Tianjin, is a 100 MW
coal-fired cogeneration project consisting of 3 x 220 ton circulating fluidized
bed boilers and 2 x 50 MW steam turbine units. The first phase will consist of
one boiler and one steam turbine. The Tianjin TEDA power plant is to be owned by
the Tianjin TEDA AES Power Company Ltd., a 20-year cooperative joint venture
formed by a wholly owned subsidiary of the Company and the Tianjin Economic
Development Corporation ("Tianjin Development"). Total investment in the joint
venture is expected to be approximately $95 million. Registered capital of the
joint venture is expected to be 40% of the total investment. Unless third-party
debt can be arranged, the parties will contribute shareholder loans representing
60% of the total investment. The Company has a 70% ownership interest and
Tianjin Development has a 30% ownership interest in the joint venture.
Applications for approval of the project have been made to the State Planning
Commission and MOFTEC. The joint venture contract will become effective upon
satisfaction of certain conditions precedent.
Nanpu Southern Delta. The Nanpu Southern Delta power plant, to
be located in Huian County Fujian Province, is a 700 MW coal-fired power plant
consisting of 2 x 350 units. The Nanpu Southern Delta power plant is to be owned
by the Fujian Nanpu Power Company Limited, a 19-year cooperative joint venture
formed by the Company, the Fujian Provincial Power Bureau ("Fujian Power") and
CPI. The total investment in the joint venture is expected to be approximately
$600 million and the registered capital is expected to be approximately $150
million. The project costs in excess of the registered capital are expected to
be financed through limited-recourse project financing. CPI and Fujian Power
have committed to obtain, on behalf of the project company, all necessary
approvals, including those from the State Planning Commission, MOFTEC and SAFE.
Negotiation of the power purchase contract and other project documents has
commenced. The project has received its initial project approval from the State
Planning Commission, and Fujian Power has commenced the preliminary design work
for the power plant at its own cost.
The ability of the Company to make an investment in the Nanpu
Southern Delta project following the Amalgamation is contingent on, among other
things, the consent of the Company's partners in such project and the approval
of the relevant PRC Government authorities.
Employees
At January 31, 1997, the Company employed 69 people, 24 of
whom are involved in operations or construction.
Passive Foreign Investment Company Status
The Company has determined that it was not a Passive Foreign
Investment Company ("PFIC") for U.S. federal income tax purposes for its fiscal
years ended November 30, 1995 and 1996. However, the Company has determined
that, subject to the "start-up" exception discussed below, it was a PFIC for its
initial taxable year, the fiscal year ended November 30, 1994, due to the fact
that, pending the investment of its funds in electric power generation projects
in China, the Company had invested in marketable securities that constituted
assets giving rise to passive income. The Company believes that it retroactively
avoided PFIC status for the fiscal year ended November 30, 1994 by qualifying
under the so-called "start-up" exception. Under this exception, a corporation
that would otherwise be a PFIC with respect to its initial taxable year will
generally not be so treated if it is not a PFIC in each of the succeeding two
years. Since the rules regarding PFICs are very complicated, U.S. shareholders
should consult their own tax advisors for further information.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
Not applicable.
Item 2. Properties
The Company leases its principal office in Beijing, People's
Republic of China. The Company also leases a regional office in Hong Kong. The
Beijing lease expires in July 1997. The Company's regional office in Hong Kong
is comprised of two floors with the lease expiring in May 1997.
The following table shows the material properties which the
Company's subsidiaries and other joint ventures in which the Company invests
lease or for which they have land use rights.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Expiration or Approximate Plant
Plant or Project Location Land Use Rights Term of Land Use Area Description
Rights
- --------------------- --------------------- ---------------- ------------------- -------------- ---------------
Anhui Liyuan-AES 7 Dang Shan Road, Lease of Land March 28, 2012 13,850 m2* Oil-fired
Power Company Ltd. Hefei City, Anhui Use Right Combined
Province, People's Cycle
Republic of China Gas-steam
Turbine
Facility
Chengdu AES-Kaihua Sichuan Sino-US Acquisition of March 2045 21,722 m2 Natural
Gas Turbine Power (Foreign) Medium & Land Use Right Gas-fired
Co. Ltd. Small-sized Simple Cycle
Enterprises Gas Turbine
Development Zone, Facility
Jin Tang County,
Sichuan Province,
People's Republic
of China
Hefei Zhongli 7 Dang Shan Road, Lease of Land March 17, 2012 13,850 m2* Oil-fired
Energy Company Ltd. Hefei City, Anhui Use Right Combined
Province, People's Cycle
Republic of China Gas-steam
Turbine
Facility
Hunan Xiangci-AES Chao Wang Ta Yi Transfer / October 7, 2019 48,110 m2 Hydroelectric
Hydro Power Company Zu and Pi Pa Zhou Assignment of Facility
Ltd. Tou, Chengguan, Land Use Right
Cili County,
Hunan Province,
People's Republic
of China
Jiaozuo Wan Fang Zhao Zhang Gong Transfer / April 25, 2019 481,490 m2 Pulverized
Power Company Ltd. Village, Dong Kong Assignment of Coal-fired
Zhuang Village, Land Use Right Facility
Daiwang Town,
Machun District,
Jiaozuo City, Henan
Province, People's
Republic of China
Sichuan Fuling Aixi Qiaobang Village, Acquisition of March 24, 2026 140,977 m2 Coal-fired
Power Company Ltd. Longhua Town, Land Use Right Circulating
Nanchuan City, Fluidized Bed
Sichuan Province, Boiler
People's Republic Facility
of China
Wuhu Shaoda Xi He Shan, Wuhu Lease of Land July 10, 2008+ 41,658 m2 Coal-fired
Electric Power City, Anhui Use Right Facility
Development Company Province, People's
Ltd. Republic of China
Wuxi-AES-CAREC Gas Xi Zhang Village Acquisition of November 22, 2012 73,103 m2* Oil-fired Gas
Turbine Power and Sheng Feng Land Use Right Turbine
Company Ltd. Village, Qianqiao Facility
Town, Xishan City,
Jiangsu Province,
People's Republic
of China
Wuxi-AES-Zhonghang Xi Zhang Village Acquisition of November 22, 2012 73,103 m2* Heat Recovery
Power Company Ltd. and Sheng Feng Land Use Right Steam Turbine
Village, Qianqiao Facility
Town, Xishan City,
Jiangsu Province,
People's Republic
of China
Yangchun Fuyang Side of Kongdong Transfer / March 26, 2045 625 m2 Diesel Engine
Diesel Engine Power 110kV Substation, Assignment of Facility
Co. Ltd. Chuncheng Town, Land Use Right
Yangchun City,
Guangdong Province,
People's Republic
of China
</TABLE>
- ---------------------------
* Land use rights shared by two plants or projects at the same location.
+ The lessor is Wuhu Energy Development Company ("WED") which is granted the
land use rights of the site by the State for a term of 40 years up to April
16, 2036. WED guaranteed to extend the lease term with the joint venture
prior to its expiration, and obtain the required registration with the Land
Bureau to ensure that the joint venture has the land use right of the site
for its entire term of operations.
Item 3. Legal Proceedings
On November 22, 1996, an action was filed against AES in the
Court of Chancery of the State of Delaware in and for New Castle County, by a
holder of 750 shares of AES Chigen Class A Common Stock, individually and on
behalf of a purported class of public shareholders of the approximately 8.2
million outstanding AES Chigen Class A Common Stock. The complaint seeks
preliminarily and permanently to enjoin AES from acquiring the outstanding
shares of AES Chigen which it does not already own. In addition, the complaint
seeks unspecified damages, including attorneys' fees and costs.
AES Chigen is not named in the suit. Plaintiff's allegations
state that AES, as the controlling shareholder of AES Chigen, breached its
fiduciary duties to treat the plaintiff class with entire fairness in connection
with AES's execution of an agreement with AES Chigen to acquire the outstanding
AES Chigen Class A Common Stock at an allegedly grossly inadequate price.
The parties have entered into a stipulation extending, until
March 24, 1997, AES's time to answer, move or otherwise plead to the complaint
and answer or object to plaintiff's pending document production request.
Plaintiff has the right to move for an order requiring an earlier response. AES
has informed AES Chigen that it believes that it has meritorious defenses to the
lawsuit and intends to defend against it vigorously. The parties to the
Amalgamation Agreement intend to proceed with the Amalgamation, subject to
shareholder approval and the satisfaction of the other conditions contained in
the Amalgamation Agreement, unless enjoined.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
(a) Market Information
The Class A Common Stock is quoted on the National Association
of Securities Dealers Automated Quotation ("NASDAQ") National Market System
under the symbol "CHGNF". The following table sets forth, for the periods
indicated, the high and low sales prices for the Class A Common Stock as
reported by NASDAQ National Market System. There is no market for the Class B
Common Stock.
1996 Fiscal Quarters High Low
------------------------ ------ -------
First Quarter 9 1/4 7 1/2
-------------------------
Second Quarter 10 1/2 8 3/8
-------------------------
Third Quarter 10 5/8 8 5/8
-------------------------
Fourth Quarter 14 8 1/2
1995 Fiscal Quarters High Low
------------------------- ------ -------
First Quarter 10 3/4 8 1/4
-------------------------
Second Quarter 9 1/4 8
-------------------------
Third Quarter 10 3/4 8
-------------------------
Fourth Quarter 10 1/8 8 1/8
The foregoing quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
(b) Holders
As of January 31, 1997, there were approximately 171 record
holders of the Class A Common Stock. AES is the only holder of Class B Common
Stock.
(c) Dividends
No dividends were paid on the Class A Common Stock or Class B
Common Stock during the years ended November 30, 1996 and 1995. The Company does
not currently intend to pay dividends in the foreseeable future. See "Discussion
and Analysis of Financial Condition and Results of Operations" for a discussion
of current and potential restrictions on the ability of the Company and its
project companies to pay dividends, which discussion is incorporated herein by
reference.
(d) Bermuda Law
The Company is organized under the laws of Bermuda. No Bermuda
withholding tax is imposed on dividends paid by the Company. No reciprocal tax
treaty affecting the Company exists between Bermuda and the United States.
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------
For the Years Ended November 30, 1996 and 1995
For the Period from December 7, 1993 (inception) to November 1996 1995 1994
30, 1994
- --------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA
Revenue $ 9,212 $ 1,382 $ 38
Operating costs and expenses 8,867 9,894 6,995
Operating income/(loss) 345 (8,512) (6,957)
Income/(loss) before taxes and minority interest 4,804 2,223 (368)
Net income/(loss) 4,140 2,138 (371)
Net income/(loss) per share 0.26 0.12 (0.03)
Cash dividend per share 0 0 0
- --------------------------------------------------------------------------------------------------------------------
As of November 30 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
Total assets $ 280,698 $ 229,871 210,870
Loans from minority shareholders (long-term) 34,933 6,666 0
Shareholders' equity 190,355 187,585 201,584
</TABLE>
Item 7. Discussion and Analysis of Financial Condition and Results of
Operations.
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 joint ventures. The Company currently owns interests in eight power plants
with an aggregate nameplate capacity of approximately 818 MW. See "Description
of the Current Projects." The Company is considering an investment in Yangcheng
Sun City, a project with an aggregate nameplate capacity of 2,100 MW, and is
also considering investments in two other power projects. See "Description of
the Potential Projects." After the Amalgamation, the Company's ability to invest
in projects will be substantially limited by the AES Debt Covenants.
Because of the significant magnitude and complexity of
constructing electric power plants in the PRC, 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 construction of an electric power generation plant,
including its ancillary facilities such as a transmission line or substation,
may be adversely affected by many factors commonly associated with the
construction of infrastructure projects, including shortages of equipment,
materials and labor, as well as labor disputes, adverse weather conditions,
natural disasters, accidents and other unforeseen circumstances and problems.
Any of these could cause completion delays and cost overruns. Delays in
obtaining requisite licenses, permits or approvals from government agencies or
authorities could also increase the cost or delay or prevent the commercial
operation of a project. Construction delays can result in the loss or delayed
receipt of revenues and, if completion is delayed beyond the completion date
specified in the power purchase contract, the payment of penalties.
Additionally, the failure to complete construction according to specifications
can result in reduced plant efficiency, higher operating costs and reduced or
delayed earnings.
The economics of any 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 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.
While the relevant PRC pricing bureaus have committed to
utilize the Joint Ventures' formulas in establishing and adjusting tariffs,
there can be no assurance that the relevant pricing bureaus will calculate and
adjust tariffs in accordance with these tariff formulas. On April 1, 1996, a new
law governing the electric power sector in the PRC came into effect. The law
establishes, among other things, broad principles with respect to the
methodology of calculating and setting electric power tariffs. Detailed
regulations with respect to tariff calculation and tariff setting are expected
to be promulgated in the near future by the Central Government. There can be no
assurance that such regulations, when promulgated, will not adversely affect the
tariff structures which the Company's Joint Ventures have adopted.
Demand for power produced by a power plant is determined by
the demand for electric power in the area served by the power plant 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 can look only to the credit of the power purchaser to pay the required
amount. The Company focuses its development efforts on power plants that will
provide power to areas of high demand relative to existing and planned capacity.
Some regions or cities in the PRC have experienced slower
economic development in recent years. As a consequence, load growth in the PRC,
while generally increasing in the country overall, has exhibited uneven
development. Some of the Joint Ventures' power plants are designed to provide
peaking power. Such plants are dispatched only after base load power stations
have been brought on-line and reached maximum capacity. If electric power demand
proves less than expected in an area, additional peak or base load power may not
be required in the area or may be required at lower than expected levels. The
Company's Joint Ventures seek to mitigate this risk by entering into take-or-pay
power purchase arrangements and by entering into dispatch contracts with PRC
electric power dispatching authorities which obligate the dispatchers to
dispatch the power plants at their full capacity for a minimum number of hours
each year. There can be no assurance, however, that the Joint Ventures will not
experience difficulty in enforcing take or pay contract obligations or such
dispatch contract obligations if electric power in an area proves not to be
needed by the affected power purchaser and dispatcher.
The operation of an electric power generation plant may be
adversely affected by many factors such as the breakdown or failure of equipment
or processes, performance below expected levels of output or efficiency, labor
disputes, operational errors, natural disasters, and the need to comply with the
directions of the relevant government authorities, the dispatcher and power
purchaser of a power plant. In addition, such operation may be hampered by
insufficient or poor quality fuel caused by either inadequate supply or
transportation or arrangements therefor.
In all of its projects, the Company and its Joint Ventures are
relying on the reliability and creditworthiness of PRC entities such as its
partners, contractors, customers, suppliers, operators, guarantors, lenders and
others who are parties to agreements with the Company or its Joint Ventures.
While the Company believes that these counterparties have the ability to perform
and will perform their obligations, the reliability and creditworthiness of PRC
entities are difficult to ascertain. In most cases, the Company, in assessing
the reliability and credit standing of counterparties, is relying on financial
or other information provided to the Company or its Joint Ventures by such
parties or others, or from information and sources publicly available in the
PRC. The Company can offer no assurance that this information is accurate or
that these counterparties will meet their contractual obligations. The failure
of any one of these counterparties to fulfill its obligations to a Joint Venture
could have a substantial negative impact on such Joint Venture's operations.
In a number of cases, the Company's partner in a Joint Venture
controls or is affiliated with the power purchaser, contractor, operator and/or
fuel supplier of the project. It is possible, in these cases, that such
arrangements may result in one or more of these parties having a conflict of
interest in a project, which could have an adverse effect on the Joint Ventures'
operations.
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 by 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. Under these circumstances the shareholder
loans generally are, or will be, subordinated to such third party debt.
The Company's revenue growth will depend in large part on the
Company's ability to bring the Joint Ventures' power plants currently under
construction into commercial operation. The Company's revenue growth will also
depend on its ability to secure financing and achieve financial closing,
construction completion and commercial operation of the Potential Projects and
other future project opportunities, subject to the limitations that would be
imposed by the AES Debt Covenants following the Amalgamation.
Results of Operations
The discussion set forth below relates to the results of
operations and financial condition of the Company for, and as of the end of, the
years ended November 30, 1996 and 1995 and the year ended November 30, 1995 and
the period from December 7, 1993 (the date of the Company's establishment) to
November 30, 1994, and the following should be read in conjunction with the
Consolidated Financial Statements of the Company included elsewhere in this
Annual Report on Form 10-K.
Years ended November 30, 1996 and 1995
Revenues and Costs of Sales. Total revenues increased from
approximately $1.4 million to $9.2 million from 1995 to 1996. Costs of sales,
which include fuel, operations and maintenance expenses, depreciation and
amortization, increased from approximately $600,000 to $5.4 million from 1995 to
1996. The increases in revenues and costs of sales were due primarily to the
commencement of operations of the Wuxi Tin Hill project. The increase in
revenues generated in 1996 from the operations of the Wuxi Tin Hill project was
offset, in part, by a decrease in revenues generated pursuant to the payment of
construction delay fees paid by the contractor of the Cili Misty Mountain
project. The Company was entitled to construction delay payments from the
contractor through March 11, 1996 to compensate for the lost generation.
Development, Selling, General and Administrative Expenses.
Development, selling, general and administrative expenses decreased $5.8 million
from $9.3 million in 1995 to $3.5 million in 1996. The decrease was primarily
due to the capitalization of a higher proportion of development costs associated
with projects which have achieved financial closing or which have achieved
certain project-related milestones.
Interest Income. Interest income in 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 in 1996 decreased $4.1 million from $10.5 million to $6.4 million
compared with 1995. The decrease in interest income for 1996 was primarily due
to a lower average amount of funds available for marketable securities
investment due to capital investments in Joint Ventures, as well as the
repurchase of a portion of the outstanding shares of the Class A Common Stock.
Interest Expense. In 1996, interest expense of $1.1 million
related primarily to the interest on two minority shareholder loans to
Wuxi-AES-CAREC.
Amalgamation Cost. In 1996, amalgamation cost of $1.4 million
related to expenses incurred in pursuing the proposed Amalgamation with AES
announced in November 1996.
Year ended November 30, 1995 and the period from December 7,
1993 (the date of the Company's establishment) to November 30,
1994
Revenues and Costs of Sales. Total revenues increased from
approximately $38,000 to $1.4 million from 1994 to 1995. There were two
components to revenues generated in 1995: (i) revenue generated by electricity
sales from the Cili Misty Mountain project, which increased from approximately
$38,000 to $0.7 million from 1994 to 1995, and (ii) revenue generated pursuant
to the payment of construction delay fees of approximately $0.7 million paid by
the contractor of the Cili Misty Mountain project. Costs of sales increased from
approximately $68,000 to $0.6 million in 1995. The significant increases in
revenues generated and costs of sales in 1995 were primarily attributable to a
full year of operations for the Cili Misty Mountain project, commencing in
November 1994.
Development, Selling, General and Administrative Expenses.
Development, selling, general and administrative expenses increased by $2.3
million from $6.9 million in 1994 to $9.2 million in 1995. The increase in
development, selling, general and administrative expenses was primarily due to
the hiring of additional employees in 1994 and 1995 for the development of power
plants and the financial management of the Joint Ventures in China. The increase
was offset in part by capitalization of development costs associated with
projects which achieved certain project related milestones.
Interest Income. Interest income increased approximately $3.9
million from $6.6 million to $10.5 million from 1994 to 1995. The increase was
due primarily to proceeds received from the Company's initial public offering
being available for investment in marketable securities for all of 1995, while
such proceeds were only available the previous year beginning in the second
quarter of 1994. In addition, interest rates on the Company's marketable
securities were somewhat higher during 1995. These factors were offset in part
by the Company's investment in Yangchun Fuyang in March and September 1995 and
Wuxi-AES-CAREC and Wuxi-AES-Zhonghang beginning in May 1995 and due to the
repurchase by the Company during 1995 of a portion of the outstanding shares of
Class A Common Stock.
Liquidity and Capital Resources
The Company's business has required substantial investment
associated with the development, acquisition and construction of electric power
plants and related facilities through its Joint Ventures. Since commencing
business, the Company had entered into commitments to invest a total of
approximately $259.6 million in the form of equity contributions and loans to
its Joint Ventures, of which $165.7 million had been invested as of January 31,
1997. If the Amalgamation is not consummated or the AES Debt Covenants otherwise
do not apply, the Company would expect 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. On December 19, 1996, the
Company completed the issuance of $180 million principal amount of the 2006
Notes. The proceeds, net of underwriting discounts and commissions and other
offering costs, were approximately $173.9 million. Pursuant to the terms of the
Indenture for the 2006 Notes, the Company was required to deposit approximately
$27.1 million in an interim reserve account to make interest payments on the
2006 Notes through June 15, 1998, and approximately $9.1 million in a debt
payment reserve. The Company intends to use the available proceeds of the 2006
Notes to fund investment commitments to the Current Projects, for general
corporate purposes and, to the extent funds are available and subject to the AES
Debt Covenants, for the Potential Projects and other future projects. Pending
such use, the Company will invest such proceeds in marketable securities that
are Permitted Investments as defined in the Indenture for the Notes. The
proceeds of the Notes together with the Company's existing cash and cash
equivalents are expected to be sufficient to enable it to fund its commitments
to the Current Projects together with its investment in a portion of one or more
of the Potential Projects or other future projects. In addition, the Company
expects to obtain additional funds from operating activities as more of its
electric power plants become operational. However, if the Amalgamation is
consummated and the AES Debt Covenants become applicable, the Company will be
restricted in its ability to invest cash flows from operating activities in its
projects. If the Amalgamation is not consummated or the AES Debt Covenants
otherwise do not apply, the Company may raise additional equity or debt, if
needed, to fund future investment opportunities, subject to its ability to raise
debt financing under certain covenants governing the 2006 Notes.
The Indenture for the 2006 Notes limits, among other things,
(i) the payment of dividends and redemption of equity interests by the Company
and its project companies; (ii) the redemption of subordinated indebtedness;
(iii) the making of certain investments; (iv) the incurrence by the Company and
its project companies of certain indebtedness; (v) the imposition by the Company
or any of its project companies of restrictions on the payment of dividends and
other actions; (vi) the creation by the Company or any of its project companies
of certain liens; (vii) certain transactions with affiliates of the Company;
(viii) certain asset sales and the incurrence of indebtedness to refinance
existing indebtedness; (ix) the issuance of stock by certain subsidiaries of the
Company; (x) any change in the nature of the Company's business; and (xi) the
merger or consolidation of the Company or its project companies with other
entities. The Indenture also obligates the Company and its project companies to
maintain certain insurance, obtain required government approvals, maintain good
title to their properties and operate and maintain their power generation
facilities in accordance with prudent industry operating and maintenance
practices. The events of default under the Indenture include, among other
things, (i) failure to pay interest within 30 days or failure to pay principal
at maturity or upon redemption or repurchase of the 2006 Notes; (ii) a default
in the performance of covenants contained in the Indenture; (iii) a default
under indebtedness of the Company or any of its project companies in the amount
of $5 million or more (other than under the 2006 Notes or any non-recourse
debt); and (iv) a judgment against the Company or any of its project companies
in an amount in excess of $5 million.
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 Company's Nanpu Southern Delta project is one
example of a potential project that is likely to be completed only with
substantial third party financing.
The ability of Wuhu Shaoda Joint Venture 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. See "Description of the
Current Projects -- Wuhu Grassy Lake." 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 may depend on the assent 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.
In the event that the Amalgamation is consummated, and any
holder of shares of Class A Common Stock exercises dissenter's rights under
Bermuda law, the Company would be obligated to pay any amounts awarded by a
Bermuda court, which would reduce the amounts available for investment in the
Current Projects or the Potential Projects.
The Company is not currently affected by the AES Debt
Covenants because it is not a subsidiary of AES. After the Amalgamation, the
Company will be subject to the AES Debt Covenants, including those contained in
the documents governing AES's 10 1/4% Subordinated Notes due 2006, 9 3/4% Senior
Subordinated Notes due 2000 and $425 million credit facility due 1999. If the
Amalgamation occurs, the material limitations applicable to the Company will
include those described below.
Under the AES Debt Covenants, AES may not permit any
subsidiary with a direct or indirect interest in a power generation facility (as
defined in the relevant agreements) to make any investment in, or to consolidate
or merge with, any other entity with a direct or indirect interest in any other
power generation facility or other business.
Immediately prior to the expected consummation of the
Amalgamation, the Company intends to contribute the net proceeds of the 2006
Notes remaining after the funding of an interim reserve account and a debt
service reserve account, along with certain of its existing funds, to its
subsidiaries to provide funding for potential projects and other future
projects, as well as additional funding for current projects. It is anticipated
that these amounts will not in the aggregate be more than approximately $95
million. Under the AES Debt Covenants, as a general matter, after exhaustion of
these amounts, no additional AES Chigen funds would be available to fund
investment in additional power projects or to fund the capital requirements and
construction cost overruns for current projects. As a consequence, opportunities
for investment, along with the associated risks, that would otherwise be
available to the Company may instead be taken by other investors, including AES.
Additional capital requirements for AES Chigen-invested projects would have to
be funded by other parties, including AES, which would result in a dilution of
the Company's interest in any such project. In addition, due to the application
of the AES Debt Covenants, cash flow generated from projects would not be
permitted to be invested in any other project. As a result, to the extent these
funds are not required to pay expenses incurred by the Company, they may
accumulate over time. The Company is permitted, pursuant to the terms of the
Indenture under which the 2006 Notes were issued, to pay a portion of such funds
as dividends, provided that the Company satisfies certain conditions.
In addition, under the AES Debt Covenants, investment could
not be made in a project directly by the Company (as opposed to through one of
its subsidiaries). Accordingly, prior to the Amalgamation, the Company intends
to transfer its interests in certain potential projects, such as Yangcheng Sun
City and Nanpu Southern Delta, to wholly owned subsidiaries of the Company. In
the case of each of these projects, the consent of the Company's partners in
such project and the examination and approval of the relevant PRC government
authority are required to effect the transfers of the Company's interest. There
can be no assurance that such consents and approvals will be obtained in order
to permit investments to be made in these projects following the Amalgamation.
Under the AES Debt Covenants, the Company and its subsidiaries
would be effectively prohibited from incurring additional indebtedness (as
defined in the relevant instruments), except that a subsidiary would under some
circumstances be permitted to incur indebtedness for the purpose of financing a
power project as long as such indebtedness did not have recourse to AES, the
Company or another subsidiary.
Both the AES Debt Covenants and the covenants contained in the
Indenture for the 2006 Notes applicable to the Company require the repayment or
purchase of indebtedness under specified circumstances involving asset
dispositions. Insofar as separate repayments are required at the AES and the
Company levels with respect to a single asset sale, this covenant may tend to
cause the Company not to make an asset sale under circumstances where it
otherwise would.
Under the AES Debt Covenants, an AES subsidiary is not
permitted to make an investment in a project company following the occurrence of
a condition permitting the acceleration of indebtedness relating to the project
or any failure to pay such indebtedness at its final maturity.
Years ended November 30, 1996 and 1995
Cash from Operations. Net cash used in operating activities
totaled $1.5 million for 1996 as compared to $0.8 million provided by operating
activities for 1995. The decrease in 1996 resulted primarily from an increase in
net income due to the commencement of operations of Wuxi Tin Hill offset by an
adjustment of the provision for project development costs and a net reduction in
the components of working capital.
Cash from Investing Activities. Net cash used in investing
activities totaled $66.6 million during 1996 as compared to $22.8 million
provided by investing activities during 1995. The 1996 amount primarily
reflected the purchase of property, plant and equipment and other project
related investments of $101.5 million which was partially offset by cash of
$34.7 million provided by the maturity of short-term investments (net of
purchases). The 1995 amount primarily reflected cash provided by the maturity of
short-term investments (net of purchases) of $64.5 million. This amount was
partially offset by the cash used in purchases of property, plant and equipment
and other project related investments of $41.7 million.
Cash from Financing Activities. Net cash used in financing
activities aggregated $1.4 million during 1996 as compared to $8.2 million
provided by financing activities during 1995. During 1996, the Company
repurchased shares of its Class A Common Stock for $11.4 million which was
partially offset by $8.5 million of loans and contributions made to subsidiaries
by minority shareholders and net proceeds from notes payable of $1.9 million.
The 1995 amount reflected cash of $13.5 million provided to the Company's
subsidiaries by minority shareholders and $1.0 million from notes payable, less
$6.4 million in cash used for the repurchase of shares of Class A Common Stock.
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.
Foreign Currency Exchange
The Company anticipates that its Joint Ventures will receive
nearly all of their revenues in Renminbi. A significant portion of this revenue
will need to be converted to other currencies, primarily US dollars, and
remitted outside of the PRC to meet foreign currency obligations to equipment
suppliers, to repay borrowings from foreign third party lenders and to make
payments to the Company in respect of equity distributions and shareholder
loans. However, the Renminbi is not freely convertible into US dollars. Although
the receipt of approvals to convert Renminbi into foreign currencies and to
remit foreign currencies outside of the PRC is routine for approved foreign
investment enterprises such as the Joint Ventures, there can be no assurance
that the PRC Government will continue to provide such approvals. Moreover, while
in the last two years foreign currency has been readily available, no assurance
can be given that the Joint Ventures will in the future be able to convert
sufficient amounts of Renminbi to foreign currency in China's foreign exchange
markets to meet their foreign currency obligations, or that the Joint Ventures
will freely be able to remit foreign currency abroad.
Prior to 1994, the Renminbi had experienced a significant net
devaluation against most major currencies, and during certain periods,
significant volatility in the market-based exchange rate. Since the beginning of
1994, the Renminbi to US dollar exchange rate has largely stabilized. While the
Joint Ventures will receive nearly all of their revenues in Renminbi, the
Company expects its Joint Ventures to have significant US dollar obligations
with respect to distributions to the Company. Under the terms of all of their
power purchase contracts, the Company's Joint Ventures are entitled to obtain
tariff adjustments for future Renminbi devaluation. While the Company expects
that its Joint Ventures will be able to pass on increased costs resulting from a
devaluation of the Renminbi by means of such tariff adjustments, no assurance
can be given that the Joint Ventures will be able to obtain approval for a
sufficient tariff adjustment.
Special Note Regarding Forward-Looking Statements
Certain statements in this Discussion and Analysis of
Financial Condition and Results of Operations and under the caption "Business"
and elsewhere in this Annual Report on Form 10-K constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 ("Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance and achievements of the Company, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: political and economic considerations,
restrictions on foreign currency convertibility and remittance abroad, exchange
rate fluctuations and developing legal system, in each case pertaining to the
PRC; holding company structure of the Company; regulation and restrictions;
tariffs; governmental approval processes; environmental matters; construction,
operating and fuel risks; load growth, dispatch and transmission constraints;
reliance on and creditworthiness of PRC counterparties; conflict of interest of
contracting parties; control by and reliance on AES; limitations resulting from
the Amalgamation and adherence to the AES principles; and other factors
referenced in this Annual Report on Form 10-K.
Item 8. Financial Statements and Supplementary Data.
The following financial statements of the Company and its
consolidated subsidiaries are attached to this Annual Report on Form 10-K
following the signature page:
- Report of Independent Auditors.
- Consolidated Statements of Operations for the fiscal
years ended November 30, 1996 and 1995 and for the
period from December 7, 1993 (inception) to November
30, 1994.
- Consolidated Balance Sheets as of November 30, 1996 and
1995.
- Consolidated Statements of Shareholders' Equity for the
fiscal years ended November 30, 1996 and 1995 and for
the period from December 7, 1993 (inception) to
November 30, 1994.
- Consolidated Statements of Cash Flows for the fiscal
years ended November 30, 1996 and 1995 and for the
period from December 7, 1993 (inception) to November
30, 1994.
- Notes to Consolidated Financial Statements for the
fiscal years ended November 30, 1996 and 1995 and for
the period from December 7, 1993 (inception) to
November 30, 1994.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
(a) Directors of the Company
The Company's Bye-laws provide that the Board of Directors
consists of two classes, the Class A Directors (the "Class A Directors") and the
Class B Directors (the "Class B Directors"). At each Annual General Meeting of
Shareholders, the holders of Class A Common Stock elect the Class A Directors
and the holders of Class B Common Stock elect the Class B Directors. Directors
serve until the next Annual General Meeting of Shareholders and until their
successors have been elected and shall have qualified. The current directors of
the Company are listed below:
Name Age Position
Roger W. Sant*................... 65 Chairman of the Board and Director
Dennis W. Bakke*................. 51 Vice Chairman and Director
Robert F. Hemphill, Jr*.......... 53 Vice Chairman and Director
Thomas Tribone*.................. 44 Director
Thomas I. Unterberg*............. 65 Director
William Dykes.................... 64 Director
Xiliang Feng..................... 77 Director
Dr. Victor Hao Li................ 55 Director
William H. Taft, IV.............. 51 Director
- ------------------------------
*Class B Director
Roger W. Sant has been the Chairman of the Board and a Class B
Director of the Company since December 1993. In 1981, Mr. Sant and Dennis Bakke
co-founded AES. Mr. Sant has been Chairman of the Board and a Director of AES
since its inception, and he held the additional office of Chief Executive
Officer through 1993. He is currently Chairman of the Board of Directors of The
World Wildlife Fund U.S. and serves on the Boards of Directors of Marriott
International Inc., The World Resources Institute, and The World Wide Fund for
Nature and serves on the National Council for The Environmental Defense Fund. He
was Assistant Administrator for Energy Conservation and the Environment of the
Federal Energy Administration ("FEA") from 1974 to 1976 and the Director of the
Energy Productivity Center, an energy research organization affiliated with The
Mellon Institute at Carnegie Mellon University, from 1977 to 1981.
Dennis W. Bakke has been Vice Chairman and a Class B Director
of the Company since December 1993. Mr. Bakke co-founded AES with Mr. Sant in
1981 and has been a Director of AES since 1986. He was named President and Chief
Executive Officer of AES in January 1994, and from 1987 through 1993, Mr. Bakke
held the office of President and Chief Operating Officer of AES. From 1982 to
1986, he served as Executive Vice President of AES and from 1985 to 1986 he also
served as Treasurer of AES. Mr. Bakke served with Mr. Sant as Deputy Assistant
Administrator of FEA from 1974 to 1976 and as Deputy Director of the Energy
Productivity Center from 1978 to 1981. He is a trustee of Geneva College.
Robert F. Hemphill has been Vice Chairman of the Company since
February 1995 and has been a Class B Director of the Company since December
1993. From December 1993 to February 1, 1995, Mr. Hemphill was President and
Chief Executive Officer of the Company. Mr. Hemphill was named a Director of AES
in June 1996. From 1987 to such appointment, Mr. Hemphill served as Executive
Vice President of AES. From 1984 to 1987, he was Senior Vice President of AES
and from 1982 to 1984 he served as Vice President for project development of
AES. He also has served as President and Chief Executive Officer of AES
Transpower Pvt. Ltd. ("Transpower"), a subsidiary of AES, since 1989. Prior to
joining AES, he was the Deputy Manager of Power of the Tennessee Valley
Authority, the largest electric utility in the United States. He also served
with the U.S. Department of Energy as Deputy Assistant Secretary for Planning
and Evaluation, and with the FEA where he assisted in drafting several major
energy statutes, including the National Energy Act. He serves on the Board of
Directors of the Friends of the U.S. National Arboretum and is a member of the
Arlington County Transportation Commission.
Thomas Tribone has been a Class B Director of the Company
since March 1995. Mr. Tribone has been Senior Vice President of AES since 1990.
He is President of the AES Americas Division of AES with responsibility for
business in Latin America and parts of the United States. He is Vice Chairman of
the Inter-regional Transmission Coordination Forum, an organization of 45
electric utilities which coordinates power transmission in the eastern half of
North America.
Thomas I. Unterberg has been a Class B Director of the Company
since December 1993. He has been a Director of AES since 1984 and was a Director
of AES from 1982 to 1983. He has been a Managing Director of Unterberg Harris,
L.P. since 1989, having been a Managing Director of Shearson Lehman Brothers
Inc. from 1987 through 1988. Prior to 1986, he was a Managing Director and
Chairman of L.F. Rothschild Unterberg Towbin, Inc. He currently serves on the
Boards of Directors of Electronics for Imaging, Inc., Fractal Design
Corporation, and Systems and Computer Technology Corp.
William Dykes has been a Class A Director of the Company since
February 1994. Mr. Dykes retired from Citibank N.A. ("Citibank") in 1992 after
36 years of service. Since his retirement, Mr. Dykes has provided financial
advisory services for international projects. Prior to his retirement, he spent
11 years as Managing Director of Citicorp International Limited in Hong Kong
where he was responsible for providing financial advisory services and
structuring major term loans to governments, corporations and projects in the
Pacific basin. During that time he was responsible for Citibank's involvement in
a number of major PRC-related financings, including the 700 MW Shajiao B project
constructed by Hopewell Holdings Limited in Guangdong Province.
Xiliang Feng has been a Class A Director of the Company since
March 1995. Since 1991, Mr. Feng has been Editor-in-Chief Emeritus and Special
Advisor to the China Daily newspaper and Chairman of the China Daily
Distribution Corporation in New York. Mr. Feng has also been Senior Consultant
to "WINDOW" newsmagazine of Hong Kong since 1991. Born in Shanghai in 1920, Mr.
Feng received a bachelor's degree in journalism from St. John's University in
Shanghai, a master's degree in journalism from University of Missouri and was a
Professional Journalism Fellow at Stanford University in 1983. He was awarded
The Missouri Medal of Honour for Distinguished Service in Journalism awarded by
the University of Missouri in 1984. He has been a Member of the National
Committee of the Chinese People's Political Consultative Conference (CPPCC)
since 1987. Mr. Feng is a trustee of the International Center for Communications
at San Diego State University and a member of the Pacific Communications
Research Council.
Dr. Victor Hao Li has been a Class A Director of the Company
since February 1994. Since 1991, Dr. Li has been Co-Chairman of the Asia Pacific
Consulting Group of Watanabe, Ing & Kawashima in Honolulu, Hawaii and is a
specialist in Asian law. From 1981 to 1990, he served as President of the
East-West Center, a federally supported research center. He currently serves on
the Board of Directors of Hawaiian Electric Industries, Inc., a utility customer
of AES Barbers Point, Inc., a subsidiary of AES. Born in China, Dr. Li graduated
from Columbia College and Columbia Law School and holds two post-graduate
degrees from Harvard Law School.
William H. Taft, IV has been a Class A Director since April
1994. Mr. Taft joined the law firm of Fried, Frank, Harris, Shriver and Jacobson
in September 1992 and is a partner in the firm's Washington, D.C. office. From
1989 until 1992, he was U.S. Permanent Representative of NATO. Prior to coming
to NATO, Mr. Taft served as Deputy Secretary of Defense from January 1984 until
April 1989 and as Acting Secretary of Defense from January to March 1989. From
1981 until 1984, Mr. Taft served as Department of Defense General Counsel. Prior
to his initial appointment to the Department of Defense, Mr. Taft was engaged in
the practice of law in Washington, D.C. from 1977 to 1981. Before entering
private practice, he served in various positions at the Federal Trade
Commission, the Office of Management and Budget, and the Department of Health,
Education and Welfare (HEW), highlighted by his appointment by President Gerald
Ford in 1976 to serve as General Counsel of HEW.
Upon the consummation of the Amalgamation, the Board of
Directors of the Company is expected to consist of three Directors, Roger W.
Sant, Dennis W. Bakke and Robert F. Hemphill, Jr.
(b) Executive Officers of the Company
The following is certain information concerning the executive
officers of the Company.
Roger W. Sant - See information with respect to Mr. Sant under
Item 10(a) hereof, which information is incorporated by reference.
Dennis W. Bakke - See information with respect to Mr. Bakke
under Item 10(a) hereof, which information is incorporated by reference.
Robert F. Hemphill, Jr. - See information with respect to Mr.
Hemphill under Item 10(a) hereof, which information is incorporated by
reference.
Paul T. Hanrahan, 39 years old, has been President and Chief
Executive Officer of the Company since February 1995. From December 1993 until
such appointment, Mr. Hanrahan was Executive Vice President and Chief Operating
Officer of the Company. From December 1993 until April 1994, he was Secretary of
the Company. He has been a Vice President of AES since December 1993. Prior to
December 1993, he was the general manager of Transpower, leading development
efforts in China, India, the Philippines and Eastern Europe. He has also played
a leading role in development of several AES projects, including the Belfast
West and Kilroot projects in Northern Ireland, the AES Barbers Point project in
Hawaii and the AES Thames project in Connecticut. Mr. Hanrahan graduated with a
mechanical engineering degree from the U.S. Naval Academy and with a Master of
Business Administration from the Harvard Business School.
Edward C. Hall III, 37 years old, has been Executive Vice
President of the Company since August 1996. From 1994 until Mr. Hall's
appointment as Executive Vice President, he was a Vice President of the Company.
From December 1993 until April 1994, Mr. Hall served as Chief Financial Officer
of the Company. He has been a Vice President of Transpower since July 1993. From
1992 to July 1993, Mr. Hall served as Project Director for AES and from 1990
through 1992, as Project Director for the AES Warrior Run project. From 1988
through 1989 he served as Project Development Manager working on the AES Thames
project refinancing , the AES Barbers Point project financing and the AES Medway
project in England. His experience includes over ten years of engineering,
operations, and project management in the power industry. He is registered as a
professional engineer in the Commonwealth of Massachusetts. He graduated with a
Master of Science degree from the Massachusetts Institute of Technology Sloan
School of Management and with a mechanical engineering degree from Tufts
University.
Jeffery A. Safford, 38 years old, has been Vice President,
Chief Financial Officer and Secretary of the Company since April 1994. From
February 1994 until his appointment as Vice President, Chief Financial Officer
and Secretary in April 1994, Mr. Safford served as Assistant Secretary of the
Company and performed the function of principal accounting officer. He was
Director of Finance and Administration of AES prior to April 1994. Prior to
joining AES, he worked as a Senior Auditor for Touche Ross & Co., an accounting
firm, with responsibility for several large publicly held clients. He graduated
from Pennsylvania State University with a degree in accounting and he is a
Certified Public Accountant.
James R. Reiney, Jr., 56 years old, joined the Company in
September 1995 and has been Vice President of the Company since November 1995.
Prior to joining the Company, Mr. Reiney was a Vice President and Manager of
Construction for Bechtel Corporation ("Bechtel") (construction and engineering),
with responsibilities for Bechtel's world-wide power construction projects.
After Bechtel's corporate restructuring, Mr. Reiney was appointed as Vice
President and Manager of Construction for the San Francisco Regional Office with
responsibilities for 44 projects world-wide. Mr. Reiney graduated from The
Citadel with a Bachelor of Science degree in Civil Engineering.
Thomas Wu, 36 years old, has been Vice President of the
Company since March 1995. From January 1995 until his appointment as Vice
President, Mr. Wu was a project director of the Company. From February 1993
until January 1995, he was Chief Executive Officer of Health Secrets, Inc.
(health care products) and from January 1994 until January 1995, he also acted
as a part-time consultant to the Company. Prior to February 1993, he was
Director of Product Marketing for the Language Business Unit of Borland
International, Inc. (software). Mr. Wu graduated with a Master of Science degree
in management from the Massachusetts Institute of Technology Sloan School of
Management.
Kerry Yeager, 45 years old, has been a Vice President of the
Company since April 1996. From 1994 until his appointment as Vice President in
April 1996, he was a project director for the Company. From 1989 to 1994, he
served as a project manager for AES. Prior to joining AES, Mr. Yeager worked for
the Lower Colorado River Authority from 1973, with experience in distribution
and transmission lines, as well as power design and management. Mr. Yeager
graduated from the University of Texas with a Bachelor of Business
Administration degree.
The occupations listed above were the principal occupation and
employment of each executive officer during the period indicated. None of the
above listed executive officers is related to any other such executive officer
and none was selected pursuant to any arrangement or understanding between such
executive officer and any other person. All executive officers are elected by
the Board of Directors annually.
(c) Reports under Section 16 of the Securities Exchange Act of
1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Company's directors and certain of
its officers, and persons who own more than ten (10%) percent of a registered
class of the Company's equity securities, to file reports on Forms 3, 4, and 5
with the Securities and Exchange Commission ("SEC") that disclose ownership or
transactions in the Company's securities. Officers, directors and greater than
ten (10%) percent beneficial owners of a class of the Company's equity
securities are required by the SEC to furnish the Company with copies of all
such forms they file.
Based solely on the Company's review of the copies of such
forms it has received and written representations from certain reporting persons
that they were not required to file Forms 4 and 5 for the 1996 fiscal year, the
Company believes that all its officers, directors and greater than ten percent
beneficial owners complied with all the filing requirements applicable to them
with respect to transactions during fiscal year 1996.
Item 11. Executive Compensation.
(a) Compensation of Executive Officers
The following Summary Compensation Table sets forth
compensation received by Paul T. Hanrahan, President and Chief Executive Officer
of the Company, and the other four most highly compensated executive officers of
the Company for the period from December 7, 1993 (inception) through the fiscal
year ending November 30, 1996.
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Long Term
Compensation
Awards
Annual Compensation Table(1) ------------
---------------------------- Securities All Other
Other Annual Underlying Compensation
Names and Principal Position Year Salary($) Bonus($)(3) Compensation($)(4) Options(#) ($)(5)
- ---------------------------------- ------ ------------ ------------- ------------------ ------------ -------------
Paul T. Hanrahan(2)............ 1996 140,000 270,000 179,031 30,550 -0-
President and Chief Executive 1995 139,917 90,000 241,636 200,000 -0-
Officer 1994 117,333 80,000 166,950 150,000 -0-
- ----------------------------------
- ----------------------------------
Edward C. Hall III(2).......... 1996 121,000 200,000 279,006 26,889 -0-
Executive Vice President 1995 120,083 55,000 229,888 80,000 -0-
1994 100,833 60,000 153,198 100,000 -0-
- ----------------------------------
Jeffery A. Safford(2).......... 1996 110,000 125,000 257,548 24,444 -0-
Vice President, Chief Financial 1995 109,167 40,000 290,139 22,059 -0-
Officer and Secretary 1994 61,384 50,000 103,686 70,000 -0-
- ----------------------------------
James R. Reiney, Jr.(6)........ 1996 141,000 50,000 135,218 -0- 12,690
Vice President 1995 27,417 -0- 36,426 50,000 -0-
- ----------------------------------
Thomas Wu(7)................... 1996 115,000 125,000 71,600 15,972 16,415
Vice President 1995 103,871 30,000 84,407 70,000 -0-
- ----------------------------------
</TABLE>
- ---------------------------
(1) All officers of the Company who also serve as officers or employees of AES
receive compensation from AES for their services to AES and participate in
the employee benefit plans and arrangements sponsored by AES. The benefit
plans include The AES Corporation Incentive Stock Option Plan, The AES
Corporation Profit Sharing and Stock Ownership Plan, The AES Corporation
Deferred Compensation Plan for Executive Officers, health and life
insurance plans and other plans which may be established in the future. The
Company reimburses AES for the cost of health and life insurance based on
the proportion of time spent by each such person in attending to the
Company's business. The Company does not reimburse AES for the costs of
providing benefits to such persons under any other of the existing plans.
(2) Messrs. Hanrahan, Hall and Safford joined the Company while serving as
officers or employees of AES, and they continue to be employed by AES.
However, they receive no compensation from AES except that they participate
in employee benefit plans and arrangements sponsored by AES.
(3) Bonus amounts were awarded to named individuals in fiscal year 1997 for the
fiscal year 1996, in fiscal year 1996 for the fiscal year 1995, and in
fiscal year 1995 for the fiscal year 1994.
(4) Messrs. Hanrahan, Hall, Safford, Reiney and Wu have been relocated from the
United States and in accordance with market-based practices receive
additional cash compensation attributable to such overseas assignments. In
order to compensate these officers for additional taxes, including United
States federal, state, Social Security and Medicare taxes, imposed on them
as a result of their employment outside the United States, the Company pays
on their behalf their entire federal, state, Social Security and Medicare
tax liabilities and such officers reimburse the Company for an amount equal
to the hypothetical taxes they would have paid if they had been employed in
the United States. The following table provides information with respect to
the taxes paid by the Company on behalf of the named executive officers,
net of hypothetical taxes for which they reimbursed the Company, housing
expenses paid by the Company and other benefits provided by the Company.
Mr. Hanrahan's "Other Benefits" include cost-of-living and relocation
expenses. Mr. Hall's "Other Benefits" include cost-of-living, relocation
and educational expenses, Mr. Safford's "Other Benefits" include
cost-of-living, relocation and educational expenses. Mr. Reiney's "Other
Benefits" include cost-of-living and relocation expenses. Mr. Wu's "Other
Benefits" include cost-of-living, car and relocation expenses.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Other Annual Compensation ($)
---------------------------------
Payment of Housing
Names Year Taxes, Net Expenses Other Benefits
- --------------------------------- ---- ---------- -------- --------------
Paul T. Hanrahan............... 1996 (61,497) 183,264 57,264
1995 (3,830) 171,774 73,692
1994 (30,904) 148,178 49,676
- ---------------------------------
Edward C. Hall III............. 1996 (17,896) 214,924 81,978
1995 9,256 168,603 52,029
1994 1,356 115,230 36,612
- ---------------------------------
Jeffery A. Safford............. 1996 (31,597) 189,143 100,002
1995 6,352 186,104 97,683
1994 3,425 51,282 48,979
- ---------------------------------
James R. Reiney, Jr............ 1996 (39,480) 122,400 55,716
1995 (7,128) 22,100 21,454
- ---------------------------------
Thomas Wu...................... 1996 (42,000) 75,108 38,492
1995 (38,067) 67,839 54,635
</TABLE>
- ---------------------------------
(5) This column constitutes contributions to the Profit Sharing and Stock
Ownership Plan of the Company. Contributions for fiscal year 1996 were made
in fiscal year 1997. Messrs. Hanrahan, Hall and Safford also serve as
officers or employees of AES. As a result, they participate in employee
benefit plans and arrangements sponsored by AES and do not participate in
the Company's Profit Sharing and Stock Ownership Plan.
(6) Mr. Reiney joined the Company in September 1995 and he was appointed Vice
President as of November 17, 1995.
(7) Mr. Wu joined the Company in January 1995 and was appointed Vice President
as of March 27, 1995.
(b) Option Grants in Last Fiscal Year
The following table provides information on options granted in
the fiscal year ended November 30, 1996 to the named executive officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise or Grant Date
Granted in Fiscal Base Price Expiration Present Value
Name (#)(1) Year ($/Sh) Date ($)(2)
- ---- ------ ---- ------ ---- ------
Paul T. Hanrahan................ 30,550 13.0% 8.50 01/10/06 109,980
President and Chief Executive
Officer
Edward C. Hall III.............. 26,889 11.5% 8.50 01/10/06 96,800
Executive Vice President
Jeffery A. Safford.............. 24,444 10.4% 8.50 01/10/06 87,998
Vice President, Chief Financial
Officer and Secretary
James R. Reiney, Jr............. -0- -0- -0- -0- -0-
Vice President
Thomas Wu....................... 15,972 6.8% 8.50 01/10/06 57,499
Vice President
</TABLE>
- ------------------------------
(1) All options are for shares of Class B Common Stock of the Company. Options
granted with an expiration of January 10, 2006 were granted at the fair
market value of the Class A Common Stock on January 10, 1996. Options
granted on January 10, 1996 to the named officers vest at a rate of 50% per
year.
(2) The Black-Scholes stock option pricing model was used to value the stock
options on the grant date. The assumptions under this model include an
expected volatility of 32.7%, a 5.81% risk-free rate of return and no
payment of dividends. Adjustments were made for vesting. The options expire
ten years after the grant date and vest over a 2 year period at 50% a year.
Therefore, the options vested each year have a different time to
expiration. Using the Black-Scholes model, two values, each representing
50% of the total options granted, were calculated for the options and were
then discounted at 15% to determine the grant date present value. There
were no adjustments made for "price per share" vesting, nontransferability
or risk of forfeiture.
(c) Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
There were no options exercised in fiscal year 1996 by the
named executive officers. The following table reflects the number of unexercised
options at fiscal year end, November 30, 1996, and the value of those
unexercised options.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money Options
Shares Acquired Realized Options at Fiscal Year-End(#) at Fiscal Year-End ($)
Name on Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- --- ----------- ------------- ----------- -------------
Paul T. Hanrahan -0- -0- 100,000 280,550 130,000 657,475
President and
Chief Executive
Officer
Edward C. Hall III -0- -0- 70,000 136,889 97,500 283,501
Executive Vice
President
Jeffery A. Safford -0- -0- 32,412 84,091 28,339 188,351
Vice President,
Chief Financial
Officer and
Secretary
James R. Reiney, Jr. -0- -0- 10,000 40,000 40,000 160,000
Vice President
Thomas Wu -0- -0- 14,000 71,972 45,500 253,874
Vice President
</TABLE>
- -----------------------------
(1) The fair market value of the securities underlying the options on November
30, 1996 was $13.00 per share. As of November 30, 1996, the fair market
value exceeded the exercise price of the foregoing options for each named
executive officer.
(d) Compensation of Directors
Each Class A Director receives an annual fee of $18,000. Each
Class B Director who is an officer of the Company or an officer of AES receives
no additional compensation for serving as a director. Each other Class B
Director receives a fee of $2,000 for each meeting he attends. However, fees are
not paid for meetings held by telephonic conference calls. Each director is
reimbursed for expenses in connection with attending meetings of the Board of
Directors. For the fiscal year ending November 30, 1996, Messrs. Taft, Dykes,
Feng and Dr. Li each received $18,000. Mr. Unterberg received $6,000.
(e) Compensation Committee Interlocks and Insider
Participation
The Human Resources Committee (the "Committee") of the Board
of Directors establishes rates of salary, bonuses, grants of stock options,
retirement and other compensation for all executive officers of the Company, and
for such other people as the Board of Directors may designate. For the fiscal
year ending November 30, 1996, the Committee was comprised of Messrs. Dykes,
Feng and Taft and Dr. Li.
All of the members of the Committee served during the fiscal
year ended November 30, 1996. No member of the Committee was an officer or
employee of the Company or any of its subsidiaries during the fiscal year ended
November 30, 1996 or at any prior time. In addition, there are no transactions,
relationships, or indebtedness for which disclosure is required under the rules
of the SEC with respect to any member of the Committee.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth as of February 1, 1997 certain
information known to the Company regarding ownership of the Class A Common Stock
and Class B Common Stock by all persons who own more than five percent (5%) of
each such class. The information in the table relating to ownership of Class A
Common Stock is based solely on the Company's review of filings made with the
SEC pursuant to rules promulgated under Section 13 of the Exchange Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount and
Nature of
Name and Address of Beneficial % of
Beneficial Owner Ownership % of Class Common Stock
-------------------------- ------------ ---------- ------------
Class B Common Stock......... The AES Corporation 7,500,000 100% 48%
1000 N. 19th St.
Arlington, Virginia 22209
Class A Common Stock......... Weiss, Peck & Greer, L.L.C. 1,627,200(1) 20.0% 10.4%
One New York Plaza
New York, New York
10004-1950
Class A Common Stock......... Wanger Asset Management, L.P. 1,455,000(2) 17.9% 9.3%
227 West Monroe St., Suite
3000
Chicago, Illinois 60606
Class A Common Stock......... John W. Bristol & Co., Inc. 941,477(3) 11.6% 6.0%
233 Broadway
New York, New York 10279
Class A Common Stock......... Acorn Investment Trust, Series 810,000(2) 10.0% 5.2%
Designated Acorn Fund
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
</TABLE>
- ----------------------------
(1) Weiss, Peck & Greer, L.L.C. a registered broker-dealer under the Exchange
Act and a registered adviser under the Investment Advisers Act of 1940, as
amended ("IAA"), held 1,627,200 shares of Class A Common Stock at December
31, 1996 for the discretionary accounts of certain clients. Weiss, Peck &
Greer expressly disclaims beneficial ownership of such shares.
(2) Wanger Asset Management, L.P., a registered broker-dealer under the
Exchange Act and a registered adviser under the IAA, reported that it had
beneficial ownership of or investment discretion over 1,455,000 shares of
Class A Common Stock at December 31, 1996. This amount includes the 810,000
shares of Class A Common Stock held by Acorn Investment Trust, Series
Designated Acorn Fund.
(3) John W. Bristol, Inc., a registered adviser under the IAA, reported that it
had investment discretion over 941,477 shares of Class A Common Stock at
December 31, 1996.
(b) Security Ownership of Management
The following table sets forth, as of February 1, 1997, the
beneficial ownership of the Class A Common Stock and Class B Common Stock by
each director and named executive officer, as well as all directors and
executive officers as a group. Unless otherwise indicated, each of the persons
and each person in the group listed below has sole voting and dispositive power
with respect to the shares shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares of Shares of
Class A Class B
Common Stock % of Common Stock % of
Position Held with the Beneficially Class A Beneficially Class B
Name Age Company Owned Shares Owned (1)(2) Shares
- ---- --- ------- ----- ------ ------------ ------
Roger W. Sant............ 65 Chairman of the Board -0- -0- -0- -0-
and Class B Director
Dennis W. Bakke........... 51 Vice Chairman of the -0- -0- -0- -0-
Board and Class B
Director
Robert F. Hemphill, Jr.(c) 53 Vice Chairman of the -0- -0- 6,000 *
Board and Class B
Director
Thomas I. Unterberg(ac)... 65 Class B Director -0- -0- -0- -0-
Thomas A. Tribone......... 44 Class B Director -0- -0- -0- -0-
William Dykes(abd)........ 64 Class A Director -0- -0- -0- -0-
Xiliang Feng(abd)......... 77 Class A Director -0- -0- -0- -0-.
Dr. Victor Hao Li(abd).... 55 Class A Director 1,000 * -0- -0-
William H. Taft IV(abcd).. 51 Class A Director 1,000 * -0- -0-
Paul T. Hanrahan.......... 39 President and Chief 2,000(3) * 185,275 2.3%
Executive Officer
Edward C. Hall III........ 37 Executive Vice -0- -0- 115,945 1.5%
President
Jeffery A. Safford........ 38 Vice President, Chief 2,000(4) * 49,046 *
Financial Officer and
Secretary
Thomas Wu................. 36 Vice President -0- -0- 35,986 *
James R. Reiney, Jr....... 56 Vice President 1,800 * 10,000 *
Kerry Yeager.............. 45 Vice President 3,300 * 21,122 *
All Directors and
Executive Officers as
a Group (15 persons)O... 11,100 * 423,374 5.3%
</TABLE>
- ------------------------
(a) Member of the Audit and Human Resource Committees.
(b) Member of the Nominating Committee.
(c) Member of the Stock Purchase Committee.
(d) Member of the Special Committee.
* Shares held represent less than 1% of the total number of outstanding
shares of Class A Common Stock or Class B Common Stock.
(1) Shares beneficially owned and deemed to be outstanding include Class B
Common Stock issued or issuable, on or before April 1, 1997 upon exercise
of outstanding stock options.
(2) Includes the following shares of Class B Common Stock issuable upon
exercise of options: Mr. Hemphill - 6,000; Mr. Hanrahan - 185,275; Mr. Hall
- 115,945; Mr. Safford - 49,046; Mr. Wu - 35,986; Mr. Reiney - 10,000; and
Mr. Yeager - 21,122.
(3) The 2,000 shares of Class A Common Stock are held jointly by Mr. Hanrahan
and his wife. Mr. Hanrahan and his wife have agreed not to exercise voting
rights with respect to these shares.
(4) Includes 1,000 shares of Class A Common Stock held jointly by Mr. Safford
and his wife; 400 shares of Class A Common Stock held in an IRA for the
benefit of Mr. Safford, and 600 shares of Class A Common Stock held in an
IRA for the benefit of his wife.
The following table sets forth, as of February 1, 1997, the
beneficial ownership of AES Common Stock held by each director and named
executive officer of the Company who beneficially own shares of Common Stock of
The AES Corporation, as well as such directors and executive officers as a
group. Unless otherwise indicated, each of the persons and each person in the
group listed below has sole voting power and dispositive power with respect to
the shares shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shares of
Common
Stock of AES
Beneficially % of Shares
Name Positions Held with the Company Owned (1)(2) (1)(2)
- ---- ------------------------------- ------------ ------
Roger W. Sant.............. Chairman of the Board and Class B Director 10,638,296 (3) 13.66%
Dennis W. Bakke............ Vice Chairman of the Board and Class B 8,993,433 (4) 11.58%
Director
Robert F. Hemphill, Jr..... Vice Chairman of the Board and Class B 856,683 (5) 1.11%
Director
Thomas A. Tribone.......... Class B Director 201,641 *
Thomas I. Unterberg........ Class B Director 675,557 (6) *
William H. Taft IV......... Class A Director 462 (7) *
Paul T. Hanrahan........... President and Chief Executive Officer 40,839 (8) *
Edward C. Hall III......... Executive Vice President 18,052 (9) *
Jeffery A. Safford......... Vice President, Chief Financial Officer 19,019 (10) *
and Secretary
Kerry Yeager............... Vice President 8,703 *
All directors and executive
officers as a group (15 21,443,982 27.59%
persons)...................
</TABLE>
- ------------------------------
* Shares held represent less than 1% of the total number of outstanding
shares of Common Stock of AES.
(1) Shares beneficially owned and deemed to be outstanding include AES Common
Stock issued or issuable, on or before April 1, 1997, (a) upon exercise of
outstanding options under The AES Corporation Incentive Stock Option Plan
and The AES Corporate Stock Option Plan for Outside Directors, (b) upon
exercise of warrants, (c) under The AES Corporation Deferred Compensation
Plan for Executive Officers, (d) under The AES Corporation Deferred
Compensation Plan for Directors, (e) upon conversion of subordinated
debentures, (f) under The AES Corporation Profit Sharing and Stock
Ownership Plan, and (g) under The AES Corporation Supplemental Retirement
Plan.
(2) Includes (a) the following shares issuable upon exercise of options under
The AES Corporation Incentive Stock Option Plan: Mr. Sant - 428,449 shares;
Mr. Bakke - 226,870, shares; Mr. Hemphill - 0 shares; Mr. Unterberg - 5,687
shares; Mr. Tribone - 141,799 shares; Mr. Hanrahan - 20,409 shares; Mr.
Hall - 9,725 shares; Mr. Safford - 5,701 shares and Mr. Yeager - 2,590
shares; all directors and executive officers as a group - 841,230 shares;
(b) the following shares issuable under The AES Corporation Deferred
Compensation Plan for Executive Officers: Mr. Sant - 14,021 shares; all
directors and executive officers as a group - 14,021 shares; (c) the
following units issuable under The AES Corporation Deferred Compensation
Plan for Directors: Mr. Unterberg - 57,838 shares; all directors and
executive officers as a group - 57,838 shares; (d) the following units
issuable under The AES Corporation Supplemental Retirement Plan: Mr. Sant -
1,727; Mr. Bakke - 2,151; Mr. Hemphill - 649; Mr. Tribone - 404; all
directors and executive officers as a group - 4,931; (e) the following
shares allocated under The AES Corporation Profit Sharing and Stock
Ownership Plan: Mr. Sant - 146,212 shares; Mr. Bakke - 139,479 shares; Mr.
Hemphill - 99,356 shares; Mr. Tribone - 27,883 shares; Mr. Hanrahan -
16,343 shares; Mr. Hall - 7,316 shares; Mr. Safford - 8,718 shares; and Mr.
Yeager - 4,410 shares; all directors and executive officers as group -
449,717 shares.
(3) Includes 7,550,146 shares held jointly by Mr. Sant and his wife. Also
includes 403,241 shares held by his wife, 146,195 shares held in an IRA for
the benefit of Mr. Sant, and 64,871 shares held in an IRA for the benefit
of his wife. In addition, includes 1,128,751 shares held by The Summit
Foundation, of which Mr. Sant disclaims beneficial ownership.
(4) Includes 6,834,658 shares held jointly by Mr. Bakke and his wife, 31,530
shares held by his children, 449,043 shares held by his wife and 181,383
shares held by the Mustard Seed Foundation, of which Mr. Bakke disclaims
beneficial ownership.
(5) Includes 8,148 shares held in an IRA for the benefit of Mr. Hemphill.
(6) Includes 4,826 shares held by Mr. Unterberg's wife.
(7) Includes 462 shares held by Mr. Taft for the benefit of his children.
(8) Includes 4,060 shares held jointly by Mr. Hanrahan and his wife and 27
shares held by his wife.
(9) Includes 1,011 shares held jointly by Mr. Hall and his wife.
(10) Includes 1,600 shares held jointly by Mr. Safford and his wife, and 3,000
shares held in an IRA for the benefit of Mr. Safford and his wife.
(c) See "Business -- General Development of Business" and
"Discussion and Analysis of Financial Condition and Results of Operations" for
information concerning the proposed Amalgamation of the Company and a wholly
owned subsidiary of AES, which information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
(a) Related Parties
AES currently owns 7,500,000 shares of Class B Common Stock,
representing approximately 48% of the Company's outstanding shares. As a result
of such ownership, AES has the right to elect one-half of the Company's Board of
Directors. In addition, the Company and AES have entered into a number of
agreements, which are described below. These agreements were not negotiated on
an arm's-length basis. Any amendment of these agreements or waiver by the
Company of its rights under these agreements would have to be approved by a
majority of the Class A Directors. Upon the consummation of the Amalgamation,
the Company will become a wholly owned subsidiary of AES and as a consequence
certain of the agreements described below would be terminated or substantially
modified.
Service Agreement
The Company has entered into a Project Services Agreement with
AES (the "Services Agreement") whereby AES will exclusively provide development,
construction, management and operations services to the Company. The Services
Agreement has an initial term of five years commencing December 1993 with three
five-year renewal terms. As compensation for its services under the Services
Agreement, AES will receive a payment equal to the salaries and benefits (other
than benefits under certain plans identified under "Management -- Compensation
of Directors and Officers") of persons performing services on behalf of AES
under the Services Agreement, plus 45% thereof to cover corporate overhead and
similar indirect costs. AES also will receive 50% of any development fee,
construction success fee or operations and maintenance performance fee received
by the Company in respect of projects for which AES has performed services.
Because these arrangements were not negotiated on an arm's-length basis, it is
possible that the Company could obtain similar services on more favorable terms
from third parties. Management fees under the Services Agreement totalled $0.3
million, $0.1 million, and $0.4 million for the fiscal year ended November 30,
1996, November 30, 1995, and November 30, 1994 respectively. The Services
Agreement provides that for the first five years that the agreement is in
effect, AES will invest the after-tax proceeds of certain performance fees in
additional shares of Class B common Stock. AES was not required to invest in
additional shares of Class B Common Stock pursuant to this provision during the
fiscal year ended November 30, 1996, the fiscal year ended November 30, 1995 or
the fiscal year ended November 30, 1994.
Stock Purchase and Shareholder's Agreement
The Company and AES entered into a Stock Purchase and
Shareholder's Agreement, dated as of December 29, 1993 (the "Stock Purchase
Agreement"), pursuant to which the Company issued to AES 7,500,000 shares of
Class B Common Stock in consideration of: (i) the investment by AES of $50.0
million in the Company; (ii) the assignment (subject to obtaining necessary
third-party consents) to the Company of AES's direct or indirect interests in
all letters of intent and preliminary agreements with PRC Government entities
and other third parties in respect of the development of electric power
generation projects in China; and (iii) AES's agreement not to compete, and to
cause each of its controlled subsidiaries not to compete, with the Company in
China for at least ten years. The Stock Purchase Agreement also provides that
until the fifth anniversary of the date of the Services Agreement, AES will
apply the after-tax proceeds of all performance fees received by AES with
respect to the Company's projects to the purchase of additional shares of Class
B Common Stock, subject to certain exceptions. See "Services Agreement." The
Stock Purchase Agreement would be terminated upon the consummation of the
Amalgamation.
Non-Competition and Non-Disclosure Agreement
As part of the consideration for issuance to AES of 7,500,000
shares of Class B Common Stock, AES entered into a Non-Competition and
Non-Disclosure Agreement, dated as of December 29, 1993 and amended and restated
as of February 1, 1994 (the "Non-Competition Agreement"). The Non-Competition
Agreement provides that AES will not, and will not permit any subsidiary to,
develop, construct, own, manage, operate, control, invest in, lend to, or
acquire an interest in, or otherwise engage or participate in any electric power
generation project in China, for a period equal to the greater of (i) ten years
and (ii) three years after the earlier of (a) termination or non-renewal of the
Services Agreement for any reason and (b) the permitted sale, conveyance or
transfer by AES of all of its shares of Class B Common Stock to an unaffiliated
party or parties. The Non-Competition Agreement would be terminated upon the
consummation of the Amalgamation.
AES Affiliates' Agreements
Roger W. Sant, Chairman of the Board and a director of AES,
and Dennis W. Bakke, Vice Chairman and a director of AES, and each other
director and executive officer of AES (the "AES Affiliates"), have entered into
agreements with the Company (the "AES Affiliates' Agreements") pursuant to which
each AES Affiliate has agreed that until such date as all of the shares of Class
B Common Stock have been converted to shares of Class A Common Stock, such AES
Affiliate will not acquire, offer to acquire, or agree to acquire any shares of
Class A Common Stock or rights or options to acquire any shares of Class A
Common Stock, or make or in any way participate in any solicitation of proxies
to vote or seek to advise, encourage or influence any person or entity with
respect to the voting of any Class A Common Stock. This restriction does not
apply to any such action if any person (other than such AES Affiliate, AES or a
subsidiary of AES) publicly announces or proposes to the Board of Directors or
management of the Company any tender or exchange offer, merger, consolidation,
solicitation of proxies or similar transaction involving the Class A Common
Stock, or any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or series of transactions) by the Company, any
subsidiary of the Company or any Joint Venture in which the Company or any
subsidiary invests which involves aggregate consideration equal to 50% or more
of the aggregate book value of all the assets of the Company determined on a
consolidated basis. The AES Affiliate's Agreement of Thomas I. Unterberg, a
Director of AES and of the Company, provides that the foregoing restrictions
will not restrict any market-making or investment banking activities of
Unterberg Harris, of which he is a Managing Director.
Waivers of restrictions on purchasing Class A Common Stock
under the AES Affiliates' Agreement entered into by Paul T. Hanrahan, President
and Chief Executive Officer of AES Chigen, were granted in 1995 to permit Mr.
Hanrahan to purchase 2,000 shares of Class A Common Stock.
Each AES Affiliates' Agreement will have no further relevance
if the Amalgamation is consummated, because all Common Stock will be owned by
AES.
Dual Status of Officers
Messrs. Sant and Bakke, in addition to serving as Chairman and
Vice Chairman of AES Chigen, respectively, serve as executive officers of AES.
Mr. Hanrahan devotes substantially all of his time serving as President and
Chief Executive Officer of AES Chigen, but continues as a Vice President of AES
and devotes some of his time to AES's activities in Asia. Mr. Safford devotes
substantially all of his time serving as Vice President, Chief Financial Officer
and Secretary of AES Chigen but continues to work for AES, which, from time to
time, requires him to devote a portion of his time to other AES matters. Messrs.
Hall and Yeager devote substantially all of their time serving as Executive Vice
President and Vice President of AES Chigen, respectively, but also continue to
work for AES, which, from time to time, requires them to devote a portion of
their time to other AES matters. While Messrs. Hanrahan, Safford and Hall are
expected to devote substantially all of their time to AES Chigen's business, AES
Chigen and AES have not established any fixed allocation of their time. AES
Chigen and AES acknowledge that the dual status of the aforesaid persons with
AES Chigen and AES may, from time to time, require attention by an individual or
individuals to matters for AES rather than AES Chigen's business in the future.
In the event that such circumstances arise, AES Chigen intends to shift
responsibilities of other officers, or to appoint additional officers, and to
take such other action as may be necessary to avoid an adverse effect on AES
Chigen's business. Furthermore, AES has agreed that it will adopt similar
staffing strategies to avoid, to the extent possible, conflicting demands on
such officers.
Amalgamation
See "Business -- General Development of Business" and
"Discussion and Analysis of Financial Condition and Results of Operations" for
information concerning the proposed Amalgamation of the Company and a wholly
owned subsidiary of AES, which information is incorporated herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) The following financial statements of the Company
and its consolidated subsidiaries are attached to
this Annual Report on Form 10-K following the
signature page:
- Report of Independent Auditors.
- Consolidated Statements of Operations for
the fiscal years ended November 30, 1996 and
1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
- Consolidated Balance Sheets as of November
30, 1996 and 1995.
- Consolidated Statements of Shareholders'
Equity for the fiscal years ended November
30, 1996 and 1995 and for the period from
December 7, 1993 (inception) to November 30,
1994.
- Consolidated Statements of Cash Flows for
the fiscal years ended November 30, 1996 and
1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
- Notes to Consolidated Financial Statements
for the fiscal years ended November 30, 1996
and 1995 and for the period from December 7,
1993 (inception) to November 30, 1994.
(2) Financial Statement Schedules
- Schedule I - Condensed Financial
Information.
Schedules other than that listed above are
omitted as the information is either not
applicable, not required or has been
furnished in the financial statements or
notes thereto included in this Annual Report
on Form 10-K.
(3) Exhibits
1.1 Underwriting Agreement dated December
12, 1996 between the Company and Morgan
Stanley & Co. Incorporated and
Donaldson, Lufkin & Jenrette Securities
Corporation.
3.1 Memorandum of Association of the Company is
incorporated herein by reference to Exhibit
3.1 to the Registration Statement on Form
S-1 (Registration No.
33-73668).
3.2 Bye-laws of the Company, as amended March
27, 1995, are incorporated herein by
reference to Exhibit 3.2 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended February 28, 1995.
4.1 Indenture dated as of December 19, 1996
between the Company and Bankers Trust
Company, as Trustee.
4.2 Form of 2006 Note.
4.3 Security Agreement, dated as of December
19, 1996, among the Company, Bankers
Trust Company, as Trustee, and Bankers Trust
Company, as Collateral Agent.
10.1 Stock Purchase and Shareholder's Agreement,
dated as of December 29, 1993, between the
Company and AES is incorporated herein by
reference to Exhibit 10.1 to the
Registration Statement on Form S-1
(Registration No. 33-73668).
10.2 Project Services Agreement, dated as of
December 29, 1993, between the Company and
AES is incorporated herein by reference to
Exhibit 10.2 to the Registration Statement
on Form S-1 (Registration No. 33-73668).
10.3 Non-Competition and Non-Disclosure Agreement,
dated as of December 29, 1993 and amended and
restated as of February 1, 1994, between the
Company and AES is incorporated herein by
reference to Exhibit 10.3 to Amendment No. 1
to the Registration Statement on Form S-1
(Registration No. 33-73668).
10.4 Form of AES Affiliate's Agreement, dated
February 1, 1994, between the Company and
each Director and Executive Officer of AES
is incorporated herein by reference to
Exhibit 10.4 to Amendment No. 1 to the
Registration Statement on Form S-1
(Registration No. 33-73668).
10.5 Joint Venture Agreement to Establish
Yangcheng International Power Generating
Company, Limited, initialed draft dated
December 20, 1994, among North China
Electric Power Group Corporation, Jiangsu
Province Investment Corporation, Shanxi
Energy Enterprise (Group) Company, Shanxi
Provincial Power Company, Jiangsu Provincial
Power Company and the Company is
incorporated herein by reference to Exhibit
10.5 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.6 Assignment and Assumption dated as of
December 29, 1993 between AES and certain
subsidiaries of AES and the Company is
incorporated herein by reference to Exhibit
10.11 to the Registration Statement on Form
S-1 (Registration No. 33-73668).
10.7 AES China Generating Co. Ltd. Incentive
Stock Option Plan, as amended March 27,
1995, is incorporated herein by reference to
Exhibit 10.12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 28, 1995.
10.8 Agreement to Establish a Sino-U.S.
Cooperative Joint Venture, Nanpu Thermal
Power Plant in Fujian Province, executed on
April 21, 1994 between Fujian Provincial
Electric Power Bureau and the Company is
incorporated herein by reference to Exhibit
10.13 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.9 Cooperative Joint Venture Contract for the
Establishment of Sichuan Fuling Aixi Power
Company Limited dated February 9, 1995
between Sichuan Fuling Banxi Colliery and
AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.17 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.10 Joint Venture Contract to Establish
Xiangci-AES Hydro Power Company Ltd. dated
July 21, 1994 between China Hunan Cili Power
Company and the Company is incorporated
herein by reference to Exhibit 10.19 to the
Annual Report on Form 10-K of the Company
for the fiscal year ended November 30, 1994.
10.11 Power Purchase Contract dated as of July 21,
1994 between China Hunan Cili Electric Power
Company and Xiangci-AES Hydro Power Company
Ltd. (effectiveness certified on September
9, 1994) is incorporated herein by reference
to Exhibit 10.20 to the Annual Report on
Form 10-K of the Company for the fiscal year
ended November 30, 1994.
10.12 Shareholders' Agreement to establish
AES-GITIC Power Development Company Limited,
a Bermuda limited liability company, dated
November 10, 1994 between the Company and
Guangdong International Trust and Investment
Corporation Hong Kong (Holdings) Limited is
incorporated herein by reference to Exhibit
10.21 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1994.
10.13 Amendment to Article 15.03 of the
Shareholders' Agreement to establish
AES-GITIC Power Development Company Limited,
a Bermuda limited liability company, between
the Company and Guangdong International
Trust and Investment Corporation Hong Kong
(Holdings) Limited.
10.14 Cooperative Joint Venture Contract for the
establishment of Yangchun Fuyang Diesel
Engine Power Company Ltd. dated December 4,
1994 among Yangchun Municipal Power Supply
Company, Shenzhen Futian Gas Turbine Power
Company Ltd. and ABC Yangchun Company
Limited is incorporated herein by reference
to Exhibit 10.22 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
February 28, 1995.
10.15 Chengbao (Responsibility) Management
Contract for Yangchun Fuyang Diesel Engine
Power Company Ltd. dated December 31, 1994
between Yangchun Fuyang Diesel Engine Power
Company Ltd. and Yangchun Municipal Power
Supply Company and Supplemental Contract
dated March 6, 1995 are incorporated herein
by reference to Exhibit 10.23 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1995.
10.16 Power Purchase Contract dated May 24, 1995
between Wuxi County Sandianban and
Wuxi-AES-CAREC Gas Turbine Power Company
Limited is incorporated herein by reference
to Exhibit 10.24 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1995.
10.17 Cooperative Joint Venture Contract for the
establishment of Wuxi-AES-Zhonghang Power
Company Ltd. dated May 4, 1995 among Wuxi
Power Industry Company, China National
Aero-engine Corporation and the Company is
incorporated herein by reference to Exhibit
10.25 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.18 Cooperative Joint Venture Contract for the
establishment of Wuxi-AES-CAREC Gas Turbine
Power Company Ltd. dated May 4, 1995 among
Wuxi Power Industry Company, China National
Aero-engine Corporation and the Company is
incorporated herein by reference to Exhibit
10.26 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.19 Loan Contract dated May 24, 1995 between
AES-Chigen Company (L) Ltd. and
Wuxi-AES-Zhonghang Power Company Ltd. is
incorporated herein by reference to Exhibit
10.27 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1995.
10.20 Loan Contract dated May 24, 1995 between
AES-Chigen Company (L) Ltd. and
Wuxi-AES-CAREC Gas Turbine Power Company
Ltd. is incorporated herein by reference to
Exhibit 10.28 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1995.
10.21* Power Purchase Contract dated December 11,
1995 among Power Supply Company of the
Fuling Prefecture of Sichuan Province,
Sichuan Fuling Grid Management Department
and Sichuan Fuling Aixi Power Company
Limited is incorporated herein by reference
to Exhibit 10.21 to the Annual Report on
Form 10-K of the Company for the fiscal year
ended November 30, 1995.
10.22 Addendum Number One of Cooperative Joint
Venture Contract to Establish Sichuan Fuling
Aixi Power Company Limited dated July 11,
1995 between Sichuan Fuling Banxi Colliery
and AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.22 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.23 Addendum Number Two of Cooperative Joint
Venture Contract to Establish Sichuan Fuling
Aixi Power Company Limited dated August 29,
1995 between Sichuan Fuling Banxi Colliery
and AES Tian Fu Power Company Limited is
incorporated herein by reference to Exhibit
10.23 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.24* Construction and Term Loan Agreement dated
December 21, 1995 between AES Tian Fu Power
Company (L) Ltd. and Sichuan Fuling Aixi
Power Generating Company Limited is
incorporated herein by reference to Exhibit
10.24 to the Annual Report on Form 10-K of
the Company for the fiscal year ended
November 30, 1995.
10.25 Cooperative Joint Venture Contract to
Establish Jiaozuo Wan Fang Power Company
Limited dated January 21, 1996 between
Jiaozuo Aluminum Mill and Jiaozuo Power
Partners, L.P. is incorporated herein by
reference to Exhibit 10.25 to the Annual
Report on Form 10-K of the Company for the
fiscal year ended November
30, 1995.
10.26* Cooperative Joint Venture Contract to
Establish Jiaozuo Wan Fang Power Company
Limited dated March 27, 1996 between Jiaozuo
Power Partners, L.P. and Jiaozuo Aluminum
Mill is incorporated herein by reference to
Exhibit 10.26 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
10.27* Shareholder Loan Contract dated April 26,
1996 between Jiaozuo Wan Fang Power Company
Limited and Jiaozuo Aluminum Mill is
incorporated herein by reference to Exhibit
10.27 to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1996.
10.28* Shareholder Loan Contract dated April 26,
1996 between Jiaozuo Wan Fang Power Company
Limited and AES China Power Holding Co. (L),
Ltd. is incorporated herein by reference to
Exhibit 10.28 to Amendment No. 1 on Form
10-Q/A to the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31,
1996.
10.29* Power Purchase and Sale Contract dated April
26, 1996 between Jiaozuo Wan Fang Power
Company Limited and Jiaozuo Aluminum Mill is
incorporated herein by reference to Exhibit
10.29 to Amendment No. 1 on Form 10-Q/A to
the Company's Quarterly Report on Form 10-Q
for the quarter ended May 31, 1996.
10.30* Power Purchase and Sale Contract dated April
25, 1996 between Jiaozuo Wan Fang Power
Company Limited and Henan Electric Power
Corporation is incorporated herein by
reference to Exhibit 10.30 to Amendment No.
1 on Form 10-Q/A to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
10.31 Assignment and Assumption Contract dated
April 26, 1996 between Jiaozuo Wan Fang
Power Company Limited and Jiaozuo Aluminum
Mill is incorporated herein by reference to
Exhibit 10.31 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1996.
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 is incorporated herein
by reference to Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.33* Operation & Offtake Contract dated July 5,
1996 between Wuhu Shaoda Electric Power
Development Company Limited and Anhui
Provincial Electric Power Corporation is
incorporated herein by reference to Exhibit
10.33 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 31,
1996.
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 is incorporated
herein by reference to Exhibit 10.34 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
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 is incorporated herein by
reference to Exhibit 10.35 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended August 31, 1996.
10.36 Subordinated Insurance Assignment between
Wuhu Shaoda Electric Power Development
Company Limited and AES China Holdings
Company (L) Limited is incorporated herein
by reference to Exhibit 10.36 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.37 Subordinated Borrower Charge Over Accounts
between Wuhu Shaoda Electric Power
Development Company Limited and AES China
Holdings Company (L) Limited is incorporated
herein by reference to Exhibit 10.37 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.38 Subordinated Project Contracts Assignment
between Wuhu Shaoda Electric Power
Development Company Limited and AES China
Holdings Company (L) Limited is incorporated
herein by reference to Exhibit 10.38 to the
Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1996.
10.39 Subordinated Mortgage Contract between Wuhu
Shaoda Electric Power Development Company
Limited and AES China Holdings Company (L)
Limited is incorporated herein by reference
to Exhibit 10.39 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
August 31, 1996.
10.40* Cooperative Joint Venture Contract dated
March 18, 1996 by and among Anhui Liyuan
Electric Power Development Company Ltd.,
Hefei Municipal Construction and Investment
Company and AES Anhui Power Company Ltd.
establishing Anhui Liyuan-AES Power Company
Ltd.
10.41* AES Loan Contract by and between Anhui
Liyuan-AES Power Company Limited and AES
Chigen Company (L), Ltd.
10.42* Cooperative Joint Venture Contract dated
March 18, 1996 by and among Anhui Liyuan
Electric Plower Development Company Ltd.,
Hefei Municipal Construction and Investment
Company and AES Anhui Power Company Ltd.
establishing Hefei Zhongli Energy Company
Ltd.
10.43* AES Loan Contract by and between Hefei
Zhongli Energy Company Limited and AES
Chigen Company (L), Ltd.
10.44* Operation and Offtake Contract between Anhui
Provincial Electric Power Corporation, Anhui
Liyuan-AES Power Company Ltd. and Hefei
Zhongli Energy Company Ltd.
10.45* Cooperative Joint Venture Contract by and
among Chengdu Huaxi Electric Power (Group)
Shareholding Company Ltd., China National
Aero-engine Corporation and the Company.
10.46* Support Contract dated as of August 12, 1996
between AES Tian Fu Power Company (L) Ltd.
and Chengdu AES KAIHUA Gas Turbine Power
Co., Ltd.
10.47* Power Purchase Contract between Chengdu
Huaxi Electric Power (Group) Shareholding
Company Ltd. and Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd.
10.48* Agreement of Amendment to the Cooperative
Joint Venture Contract and Articles of
Association of Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd.
11.1 Statement of computation of earnings per
share.
21.1 List of Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
25.1 Power of Attorney.
27.1 Financial Data Schedule.
99.1 Statement Re: Computation of Fixed Charge
Coverage Ratio
*The Company has requested confidential treatment for certain information
identified in this exhibit.
(b) Reports on Form 8-K.
No reports on Forms 8-K have been filed during the last
quarter of the Company's fiscal year ended November 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 28, 1997
AES CHINA GENERATING CO. LTD.
(Company)
By: /s/ Paul T. Hanrahan
Paul T. Hanrahan
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ Roger W. Sant* Chairman of the Board and February 28, 1997
- ------------------------------ Class B Director
Roger W. Sant
/s/ Dennis W. Bakke* Vice Chairman and February 28, 1997
- ------------------------------ Class B Director
Dennis W. Bakke
/s/ Robert F. Hemphill, Jr.* Vice Chairman and February 28, 1997
- ------------------------------ Class B Director
Robert F. Hemphill, Jr.
/s/ Thomas Tribone* Class B Director February 28, 1997
- ------------------------------
Thomas Tribone
/s/ Thomas I. Unterberg* Class B Director February 28, 1997
- ------------------------------
Thomas I. Unterberg
/s/ William Dykes* Class A Director February 28, 1997
- ------------------------------
William Dykes
/s/ Xiliang Feng* Class A Director February 28, 1997
- ------------------------------
Xiliang Feng
/s/ Dr. Victor Hao Li* Class A Director February 28, 1997
- ------------------------------
Dr. Victor Hao Li
/s/ William H. Taft, IV* Class A Director February 28, 1997
- ------------------------------
William H. Taft, IV
/s/ Paul T. Hanrahan President and Chief Executive Officer February 28, 1997
- ------------------------------ (Principal Executive Officer)
Paul T. Hanrahan
/s/ Jeffery A. Safford Vice President, Chief Financial Officer February 28, 1997
- ------------------------------ and Secretary (Principal Financial and
Jeffery A. Safford Accounting Officer)
*/s/ Jeffery A. Safford
Jeffery A. Safford
Attorney-in-Fact
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF
AES CHINA GENERATING CO. LTD.
We have audited the accompanying consolidated balance sheets of AES
China Generating Co. Ltd. and subsidiaries as of November 30, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the two years in the period ended November 30, 1996 and
for the period from December 7, 1993 (inception) to November 30, 1994. Our
audits also included the financial statement schedule listed at Item 14(a)(2).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of AES China Generating Co.
Ltd. and subsidiaries as of November 30, 1996 and 1995, and the results of their
operations and cash flows for each of the two years in the period ended November
30, 1996 and for the period from December 7, 1993 (inception) to November 30,
1994 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
DELOITTE TOUCHE TOHMATSU
Hong Kong
January 31, 1997
F-1
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period
Ended November 30,
-----------------------------------------------------
1996 1995 1994
------------ ------------- -------------
(in thousands, except per share amounts)
Revenues:
Electricity sales................................ $8,812 $702 $38
Construction delay fee........................... 400 680 --
------------ ------------- -------------
Total revenues........................... 9,212 1,382 38
Operating costs and expenses:
Costs of sales................................... 5,360 635 68
Development, selling, general and
administrative expenses.......................... 3,507 9,259 6,927
------------ ------------- -------------
Total operating costs and expenses....... 8,867 9,894 6,995
------------ ------------- -------------
Operating income/(loss)............................ 345 (8,512) (6,957)
Other income/(expense):
Interest income.................................. 6,360 10,529 6,589
Interest expense................................. (1,120) -- --
Equity in earnings of affiliates................ 663 206 --
Amalgamation cost ............................... (1,444) -- --
------------ ------------- -------------
Income/(loss) before income taxes and
minority interest................................ 4,804 2,223 (368)
Income taxes..................................... 387 -- --
Minority interest................................ 277 85 3
------------ ------------- -------------
Net income/(loss).................................. $4,140 $2,138 $(371)
------------
============= =============
Net income/(loss) per share........................ $ 0.26 $0.12 $(0.03)
============ ============= =============
Weighted average number of shares.................. 15,670 17,391 14,817
============ ============= =============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
----------------------------------------
1996 1995
---------------- ----------------
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents............................ $56,200 $125,684
Investments-- held-to-maturity....................... 8,995 41,609
Investments-- available-for-sale..................... -- 2,995
Accounts receivable from related parties............. 6,809 463
Interest receivable.................................. 286 293
Inventory............................................ 765 31
Prepaid expenses and other current assets............ 874 422
---------------- ----------------
Total current assets......................... 73,929 171,497
Property, Plant and Equipment:
Electric generating facilities...................... 64,185 6,468
Equipment, furniture and leasehold improvements...... 2,646 1,233
Accumulated depreciation and amortization............ (3,143) (665)
Construction in progress............................. 98,912 39,555
---------------- ----------------
Total property, plant and equipment, net..... 162,600 46,591
Other Assets:
Project development costs............................ 3,352 1,083
Investments in and advances to affiliates............ 33,202 2,566
Note receivable...................................... 6,626 7,500
Deposits and other assets............................ 989 634
---------------- ----------------
Total other assets........................... 44,169 11,783
================ ================
TOTAL........................................ $280,698 $229,871
================ ================
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
-------------------------------------
1996 1995
--------------- --------------
(in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-- The AES Corporation........................ $1,185 $214
Accounts payable.............................................. 2,199 537
Payable for repurchase of shares.............................. -- 10,011
Payable for investment purchase............................... -- 2,995
Accrued liabilities........................................... 2,618 1,430
Accrued liabilities for construction.......................... 4,259 --
Loans from minority shareholders-- current portion............ 1,365 351
Notes payable................................................. 2,861 1,000
--------------- --------------
Total current liabilities............................. 14,487 16,538
Long-Term Liabilities:
Deferred income taxes......................................... 387 --
Loans from minority shareholders.............................. 34,933 6,666
--------------- --------------
Total long-term liabilities........................... 35,320 6,666
Minority Interest............................................... 40,536 19,082
Commitments and Contingencies
Shareholders' Equity:
Class A common stock -- par value $0.01 per share, (50,000,000
shares authorized; 1996 -- 8,134,100 shares issued and
outstanding after deducting retirement of treasury stock; 1995-
10,216,000 shares issued)..................................... 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............................................. 5,907 1,767
Cumulative translation adjustment............................. 312 250
Treasury stock, at cost,
(1,912,600 shares at November 30, 1995)...................... -- (16,371)
--------------- --------------
Total shareholders' equity............................ 190,355 187,585
=============== ==============
TOTAL................................................. $280,698 $229,871
=============== ==============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Class B
Common Stock Common Stock
-------------------------- -----------------------------
Shares Amount Shares Amount
------------ ----------- ------------- ------------
(in thousands, except share amounts)
Balance December 7, 1993................. -- $ -- -- $ --
Issuance of Class B common stock......... -- -- 7,500,000 75
Issuance of Class A common stock......... 10,216,000 102 -- --
Foreign currency translation............. -- -- -- --
Net loss for the period.................. -- -- -- --
------------ ----------- ------------- ------------
Balance November 30, 1994................ 10,216,000 102 7,500,000 75
Purchase of treasury stock............... -- -- -- --
Foreign currency translation............. -- -- -- --
Net income for the year.................. -- -- -- --
------------ ----------- ------------- ------------
Balance November 30, 1995................ 10,216,000 102 7,500,000 75
Purchase of treasury stock............... -- -- -- --
Retirement of treasury stock ............ (2,081,900) (21) -- --
Foreign currency translation ............ -- -- -- --
Net income for the year ................. -- -- -- --
============ =========== ============= ============
Balance November 30, 1996 ............... 8,134,100 $ 81 7,500,000 $ 75
============ =========== ============= ============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Retained
Additional Earnings/ Cumulative
Paid-In (Accumulated Translation Treasury Stock Shareholders'
Capital Deficit) Adjustment Shares Amount Equity
------------- ---------------- -------------- ------------- ------------- ---------------
(in thousands, except share amounts)
$ -- $ -- $ -- -- $ -- $ --
49,925 -- -- -- -- 50,000
151,837 -- -- -- -- 151,939
-- -- 16 -- -- 16
-- (371) -- -- -- (371)
------------- ---------------- -------------- ------------- ------------- ---------------
201,762 (371) 16 -- -- 201,584
-- -- -- (1,912,600) (16,371) (16,371)
-- -- 234 -- -- 234
-- 2,138 -- -- -- 2,138
------------- ---------------- -------------- ------------- ------------- ---------------
201,762 1,767 250 (1,912,600) (16,371) 187,585
-- -- -- (169,300) (1,432) (1,432)
(17,782) -- -- 2,081,900 17,803 --
-- -- 62 -- -- 62
-- 4,140 -- -- -- 4,140
============= ================ ============== ============= ============= ===============
$ 183,980 $ 5,907 $ 312 -- $ -- $ 190,355
============= ================ ============== ============= ============= ===============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period Ended November 30,
--- --------------------------------------------- ------
1996 1995 1994
--------------- --------------- --------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)......................................... $ $ $
4,140 2,138 (371)
Adjustments to reconcile net income/(loss) to net cash
(used in)
provided by operating activities:
Depreciation and amortization........................... 2,071 476 107
Provision for deferred taxes............................ 387 -- --
Minority interest....................................... 277 85 3
Equity in earnings of affiliates........................ (663) (206) --
Dividend from affiliate................................. 626 -- --
Decrease in provision for project development costs..... (2,298) -- --
Amortization of discount/premium on investments-net..... (2,038) (3,543) --
Changes in assets and liabilities:
Accounts receivable from related parties.............. (6,346) (422) (41)
Interest receivable................................... 7 683 (976)
Inventory, prepaid expenses and other current assets.. (1,186) (55) (398)
Accrued interest income from affiliates............... (333) -- --
Deposits.............................................. 28 (82) (309)
Accounts payable and accrued expenses................. 3,821 114 2,067
--------------- --------------- --------------
Net cash (used in) / provided by operating
activities......................................... (1,507) 812 82
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock................ -- -- 201,939
Contributions and loans from minority shareholders........ 8,497 13,535 --
Repayment of loans from minority shareholders............. (270) -- --
Proceeds from notes payable............................... 2,861 1,000 --
Repayment of notes payable................................ (1,000) -- --
Repurchase of Class A common stock........................ (11,443) (6,360) --
--------------- --------------- --------------
Net cash (used in) / provided by financing
activities......................................... (1,355) 8,175 201,939
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress........ (69,205) (29,544) (3,274)
Purchase of investments................................... -- -- (195,943)
Purchase of investments-held-to-maturity.................. (29,176) (154,630) --
Purchase of investments-available-for-sale................ (16,797) (14,557) --
Proceeds from sales/maturity of investments............... -- -- 93,369
Proceeds from the maturity of investments-held-to-maturity 63,656 219,086 --
Proceeds from the sales of investments-available-for-sale. 16,969 14,609 --
Investments in and advances to affiliates................. (22,990) (2,360) --
Recoupment of investment in affiliate..................... 216 -- --
Project development costs and other assets................ (2,669) (2,269) (687)
Investment in note receivable............................. (6,626) (7,500) --
--------------- --------------- --------------
Net cash (used in) / provided by investing
activities......................................... (66,622) 22,835 (106,535)
--------------- --------------- --------------
(Decrease ) /increase in cash and cash equivalents. (69,484) 30,198 95,486
CASH AND CASH EQUIVALENTS,
Beginning of year/period................................ 125,684 95,486 --
=============== =============== ==============
End of year/period...................................... $ 56,200 $ 125,684 $ 95,486
=============== =============== ==============
</TABLE>
F-7
<PAGE>
Supplemental 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.
In 1995, the Company's joint venture partners in Wuxi-AES-CAREC and
Wuxi-AES-Zhonghang contributed capital in the form of work-in-progress and
equipment of $5.3 million. At November 30, 1995, the Company had recorded the
purchase of investments and the purchase of treasury stock for $3.0 million and
$10.0 million, respectively. Payments for such purchases were made subsequent to
year-end.
In 1994, the Company's joint venture partner in Xiangci-AES contributed
capital in the form of work-in-progress and equipment of $7.2 million.
See notes to consolidated financial statements.
F-8
<PAGE>
AES CHINA GENERATING CO. LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 November 30, 1996, AES owned
approximately 48% of the outstanding common stock of the Company. AES Chigen was
a development stage company in 1994.
As detailed in note 12, an Amended and Restated Agreement and Plan of
Amalgamation, dated as of November 12, 1996 has been signed which, if approved
by the Class A shareholders of the Company and subject to the satisfaction of
certain conditions, would result in AES owning the entire outstanding common
stock of the Company.
Fiscal Periods -- Statements of operations and cash flows are presented
for the period from December 7, 1993 (inception), to November 30, 1994 and for
the years ended November 30, 1995 and 1996.
Accounting Principles -- The Company has prepared its financial
statements on the basis of United States generally accepted accounting
principles.
Principles of Consolidation -- The consolidated financial statements of
the Company include the accounts of AES Chigen and its subsidiaries. Investments
in 50% or less owned affiliates over which the Company exercises significant
influence, but not control, are accounted for by 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.
The Company's joint venture partners in certain 50% or less owned
affiliates have guaranteed a minimum return on the Company's investment. The
Company recognizes such guaranteed return in excess of its equity in the
earnings of the affiliates to the extent it believes it is probable that the
guaranteed return will be realized.
Cash and Cash Equivalents -- The Company considers cash on hand,
deposits in banks, certificates of deposit and short-term marketable securities
with an original maturity of three months or less to be cash and cash
equivalents. Cash and cash equivalents consists mainly of short-term commercial
paper and US Treasury bills.
Investments -- Debt and equity securities which the Company has both
the positive intent and ability to hold to maturity are classified as
held-to-maturity and carried at amortized cost. Debt and equity securities which
might be sold prior to maturity are classified as available-for-sale and carried
at approximate fair value. Material unrealized gains and losses, if any, related
to available-for-sale investments, net of applicable taxes, are reflected in a
separate component of shareholders' equity. The Company determines the
appropriate classification of securities at the time of purchase and evaluates
such classification as of each balance sheet date. Transactions in investment
securities are accounted for on the trade date.
F-9
<PAGE>
Inventory -- Inventory, valued at lower of cost (principally weighted
average method) or market value, consists of spare parts, materials and fuel
supplies used for the production of electricity.
Property, Plant and Equipment -- Property, plant and equipment is
stated at cost including the cost of improvements. Depreciation, after
consideration of salvage value, is computed using the straight-line method over
the estimated composite lives of the assets, which range from 3 to 25 years.
Maintenance and repairs are charged to expense as incurred.
Construction in Progress -- Construction progress payments, engineering
costs, insurance costs, wages, interest and other costs relating to construction
in progress are capitalized. Construction in progress balances are transferred
to electric generating facilities when the related assets or group of assets are
ready for their intended use. Capitalized interest during construction was $3.2
million in 1996 and $0.3 million in 1995.
Revenue Recognition -- Revenues from the sale of electricity are
recorded based upon output delivered and capacity provided at rates as specified
under contract terms. Most of the Company's power plants rely primarily on one
power sales contract with a single customer for the majority of its revenues.
Two customers accounted for 87% and 13% of electricity sales revenues in 1996,
one customer accounted for 100% of electricity sales revenues in 1995 and 1994.
The failure of any customer to fulfill its contractual obligations could have a
substantial negative impact on AES Chigen's revenues. However, the Company does
not anticipate non-performance by the customers under these contracts. Fees for
construction delay paid by Cili Power Company, the contractor of Xiangci-AES
Hydro Power Company Ltd. ("Xiangci-AES"), to compensate the Company for lost
generation in respect of an expansion facility, are recognized as revenue when
earned.
Project Development Costs -- Project development costs generally
represent costs incurred after achieving certain project related milestones
prior to the acquisition of generating assets or the start of physical
construction. These costs represent amounts incurred for professional services,
salaries, permits, options and other related costs. These costs are transferred
to construction in progress during the construction phase and to electric
generating facilities after commencement of operations.
Income Taxes -- Income taxes are provided based on an asset and
liability approach for financial accounting and reporting of income taxes.
Deferred income tax liabilities or benefits are recorded to reflect the tax
consequences in future years of differences between the tax basis of assets and
liabilities and the financial reporting amounts at each year end. A valuation
allowance is recognized if it is more likely than not that some portion of, or
all of, a deferred tax asset will not be realized.
Net Income/(Loss) Per Share -- Net income/(loss) per share is based on
the weighted average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents result from dilutive stock
options and pension arrangements. The effect of dilutive stock options on net
income/(loss) per share is computed using the treasury stock method. The
weighted average number of shares used in computing net income/(loss) per share
was 15.7 million, 17.4 million and 14.8 million for 1996, 1995 and 1994. Primary
and fully diluted earnings per share are approximately the same.
Stock Options -- Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" has been issued and will be
adopted by the Company in the year ended November 30, 1997. The statement
includes an optional new method for recognizing compensation expense for
employee stock options. The Company is continuing to evaluate whether or not it
will change to the new recognition method and, as a result, the Company has not
yet determined the effect of adopting SFAS No.123.
Foreign Currency Translation -- The Company's financial reports are
prepared using the United States dollar as the reporting currency. For
subsidiaries whose functional currency is deemed to be other
F-10
<PAGE>
than the United States dollar, asset and liability accounts are translated at
period-end rates of exchange and revenue and expenses are translated at average
exchange rates prevailing during the year. Translation adjustments are included
as a separate component of shareholders' equity. The functional currency of all
the Company's current subsidiaries and affiliates is the Renminbi Yuan, the
lawful currency of the PRC ("Renminbi").
Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires the use of
estimates. Actual results could differ from those estimates.
Reclassifications -- Certain reclassifications have been made to prior
period amounts to conform with the 1996 presentation.
2. INVESTMENTS
At November 30, 1996 and 1995, the Company's investments were
classified as either held-to-maturity or available-for-sale. The amortized cost
and estimated fair value of the investments at November 30, 1996 and 1995
classified as held-to-maturity and available-for-sale were approximately the
same. All investments in debt securities had maturity dates within one year from
the balance sheet date. The short-term investments were invested as follows:
As of
November 30,
--------------------------
1996 1995
------------ -----------
(in thousands)
Held-to-maturity
US Treasury and government agency securities....... $1,000 $32,617
Foreign certificates of deposit.................... -- 3,000
Commercial paper-discounted........................ 7,995 --
Floating rate notes................................ -- 5,992
========== ===========
$8,995 $41,609
========== ===========
Available-for-sale
US Treasury and government agency securities....... $-- $ 2,995
========== ===========
3. INVESTMENTS IN AND ADVANCES TO AFFILIATES
As of November 30, 1996 and 1995, the Company's investments in and
advances to affiliates included a 25% ownership interest in Yangchun Fuyang
Diesel Power Co. Ltd. ("Yangchun Fuyang").
As of November 30, 1996, the Company's investments in and advances to
affiliates also included a 25% ownership interest in, and loan to, Wuhu Shaoda
Electric Power Development Company Ltd. ("Wuhu Shaoda") as well as a 35%
ownership interest in, and loan to, Chengdu AES-Kaihua Gas Turbine Power Co.
Ltd. ("Chengdu AES-Kaihua").
F-11
<PAGE>
Summarized financial information for equity method affiliates on a
combined 100% basis is as follows (in thousands):
1996
------
Sales............................................ $ 5,950
Operating income................................. 2,226
Net income/(loss)................................ (407)
Current assets................................... 21,083
Non current assets............................... 124,904
Current liabilities.............................. 17,903
Non current liabilities.......................... 78,448
Stockholders' equity............................. 49,637
4. NOTE RECEIVABLE
As of November 30, 1996, Jiaozuo Wan Fang had provided loans in the
aggregate amount of $6.6 million through Zhongyuan Trust and Investment Company
to Henan Electric Power Corporation for the construction of interconnection and
transmission facilities. The loans are unsecured and bear interest at 15.3% per
annum. Interest on the loans is payable in arrears beginning in 1997 and the
principal is payable in 2004.
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 would 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.
5. LOANS FROM MINORITY SHAREHOLDERS
As of November 30, 1996 and 1995, loans from minority shareholders
included debt provided by the Company's joint venture partners, Wuxi Power
Industry Company ("Wuxi Power") and China National Aero-Engine Corporation
("CAREC") to Wuxi-AES-CAREC Gas Turbine Power Co. Ltd. ("Wuxi-AES-CAREC") and
Wuxi-AES-Zhonghang Power Co. Ltd., ("Wuxi-AES-Zhonghang"). The loans are secured
by the land use rights and all assets of the joint venture companies and bear
interest at 13% per annum through the end of 1995 and 15% per annum thereafter.
Principal and interest are repayable in 20 semi-annual installments beginning
July 1, 1996.
As of November 30, 1996, loans from minority shareholders also included
a loan in the amount of $25.7 million from Jiaozuo Aluminum Mill to Jiaozuo Wan
Fang. The loan is unsecured and bears interest at 15.3% per annum and a service
fee to the lender of 3% per annum. The loan is divided into two tranches in
equal amounts. 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 principal of the second
tranche is payable in 25 quarterly installments beginning July 1, 1998.
F-12
<PAGE>
Scheduled maturities of loans from minority shareholders as of November
30, 1996 are as follows:
As of November 30,
1996
------------------
(in thousands)
1997................................... $ 1,365
1998................................... 4,845
1999................................... 5,120
2000................................... 5,120
2001................................... 5,120
Thereafter............................. 14,728
=========================
$ 36,298
=========================
6. NOTES PAYABLE
At November 30, 1996, short-term bank loans totaling $0.4 million to
Xiangci-AES were outstanding. The loans are secured by the buildings of the
joint venture, bear interest from 10.7% to 14.5% per annum and are repayable
within one year. In addition, a short-term bank loan of $1.5 million to Anhui
Liyuan-AES Power Company Ltd. ("Anhui Liyuan-AES") was outstanding. The note is
unsecured, bears interest at the prevailing lending rates in the PRC which
ranged from 6.8125% to 7.49% per annum and is repayable within one year.
At November 30, 1995, notes payable consisted primarily of a short-term
bank loan to Wuxi-AES-CAREC. The note is guaranteed by Wuxi County Power Fuel
Company. In 1996, the short-term bank loan was renewed for another year with
interest at 12.1% per annum.
7. COMMITMENTS AND CONTINGENCIES
Subsidiaries of the Company entered into various long-term contracts
for the purchase of fuel subject to termination only in certain limited
circumstances. These contracts have remaining terms of 14 years to 27 years.
As of November 30, 1996, Xiangci-AES has approximately a $1.0 million
cash reserve to complete construction of the expansion facility. Upon completion
of the facility, any portion of this amount not utilized will be paid by
Xiangci-AES to Cili Power Company, as contractor.
In April 1996, Wuhu Shaoda entered into a $65.0 million term loan
facility ("the Term Loan") with a syndicate of lenders to finance the
construction of the power plant. The Company has guaranteed to the lenders of
the Term Loan certain obligations of its wholly owned subsidiary under the joint
venture contract, including an obligation to fund an $18.0 million subordinated
loan and certain other liabilities which, in the aggregate, do not exceed $6.0
million.
Wuhu Shaoda had entered into a lease contract with Wuhu Energy
Development Company, one of the PRC partners in the joint venture, for land use
rights of the site over its entire term of operations at an annual lease fee of
$0.2 million. As of November 30, 1996, total commitment under the land use
rights lease contract amounted to $5.3 million.
F-13
<PAGE>
Since the commencement of operations, the Company has entered into
commitments to invest a total of approximately $259.6 million in the form of
equity contributions and loans to its joint ventures. As of November 30, 1996,
the total outstanding commitment to its joint ventures was $116.8 million.
The Company has initialed or signed several joint venture contracts
which become effective under Chinese law following receipt of certain government
approvals. These joint venture contracts are also subject to the satisfaction or
waiver of certain conditions precedent specified in the joint venture contracts.
Until the appropriate governmental approvals have been obtained and all
conditions precedent have been satisfied or waived, the Company regards the
initialing or signing of a joint venture contract as being a preliminary step in
the development of an electric power generation project and therefore does not
recognize amounts under these joint venture contracts as commitments.
8. SHAREHOLDERS' EQUITY
Class A Common Stock
On March 2, 1994, the Company issued 10,000,000 shares of Class A
common stock in a public offering. On April 4, 1994, the underwriters for the
offering exercised a portion of the over-allotment option granted to them in
connection with the initial public offering and the Company sold an additional
216,000 shares of Class A common stock. In connection with the offering, the
Company registered its Class A common stock with the United States Securities
and Exchange Commission and its shares were approved for quotation on the
National Association of Securities Dealers Automated Quotation National Market
System. The net proceeds of the offering amounted to $151.9 million.
The holders of AES Chigen's Class A common stock are entitled, voting
as a class, to elect one-half of the Board of Directors of the Company. However,
the voting rights of certain holders, if any, of 20% or more of the Class A
shares will be restricted in accordance with the Company's Bye-laws.
The holders of Class A common stock had a one-time right to require the
Company to repurchase their respective Class A shares if by February 23, 1997
the Company had not invested or entered into binding commitments to invest at
least $50.0 million in one or more electric power generation projects in the PRC
on which construction had commenced. The Company has entered into such
commitments and therefore the Class A shareholders no longer have the right to
require repurchase. As a result, the Class A common stock has been reclassified
into shareholders' equity.
Class B Common Stock
On December 29, 1993, AES, pursuant to a Stock Purchase and
Shareholder's Agreement (the "Stock Purchase Agreement") between AES and the
Company, purchased 7,500,000 shares of Class B common stock.
The net proceeds of the sale amounted to $50.0 million.
The holders of Class B common stock are entitled, voting as a class, to
elect one-half of the Board of Directors of the Company. As of November 30,
1996, 1995 and 1994, there were 7,500,000 shares of Class B common stock
outstanding, all of which were owned by AES.
Under the Stock Purchase Agreement, AES agreed that it would not
transfer any Class B shares before February 23, 1996. AES also agreed not to
dispose of more than 3,750,000 Class B shares plus 50% of any Class B shares
acquired subsequent to AES's initial purchase of Class B common stock (excluding
certain shares issued upon reinvestment by AES of performance fees received by
it under the Services Agreement (see Note 9) between the Company and AES) until
the earlier of the tenth anniversary of the effective date of the offering and
the termination of the Services Agreement. Upon the sale or transfer by AES of
any Class B common stock, such shares convert to Class A common stock. Upon the
sale or transfer by AES in one or more transactions of more than approximately
50% of the Class B common stock acquired by AES, the Class B common stock will
convert into Class A common stock and the right of AES to elect one-half of the
Board of Directors of the Company will terminate.
F-14
<PAGE>
The Stock Purchase Agreement also provides AES with a preemptive right
to purchase additional Class B common stock in the event the Company issues
additional Class A common stock. AES also has
agreed not to acquire any Class A common stock until such time as all of the
shares of Class B common stock have been converted to shares of Class A common
stock.
Treasury Stock
On April 4, 1995, the Company announced a plan to repurchase up to an
additional 2,042,000 shares of its Class A common stock. Prior to the
announcement of the plan, the Company had purchased 168,000 shares of Class A
common stock through unsolicited block transactions. As of November 30, 1995,
the Company had repurchased a total of 1,912,600 shares of its Class A common
stock. During the year ended November 30, 1996, the Company repurchased a
further 169,300 shares of Class A common stock. The aggregate repurchase of
shares approximates 20% of the shares of Class A common stock issued and were
acquired at an average price of $8.55 per share. As of November 30, 1996, the
Company had retired all the shares of treasury stock.
Transfer of Funds from Subsidiaries and Affiliates
Nearly all of the monetary assets of the Company's subsidiaries and 50%
or less owned affiliates are denominated in Renminbi. The conversion of Renminbi
into US dollars and the remittance of US dollars abroad require PRC government
approvals. At November 30, 1996, the Company's share of the net assets of its
subsidiaries in the PRC amounted to $98.8 million. In addition, the ability of
Wuhu Shaoda to pay dividends to the Company is subject to certain restrictions
under the terms of a bank facility which has been entered into by the joint
venture. No dividend distributions by the joint venture are permitted if certain
debt service coverage ratios are not met.
Stock Options
In 1994, the Company adopted the AES China Generating Co. Ltd.
Incentive Stock Option Plan (the "Plan"). In March 1995, the Company's
shareholders approved an increase in the total number of shares available for
issuance upon exercise of options granted to employees from 875,000 to 2,000,000
shares of Class B common stock and an increase in the maximum number of shares
issuable upon exercise of options that can be granted to an individual from
250,000 to 500,000 shares of Class B common stock. At November 30, 1996, there
were 589,440 shares reserved for future grants under the Plan. A summary of
stock option activity for the years ended November 30, 1995 and 1996 and for the
period from December 7, 1993 (inception) through November 30, 1994 is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended
November 30, Period Ended
--------------------------------- November 30,
1996 1995 1994
-------------- --------------- -----------------
(in shares)
Outstanding at beginning of year/period........ 1,451,059 752,500 --
Exercised during the year/period............... -- -- --
Forfeited during the year/period............... (290,388) --
Granted during the year/period (from $8.50
to $16.00) ................................. 247,889 698,559 752,500
-------------- --------------- -----------------
Outstanding -- end of year/period (from $8.50
to $16.00).................................. 1,408,560 1,451,059 752,500
============== =============== =================
Eligible for exercise-- end of year/period..... 379,112 150,500 --
============== =============== =================
</TABLE>
F-15
<PAGE>
All options granted under the Plan have an exercise price equal to 100%
of the market price of the Class A common stock at the date the option was
granted. For the options granted in 1994 and 1995, options granted expire in ten
years from the date of grant and generally become eligible for exercise in
installments of 20% at the end of each of the first five years following the
grant date. Certain options granted during 1995 become eligible for exercise in
installments of 20% at the end of one year following the date of grant with an
additional 20% of the shares vesting on the later of each of the second, third,
fourth and fifth anniversaries of the date of grant or the date the market price
reaches, for a sixty-day consecutive period, a price per share of $15.00,
$20.00, $25.00 and $30.00, respectively. A majority of options granted in 1996
become eligible for exercise over a two year period.
9. RELATED PARTIES
AES Chigen has entered into a Project Services Agreement with AES (the
"Services Agreement") whereby AES will exclusively provide development,
construction management and operations services to the Company. The Services
Agreement has an initial term of five years commencing December 1993 with three
five-year renewal terms. Management fees under the Services Agreement totaled
$0.3 million, $0.1 million and $0.4 million for the years ended November 30,
1996 and 1995 and for the period ended November 30, 1994, respectively. The
Services Agreement provides that for the first five years that the agreement is
in effect AES will invest the after-tax proceeds of certain performance fees in
additional shares of Class B common stock.
The Company has entered into a Non-Competition and Non-Disclosure
Agreement with AES which provides that AES will not compete with the Company in
China to develop, acquire, construct, own, or operate electric power generation
facilities for a period of ten years beginning December 1993, or for the period
ending three years after the Services Agreement is terminated, whichever is
longer. The Company has agreed not to compete with AES in the remaining parts of
Asia with respect to electric power generation activities.
Pursuant to the service agreement between Wuxi-AES Zhonghang and
Wuxi-AES-CAREC, and the construction service agreement between Wuxi-AES-CAREC,
CAREC and Wuxi Power Industry Company ("Wuxi Power"), CAREC and Wuxi Power are
responsible for the construction of the combined cycle plant on a cost-plus
basis. The amounts paid to CAREC and Wuxi Power for construction during 1996 and
1995 were approximately $0.7 million and $0.2 million, respectively.
As of November 30, 1996, accounts receivable from related parties
consisted primarily of amounts due from Cili Power Company, for sale of
electricity and for the payment of construction delay fees, amount due from the
Xishan City Electricity Management Office, an associated company of the joint
venture partner in Wuxi-AES-CAREC, for sale of electricity and a short-term loan
to a Chinese partner in Wuxi-AES-CAREC bearing interest at 12.1% per annum.
As of November 30, 1995, accounts receivable from related parties
represented amounts due from Cili Power Company, a joint venture partner in
Xiangci-AES, for sale of electricity.
10. INCOME TAXES
The Company's PRC joint ventures are entitled to a two-year tax
exemption from state and local income taxes commencing from the first profitable
year of operations, after taking into account any losses brought forward from
prior years, followed by a 50% reduction in tax rates for the next three years
("tax holidays"). No PRC income tax was incurred during 1996, 1995 and 1994 as
the joint ventures were either within the exemption period of the tax holidays
or had not yet commenced commercial operations.
As of November 30, 1996, a deferred tax liability amounting to
approximately $0.4 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.
F-16
<PAGE>
As of November 30, 1994 and 1995, there were no material temporary
differences between recognition of transactions for tax reporting purposes and
financial reporting purposes, therefore, no provision for deferred tax was
recorded.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of financial instruments, including cash and cash
equivalents, investments, note receivable and payables for repurchase of shares
and investment purchases, were equal to their approximate fair values as of
November 30, 1996 and 1995 because of the relatively short maturities of these
investments. As of November 30, 1996 and 1995, the carrying value of loans from
minority shareholders and the note payable approximated fair value determined by
the estimated discount rate a prospective seller would pay to a credit-worthy
third party to assume the obligation.
12. SUBSEQUENT EVENTS
The Company and AES have entered into an Amended and Restated Agreement
and Plan of Amalgamation, dated as of November 12, 1996, pursuant to which a
wholly owned subsidiary of AES would amalgamate (the "Amalgamation") with the
Company and each share of the Company's Class A common stock outstanding prior
to the Amalgamation will thereafter represent the right to receive shares of AES
common stock. The Agreement and Plan of Amalgamation is subject to various
conditions, including the approval of the holders of the Class A common Stock of
the Company. In the Amalgamation, all outstanding options to acquire Class B
common Stock in the Company under the Company's Incentive Stock Option Plan
would be converted into options to acquire shares of AES common stock.
On December 19, 1996 the Company completed a $180.0 million public
offering of its notes and received net proceeds of approximately $173.9 million.
The notes mature on December 15, 2006 and bear interest at the rate of 10 1/8%
per annum. Interest is payable on June 15 and December 15 of each year,
commencing on June 15, 1997. The notes rank at least pari passu in right of
payment with all existing and future senior unsecured indebtedness of the
Company. The holders of the notes have a claim to amounts on deposit in certain
collateral accounts that is prior to the claims of other creditors of the
Company. The notes contain certain restrictions on the payment of dividends,
redemption of equity interests and the making of certain investments, among
other things.
F-17
<PAGE>
SCHEDULE I
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
STATEMENTS OF UNCONSOLIDATED OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period
Ended November 30,
-----------------------------------------------------
1996 1995 1994
------------ ------------- -------------
Revenues $ 400 $ 680 $ --
Equity in earnings of subsidiaries 3,724 465 5
------------ ------------- -------------
Total revenues 4,124 1,145 5
------------ ------------- -------------
Operating costs and expenses:
Costs of sales and services 557 524 37
Selling, general and administrative expenses 3,463 8,616 6,927
------------ ------------- -------------
Total operating costs and expenses 4,020 9,140 6,964
------------ ------------- -------------
Operating Income/ (loss) 104 (7,995) (6,959)
Amalgamation cost (1,444) -- --
Interest income, net 5,480 10,133 6,588
------------ ------------- -------------
Income/(loss) before taxes 4,140 2,138 (371)
Income Taxes -- -- --
============ ============= =============
Net income/(loss) $ 4,140 $ 2,138 $ (371)
============ ============= =============
</TABLE>
See notes to Schedule 1
S-1
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
-----------------------------------------
1996 1995
----------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 26,190 $ 109,713
Investments-- held-to-maturity 8,995 41,609
Investments-- available-for-sale -- 2,995
Accounts receivable from related parties 1,231 320
Prepaid expenses and other current assets 630 978
---------------- ----------------
Total current assets 37,046 155,615
Investment in subsidiaries (on the equity method) 152,712 36,990
Office Equipment:
Cost 1,220 1,003
Accumulated depreciation (653) (355)
---------------- ----------------
Total property, plant and equipment, net 567 648
Other Assets:
Project development costs 3,352 1,083
Note receivable -- 7,500
Deposits and other assets 972 633
---------------- ----------------
Total other assets 4,324 9,216
---------------- ----------------
TOTAL $ 194,649 $ 202,469
================ ================
</TABLE>
See notes to Schedule 1
S-2
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
As of November 30,
-------------------------------------
1996 1995
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable-- The AES Corporation $ 1,185 $ 214
Accounts payable 1,114 193
Payable for repurchase of shares -- 10,011
Payable for investment purchase -- 2,995
Accrued liabilities 2,307 1,721
--------------- --------------
Total current liabilities 4,606 15,134
Shareholders' Equity:
Class A common stock 81 102
Class B common stock 75 75
Additional paid-in capital 183,980 201,762
Retained earnings 5,907 1,767
Treasury stock, at cost, -- (16,371)
--------------- --------------
Total shareholders' equity 190,043 187,335
--------------- --------------
TOTAL $ 194,649 $ 202,469
=============== ==============
</TABLE>
See notes to Schedule 1
S-3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONDENSED FINANCIAL INFORMATION
UNCONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Period Ended November 30,
--------------------------------------------------------
1996 1995 1994
--------------- --------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash (used in) / provided by operating (40) (1,370) 335
activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock -- -- 201,939
Repurchase of Class A common stock (11,443) (6,360) --
--------------- --------------- --------------
Net cash (used in) / provided by financing
activities (11,443) (6,360) 201,939
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress (224) (445) (544)
Purchase of investments -- -- (195,943)
Purchase of investments-held-to-maturity (29,176) (154,630) --
Purchase of investments-available-for-sale (16,797) (14,557) --
Proceeds from sales/maturity of investments -- -- 93,369
Proceeds from the maturity of investments-held-to-maturity 63,656 219,086 --
Proceeds from sales of investments-available-for-sale 16,969 14,609 --
Investments in and advances to subsidiaries (104,714) (28,453) (7,500)
Recoupment of investment in subsidiaries 871 -- --
Project development costs and other assets (2,625) (1,327) (996)
Investment in note receivable -- (7,500) --
--------------- --------------- --------------
Net cash (used in) / provided by investing
activities (72,040) 26,783 (111,614)
--------------- --------------- --------------
(Decrease ) / increase in cash and cash equivalents (83,523) 19,053 90,660
CASH AND CASH EQUIVALENTS,
Beginning of year/period 109,713 90,660 --
=============== =============== ==============
End of year/period $ 26,190 $ 109,713 $ 90,660
=============== =============== ==============
</TABLE>
See notes to Schedule 1
S-4
<PAGE>
AES CHINA GENERATING CO. LTD
NOTES TO SCHEDULE I
1. APPLICATION OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting for Subsidiaries - AES China Generating Co. Ltd.
has accounted for the earnings of its subsidiaries on the equity method in the
unconsolidated condensed financial information.
Revenues - Construction and operation management fees earned
by the parent from its consolidated subsidiaries are eliminated.
S-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit Sequentially
Number Document Numbered Page
1.1 Underwriting Agreement dated December 12, 1996 between the
Company and Morgan Stanley & Co. Incorporated and Donaldson,
Lufkin & Jenrette Securities Corporation.
4.1 Indenture dated as of December 19, 1996 between the Company
and Bankers Trust Company, as Trustee.
4.2 Form of 2006 Note.
4.3 Security Agreement, dated as of December 19, 1996, among the
Company, Bankers Trust Company, as Trustee, and Bankers Trust
Company, as Collateral Agent.
10.40* Cooperative Joint Venture Contract dated March 18, 1996 by
and among Anhui Liyuan Electric Plower Development Company
Ltd., Hefei Municipal Construction and Investment Company and
AES Anhui Power Company Ltd. establishing Anhui Liyuan-AES
Power Company Ltd.
10.41* AES Loan Contract by and between Anhui Liyuan-AES Power
Company Limited and AES Chigen Company (L), Ltd.
10.42* Cooperative Joint Venture Contract dated March 18, 1996 by
and among Anhui Liyuan Electric Plower Development Company
Ltd., Hefei Municipal Construction and Investment Company and
AES Anhui Power Company Ltd. establishing Hefei Zhongli
Energy Company Ltd.
10.43* AES Loan Contract by and between Hefei Zhongli Energy Company
Limited and AES Chigen Company (L), Ltd.
10.44* Operation and Offtake Contract between Anhui Provincial
Electric Power Corporation, Anhui Liyuan-AES Power Company
Ltd. and Hefei Zhongli Energy Company Ltd.
10.45* Cooperative Joint Venture Contract by and among Chengdu Huaxi
Electric Power (Group) Shareholding Company Ltd., China
National Aero-engine Corporation and the Company.
10.46* Support Contract dated as of August 12, 1996 between AES Tian
Fu Power Company (L) Ltd. and Chengdu AES KAIHUA Gas Turbine
Power Co., Ltd.
10.47* Power Purchase Contract between Chengdu Huaxi Electric Power
(Group) Shareholding Company Ltd. and Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd.
10.48* Agreement of Amendment to the Cooperative Joint Venture Contract
and Articles of Association of Chengdu AES KAIHUA Gas Turbine
Power Co., Ltd.
11.1 Statement of computation of earnings per share.
21.1 List of Subsidiaries of the Company.
23.1 Independent Auditors' Consent.
25.1 Power of Attorney.
27.1 Financial Data Schedule.
99.1 Statement Re: Computation of Fixed Charge Coverage
Ratio
</TABLE>
*The Company has requested confidential treatment for certain information
identified in this exhibit.
Exhibit 1.1
CONFORMED COPY
AES CHINA GENERATING CO. LTD.
$180,000,000
10 1/8% NOTES DUE 2006
UNDERWRITING AGREEMENT
December 12, 1996
<PAGE>
December 12, 1996
Morgan Stanley & Co.
Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
AES China Generating Co. Ltd., a corporation established under the laws
of Bermuda (the "Company"), proposes to issue and sell to the several
Underwriters named in Schedule I hereto (the "Underwriters") $180,000,000
principal amount of its 101/8% Notes Due 2006 (the "Notes") to be issued
pursuant to the provisions of an Indenture (the "Indenture") to be dated as of
the Closing Date (as defined herein) between the Company and Bankers Trust
Company, as trustee (the "Trustee"). As security for the payment and performance
by the Company of all of its obligations under the Indenture and the Notes, the
Company will assign all amounts on deposit in the Collateral Accounts (as
defined in the Indenture) at any time as collateral to Bankers Trust Company, as
collateral agent (the "Collateral Agent"), for the benefit of the Trustee on
behalf of the Noteholders upon the terms and conditions set forth in a Security
Agreement to be dated as of the Closing Date (the "Security Agreement") among
the Company, the Trustee and the Collateral Agent.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (Commission File No. 333-5798) on Form
S-3, including a prospectus, relating to the Notes. The registration statement
on Form S-3 as amended at the time it becomes effective, including the
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as
amended (the "Securities Act"), is hereinafter referred to as the "Registration
Statement"; the prospectus in the form first used to confirm sales of Notes is
hereinafter referred to as the "Prospectus." If the Company has filed an
abbreviated registration statement pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement") increasing the size of the offering,
then any reference herein to the term "Registration Statement" shall be deemed
to include such Rule 462 Registration Statement. The "Bermuda Prospectus" means
the Registration Statement, or where applicable a copy thereof, signed by each
director of the Company or such director's duly authorized attorney-in-fact,
together with the required attachments thereto, or any supplement or amendment
thereto, filed with the Registrar of Companies in Bermuda (the "Registrar of
Companies") as required by The Companies Act 1981, as amended, of Bermuda (the
"Companies Act") and the rules and regulations promulgated thereunder (the
"Companies Act Rules").
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in the Prospectus complied or will comply when so
filed in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder, (ii) each part of the
Registration Statement, when such part became effective, did not contain
and each such part, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) the Registration Statement and the Prospectus
comply and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain,
as of the date of any such amendment or supplement, any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set
forth in this Section 1.(b) do not apply (A) to statements or omissions in
the Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein or (B) to that part of
the Registration Statement that constitutes the Statement of Eligibility
(Form T-1) under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), of the Trustee.
(c) The Company has been duly incorporated and is validly existing and
in good standing (meaning that the Company has not failed to make any
filing with any Bermuda governmental authority or to pay any Bermuda
government fee or tax which might make the Company liable to be struck off
the Register of Companies of Bermuda and thereby cease to exist under the
laws of Bermuda) under the laws of Bermuda, has the corporate power and
authority to own its property and to conduct its business as described in
the Prospectus and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and the Project Companies (as
defined below), taken as a whole.
(d) Jiaozuo Power Partners, L.P. ("Jiaozuo L.P.") has been duly
organized and is validly existing as a limited partnership in good standing
under the laws of its organization and each of AES Yangchun Power Co. Ltd.,
AES Chigen Co. (L) Ltd., AES Anhui Power Company Ltd., AES Tien Fu Power
Co. Ltd., AES Tien Fu Power Co. (L) Ltd., Jiaozuo (G.P.) Corp., AES China
Power Holding Co. (L) Ltd. and AES China Holding Co. (L) Ltd.
(collectively, together with Jiaozuo L.P., the "AES Group Companies" and
each an "AES Group Company") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, and each of the AES Group Companies has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and the Project Companies, taken as a whole.
(e) Each of Hunan Xiangci-AES Hydro Power Company Ltd., Yangchun
Fuyang Diesel Engine Power Co. Ltd., Wuxi-AES-CAREC Gas Turbine Power
Company Ltd., Wuxi-AES-Zhonghang Power Co. Ltd., Sichuan Fuling Aixi Power
Company Ltd., Jiaozuo Wan Fang Power Company Ltd., Wuhu Shaoda Electric
Power Development Company Ltd., Chengdu-AES-Kaihua Gas Turbine Power Co.
Ltd., Anhui Liyuan AES Power Company Ltd. and Hefei Zhongli Energy Company
Ltd. (collectively the "Joint Venture Companies" and each a "Joint Venture
Company" and, together with the AES Group Companies, the "Project
Companies") has been duly organized under the laws of the People's Republic
of China (the "PRC") as a joint venture enterprise with the status of a
Chinese legal person, is validly existing under the laws of the PRC, has
the corporate power and authority to own its property (including land use
rights) and to conduct its business as described in the Prospectus, and is
in good standing and duly qualified to transact business in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except as otherwise
disclosed in the Prospectus.
(f) The Company has an authorized capitalization as set forth in the
Prospectus, and, except as set forth in the Prospectus, all of the issued
shares in the share capital of the Company have been duly and validly
authorized and issued and are fully paid. All of the issued shares in the
share capital (or partnership interests in the case of Jiaozuo L.P.) of
each AES Group Company have been duly and validly authorized and issued,
and are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, restrictions on transfer, equities or claims.
(g) An AES Group Company or the Company is the owner of the respective
percentage of registered capital of each of the Joint Venture Companies as
set forth in the Prospectus, in each case free and clear of all liens,
encumbrances, equities, claims, restriction on transfer (other than as
required under PRC law or pursuant to the provisions of the Joint Venture
Documents (as defined below) of any such Joint Venture Company), voting
trust or other defect of title whatsoever, in all material respects; and
the ownership of such registered capital is valid and lawful under all
applicable laws, rules, regulations or guidelines of any local or other
court or public, governmental or regulatory agency or body in all material
respects.
(h) The contracted registered capital of each of the Joint Venture
Companies has been subscribed in full by the respective joint venture
partners of each such Joint Venture Company and all government approvals
relating to the subscription thereof have been issued and are in full force
and effect (except any such delayed subscription permitted pursuant to the
applicable Joint Venture Documents) such that the ownership of registered
capital of each such Joint Venture Company is as described in the
Registration Statement in all material respects.
(i) This Agreement has been duly authorized, executed and delivered by
the Company.
(j) The Security Agreement has been duly authorized by the Company
and, when executed and delivered by the Company, will be a valid and
binding agreement of the Company, enforceable in accordance with its terms
except as the enforceability thereof may be limited (i) by bankruptcy,
insolvency, fraudulent transfer, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii)
by equitable principles of general applicability.
(k) The Indenture has been duly qualified under the Trust Indenture
Act and has been duly authorized and, when executed and delivered by the
Company, will be a valid and binding agreement of the Company, enforceable
in accordance with its terms except as the enforceability thereof may be
limited (i) by bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) by equitable principles of general applicability.
(l) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Underwriters in accordance with the terms
of this Agreement, will be entitled to the benefits of the Indenture and
will be valid and binding obligations of the Company, enforceable in
accordance with their terms except as the enforceability thereof may be
limited (i) by bankruptcy, insolvency, fraudulent transfer, fraudulent
conveyance, reorganization, moratorium, or similar laws affecting
creditors' rights generally and (ii) by equitable principles of general
applicability.
(m) The execution and delivery by the Company, and the performance by
the Company of its obligations under, this Agreement, the Indenture, the
Security Agreement and the Notes (i) will not contravene any provision of
applicable law or the memorandum of association or bye-laws of the Company
or any agreement or other instrument binding upon the Company or any of the
Project Companies that is material to the Company and the Project
Companies, taken as a whole, or any regulation, judgment, order or decree
of any governmental body, agency or any court having jurisdiction over the
Company or any Project Company or, (ii) except as contemplated by the
Security Agreement, result in the creation or imposition of any claim,
lien, mortgage, security interest or other encumbrance on any property or
assets of the Company or any of the Project Companies. No consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of its obligations under this Agreement, the Indenture, the Security
Agreement or the Notes, except the following items: (i) such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Notes, (ii) such as have been
duly obtained in accordance with Bermuda law and are in full force and
effect and (iii) such consents, approvals, authorizations, orders or
qualifications, the absence of which would not, individually or in the
aggregate, have a material adverse effect on the ability of the Company to
consummate the transactions contemplated by this Underwriting Agreement.
(n) The execution and delivery of, and performance by each Joint
Venture Company and, to the best of the Company's knowledge, by each of the
other parties thereto of its obligations under the Project Documents (as
defined below) to which it is party do not contravene, in any material
respect, any provision of applicable law or any regulation or any judgment,
order or decree of any governmental body or agency or any court having
jurisdiction over any such party. Each of the Project Documents constitutes
a valid and binding agreement of the appropriate Joint Venture Company and,
to the best of the Company's knowledge, of each of the other parties
thereto, is in full force and effect, and is enforceable in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors' rights
generally and to general principles of equity. "Project Documents" for each
Joint Venture Company and the power generation facility under construction
or owned by such Joint Venture Company (each a "Project") means all
material documents relating to property ownership and operation of such
Joint Venture Company, including but not limited to, the construction and
equipment procurement contracts, the power purchase agreement (together
with the tariff calculation and adjustment method), the dispatch and
interconnection agreement, the fuel supply agreements (if applicable), the
operation and maintenance agreement (if applicable) and the land use rights
grant or lease agreement. Schedule II hereto contains an accurate and
complete list of all Project Documents relating to each of the Joint
Venture Companies.
(o) The execution and delivery of and performance by the Company, each
AES Group Company and, to the best of the Company's knowledge, by each of
the other parties thereto of its obligations under the Joint Venture
Documents (as defined below) to which it is a party do not contravene, in
any material respect, any provision of applicable law or any regulation or
any judgment, order or decree of any governmental body or agency or any
court having jurisdiction over any such party. Each of the Joint Venture
Documents to which it is a party constitutes a valid and binding agreement
of the Company and the appropriate AES Group Company and, to the best of
the Company's knowledge, of the other parties thereto, is in full force and
effect and is enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, fraudulent
conveyance, moratorium or similar laws affecting creditors' rights
generally and to general principles of equity. "Joint Venture Documents" in
connection with each Joint Venture Company means all material agreements
relating to the establishment of the Joint Venture Company, material
agreements between such Joint Venture Company and the joint venture
partners thereof and material agreements among the joint venture partners
of such Joint Venture Company, including but not limited to the joint
venture contract, articles of association, any profit sharing agreement not
otherwise contained in the joint venture contract and any financing
agreements entered into by each such Joint Venture Company. Schedule III
hereto contains an accurate and complete list of all the Joint Venture
Documents relating to each of the Joint Venture Companies.
(p) No consent, approval, authorization, permit, certificate or order
of or from, or filing, declaration or qualification with or to, any
governmental body, self-regulatory organization, court, tribunal, agency or
official in or of the PRC was or is required for (i) the establishment of
each of the Joint Venture Companies (taking into account the anticipated
total investment in such Joint Venture Company), (ii) the ownership by the
Company or an AES Group Company, as the case may be, of the respective
percentage of registered capital of each of the Joint Venture Companies as
set forth in the Prospectus, (iii) the performance by the Company, the
applicable AES Group Company, the applicable Joint Venture Company and, to
the best of the Company's knowledge, each other party thereto of its
obligations under the Joint Venture Documents to which it is a party, (iv)
the conduct by each of the Joint Venture Companies of its business and
ownership of its properties (including the establishment and ownership of
the relevant Project) as described in the Prospectus and as contemplated
under the Project Documents relating thereto, (v) the application of the
tariff calculation and adjustment method contained in the relevant power
purchase contract to the electricity tariff payable to the relevant Joint
Venture Company and (vi) the performance by each party of its obligations
under the Project Documents to which it is a party, including, but not
limited to, payment of, and adjustments to, the relevant tariff by the
relevant power purchaser of each Project as contemplated under the Project
Documents relating thereto (except, in the case of adjustments, any
approvals from the relevant pricing tariff bureau), except in each case (A)
such as have been obtained or made and are in full force and effect, and
have been listed in Schedule IV hereof, (B) those the absence of which,
individually or in the aggregate, would not have a material adverse effect
on the Company and the Project Companies, taken as a whole and (C) such
others, to the extent disclosed in the Prospectus. No such consent,
approval, authorization, permit, certificate or order, filing, declaration
or qualification that has been made or obtained contains any restriction on
the ability of any of the Joint Venture Companies to own, use or lease its
properties or to conduct its business or the Company's ability to satisfy
its payment obligations under the Notes, except such restrictions as are
disclosed in the Prospectus, and none of the Company or, to the knowledge
of the Company after due inquiry, any of the Project Companies has received
any notice of proceedings relating to the revocation or modification of any
such consent, approval, authorization, permit, certificate or order,
filing, declaration or qualification that has been made or obtained.
(q) Each Joint Venture Company has full power and authority to effect
dividend payments and remittances thereof and payments of interest and
principal on loans or advances by the Company or an AES Group Company
(collectively "Payments") outside the PRC in United States dollars. Each
Joint Venture Company has obtained all approvals currently required in the
PRC for it to be able to pay, and, subject to the acquisition of the
necessary foreign exchange, each such Joint Venture Company is currently
entitled to remit outside the PRC and pay, in United States Dollars, all
Payments payable to the Company or any of the AES Group Companies.
(r) All Payments by any Joint Venture Company to the Company or any
AES Group Company are currently free and clear of any PRC tax, duty,
withholding or deduction, except withholding tax payable on payments of
interest with respect to any loans to such Joint Venture Company.
(s) All payments under the Notes, the Indenture and this Agreement are
free and clear of any tax, duty, withholding or deduction and without
necessity of obtaining any license, consent or approval, governmental or
otherwise, of any nature whatsoever.
(t) All dividend payments or other distributions by any AES Group
Company to the Company are free and clear of any tax, duty, withholding or
deduction and without necessity of obtaining any license, consent or
approval of such jurisdiction, governmental or otherwise, of any nature
whatsoever.
(u) No taxes, imposts or duties of any nature (including, without
limitation, stamp or other issuance or transfer taxes or duties and capital
gains, income, withholding or other taxes) are payable by or on behalf of
the Underwriters, the Company or any of the Project Companies to Bermuda or
the United States or any political subdivision or taxing authority thereof
or therein in connection with (i) the issuance of the Notes in connection
with the offering and sale of the Notes; (ii) the sale of the Notes to the
Underwriters in the manner contemplated herein; or (iii) the resale and
delivery of Notes by the Underwriters in the manner contemplated in the
Prospectus.
(v) None of the Joint Venture Companies is, or with the giving of
notice or lapse of time or both would be, in violation of or in default
under (i) any provision of PRC law or the Joint Venture Documents of such
Joint Venture Company, (ii) any other agreement or instrument by which such
Joint Venture Company is bound or to which any of the property or assets of
such Joint Venture Company is subject or (iii) any approval, judgment,
order, decree or regulation of any governmental body or agency or of any
court having jurisdiction over such Joint Venture Company, except for such
defaults that would not, individually or in the aggregate, have a material
adverse effect on the Company and the Project Companies, taken as a whole.
(w) Each of the Joint Venture Companies has paid all PRC taxes which
it is required to have paid, except (A) for taxes the payment of which is
being contested in good faith by appropriate proceedings and for which
adequate reserves have been set aside on its books and (B) where the
failure to pay any such taxes would not, individually or in the aggregate,
have a material adverse effect on the Company and its Project Companies,
taken as a whole.
(x) Each of the Joint Venture Companies owns, or has been granted all
necessary rights to use, for the approved duration of such Joint Venture
Company, all of the material properties and assets owned or used by it or
transferred, assigned or otherwise conveyed to it in connection with its
formation or thereafter. Such properties and assets are free and clear of
all claims, liens, security interests or other encumbrances, other than
liens permitted under the Indenture, which would materially affect its
ability to perform under the Project Documents to which it is a party or
which would materially affect the Company's ability to satisfy its payment
obligations under the Notes. Each of the Joint Venture Companies has
obtained all land-use rights which are necessary in connection with the
construction, ownership and operation of the respective Project, for the
approved duration of such Joint Venture Company, and the conduct of their
respective businesses as described in the Registration Statement, free and
clear of all encumbrances and defects (other than such encumbrances or
defects which do not interfere with the use made and proposed to be made of
such land-use rights), and all such land-use rights are valid, binding and
enforceable in accordance with their respective terms, in all material
respects. All real property, buildings and equipment held under lease, if
any, by each of the Joint Venture Companies are held by each of them under
leases that are valid, binding and enforceable, in all material respects.
(y) No proceeding or other action for the winding up or dissolution or
for the withdrawal, revocation or cancellation of the business license of
any of the Joint Venture Companies has been commenced or threatened. No
notice of appointment of a receiver of any of the Joint Venture Companies
or any of its assets has been issued and no declaration or order of
insolvency has been or is threatened to be made.
(z) No material labor dispute with the employees of the Company or any
of the Joint Venture Companies exists or, to the knowledge of the Company,
is imminent.
(aa) The Company has disclosed to the Underwriters copies of (x) all
minutes and agenda of the board of directors, board of commissioners or
similar bodies of the Company and the Project Companies and (y) all
existing minutes and agenda of the management meetings of the Company and
the Project Companies.
(bb) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and the Project Companies, taken as a whole, from
that set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(cc) There are no legal or governmental proceedings pending or
threatened to which the Company or any of the Project Companies is a party
or to which any of the properties of the Company or any of the Project
Companies is subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as required.
(dd) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(ee) The Bermuda Prospectus will comply at the time of filing with the
Registrar of Companies in all material respects with the applicable
provisions of the Companies Act, the Companies Act Rules and any other
applicable statutes, rules and regulations of Bermuda or any governmental
authority therein.
(ff) The Company is not and, after giving effect to the Offering and
the application of the proceeds thereof as described in the Prospectus,
will not be an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act").
(gg) The financial statements, including the notes thereto, and
supporting schedules included in the Registration Statement and the
Prospectus present fairly the consolidated financial position of the
Company and its subsidiaries as of the dates indicated and the consolidated
results of operations of the Company and its subsidiaries for the periods
specified. Said financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a
consistent basis. The supporting schedules included in the Registration
Statement and the Prospectus present fairly the information required to be
stated therein.
(hh) Each of the Joint Ventures has devised and maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that (1) transactions are executed in accordance with management's general
or specific authorizations, (2) transactions are recorded as necessary to
permit preparation by the Company of financial statements in conformity
with United States generally accepted accounting principles and to maintain
accountability for assets, (3) access to assets is permitted only in
accordance with management's general or specific authorization and (4) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(ii) The Company is not (i) subject to regulation as a "holding
company" or a "subsidiary company" of a holding company or a "public
utility company" under Section 2(a) of the Public Utility Holding Company
Act of 1935 ("PUHCA"), (ii) subject to regulation under the Federal Power
Act or (iii) subject to regulation by any law of any state of the United
States with respect to rates or the financial or organizational regulation
of electric utilities.
(jj) The Company and the Project Companies (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) are in compliance
with all terms and conditions of any such permit, license or approval,
except where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and the Project Companies, taken as a whole.
(kk) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and the Joint Venture Companies,
in the course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably concluded
that such associated costs and liabilities would not, singly or in the
aggregate, have a material adverse effect on the Company and the Project
Companies, taken as a whole.
(ll) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
(mm) The Company has been designated as a non-resident of Bermuda for
exchange control purposes by the Bermuda Monetary Authority, whose
permission for issue and sale of the Notes as contemplated by this
Agreement has been obtained and is in full force and effect.
2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell
to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective principal amounts of Notes set forth in Schedule I hereto
opposite its name at 97.404% of their principal amount (the "Purchase Price")
plus accrued interest, if any, from December 19, 1996 to the date of payment and
delivery.
3. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Notes as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Notes are to be offered to the public initially at
99.904% of their principal amount (the "Public Offering Price") plus accrued
interest, if any, from December 19, 1996 to the date of payment and delivery and
to certain dealers selected by you at a price that represents a concession not
in excess of .250% of their principal amount under the Public Offering Price,
and that any Underwriter may allow, and such dealers may reallow, a concession,
not in excess of .125% of their principal amount, to any Underwriter or to
certain other dealers.
4. PAYMENT AND DELIVERY. Payment for the Notes shall be made by
certified or official bank check or checks payable to the order of the Company
in New York in immediately available funds (or, if agreed between the Company
and the Underwriters, by wire transfer in immediately available funds to an
account designated by the Company) in the amount of the Purchase Price less
US$275,000 reimbursement of certain of the Underwriters' expenses reimbursable
pursuant to Section 6.(g) hereof at the office of Davis Polk & Wardwell at 10:00
A.M., New York time, on December 19, 1996, or at such other time on the same or
such other date, not later than December 24, 1996, as shall be designated in
writing by you. The time and date of such payment are hereinafter referred to as
the "Closing Date."
Payment for the Notes shall be made against delivery to Trustee, as
custodian for the Depositary Trust Company for the respective accounts of the
several Underwriters of the one or more Global Notes (as defined in the
Indenture) registered in the name of Cede & Co. with any transfer taxes payable
in connection with the transfer of the Notes to the Underwriters duly paid.
5. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company and the several obligations of the Underwriters hereunder are subject to
the condition that the Registration Statement shall have become effective not
later than 5:00 p.m. (New York time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating
accorded the Notes by any "nationally recognized statistical
rating organization," as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or
operations of the Company and the Project Companies, taken as a
whole, from that set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and
that makes it, in your judgment, impracticable to market the
Notes on the terms and in the manner contemplated in the
Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an authorized officer of
the Company, to the effect set forth in clause (a)(i) above and to the
effect that the representations and warranties of the Company contained in
this Agreement are true and correct as of the Closing Date and that the
Company has complied with all of its agreements and satisfied all of the
conditions on its part to be performed or satisfied hereunder on or before
the Closing Date. The officers signing and delivering such certificate may
rely upon the best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, United States counsel
for the Company, dated the Closing Date, in form and substance satisfactory
to the Underwriters, to the effect set forth in Exhibit A hereto. With
respect to paragraph (13) of Exhibit A, Skadden, Arps, Slate, Meagher &
Flom LLP may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified.
(d) The Underwriters shall have received on the Closing Date an
opinion of Commerce & Finance Law Office, special PRC counsel for the
Company, dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect set forth in Exhibit B hereto.
(e) The Underwriters shall have received on the Closing Date an
opinion of Conyers, Dill & Pearman, Bermuda counsel for the Company, dated
the Closing Date, in form and substance satisfactory to the Underwriters,
to the effect set forth in Exhibit C hereto.
(f) The Underwriters shall have received on the Closing Date an
opinion of Conyers, Dill & Pearman, British Virgin Islands counsel for the
Company, dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect set forth in Exhibit D hereto.
(g) The Underwriters shall have received on the Closing Date an
opinion of Conyers, Dill & Pearman, Cayman Islands counsel for the Company,
dated the Closing Date, in form and substance satisfactory to the
Underwriters, to the effect set forth in Exhibit E hereto.
(h) The Underwriters shall have received on the Closing Date an
opinion of Raja, Darryl & Loh, Labuan counsel for the Company, dated the
Closing Date, in form and substance satisfactory to the Underwriters, to
the effect set forth in Exhibit F hereto.
(i) The Underwriters shall have received on the Closing Date an
opinion of Haiwen & Partners, PRC counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in Exhibit B.
(j) The Underwriters shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in paragraphs (2), (3), (4),
(10) (but only as to the statements in the Prospectus under "Prospectus
Summary - The Offering," "Description of the Notes" and "Underwriters"),
(12) and (13) of Exhibit A. With respect to paragraph 13 of Exhibit A,
Davis Polk & Wardwell may state that their opinion and belief are based
upon their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto and review and
discussion of the contents thereof, but are without independent check or
verification, except as specified.
(k) The Underwriters shall have received on the Closing Date an
officer's certificate of the Trustee, dated the Closing Date, in form and
substance satisfactory to the Underwriters.
(l) The Underwriters shall have received on the Closing Date an
officer's certificate of the Collateral Agent, dated the Closing Date, in
form and substance satisfactory to the Underwriters.
(m) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from Deloitte Touche Tohmatsu, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus.
(n) On or prior to the Closing Date, the Authorized Agent referred to
in Section 13 shall have accepted its appointment by the Company as
authorized agent pursuant to Section 13, and the Representatives shall have
received an executed copy of each such acceptance in form and substance
satisfactory to them.
(o) The Depository Trust Company shall have approved the forms of the
Global Notes.
(p) The Company shall have paid all fees and expenses payable to the
Underwriters pursuant to Section 6(g) hereof.
(q) The Underwriters shall have received on the Closing Date a
secretary's certificate of the Company in form and substance satisfactory
to the Underwriters.
(r) The opinions of Skadden, Arps, Slate, Meagher & Flom LLP; Conyers,
Dill & Pearman (Bermuda); Commerce & Finance Law Office; Conyers, Dill &
Pearman (British Virgin Islands); Conyers, Dill & Pearman (Cayman Islands)
and Raja, Darryl & Loh referred to in paragraphs (c), (d), (e), (f), (g)
and (h) above, respectively, shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
6. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, three signed copies of the
Registration Statement (including exhibits thereto) and three signed copies
of the Bermuda Prospectus (including the required attachments thereto and
all amendments thereof) and for delivery to each other Underwriter a
conformed copy of the Registration Statement (without exhibits thereto)
and, during the period mentioned in paragraph (c) below, as many copies of
the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, unless counsel advises the Company in writing,
with a copy thereof being furnished to you no less than 24 hours in advance
of such proposed filing or use, that such amendment or supplement is
required as a matter of law or pursuant to an order of a regulatory
authority or the requirement of a stock exchange.
(c) If, during such period after the first date of the public offering
of the Notes as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by
an Underwriter or dealer, any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
when the Prospectus is delivered to a purchaser, not misleading, or if, in
the opinion of counsel for the Underwriters, it is necessary to amend or
supplement the Prospectus to comply with applicable law, forthwith to
prepare, file with the Commission and furnish, at its expense, to the
Underwriters and to the dealers (whose names and addresses you will furnish
to the Company) to which Notes may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Notes for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the holders of the Notes and to you
as soon as practicable an earning statement of the Company covering the
twelve-month period ending February 28, 1998 that satisfies the provisions
of Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.
(f) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise dispose of any debt securities of the Company or warrants to
purchase debt securities of the Company substantially similar to the Notes
(other than (i) the Notes and (ii) commercial paper issued in the ordinary
course of business), without the prior written consent of Morgan Stanley &
Co. Incorporated.
(g) To pay all expenses incident to the performance of its obligations
under this Agreement, including but not limited to: (i) the preparation and
filing of the Registration Statement and the Prospectus and all amendments
and supplements thereto; (ii) the preparation, issuance and delivery of the
Notes; (iii) the fees and disbursements of counsel to the Company; (iv) all
fees and expenses of the Trustee and its counsel and of the Collateral
Agent and its counsel; (v) the qualification of the Notes under state
securities or Blue Sky laws in accordance with the provisions of Section
6.(d), including filing fees and the fees and disbursements of counsel for
the Underwriters in connection therewith and in connection with the
preparation of any Blue Sky or Legal Investment Memoranda; (vi) the
printing and delivery to the Underwriters in quantities as hereinabove
stated of copies of the Registration Statement and all amendments thereto
and of each preliminary prospectus and the Prospectus and any amendments or
supplements thereto; (vii) the printing and delivery to the Underwriters of
copies of any Blue Sky or Legal Investment Memoranda; (viii) any fees
charged by rating agencies for the rating of the Notes; (ix) the filing
fees and expenses, if any, incurred with respect to any filing with the
National Association of Securities Dealers, Inc. made in connection with
the offering of the Notes; (x) any expenses incurred by the Company in
connection with a "road show" presentation to potential investors; (xi) any
tax, imposts or duties described in paragraph (u) of Section 1 hereof; and
(xii) certain fees and disbursements of counsel for the Underwriters.
(h) For so long as the Company remains a Bermuda corporation, it will
use its best efforts to ensure that the Company is, and remains, an
"exempted company" pursuant to the Companies Act.
7. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by any Underwriter or any such controlling person
in connection with defending or investigating any such action or claim) caused
by any untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or any amendment thereof, any preliminary
prospectus or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based upon
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Underwriter, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use in the Registration Statement,
any preliminary prospectus, the Prospectus or any amendments or supplements
thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to either paragraph (a) or (b) of this Section 7, such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by Morgan
Stanley & Co. Incorporated, in the case of parties indemnified pursuant to
paragraph (a) above and by the Company, in the case of parties indemnified
pursuant to paragraph (b) above. The indemnifying party shall not be liable
for any settlement of any proceeding effected without its written consent,
but if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into
more than 30 days after receipt by such indemnifying party of the aforesaid
request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request prior to the date of such
settlement. No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 7 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other hand from the offering of the
Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on the other
hand in connection with the offering of the Notes shall be deemed to be in
the same respective proportions as the net proceeds from the offering of
the Notes (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Notes. The relative fault of the
Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective
principal amounts of Notes they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) of
this Section 7. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Notes
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The remedies provided for in this
Section 7 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any indemnified party at law or in
equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company and of its
officers or directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Notes.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by Morgan Stanley & Co. Incorporated on behalf of the Underwriters
to the Company, if (a) after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange, the American Stock Exchange, the National Association of Securities
Dealers, Inc. or The Stock Exchange of Hong Kong Limited, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York, Hong Kong or Shanghai shall have been declared by the
relevant banking authorities, (iv) there shall have occurred a change or
development involving a prospective change in the existing financial, political,
economic or regulatory conditions in Bermuda, the PRC or Hong Kong, (including,
without limitation, a change in exchange controls, currency exchange rates or
taxation) which change or development makes it, in the sole judgment of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, impractical or
inadvisable to market the Notes, or the United States, Bermuda, or the PRC
imposes new exchange controls, or (v) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any major
calamity or crisis that, in the judgment of Morgan Stanley & Co., Incorporated
on behalf of the Underwriters, is material and adverse and (b) in the case of
any of the events specified in clauses (a)(i) through (v), such event, singly or
together with any other such event, makes it, in the judgment of Morgan Stanley
& Co., Incorporated, impracticable to market the Notes on the terms and in the
manner contemplated in the Prospectus.
9. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date, any one or more of the Underwriters shall fail
or refuse to purchase Notes that it has or they have agreed to purchase
hereunder on such date, and the aggregate principal amount of Notes which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of the Notes to be
purchased on such date, the other Underwriters shall be obligated severally in
the proportions that the principal amount of Notes set forth opposite their
respective names in Schedule I bears to the principal amount of Notes set forth
opposite the names of all such non-defaulting Underwriters, or in such other
proportions as you may specify, to purchase the Notes which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the principal amount of Notes that any
Underwriter has agreed to purchase pursuant to this Agreement be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such principal
amount of Notes without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Notes and the aggregate principal amount of Notes with respect to which such
default occurs is more than one-tenth of the aggregate principal amount of Notes
to be purchased on such date, and arrangements satisfactory to you and the
Company for the purchase of such Notes are not made within 36 hours after such
default, this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company agrees to reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and disbursements of their
counsel) reasonably incurred by such Underwriters in connection with this
Agreement or the offering contemplated hereunder.
10. SUBMISSION TO JURISDICTION; AUTHORIZED AGENT. The Company (a)
agrees that any legal suit, action or proceeding brought by any Underwriter
arising out of or relating to this Agreement, the Indenture, the Notes or the
transactions contemplated hereby or thereby may be instituted in any federal or
state court in the Borough of Manhattan, the City of New York, (b) irrevocably
waives, to the fullest extent it may effectively do so, any objection (x) which
it may now or hereafter have to the laying of the venue of any such suit, action
or proceeding in any federal or state court in the Borough of Manhattan, the
City of New York or (y) that any such suit, action or proceeding has been
brought in an inconvenient forum, and (c) irrevocably submits to the
non-exclusive jurisdiction of any such court in any such suit, action or
proceeding.
The Company irrevocably designates and appoints The Prentice-Hall
Corporation System, Inc. as its authorized agent upon which process may be
served in any legal suit, action or proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby which may be instituted
in any federal or state court in the Borough of Manhattan, the City of New York,
and agrees that service of process upon such agent, and written notice of said
service to the Company by the person serving the same, shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. The Company further agrees to take any and all actions as may be
necessary to maintain such designation and appointment of such agent in full
force and effect.
11. JUDGMENT CURRENCY. If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due hereunder into any currency other
than United States dollars, the parties hereto agree, to the fullest extent that
they may effectively do so, that the rate of exchange used shall be the rate at
which in accordance with normal banking procedures an Underwriter could purchase
United States dollars with such other currency in New York City on the business
day preceding that on which final judgment is given. The obligation of the
Company in respect of any sum due from the Company to any Underwriter, or of any
Underwriter in respect of any sum due from such Underwriter to the Company
shall, notwithstanding any judgment in a currency other than United States
dollars, not be discharged until the first business day following receipt by
such Underwriter, or the Company, as the case may be, of any sum adjudged to be
so due in such other currency, on which (and only to the extent that) such
Underwriter, or the Company, as the case may be, may in accordance with normal
banking procedures purchase United States dollars with such other currency; if
the United States dollars so purchased are less than the sum originally due to
the Underwriter, or the Company, as the case may be, hereunder, the Company and
such Underwriter agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Underwriter, or the Company, as the case may be,
against such loss. If the United States dollars so purchased are greater than
the sum originally due to such Underwriter, or the Company, as the case may be,
hereunder, such Underwriter, or the Company, as the case may be, agrees to pay
to the Company or such Underwriter, as the case may be, an amount equal to the
excess of the dollars so purchased over the sum originally due to such
Underwriter, or the Company, as the case may be, hereunder.
12. WAIVER OF IMMUNITY. To the extent that the Company has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid or execution, or otherwise) with respect to itself or its
property, such party hereby irrevocably waives such immunity in respect of its
obligations hereunder to the extent permitted by applicable law and, without
limiting the generality of the foregoing, agrees that the waivers set forth in
this paragraph shall have effect to the fullest extent permitted under the
Foreign Sovereign Immunities Act of 1976 of the United States and are intended
to be irrevocable for purposes of such Act.
13. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
14. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
15. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
<PAGE>
Very truly yours,
AES CHINA GENERATING CO. LTD.
By: /s/ Paul T. Hanrahan
-------------------------
Paul T. Hanrahan
President and Chief Executive Officer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Acting severally on behalf
of themselves and the
several Underwriters named
herein.
By: Morgan Stanley & Co.
Incorporated
By: /s/ Elizabeth R. Chandler
----------------------------
Elizabeth R. Chandler
Principal
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT
OF NOTES
UNDERWRITER.............................................. TO BE PURCHASED
- ----------- ----------------
Morgan Stanley & Co. Incorporated..................... 149,400,000
Donaldson, Lufkin & Jenrette
Securities Corporation.............................. 30,600,000
Total........ 180,000,000
===========
<PAGE>
SCHEDULE II
[Project Documents (By Joint Venture Company)]
<PAGE>
SCHEDULE III
[Joint Venture Documents (By Joint Venture Company)]
<PAGE>
SCHEDULE IV
[Consents, Approvals etc. (By Joint Venture Company)]
<PAGE>
Exhibit A
[Opinion of Skadden, Arps, Slate, Meagher & Flom]
(1) Such counsel has been advised by the Commission that the Registration
Statement has become effective; to the best of such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement is in effect, and no proceedings for such
purpose are pending before or threatened by the Commission.
(2) The Indenture has been duly qualified under the Trust Indenture Act
and constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(3) When duly executed and authenticated in accordance with the terms of
the Indenture and delivered against payment therefor in accordance
with the terms of the Underwriting agreement, the Notes will be
entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(4) The Security Agreement constitutes a valid and legally binding
agreement of the Company, enforceable against the Company in
accordance with its terms.
(5) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Indenture, the Notes, the
Security Agreement and the Underwriting Agreement, each in accordance
with its terms do not (i) constitute a breach or violation of a
default under any of the agreements and instruments set forth on
Exhibit A hereto ("Applicable Contracts"), (ii) contravene any
Applicable Law or (iii) contravene any applicable judgment, order or
decree set forth on Exhibit C hereto ("Applicable Orders").
"Applicable Laws" means those laws, rules and regulations of the State
of New York and of the United States of America which in our
experience, are normally applicable to transactions of the type
contemplated by the Indenture, the Notes, the Security Agreement and
the Underwriting Agreement and are not the subject of a specific
opinion herein referring expressly to a particular law or laws
(6) No consent, approval, authorization or order of, or qualification
with, any United States Federal or New York State governmental agency
or body is required to be obtained or made by the Company for the
performance by the Company of the transactions contemplated by the
Indenture, the Notes, the Security Agreement or the Underwriting
Agreement, except for (i) such consents, approval, authorizations or
qualifications as may be required under state securities or Blue Sky
laws in connection with the offer and
A-1
<PAGE>
sale of the Notes or (ii) the registration of the Notes under the
Securities Act
(7) The Company is not and, immediately after giving effect to the
offering of the Notes and assuming the proceeds thereof have been
applied as described in the Prospectus, will not be, subject to
registration as an "investment company" under the Investment Company
Act of 1940, as amended.
(8) The Company is not (i) subject to regulation as a "holding company" or
a "public utility company" under Section 2(a) of the Public Utility
Holding Company Act of 1935, (ii) subject to regulation under the
Federal power Act or (iii) subject to regulation under the laws of the
State of New York with respect to rates or the financial or
organizational regulation of electric utilities.
(9) Under the laws of the State of New York relating to submission to
jurisdiction, the Company has, pursuant to the Indenture, the Notes,
the Security Agreement and the Underwriting Agreement (i) validly and
irrevocably submitted to the personal jurisdiction of any New York
State or United States Federal court located in Borough of Manhattan
in The City of New York, in any action, suit or proceeding brought by
any Underwriter arising out of our relating to the Indenture, the
Notes, the Security Agreement, the Underwriting Agreement or the
transactions contemplated thereby, (ii) validly waived any objection
to the laying of venue of a proceeding in any such court and (iii)
validly appointed The Prentice-Hall Corporation System, Inc. as its
authorized agent for service of process; service of process effected
on such agent in the manner set forth in Section 11.11 of the
Indenture, Section 8.11 of the Security Agreement and Section 10 of
the Underwriting Agreement will be effective to confer valid personal
jurisdiction over the Company.
(10) The statements set forth in the Prospectus under the captions
"Description of the Notes," insofar as they purport to constitute a
summary of the terms of the Notes, and "The Amalgamation -- Certain
Effects of the Amalgamation" have been reviewed by such counsel and
fairly summarize the matters purported to the described therein in all
material respects. Although the summary set forth in the section of
the Prospectus entitled "Taxation - United States Taxation" does not
purport to discuss all possible United States Federal income tax
considerations related to the acquisition, holding, or disposition of
the Notes by a "United States holder" (as defined therein), such
discussion constitutes, in all material respects, a fair and accurate
summary of the United States Federal income tax considerations that
are likely to be material to an original purchaser of the Notes who is
a United States holder.
A-2
<PAGE>
(11) Each document heretofore filed pursuant to the Exchange Act of 1934,
as amended (the "Exchange Act"), and incorporated by reference in the
Prospectus complied as to form when so filed in all material respects
with the Exchange Act and the applicable rules and regulations of the
Commission thereunder.
(12) The Registration Statement and Prospectus (except for financial
statements and schedules included therein, as to which such counsel
need not express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(13) Such counsel (i) has no reason to believe that the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and (ii) has no reason to believe that the Prospectus
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, except that, in each case, such counsel need not express
any opinion or belief with respect to (A) any information included in
or omitted from the sections of the Registration Statement entitled
"Appendix A - The People's Republic of China" and "Appendix B -
Glossary of Power Industry Terms," (B) the financial statements and
other financial or statistical data included in or excluded from the
Registration Statement or the Prospectus, (C) exhibits to the
Registration Statement and (D) that part of the Registration Statement
that constitutes the Form T-1 filed with respect to the Indenture.
(14) The "transfer" (within the meaning of Section 8-313 of the UCC) of
securities collateral consisting of U.S. government book-entry
securities, Depository Trust Company securities and certificated
securities to the Collateral Agent (as defined in the Security
Agreement), together with the Security Agreement will create a valid
and perfected security interest in such securities collateral to
secure the Secured Obligations (as defined in the Security Agreement).
(15) The Security Agreement is effective to create a valid security
interest in that portion of the Collateral (as defined in Security
Agreement) consisting of Instruments to secure the Secured
Obligations. The security interest of the Collateral Agent in such
instruments will be perfected upon delivery of such Instruments to the
Collateral Agent in the State of New York.
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<PAGE>
(16) After due inquiry of responsible officers of the Company, such counsel
does not know of (i) any legal or governmental proceedings pending or
threatened to which the Company or any of the Project Companies is a
party or to which any of the properties of the Company or any of the
Project Companies is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
(ii) any statutes or regulations of the State of New York or the
United States or any contracts or other documents governed by the laws
of the State of New York or the Federal laws of the United States that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
A-4
<PAGE>
Exhibit B
[Opinion of Commerce & Finance Law Office]
(1) Each of the Joint Venture Companies has been duly organized under the
laws of the PRC as a joint venture enterprise with the status of a
Chinese legal person, is validly existing under the laws of the PRC,
has the corporate power and authority to own its property (including
land use rights) and to conduct its business as described in the
Prospectus and its Joint Venture Documents and business license, and
is in good standing and duly qualified to transact business in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification except as otherwise
disclosed in the Prospectus.
(2) None of the Joint Venture Companies is in violation of its business
license, Joint Venture Documents or other constituent documents.
(3) An AES Group Company or the Company is the owner of the respective
percentage of registered capital of each of the Joint Venture
Companies as set forth in the Prospectus, in each case free and clear
of all liens, encumbrances, equities, claims, restriction on transfer
(other than as required under applicable PRC law or pursuant to the
provisions of the Joint Venture Documents of any such Joint Venture
Company), voting trust or other defect of title whatsoever; the
ownership of such registered capital is valid and lawful, in all
material respects, under all applicable PRC laws, rules, regulations
or guidelines of any local or other court or public, governmental or
regulatory agency or body.
(4) The contracted registered capital of each of the Joint Venture
Companies has been subscribed in full by the respective joint venture
partners of each such Joint Venture Company and all government
approvals relating to the subscription thereof have been issued and
are in full force and effect except any such delayed subscription
permitted pursuant to the applicable Joint Venture Documents such that
the ownership of registered capital of each Joint Venture Company is
as described in the Registration Statement in all material respects.
(5) The execution and delivery by the Company of, and the performance by
the Company of its obligations under, the Underwriting Agreement, the
Indenture, the Security Agreement and the Notes (i) will not
contravene any provision of PRC law or any agreement or other
instrument binding upon any of the Joint Venture Companies that is
material to the Company and the Project Companies, taken as a whole,
or any regulation, judgment, order or decree of any governmental body,
agency or any court having jurisdiction over any Joint Venture Company
or (ii) except as contemplated by the Security Agreement, result in
the creation or imposition of any
B-1
<PAGE>
claim, lien, mortgage, security interest or other encumbrance on any
property or assets of any Joint Venture Company.
(6) Each of the Project Documents constitutes a valid and binding
agreement of the appropriate Joint Venture Company, is in full force
and effect, and is enforceable in accordance with its terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws affecting creditors' rights generally and
to general principles of equity.
(7) To the best of such counsel's knowledge after due inquiry, each of the
Project Documents constitutes a valid and binding agreement of each of
the parties thereto other than the Joint Venture Companies, is in full
force and effect and is enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors'
rights generally and to general principles of equity.
(8) The performance of each AES Group Company or the Company, as the case
may be, of its obligations under the applicable Joint Venture
Documents does not and will not contravene, in any material respect,
(i) any provision of PRC law or any regulation or (ii) any approval,
judgment, order, decree or regulation of any governmental body or
agency or any court having jurisdiction over such AES Group Company or
any of the properties or assets of such AES Group Company.
(9) The performance of each Joint Venture Company of its obligations under
the applicable Project Documents does not and will not contravene, in
any material respect, (i) any provision of PRC law or any regulation
or (ii) any approval, judgment, order, decree or regulation of any
governmental body or agency or any court having jurisdiction over such
Joint Venture Company or any of the properties or assets of such Joint
Venture Company.
(10) To the best of such counsel's knowledge after due inquiry, each of the
Joint Venture Documents constitutes, in all material respects, a valid
and binding agreement of each of the parties thereto other than the
AES Group Companies, is in full force and effect and is enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of
equity.
(11) No consent, approval, authorization, permit, certificate or order of
or from, or filing, declaration or qualification with or to, any
governmental body, self-regulatory organization, court, tribunal,
agency or official was or is required for (i) the establishment of
each Joint Venture Company (taking
B-2
<PAGE>
into account the anticipated total investment in such Joint Venture
Company, (ii) the ownership by the Company or an AES Group Company, as
the case may be, of the respective percentage of registered capital of
each of the Joint Venture Companies as set forth in the Prospectus,
(iii) the performance by the Company, the applicable AES Group
Company, the applicable Joint Venture Company, and to the best of such
counsel's knowledge, each other party thereto of its obligations under
the Joint Venture Documents, (iv) the conduct by each Joint Venture
Company of its business and ownership of its properties (including the
establishment and ownership of the relevant Project) as described in
the Prospectus and as contemplated under the Project Documents, (v)
the application of the tariff calculation and adjustment method
contained in the relevant power purchase contract to the electricity
tariff payable to the relevant Joint Venture Company, (vi) the
performance by each party of its obligations under the Project
Documents to which it is a party, including, but not limited to,
payment of, and adjustments to, the relevant tariff by the relevant
power purchaser of each Project as contemplated under the Project
Documents, and (vii) the performance by the Company of its obligations
under the Underwriting Agreement, the Indenture, the Security
Agreement or the Notes, except such as have been obtained or made and
are in full force and effect and have been listed in Schedule IV of
this Agreement; no such consent, approval, authorization, permit,
certificate or order, filing, declaration or qualification that has
been made or obtained contains any restriction on the ability of the
Joint Venture Companies to own, use or lease its properties, to
conduct its business or to satisfy its obligations and enjoy rights
and benefits contemplated under the Joint Venture Documents and
Project Documents or the Company's ability to satisfy its payment
obligations under the Notes, except such restrictions as are disclosed
in the Prospectus.
(12) Each Joint Venture Company has full power and authority to effect
dividend payments and remittances thereof and payments of interest and
principal on loans or advances by the Company or an AES Group Company
(collectively, "Payments") outside the PRC in Unites States dollars.
Each Joint Venture Company has obtained all approvals currently
required in the PRC for it to be able to pay, and, subject to the
acquisition of the necessary foreign exchange, each such Joint Venture
Company is currently entitled to remit outside the PRC and pay, in
United States Dollars, all Payments payable to the Company or any AES
Group Company.
(13) All Payments by any Joint Venture Company to the Company or any AES
Group Company are currently free and clear of any PRC tax, duty,
withholding or deduction, except withholding tax payable on payments
of interest with respect to any loans to such Joint Venture Company.
B-3
<PAGE>
(14) None of the Joint Venture Companies is, or with the giving of notice
or lapse of time or both would be, in violation of or in default under
(i) any provision of PRC law, the Project Documents relating to such
Joint Venture Company or the Joint Venture Documents of such Joint
Venture Company, (ii) any other agreement or instrument by which such
Joint Venture Company is bound or to which any of the property or
assets of such Joint Venture Company is subject or (iii) any approval,
judgment, order, decree or regulation of any governmental body or
agency or of any court having jurisdiction over such Joint Venture
Company, except for such defaults that would not, individually or in
the aggregate, have a material adverse effect on the Company and the
Project Companies, taken as a whole.
(15) Each of the Joint Venture Companies has paid all PRC taxes which it is
required to have paid, except (i) for taxes payment of which is being
contested in good faith by appropriate proceedings and for which
reserves deemed by it to be adequate have been set aside on its books
and (ii) where the failure to pay any such taxes would not,
individually or in the aggregate, have a material adverse effect on
the Company and its Project Companies, taken as a whole.
(16) Each of the Joint Venture Companies owns or has been granted all
necessary rights to use, for the approved duration of such Joint
Venture Company, all of the material properties and assets owned or
used by it or transferred, assigned or otherwise conveyed to it in
connection with its formation or thereafter. Such properties and
assets are free and clear of all claims, liens, security interests or
other encumbrances, other than Liens permitted under the Indenture,
which would materially affect its ability to perform under the Project
Documents to which it is a party or which would materially affect the
Company's ability to satisfy its payment obligations under the Notes.
Each of the Joint Venture Companies has obtained all land-use rights
which are necessary in connection with the construction, ownership and
operation of the respective Project, for the approved duration of such
Joint Venture Company, and the conduct of their respective businesses
as described in the Registration Statement, free and clear of all
encumbrances and defects (other than such encumbrances or defects
which do not interfere with the use made and proposed to be made of
such land-use rights), and all such land-use rights are valid, binding
and enforceable in accordance with their respective terms, in all
material respects. All real property, buildings and equipment held
under lease if any, by each of the Joint Venture Companies are held by
each of them under leases that are valid, binding and enforceable, in
all material respects.
B-4
<PAGE>
(17) Each of the Joint Venture Companies (i) is in compliance with all
applicable laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) has
received all permits, licenses and approvals required, if any, under
applicable Environmental Laws to conduct is business, including to
construct, own and operate the Projects, as described in the
Prospectus and (iii) is in compliance with all terms and conditions of
such permits, licenses and approvals, except where any noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on such Joint Venture
Company or on the Company's ability to satisfy its payment obligations
under the Notes; and none of the Joint Venture Companies has received
any notice of proceedings relating to the revocation or modification
of any of such permits, licenses or approvals.
(18) To the best of such counsel's knowledge after due inquiry, none of the
Joint Venture Companies nor other person has taken any action nor have
any other steps been taken or legal proceedings been started or
threatened against any of the Joint Venture Companies for its winding
up or dissolution, or for the withdrawal, revocation or cancellation
of the business license of any of the Joint Venture Companies; and no
notice of appointment of a receiver of any of the Joint Venture
Companies or any of its assets has been issued and no declaration or
order of insolvency has been or is threatened to be made.
(19) There are no legal or governmental proceedings pending (i) to which
any of the Project Companies is a party or to which any such Project
Company's properties or assets is subject, or (ii) which could,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on any of the Project Companies or the
Projects or the validity or enforceability of the Underwriting
Agreement, the Indenture, the Security Agreement or the Notes or the
Project Documents and, to the best of such counsel's knowledge, after
due inquiry, no such proceedings are threatened.
(20) The statements in the Prospectus under the captions "Enforceability of
Civil Liabilities;" "Risk Factors -- Risks Pertaining to the PRC --
Developing Legal System," "-- Risks Related to the Company's Business
-- Regulation and Restrictions; Tariffs," "-- Government Approval
Process," "-- Environmental Matters," "The PRC Electric Power Industry
-- Organization of the PRC's Electric Power Industry" and "-- Electric
Power Law;" "Business -- Joint Venture Companies," "-- Government
Approvals," "-- Environmental Regulation," "-- Description of the
Current Projects" and "-- Description of the Potential Projects;" and
"Appendix A --
B-5
<PAGE>
The People's Republic of China -- Environmental Protection," "--
Foreign Exchange Controls and Exchange Rate Information" and "-- Legal
System," in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to therein,
fairly present the information called for with respect to such legal
matters, documents and proceedings and, fairly summarize the matters
referred to therein.
B-6
<PAGE>
Exhibit C
[Opinion of Conyers, Dill & Pearman (Bermuda)]
(1) The Bermuda Prospectus is in compliance with the requirements of the
Companies Act 1981 and, together with the required attachments, has
been filed with the Registrar of Companies in Bermuda pursuant to the
Companies Act 1981. whenever any of the particulars in the Prospectus
ceases in a material respect to be accurate, supplementary particulars
must also be issued and filed with the Registrar of Companies in
Bermuda.
(2) The Company is duly incorporated and validly existing and in
compliance (meaning that the Company has not failed to make any filing
with any Bermuda governmental authority or to pay any Bermuda
government fee or tax which might make the Company liable to be struck
off the Register of Companies and thereby cease to exist under the
laws of Bermuda) under the laws of Bermuda.
(3) The Company has the necessary corporate power and authority to enter
into and perform its obligations under the Registration Statement, the
Prospectus, the Underwriting Agreement, the Indenture, the Notes and
the Security Agreement (the "Documents"). The execution and delivery
of the Documents by the Company and the performance of its obligations
thereunder will not violate the memorandum of association or by-laws
of the Company, nor any applicable law or regulation of Bermuda.
(4) The Company has the corporate capacity and power:
(a) to generate, sell, supply, transmit and trade in electricity;
(b) to directly or indirectly and either solely or jointly with
others, to construct, develop, acquire, own, hold, dispose of,
sell or otherwise deal with interests in, manage, operate and
maintain, and advise, consult with and provide services to others
in connection with, electrical power generation facilities of all
kinds and related facilities, including fuel source and supply,
fuel transmission and electricity transmission facilities; and
(c) to borrow or raise or secure the payment of money in such manner
as the Company may think fit;
(d) as set out in paragraphs (b) to (n) and (p) to (u) inclusive of
the Second Schedule to the Companies Act 1981.
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<PAGE>
(5) The Company has an authorized capitalization as set forth in the
Prospectus.
(6) The Company has taken all corporate action required to authorize its
execution, delivery and performance of the Documents. The Documents
have been duly executed by or on behalf of the Company, and constitute
the valid and binding obligations of the Company, enforceable in
accordance with the terms thereof.
(7) The Notes to be sold pursuant to the Registration Statement and the
Prospectus have been duly authorized and, when executed,
authenticated, issued and delivered in accordance with the provisions
of the Indenture and as contemplated by the Registration Statement and
the Prospectus, will constitute valid and binding obligations of the
Company, enforceable in accordance with the terms thereof.
(8) No order, consent, approval, license, authorization or validation of
or exemption by any government or public body or authority of Bermuda
or any sub-division thereof is required to authorize or is required in
connection with the execution, delivery, performance and enforcement
of the Documents except such as have been duly obtained in accordance
with Bermuda law and are in full force and effect.
(9) The Company has been designated as a non-resident of Bermuda for
exchange control purposes by the Bermuda Monetary Authority, whose
permission for issue and transfer of the Notes to persons regarded as
non-residents of Bermuda for exchange control purposes as contemplated
by the Underwriting Agreement has been obtained and is in full force
and effect, and;
(a) "Foreign Currency" Accounts (all currencies other than Bermuda
dollars) with banks in or outside Bermuda may be opened and
maintained without reference to the Bermuda Monetary Authority.
(b) "External Bermuda Dollar" Accounts with banks in Bermuda may be
opened and maintained provided that balances therein are limited
to those necessary to meet day-to-day local expenses.
(c) "Resident Bermuda Dollar" Accounts may not be opened in the name
of the Company.
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<PAGE>
(10) It is not necessary to ensure the enforceability in Bermuda of the
Underwriting Agreement, the Indenture, the Security Agreement and the
Notes (the "Agreements") that they be registered in any register kept
by, or filed with, any governmental authority or regulatory body in
Bermuda. However, to ensure the priority in Bermuda of any charge
created by the Agreements that such charge be registered in the
Register of Charges in accordance with Section 55 of the Companies Act
1981. On registration such charge will have priority in Bermuda over
any unregistered charge and over any subsequently registered charge in
respect of the assets which are the subject of such charge.
(11) The obligations of the Company under the Indenture and the Notes will
rank at least pari passu in priority of payment with all other
unsecured unsubordinated indebtedness of the Company other than
indebtedness which is preferred by virtue of any provision of the laws
of Bermuda of general application.
(12) The Company is not entitled to any immunity under the laws of Bermuda,
whether characterized as sovereign immunity or otherwise, from any
legal proceedings, whether in Bermuda or elsewhere, to enforce or to
collect upon the Documents (including, without limitation, immunity
from service of process, immunity from jurisdiction of any court or
tribunal or immunity of any of its property from attachment in aid of
execution upon a judgment in respect of itself or its property).
(13) There is no income or other tax of Bermuda imposed by withholding or
otherwise on any payment to be made to or by the Company or the
Underwriters under the Documents. The Documents will not be subject to
ad valorem stamp duty in Bermuda and no registration, documentary,
recording, transfer or other similar tax, fee or charge is payable in
connection with the execution, delivery, filing, registration or
performance of the Agreements.
(15) The choice of the New York law to govern the Agreements is a valid
choice of law and the submission therein by the Company to the
non-exclusive jurisdiction of the federal or state courts in the
Borough of Manhattan, The City of New York (the "Foreign Courts") is
valid and binding upon the Company.
(16) The courts of Bermuda would recognize as a valid judgment, a final and
conclusive judgment in personam obtained in the Foreign Courts against
the parties to the Documents based upon the Documents under which a
sum of money is payable (other than a
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<PAGE>
sum of money payable in respect of multiple damages, taxes or other
charges of a like nature or in respect of a fine or other penalty) and
would give a judgment based thereon provided that (a) such courts had
proper jurisdiction over the parties subject to such judgment, (b)
such courts did not contravene the rules of natural justice of
Bermuda, (c) such judgment was not obtained by fraud, (d) the
enforcement of the judgment would not be contrary to the public policy
of Bermuda, (e) no new admissible evidence relevant to the action is
submitted prior to the rendering of the judgment by the courts of
Bermuda and (f) there is due compliance with the correct procedures
under the laws of Bermuda.
(17) Based solely upon a search of the Cause Book of the Supreme Court of
Bermuda conducted at [ am/pm] on [ ], there are no judgments against,
nor legal or governmental proceedings, pending in Bermuda to which the
Company is subject.
(18) The Agreements may be enforced against the Company, in the courts of
Bermuda and any court having appellate jurisdiction therefrom without
any express submission to any such jurisdiction, and, if action were
taken in respect of any of the Agreements before such courts, such
courts would recognize and give effect to the provisions therein
whereby they are to be governed by and construed in accordance with
New York law.
(19) The statements (i) in the Prospectus under the captions
"Enforceability of Civil Liabilities," "The Amalgamation," "Taxation -
Bermuda Taxation" and "Certain Foreign Issuer Considerations" and (ii)
in the Registration Statement in Item 15 of the Prospectus, in each
case insofar as such statements constitute summaries of Bermuda legal
matters, documents or proceedings therein, fairly represent the
information called for with respect to such Bermuda legal matters,
documents and proceedings and fairly summarize the matters referred to
therein.
C-4
<PAGE>
Exhibit D
[Opinion of Conyers, Dill & Pearman (British Virgin Islands)]
(1) Each of AES Yangchun Power Co. Ltd., AES Tien Fu Power Co. Ltd. and
AES Anhui Power Company Ltd. (collectively, the "AES Group Companies"
and each an "AES Group Company") has been duly incorporated and is
validly existing as a corporation in good standing under the laws the
British Virgin Islands, and each of the AES Group Companies has the
power and authority (corporate and other) to own its property and to
conduct its business as described in the Prospectus.
(2) All of the issued shares in the share capital of each AES Group
Company have been duly and validly authorized and issued, and are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, restrictions on transfer, equities or claims.
(3) The execution and delivery of and performance by each AES Group
Company of its obligations under the Joint Venture Documents to which
it is a party do not contravene its memorandum and by-laws or any
provision of applicable law or any regulation, judgment, order or
decree of any governmental body or agency or any court having
jurisdiction over any such AES Group Company.
(4) All dividend payments and remittances thereof and other distributions
by each AES Group Company to the Company are free and clear of any
tax, duty, withholding or deduction.
D-1
<PAGE>
Exhibit E
[Opinion of Conyers, Dill & Pearman (Cayman Islands)]
(1) Jiaozuo Power Partners, L.P. ("Jiaozuo L.P.") has been duly organized
and is validly existing as a limited partnership in good standing
under the laws of its organization and Jiaozuo (G.P.) Corp.
(collectively, together with Jiaozuo L.P., the "AES Group Companies"
and each an "AES Group Company") has been duly incorporated and is
validly existing as a corporation in good standing under the laws the
Cayman Islands, and each of the AES Group Companies has the power and
authority (corporate and other) to own its property and to conduct its
business as described in the Prospectus.
(2) All of the issued shares in the share capital (or partnership
interests in the case of Jiaozuo L.P.) of each AES Group Company have
been duly and validly authorized and issued, and are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances,
restrictions on transfer, equities or claims.
(3) The execution and delivery of and performance by each AES Group
Company of its obligations under the Joint Venture Documents to which
it is a party do not contravene its memorandum and by-laws or any
provision of applicable law or any regulation, judgment, order or
decree of any governmental body or agency or any court having
jurisdiction over any such AES Group Company.
(4) All dividend payments and remittances thereof and other distributions
by each AES Group Company to the Company are free and clear of any
tax, duty, withholding or deduction.
E-1
<PAGE>
Exhibit F
[Opinion of Raja, Darryl & Loh]
(1) Each of AES Chigen Co. (L) Ltd., AES Tien Fu Power Co (L) Ltd., AES
China Power Holding Co. (L) Ltd., and AES China Holding Co. (L) Ltd.
(collectively, the "AES Group Companies" and each an "AES Group
Company") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of Labuan, and each of the
AES Group Companies has the power and authority (corporate and other)
to own its property and to conduct its business as described in the
Prospectus.
(2) All of the issued shares in the share capital of each AES Group
Company have been duly and validly authorized and issued, and are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, restrictions on transfer, equities or claims.
(3) The execution and delivery of and performance by each AES Group
Company of its obligations under the Joint Venture Documents to which
it is a party do not contravene its memorandum and by-laws or any
provision of applicable law or any regulation, judgment, order or
decree of any governmental body or agency or any court having
jurisdiction over any such AES Group Company.
(4) All dividend payments and remittances thereof and other distributions
by each AES Group Company to the Company are free and clear of any
tax, duty, withholding or deduction.
F-1
Exhibit 4.1
CONFORMED COPY
- --------------------------------------------------------------------------------
AES CHINA GENERATING CO. LTD.
AND
BANKERS TRUST COMPANY,
AS TRUSTEE
- --------------------------------------------------------------------------------
INDENTURE
DATED AS OF DECEMBER 19, 1996
- --------------------------------------------------------------------------------
$180,000,000
10 1/8% NOTES DUE 2006
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
SECTION 1.01. DEFINITIONS .................................................. 1
SECTION 1.02. OTHER DEFINITIONS ............................................ 18
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT............. 19
SECTION 1.04. RULES OF CONSTRUCTION......................................... 19
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING............................................... 20
SECTION 2.02. EXECUTION AND AUTHENTICATION.................................. 20
SECTION 2.03. REGISTRAR AND PAYING AGENT.................................... 21
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST........................... 21
SECTION 2.05. NOTEHOLDER LISTS.............................................. 22
SECTION 2.06. TRANSFER AND EXCHANGE; DEFINITIVE NOTE........................ 22
SECTION 2.07. REPLACEMENT NOTES............................................. 24
SECTION 2.08. OUTSTANDING NOTES............................................. 24
SECTION 2.09. DETERMINATION OF HOLDERS' ACTION.............................. 25
SECTION 2.10. TEMPORARY NOTES............................................... 25
SECTION 2.11. CANCELLATION.................................................. 25
SECTION 2.12. DEFAULTED INTEREST............................................ 25
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF NOTES.............................................. 25
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY............................... 26
SECTION 3.03. LIMITATION ON RESTRICTED PAYMENTS............................. 27
SECTION 3.04. LIMITATION ON INCURRENCE OF INDEBTEDNESS...................... 29
SECTION 3.05 LIMITATION ON PAYMENT RESTRICTIONS AFFECTING PROJECT COMPANIES 31
SECTION 3.06. PAYMENT OF ADDITIONAL AMOUNTS................................. 32
SECTION 3.07. LIMITATION ON LIENS........................................... 33
SECTION 3.08. CHANGE OF CONTROL............................................. 35
SECTION 3.09. COMPLIANCE CERTIFICATE........................................ 37
SECTION 3.10. COMMISSION REPORTS............................................ 37
SECTION 3.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.................... 38
SECTION 3.12. LIMITATIONS ON SALES OF ASSETS AND REFINANCINGS............... 39
SECTION 3.13. MAINTENANCE OF CERTAIN CASH PROCEEDS.......................... 42
SECTION 3.14. PAYMENT OF STAMP DUTY AND OTHER TAXES......................... 42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 3.15. PAYMENT OF TAXES AND OTHER CLAIMS............................. 42
SECTION 3.16. NOTICE OF DEFAULTS AND OTHER EVENTS........................... 42
SECTION 3.17. MAINTENANCE OF INSURANCE...................................... 42
SECTION 3.18. LIMITATION ON ISSUANCE OF SUBSIDIARY CAPITAL STOCK............ 43
SECTION 3.19. LIMITATION ON CHANGES IN THE NATURE OF THE BUSINESS........... 43
SECTION 3.20. LIMITATION ON CERTAIN SUBSIDIARY INVESTMENTS.................. 43
SECTION 3.21. GOVERNMENT APPROVALS.......................................... 43
SECTION 3.22. COMPLIANCE WITH LAWS.......................................... 44
SECTION 3.23. OPERATIONS AND MAINTENANCE.................................... 44
ARTICLE 4
CONSOLIDATION AND MERGER
SECTION 4.01. MERGER AND CONSOLIDATION...................................... 44
SECTION 4.02. SUCCESSOR SUBSTITUTED......................................... 45
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT............................................. 46
SECTION 5.02. ACCELERATION.................................................. 48
SECTION 5.03. OTHER REMEDIES................................................ 48
SECTION 5.04. WAIVER OF PAST DEFAULTS....................................... 48
SECTION 5.05. CONTROL BY MAJORITY........................................... 49
SECTION 5.06. LIMITATION ON SUITS........................................... 49
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.......................... 49
SECTION 5.08. COLLECTION SUIT BY TRUSTEE.................................... 50
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM.............................. 50
SECTION 5.10. PRIORITIES.................................................... 50
SECTION 5.11. UNDERTAKING FOR COSTS......................................... 51
SECTION 5.12. WAIVER OF STAY OR EXTENSION LAWS.............................. 51
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE............................................. 51
SECTION 6.02. RIGHTS OF TRUSTEE............................................. 52
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE.................................. 53
SECTION 6.04. TRUSTEES DISCLAIMER........................................... 53
SECTION 6.05. NOTICE OF DEFAULTS............................................ 53
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS................................. 53
SECTION 6.07. COMPENSATION AND INDEMNITY.................................... 53
SECTION 6.08. REPLACEMENT OF TRUSTEE........................................ 54
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC.............................. 55
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION................................. 55
SECTION 6.11. PREFERENTIAL COLLECTIONS OF CLAIMS AGAINST COMPANY............ 55
ARTICLE 7
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE................... 56
SECTION 7.02. DEFEASANCE AND DISCHARGE OF INDENTURE......................... 56
SECTION 7.03. DEFEASANCE OF CERTAIN OBLIGATIONS............................. 58
SECTION 7.04. APPLICATION OF TRUST MONEY.................................... 59
SECTION 7.05. REPAYMENT TO COMPANY.......................................... 59
SECTION 7.06. REINSTATEMENT................................................. 60
ARTICLE 8
AMENDMENTS AND SUPPLEMENTS
SECTION 8.01. WITHOUT CONSENT OF HOLDERS.................................... 60
SECTION 8.02. WITH CONSENT OF HOLDERS....................................... 61
SECTION 8.03. SUPPLEMENTAL INDENTURES....................................... 62
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS............................. 62
SECTION 8.05. NOTATION ON OR EXCHANGE OF NOTES.............................. 62
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS.................................... 63
SECTION 8.07. FIXING OF RECORD DATES........................................ 63
ARTICLE 9
SECURITY AGREEMENT
SECTION 9.01. SECURITY AGREEMENT............................................ 63
SECTION 9.02. HOLDERS' CONSENT.............................................. 64
SECTION 9.03. TRUST INDENTURE ACT OF 1939 REQUIREMENTS...................... 64
SECTION 9.04. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS......... 64
SECTION 9.05. RETIREMENT OF NOTES........................................... 64
ARTICLE 10
REDEMPTION
SECTION 10.01. NOTICE TO TRUSTEE............................................ 65
SECTION 10.02. SELECTION OF NOTES TO BE REDEEMED............................ 66
SECTION 10.03. NOTICE OF REDEMPTION......................................... 66
SECTION 10.04. EFFECT OF NOTICE OF REDEMPTION............................... 67
SECTION 10.05. DEPOSIT OF REDEMPTION PRICE.................................. 67
SECTION 10.06. NOTES REDEEMED IN PART....................................... 67
SECTION 10.07. OPTIONAL REDEMPTION FOR CHANGES IN WITHHOLDING TAXES......... 67
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
ARTICLE 11
MISCELLANEOUS
<S> <C> <C>
SECTION 11.01. TRUST INDENTURE ACT CONTROLS................................. 68
SECTION 11.02. NOTICES...................................................... 68
SECTION 11.03. COMMUNICATION BY HOLDERS WITIH OTHER HOLDERS................. 69
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT........... 69
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION................ 69
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.................................. 69
SECTION 11.07. SUCCESSORS; NO RECOURSE AGAINST OTHERS....................... 70
SECTION 11.08. DUPLICATE ORIGINALS.......................................... 70
SECTION 11.09. OTHER PROVISIONS............................................. 70
SECTION 11.10. GOVERNING LAW................................................ 70
SECTION 11.11. CONSENT TO JURISDICTION...................................... 70
SECTION 11.12. JUDGMENT CURRENCY............................................ 71
SECTION 11.13. EFFECT OF HEADINGS........................................... 71
SECTION 11.14. WAIVER OF IMMUNITY........................................... 71
SECTION 11.15. TAX CONSIDERATIONS........................................... 72
</TABLE>
EXHIBIT A - FORM OF NOTE
iv
<PAGE>
INDENTURE dated as of December 19, 1996, between AES China Generating
Co. Ltd., a corporation established under the laws of Bermuda (the "Company")
and Bankers Trust Company, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the holders of the Company's 10 1/8 % Notes
Due 2006:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the
time at which such Person became a Subsidiary and not incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary. Acquired
Indebtedness shall be deemed to be Incurred on the date the acquired Person
becomes a Project Company.
"ADDITIONAL AMOUNTS" has the meaning set forth in Section 3.06 hereof.
Any reference in this Indenture to principal or interest in respect of the Notes
shall be deemed also to refer to any Additional Amounts that may be payable as
set forth herein and under the Notes.
"ADDITIONAL ASSETS" means (i) any property or assets related to the
Line of Business which will be owned and used by the Company or a Project
Company, (ii) the Capital Stock of a Person that becomes a Project Company as a
result of the acquisition of such Capital Stock by the Company or another
Project Company, or (iii) Capital Stock in any Person that at the time of
acquisition of such Capital Stock is a Project Company.
"ADJUSTED CASH FLOW" means, for any period, the excess of (A) the
aggregate amount (without duplication ) of (i) dividends, distributions,
payments of interest and scheduled repayments of loans or advances, in each
case, that are received by the Company and its Wholly Owned Subsidiaries from
the Project Companies during such period, (ii) 50% of the dividends,
distributions, payments of interest and scheduled repayments of loans or
advances, in each case, that are received by the Company and its Wholly Owned
Subsidiaries from any Person other than a Project Company during such period,
(iii) all payments received by the Company and its Wholly Owned Subsidiaries
during such period from any Person with respect to agreements to provide
development, construction or operations management and the provision of
consulting or advisory services; (iv) 50% of the combined interest income of the
Company and its Wholly Owned Subsidiaries for such period from cash, cash
equivalents and investments in marketable securities; (v) the interest income
(net of interest expense) of the Company and its Wholly Owned Subsidiaries from
the transactions referred to in clause (viii) of the definition of Permitted
Investments over (B) the aggregate amount (without duplication) of (i) the
combined selling, general and administrative expenses of the Company and its
Wholly Owned Subsidiaries for such period determined in accordance with GAAP and
(ii) the Company Designated Costs for such period and (iii) the total income
taxes paid by the Company and its Wholly Owned Subsidiaries during such period.
"ADJUSTED INTEREST EXPENSE" means, for any period, the sum of (without
duplication) (a) the combined interest expense of the Company and its Wholly
Owned Subsidiaries for such period as determined in accordance with GAAP,
including, without limitation or duplication, (i) amortization of debt issuance
costs or of original issue discount on any Indebtedness and the interest portion
of any deferred payment obligation, calculated in accordance with the effective
interest method of accounting, (ii) accrued interest, (iii) noncash interest
payments, (iv) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, (v) interest
actually paid by the Company or any Wholly Owned Subsidiary under any guarantee
of Indebtedness or other obligation of any other Person and (vi) net costs
associated with Interest Rate Agreements (including amortization of discounts)
and Currency Agreements of the Company or any Wholly Owned Subsidiary relating
to Indebtedness, plus (b) all but the principal component of rentals in respect
of Capitalized Lease Obligations paid, accrued, or scheduled to be paid or
accrued by the Company or any Wholly Owned Subsidiary, plus (c) capitalized
interest, plus (d) dividends paid in respect of Preferred Stock of the Company
or any Wholly Owned Subsidiary held by Persons other than the Company or any
Wholly Owned Subsidiary, plus (e) cash contributions to any employee stock
ownership plan to the extent such contributions are used by such employee stock
ownership plan to pay interest or fees to any person (other than the Company) in
connection with loans Incurred by such employee stock ownership plan to purchase
Capital Stock of the Company, plus (f) the interest expense of any Project
Company to the extent attributable to any Indebtedness of such Project Company
to the extent guaranteed by the Company or any Wholly Owned Subsidiary, minus
(g) interest expense of the Company or any Wholly Owned Subsidiary attributable
to Indebtedness referred to in clause (viii) of the definition of "Permitted
Investments."
"AES" means The AES Corporation, a Delaware corporation, its
successors, and any Subsidiary thereof.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Section 3.11 only, "Affiliate" shall also mean any beneficial owner
of 5% or more of the total Voting Shares (on a fully Diluted Basis) of the
Company or of rights or warrants to purchase such stock (whether or not
currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"AGENT" means any Registrar, Paying Agent, authenticating agent,
co-registrar or additional paying agent.
"ASSET SALE" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale leaseback transactions, but excluding
(except as provided for in the provisions described in the last paragraph of
Section 3.12(b)) those permitted by Article 4 hereof and those permitted by
Section 3.03 hereof) in one or a series of transactions by the Company or any
Project Company to any Person other than the Company or any Wholly Owned
Subsidiary, of (i) all or any of the Capital Stock of the Project Company, (ii)
all or substantially all of the assets of any operating unit, Facility or
division of the Company or any Project Company or (iii) any other property or
assets or rights to acquire property or assets of the Company or any Project
Company outside of the ordinary course of business of the Company or such
Project Company.
"ATTRIBUTABLE COSTS" means, for any period, the Company Designated
Costs for such period to the extent that such amount does not exceed an amount
calculated for such period at a rate equal to $10 million per annum (which shall
increase by 5% for each fiscal year beginning on or after December 1, 1997).
"AUTHORIZED OFFICERS" means with respect to the Company, the President,
the Chief Financial Officer and any vice president.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of (A) the numbers of years from the date of determination
to the dates of each successive scheduled principal payment of such Indebtedness
or scheduled redemption or similar payment with respect to such Indebtedness or
Preferred Stock multiplied by (B) the amount of such payment by (ii) the sum of
all such payments.
"BANKRUPTCY CUSTODIAN" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
"BANKRUPTCY LAW" means Title 11, United States Code, or any similar
federal or state law or laws of Bermuda for the relief of debtors or the
administration, reorganization or liquidation of debtors' estates for the
benefit of their creditors.
"BERMUDA" means the British colony of Bermuda.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee thereof.
"BOARD RESOLUTION" means a copy of a resolution certified by a director
of the Company to have been duly adopted by the Board of Directors to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized by law to close or
are otherwise not open for business. If any payment date hereunder or under the
Notes is not a Business Day, payment may be made at that place on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period. If a regular record date hereunder or under the Notes is not
a Business Day, the regular record date shall not be affected.
"CAPITAL STOCK" means any and all shares, interests (including joint
venture interests), participations or other equivalents (however designated) of
capital stock of a corporation or any and all equivalent ownership interests in
a Person (other than a corporation).
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date upon which such lease may be
terminated by the lessee without payment of a penalty; and "Capitalized Lease
Obligations" means the rental obligations, as aforesaid, under such lease.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than AES or an underwriter engaged in a firm commitment
underwriting on behalf of the Company, is or becomes the beneficial owner (as
such term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (i) a person shall be deemed to have beneficial
ownership of all shares that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total outstanding shares of Class A Common
Stock; (ii) AES is no longer entitled to elect at least one half of the members
of the Board of Directors; (iii) AES ceases to be the beneficial owner (as such
term is used in Rules 13d-3 and 13d-5 under the Exchange Act) of at least
6,000,000 Voting Shares of the Company (as adjusted from time to time for any
stock dividends, splits or recombinations after the Issue Date); or (iv) during
any period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors (together with any new directors whose
election by the Board of Directors or whose nomination for election by the
stockholders was approved by a vote of 66-2/3% of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors then in
office.
"CHANGE OF CONTROL TRIGGERING EVENT" means either (x) the occurrence of
both an event specified in clause (i) or (iv) of the definition of Change of
Control and a Rating Decline or (y) the occurrence of an event specified in
clause (ii) or (iii) of the definition of Change of Control.
"CLASS A COMMON STOCK" means the Class A Common Stock, par value $0.01
per share, of the Company.
"CLASS B COMMON STOCK" means the Class B Common Stock, par value $0.01
per share, of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" has the meaning set forth in the Security Agreement.
"COLLATERAL ACCOUNT" has the meaning set forth in the Security
Agreement.
"COLLATERAL AGENT" means Bankers Trust Company as collateral agent, and
any successor thereof, under the Security Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" means AES China Generating Co. Ltd., a Bermuda corporation,
until a successor replaces it pursuant to the terms and conditions of this
Indenture and thereafter means the successor.
"COMPANY DESIGNATED COSTS" means the total costs of development,
construction or operations management and the provision of consulting or
advisory services incurred by the Company and its Wholly Owned Subsidiaries (net
of any amounts received in reimbursement of such costs to the extent not in
excess of such costs).
"CONSOLIDATED CURRENT LIABILITIES," as of the date of determination,
means the aggregate amount of liabilities of the Company and its Consolidated
Restricted Subsidiaries which may properly be classified as current liabilities
(including taxes accrued as estimated), after eliminating (i) all inter-company
items between the Company and any Consolidated Subsidiary and (ii) deducting all
current maturities of long-term Indebtedness, all as determined in accordance
with GAAP.
"CONSOLIDATED NET INCOME (LOSS)" means, for any period, as applied to
the Company, the consolidated net income (loss) of the Company and its
Consolidated Restricted Subsidiaries for such period, determined in accordance
with GAAP, adjusted by excluding (without duplication), to the extent included
in such net income (loss), the following: (i) all extraordinary gains or losses;
(ii) any net income of any Person (other than the Company and its Consolidated
Restricted Subsidiaries), except that (A) the Company's equity in the net income
of any such Person for such period shall be included in Consolidated Net Income
(Loss) up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution and (B) the equity of the Company or a Restricted Subsidiary
in a net loss of any such Person for such period shall be included in
determining Consolidated Net Income (Loss); (iii) the net income of any
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions by such Restricted Subsidiary of such income is not at
the time thereof permitted, directly or indirectly, by operation of the terms of
its charter or bye-laws or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary or its stockholders; (iv) any net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a "pooling of
interests" basis attributable to any period prior to the date of such
combination; and (v) any gain (but not loss) realized upon the sale or other
disposition of any property, plant or equipment of the Company or its Restricted
Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is
not sold or otherwise disposed of in the ordinary course of business and any
gain (but not loss) realized upon the sale or other disposition by the Company
or any Restricted Subsidiary of any Capital Stock of any Person, provided that
losses shall be included on an after-tax basis; and further adjusted by
subtracting from such net income the tax liability of any parent of the Company
to the extent of payments made to such parent by the Company pursuant to any tax
sharing agreement or other arrangement for such period.
"CONSOLIDATED NET TANGIBLE ASSETS" means, as of any date of
determination, as applied to the Company, the total amount of assets (less
accumulated depreciation or amortization, allowances for doubtful receivables,
other applicable reserves and other properly deductible items) as set forth on
the most recently available quarterly or annual consolidated balance sheet of
the Company and its Consolidated Restricted Subsidiaries, determined in
accordance with GAAP, and after giving effect to purchase accounting and after
deducting therefrom, to the extent otherwise included, the amounts of: (i)
Consolidated Current Liabilities; (ii) minority interests in Consolidated
Subsidiaries held by Persons other than the Company or a Restricted Subsidiary;
(iii) excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors as evidenced by a Board
Resolution; (iv) any revaluation or other write-up in value of assets subsequent
to December 31, 1995 as a result of a change in the method of valuation in
accordance with GAAP; (v) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks, service marks,
trade names, copyrights, licenses, organization or developmental expenses and
other intangible items; (vi) treasury stock; (vii) any cash set apart and held
in a sinking or other analogous fund established for the purpose of redemption
or other retirement of Capital Stock to the extent such obligation is not
reflected in Consolidated Current Liabilities; and (viii) any Indebtedness of
the Company or a Restricted Subsidiary referred to in clause (viii) of the
definition of Permitted Investments.
"CONSOLIDATED NET WORTH" means, at any date of determination, as
applied to the Company, stockholders' equity as set forth on the most recently
available quarterly or annual consolidated balance sheet of the Company and its
Consolidated Restricted Subsidiaries, less any amounts attributable to
Redeemable Stock or Exchangeable Stock, the cost of treasury stock and the
principal amount of any promissory notes receivable from the sale of Capital
Stock of the Company or any Subsidiary.
"CONSOLIDATION" means, with respect to any Person, the consolidation of
accounts of such Person and each of its subsidiaries if and to the extent the
accounts of such Person and such subsidiaries are consolidated in accordance
with GAAP. The term "Consolidated" shall have a correlative meaning.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Project Company against fluctuations in currency values to or
under which the Company or any Project Company is a party on the Issue Date or
becomes a party thereafter.
"DEBT SERVICE RESERVE ACCOUNT" has the meaning set forth in the
Security Agreement.
"DEFAULT" means any event which is, or, after notice or passage of time
or both, would be, an Event of Default.
"DEFAULTED INTEREST" means any interest on any Note which is payable,
but is not punctually paid or duly provided for on any Interest Payment Date.
"DEPOSITARY" means The Depository Trust Company, its nominees, and
their respective successors until a successor Depositary shall have become such
pursuant to the applicable provisions of this Indenture and thereafter
"Depositary" shall mean or include each Person who is then a Depositary
hereunder.
"DESIGNATED FINANCING" means any Incurrence of Indebtedness by an
Existing Subsidiary or Existing Joint Venture that refinances Shareholder Loans
in whole or in part.
"DOLLAR PERMITTED INVESTMENTS" means investments which are denominated
and payable in US dollars in any one or more of the following: (i)(a) direct,
interest-bearing obligations of the United States in certificated form; (b)
direct, interest-bearing obligations of, and guaranteed as to timely payment of
principal and interest by, the United States, but only if such obligations are
issued in the form of any entry made on the records of the Federal Reserve Bank
of New York; and (c) direct interest bearing obligations of, and interest
bearing obligations guaranteed as to timely payment of principal and interest
by, the Federal National Mortgage Association, the Government National Mortgage
Association, the Federal Home Loan Mortgage Corporation or the Student Loan
Marketing Association, but only if (A) at the time of investment, such
obligations are assigned the highest credit rating by the Rating Agency and (B)
such obligations have been deposited with The Depository Trust Company and its
successors, or are issued in the form of an entry made on the records of the
Federal Reserve Bank of New York; (ii) certificates of deposit with an original
term to maturity (x) of not more than 180 days or (y) with respect to the
amounts representing the interest payment amounts due on June 15, 1997 or
December 15, 1997, not exceeding the second Business Day prior to such date,
issued by any U.S. depositary institution or trust company whose principal
offices are located in the Borough of Manhattan, City and State of New York, New
York (including the Trustee acting in its individual capacity); provided that
the short-term unsecured debt obligations of such depositary institution or
trust company at the time of such investment are assigned a rating of "A-1" by
S&P and "P1" by Moody's or the long-term unsecured debt obligations of such
depositary institution or trust company at the time of such investment, are
assigned a rating of "A-" or higher by S&P and "A3" or higher by Moody's; (iii)
repurchase obligations pursuant to a written agreement (a) with respect to any
obligation described in clause (i) above, where (in each case) the Trustee has
taken delivery of such obligation and (b) by a U.S. depositary institution or
trust company whose principal offices are located in the Borough of Manhattan,
City and State of New York, New York the short-term unsecured debt obligations
of which are rated "A-1" by S&P and "P-1" by Moody's at the time of such
investment or the long-term unsecured debt obligations of which are rated "A-"
or higher by S&P and "A3" or higher by Moody's (including, if applicable, the
Trustee acting in its individual capacity) at time of such investment; or (iv)
commercial paper that (a) is assigned a rating of "A-1" by S&P and "P-1" by
Moody's at the time of such investment and (b) had an original term to maturity
of not more than 180 days.
"DOLLARS," "$" AND "US DOLLARS" mean United States dollars.
"ELIGIBLE JOINT VENTURE" means a Joint Venture (other than a
Subsidiary) (i) that is formed with respect to the construction, development,
acquisition, servicing, ownership, improvement, operation or management of a
single Facility; (ii) in which the Company, directly or indirectly, owns at
least 25% of the Capital Stock therein and (iii) in respect of which the
Company, directly or indirectly, either (a) controls, by voting power,
membership on the board of directors or management committee or other similar
governing body, or through the provisions of any applicable partnership, joint
venture, shareholder or other similar agreement or under an operating,
maintenance or management agreement or otherwise, the management and operation
of the Joint Venture and any Facility of such Joint Venture or (b) otherwise has
the right to control or veto material acts and decisions with respect to the
management or operation of the Joint Venture that, taken as a whole, are
substantially similar to the rights of the Company with respect to the Existing
Joint Ventures as of the Issue Date.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGEABLE STOCK" means any Capital Stock which by its terms is
exchangeable or convertible at the option of any Person other than the Company
into another security (other than Capital Stock of the Company which is neither
Exchangeable Stock nor Redeemable Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXISTING JOINT VENTURE" means any of Chengdu-AES-Kaihua Gas Turbine
Power Co. Ltd., Wuhu Shaoda Electric Power Company Ltd. and Yangchun Fuyang
Diesel Engine Power Co. Ltd., and their respective successors, in each case, so
long as such Person is a Project Company.
"EXISTING PROJECT COMPANY NET CASH FLOW" means, for any period, (A) the
aggregate amount (without duplication) of dividends, distributions, payments of
interest and scheduled repayments of loans or advances (excluding any of such
amounts that constitute Special Proceeds), in each case, that are received by
the Company and its Wholly Owned Subsidiaries from Existing Joint Ventures and
Existing Subsidiaries during such period less (B) the sum of (i) Attributable
Costs for such period, (ii) the aggregate interest expense accrued with respect
to the Notes after June 15, 1998 and (iii) the aggregate principal amount of
Notes purchased from time to time by the Company (other than pursuant to an
Offer or a Change of Control Offer).
"EXISTING SUBSIDIARY" means any of Sichuan Fuling Aixi Power Company
Ltd., Hunan Xiangci-AES Hydro Power Company Ltd., Anhui Liyuan AES Power Company
Limited, the Hefei Zhongli Energy Company Ltd., Jiaozuo Wan Fang Power Ltd.,
Wuxi-AES-CAREC Gas Turbine Power Company Ltd. and Wuxi-AES-Zhonghang Power
Company Ltd., and their respective successors, in each case, so long as such
Person is a Project Company.
"FACILITY" means a power or steam generation facility or energy
producing facility and related assets (including without limitation electric
power transmission facilities or lines).
"FIXED CHARGE COVERAGE RATIO" as of any date of determination means the
ratio of (i) Adjusted Cash Flow for the period of the most recent four
consecutive fiscal quarters for which financial information is available to (ii)
the Adjusted Interest Expense for such period plus the Adjusted Interest Expense
for such period with respect to any Indebtedness proposed to be Incurred by the
Company and its Wholly Owned Subsidiaries; PROVIDED, HOWEVER, that, in making
such computation, the Adjusted Interest Expense attributable to interest on any
Indebtedness bearing a floating interest rate shall be computed on a pro forma
basis as if the rate in effect on the date of computation had been the
applicable rate for the entire period; and provided further, that in the event
(A) of the designation of any Restricted Subsidiary or Restricted Joint Venture
to be an Unrestricted Company during or after such period, or (B) the Company or
any Wholly Owned Subsidiary has made any Asset Sales, Designated Financings or
acquisitions of assets not in the ordinary course of business (including
acquisitions of other Persons by merger, consolidation or purchase of Capital
Stock), or has Incurred or repaid any Indebtedness (or any guarantee thereof has
terminated), during or after such period, or any Project Company has been
designated to be an Unrestricted Company (or redesignated as a Project Company)
during or after such period, such computation shall be made on a pro forma basis
as if such event had taken place on the first day of such period; and provided
further that the Adjusted Cash Flow with respect to any acquisitions shall not
exceed the net income attributable to the acquired assets for such period.
"FULLY DILUTED BASIS" means after giving effect to the exercise of any
outstanding options, warrants or rights to purchase Voting Shares and the
conversion or exchange of any securities convertible into or exchangeable for
Voting Shares.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect and, to the extent optional, adopted by the
Company on the Issue Date, consistently applied, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board.
"GUARANTEE" means, as applied to any obligation, contingent or
otherwise, of any Person, (i) a guarantee, direct or indirect, in any manner, of
any part or all of such obligation, (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (ii) an
agreement, direct or indirect, contingent or otherwise, the practical effect of
which is to ensure in any way the payment or performance (or payment of damages
in the event of nonperformance) of any part or all of such obligation, including
the payment of amounts drawn down under letters of credit.
"HOLDER" OR "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" means, as applied to any obligation, to create, incur, issue,
assume, guarantee or in any other manner become liable with respect to,
contingently or otherwise, such obligation, and "INCURRED," "INCURRENCE," and
"INCURRING" shall each have a correlative meaning; PROVIDED, HOWEVER, that any
Indebtedness or Capital Stock of a Person existing at the time such Person
becomes (after the Issue Date) a Project Company (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Project Company at the time it becomes a Project Company, and PROVIDED, FURTHER,
that any amendment, modification or waiver of any provision of any document
pursuant to which Indebtedness was previously Incurred shall not be deemed to be
an Incurrence of Indebtedness as long as (i) such amendment, modification or
waiver does not (A) increase the principal or premium thereof or interest rate
thereon, (B) change to an earlier date the Stated Maturity thereof or the date
of any scheduled or required principal payment thereon or the time or
circumstances under which such Indebtedness may or shall be redeemed, (C) if
such Indebtedness is contractually subordinated in right of payment to the
Notes, modify or affect, in any manner adverse to the Holders, such
subordination, (D) if the Company is the obligor thereon, provide that a Project
Company shall be an obligor, (E) if such Indebtedness is Non-Recourse Debt,
cause such Indebtedness to no longer constitute Non-Recourse Debt or (F)
violate, or cause the Indebtedness to violate, the provisions of Section 3.05 or
3.07 and (ii) such Indebtedness would, after giving effect to such amendment,
modification or waiver as if it were an Incurrence, comply with clause (i) of
the first proviso to the definition of "Refinancing Indebtedness."
"INDEBTEDNESS" of any Person means, without duplication, (i) the
principal of and premium (if any such premium is then due and owing) in respect
of (A) indebtedness of such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (ii) all Capitalized
Lease Obligations of such Person; (iii) all obligations of such Person Incurred
as the deferred purchase price of property, all conditional sale obligations of
such Person and all obligations of such Person under any title retention
agreement; (iv) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the tenth Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) Redeemable Stock of such Person and, in the case of any
Subsidiary, any other Preferred Stock not owned by the Company or a Wholly Owned
Subsidiary, in either case valued at, in the case of Redeemable Stock, the
greater of its voluntary or involuntary maximum fixed repurchase price exclusive
of accrued and unpaid dividends or, in the case of Preferred Stock that is not
Redeemable Stock, its liquidation preference exclusive of accrued and unpaid
dividends; (vi) all obligations of such Person in respect of Interest Rate
Agreements and Currency Agreements; (vii) all obligations of the type referred
to in clauses (i) through (vi) of other Persons and all dividends of other
Persons for the payment of which, in either case, such Person is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including by
means of any guarantee; and (viii) all obligations of the type referred to in
clauses (i) through (vii) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by such
Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured;
PROVIDED, HOWEVER, that Indebtedness shall not include trade accounts payable
arising in the ordinary course of business. For purposes hereof, the "maximum
fixed repurchase price" of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Indenture, and
if such price is based upon, or measured by, the fair market value of such
Redeemable Stock, such fair market value to be determined in good faith by the
Board of Directors as evidenced by a Board Resolution. The amount of
Indebtedness of any Person at any date shall be, with respect to unconditional
obligations, the outstanding balance at such date of all such obligations as
described above and, with respect to any contingent obligations at such date,
the maximum liability determined by such Person's board of directors, in good
faith, as, in light of the facts and circumstances existing at the time,
reasonably likely to be Incurred upon the occurrence of the contingency giving
rise to such obligation; provided that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness as determined in accordance with GAAP.
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Notes.
"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement or other similar agreement or arrangement designed
to protect against fluctuations in interest rates to or under which the Company
or any Project Company is a party on the Issue Date or becomes a party
thereunder.
"INVESTMENT" means, with respect to any Person, any direct or indirect
advance, loan or other extension of credit or capital contribution to (by means
of any transfer of cash or other property to others or any payment for property
or services for the account or use of others), or any other investment in any
other Person, or any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or assets issued or owned by
any other Person (whether by merger, consolidation, amalgamation, sale of assets
or otherwise). For purposes of the provisions set forth in Section , (i)
"Investment" shall include the portion (proportionate to the Company's Equity
Interest in such Project Company) of the fair market value of the net assets of
any Project Company at the time such Project Company is designated an
Unrestricted Company and shall exclude the fair market value of the net assets
of any Unrestricted Company at the time that such Unrestricted Company is
designated a Project Company, as the case may be, and (ii) any property
transferred to or from an Unrestricted Company shall be valued at its fair
market value at the time of such transfer, in each case as determined by the
Board of Directors in good faith as evidenced by a Board Resolution.
"ISSUE DATE" means the date on which the Notes are originally issued
under this Indenture.
"JOINT VENTURE" means a joint venture, partnership or other similar
arrangement, whether corporation, partnership or other legal form.
"LIEN" means any mortgage, lien, pledge, charge, or other security
interest or encumbrance of any kind (including any conditional sale or other
title retention agreement and any lease in the nature thereof).
"LINE OF BUSINESS" means the direct or indirect construction,
development, acquisition, servicing, ownership, improvement, operation and
management of Facilities and consulting or advisory activities related thereto.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET AVAILABLE CASH" means, (A) with respect to any Designated
Financing, the aggregate amount of cash received by the Company or a Restricted
Subsidiary in repayment of Shareholder Loans in connection therewith; (B) with
respect to any Restricted Designation Event, an amount equal to the fair market
value of an Existing Subsidiary or Existing Joint Venture that is designated an
Unrestricted Company; and (C) with respect to any Asset Sale, the cash or cash
equivalent payments received by the Company or a Project Company in connection
with such Asset Sale (including any cash received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
or when received and also including the proceeds of other property received when
converted to cash or cash equivalents) net of the sum of, without duplication,
(i) all reasonable legal, title and recording tax expenses, reasonable
commissions, and other reasonable fees and expenses incurred directly relating
to such Asset Sale, (ii) all local, state, federal and foreign taxes required to
be paid or accrued as a liability by the Company or any Project Company as a
consequence of such Asset Sale, (iii) payments made to repay Indebtedness which
is secured by any assets subject to such Asset Sale in accordance with the terms
of any Lien upon or other security agreement of any kind with respect to such
assets, or which must by its terms, or by applicable law, be repaid out of the
proceeds from such Asset Sale and (iv) all distributions required by any
contract entered into other than in contemplation of such Asset Sale to be paid
to any holder of an Equity Interest in such Project Company as a result of such
Asset Sale, so long as such distributions do not exceed such holder's pro rata
portion (based on such holder's proportionate Equity Interest) of the cash or
cash equivalent payments described above, net of the amounts set forth in
clauses (i)-(iii) above.
"NET CASH PROCEEDS" means, with respect to any issuance or sale of
Capital Stock by any Person, the cash proceeds to such Person of such issuance
or sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultancy and other fees
actually incurred by such Person in connection with such issuance or sale and
net of taxes paid or payable by such Person as a result thereof.
"NON-CONVERTIBLE CAPITAL STOCK" means, with respect to any Person, any
Capital Stock of such Person which is not convertible into another security
other than non-convertible common stock of such Person; PROVIDED, HOWEVER, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.
"NON-RECOURSE DEBT" means Indebtedness of any Project Company (or of
any other Person that directly or indirectly owns the Capital Stock of such
Project Company as its sole assets) that is Incurred to acquire, develop,
improve, construct or to provide working capital for a Facility owned by such
Project Company, PROVIDED that such Indebtedness is without recourse to any
assets of the Company or any Project Company other than the assets or Capital
Stock of the Project Company Incurring such Indebtedness (or any other Person
that, directly or indirectly owns such Capital Stock as its sole assets) and the
income and proceeds therefrom. Indebtedness that does not comply with the
foregoing sentence because of a guarantee provided by the Company or another
Project Company will nevertheless qualify as Non-Recourse Debt so long as such
guarantee complies with the restrictions set forth under Section 3.04.
"NOTES" means all series of the 10 1/8 % Notes Due 2006 that are issued
under and pursuant to the terms of this Indenture, as amended or supplemented
from time to time.
"OFFERING" means the public offering and sale of the Notes.
"OFFICERS' CERTIFICATE" means a certificate signed by two Authorized
Officers of the Company, one of whom must be the President or Chief Financial
Officer of the Company. Each Officers' Certificate (other than certificates
provided pursuant to TIA Section 314(a)(4)) shall include the statements
provided for in TIA Section 314(e).
"OPERATING LEASE OBLIGATIONS" means any obligation of the Company and
its Restricted Subsidiaries on a Consolidated basis incurred or assumed under or
in connection with any lease of real or personal property which, in accordance
with GAAP, is not required to be classified and accounted for as a capital
lease.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel, if so acceptable, may be an employee of
or counsel to the Company or the Trustee. Each such Opinion of Counsel shall
include the statements provided for in TIA Section 314(e).
"PERMITTED INVESTMENTS" means (i) any Investment in any Restricted
Subsidiary (or any Person that would become a Restricted Subsidiary as a result
of such Investment) by the Company or any other Restricted Subsidiary or in the
Company by any Restricted Subsidiary; (ii) any Restricted Joint Venture
Investment; (iii) Investments in existence on the date of this Indenture and
Investments pursuant to letters of intent or legally binding commitments in
existence on the date of this Indenture; (iv) loans and advances made to
employees of the Company in the ordinary course of business consistent with past
practices; (v) loans and advances made by a Project Company to any Person in
connection with the provision of services by such Person to such Project
Company, the construction by such Person of fuel transportation facilities for
such Project Company or the construction by such Person of transmission
facilities or lines interconnecting such Project Company's Facility with an
electric power grid; (vi) any Investment in (a) obligations of the U.S.
government and its agencies or instrumentalities; (b) bank deposits and bank
obligations (including certificates of deposit, time deposits and bankers'
acceptances); (c) floating rate securities and other instruments issued by
governments or international development agencies; (d) commercial paper and
other short-term corporate debt obligations; (e) money market funds; and (f)
repurchase agreements with banks and broker-dealers with respect to securities
described in clauses (a) through (d) above; (vii) Dollar Permitted Investments;
and (viii) any loan made to or deposit made with any commercial banking
institution rated "A-" or higher by S&P and "A3" or higher by Moody's in
connection with a substantially similar loan made by an affiliate of such
commercial banking institution to the Company or a Wholly Owned Subsidiary.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"PREFERRED STOCK," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"PRINCIPAL" of a Note means the principal of the Note plus, if
applicable, the premium on the Note.
"PROJECT COMPANIES" means the Restricted Subsidiaries and Restricted
Joint Ventures and "Project Company" means any of them.
"RATING AGENCIES" means (i) S&P and Moody's or (ii) if S&P or Moody's
or both shall not make a rating of the Notes publicly available, an
internationally recognized securities rating agency or agencies, as the case may
be, selected by the Company which shall be substituted for S&P or Moody's or
both, as the case may be.
"RATING CATEGORY" means (i) with respect to S&P, any of the following
categories: AAA, AA, A, BBB, BB, B, CCC, CC, C and D (or equivalent successor
categories, (ii) with respect to Moody's, any of the following categories: Aaa,
Aa, A, Baa, Ba, B, Caa, Ca, C and D (or equivalent successor categories) and
(iii) the equivalent of any such category used by another Rating Agency). In
determining whether the rating of the Notes has decreased by one or more
gradations, gradations within Rating Categories (+ and - for S&P; 1, 2 and 3 for
Moody's) shall be taken into account (e.g., with respect to S&P, a decline in a
rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of
one gradation).
"RATING DECLINE" means the occurrence of (i) or (ii) below on, or
within 90 days after, the earliest of (A) the Company having become aware that a
Change of Control has occurred, (B) the date of public notice of the occurrence
of a Change of Control or (C) the date of public notice of the intention by AES
or the Company to approve, recommend or enter into, any transaction which, if
consummated, would result in a Change of Control (which period shall be extended
so long as the rating of the Notes is under publicly announced consideration or
possible downgrade by either of the Rating Agencies), (i) a decrease of the
rating of the Notes by either Rating Agency by one or more rating gradations or
(ii) the failure by the Company to advise the Rating Agencies, in writing, of
such occurrence or any subsequent material developments or to use its best
efforts to obtain, from at least one Rating Agency, a written, publicly
announced affirmation of its rating of the Notes, stating that it is not
downgrading and is not considering downgrading the Notes.
"REDEEMABLE STOCK" means any class or series of Capital Stock of any
Person that (a) by its terms, by the terms of any security into which it is
convertible or exchangeable or otherwise is, or upon the happening of an event
or passage of time would be, required to be redeemed (in whole or in part) on or
prior to the first anniversary of the Stated Maturity of the Notes, (b) is
redeemable at the option of the holder thereof at any time on or prior to the
first anniversary of the Stated Maturity of the Notes (other than on a Change of
Control or Asset Sale, provided that such Change of Control or Asset Sale shall
not yet have occurred) or (c) is convertible into or exchangeable for Capital
Stock referred to in clause (a) or clause (b) above or debt securities at any
time prior to the first anniversary of the Stated Maturity of the Notes.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness of the Company or a Project Company
existing on the Issue Date or Incurred in compliance with this Indenture
(including Indebtedness of the Company that refinances Indebtedness of any
Project Company and Indebtedness of any Project Company that refinances
Indebtedness of another Project Company) including Indebtedness that refinances
Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) if the Indebtedness being
refinanced is contractually subordinated in right of payment to the Notes, the
Refinancing Indebtedness shall be contractually subordinated in right of payment
to the Notes to at least the same extent as the Indebtedness being refinanced,
(ii) if the Indebtedness being refinanced is Non-Recourse Debt, such Refinancing
Indebtedness shall be Non-Recourse Debt, (iii) the Refinancing Indebtedness is
scheduled to mature either (a) no earlier than the Indebtedness being refinanced
or (b) after the Stated Maturity of the Notes, (iv) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced and (v) such Refinancing Indebtedness is in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or if issued with
original issue discount, the aggregate accreted value) then outstanding (plus
fees and expenses, including any premium, swap breakage and defeasance costs)
under the Indebtedness being refinanced; and PROVIDED, FURTHER, that (x)
Refinancing Indebtedness shall not include Indebtedness of a Project Company
that refinances Indebtedness of the Company; (y) the provisions of clauses (iii)
and (iv) above shall not be applicable with respect to any Refinancing
Indebtedness that refinances Shareholder Loans; and (z) Refinancing Indebtedness
that refinances Shareholder Loans of any Person other than the Company or any of
its Subsidiaries shall be PARI PASSU or subordinated to the Shareholder Loans
being refinanced.
"RESTRICTED DESIGNATION EVENT" means the designation by the Board of
Directors of the Company of any Existing Subsidiary or Existing Joint Venture to
be an Unrestricted Company.
"RESTRICTED JOINT VENTURE" means any Eligible Joint Venture of the
Company that is not designated an Unrestricted Joint Venture by the Board of
Directors.
"RESTRICTED JOINT VENTURE INVESTMENT" means any Investment which is
made by the Company or a Restricted Subsidiary in a Restricted Joint Venture;
PROVIDED that (i) at the time such Investment is made, no Default or Event of
Default shall have occurred and be continuing (or would result therefrom); (ii)
the aggregate Investment in one or more Restricted Joint Ventures operating the
same Facility does not exceed 15% of Consolidated Net Tangible Assets; PROVIDED
THAT such restriction shall not apply to any Investment in (A) Yangcheng
International Power Generating Company Ltd., or its successors and (B) Tianjin
TEDA-AES Power Co. Ltd. or its successors, and PROVIDED, FURTHER, that such
restriction shall not apply to a single additional Investment of up to $100
million in the event that the Company does not make either of the Investments
described in clauses (A) and (B); and (iii) any encumbrance or restriction on
the ability of the Person in which the Investment is made to make the payments,
distributions, loans, advances or transfers referred to in clauses (i) through
(iii) under Section that would apply immediately following the making of the
Investment could be created or permitted to exist pursuant to clause (d), (g) or
(h) under Section 3.05 or in the written opinion of the President or Chief
Financial Officer of the Company (x) are not materially more restrictive, taken
as a whole, than encumbrances and restrictions customarily accepted (or, in the
absence of any industry custom, reasonably acceptable) in substantially
non-recourse project financings and (y) apply only to the assets of the Person
in whom the Investment is made, the Capital Stock of such Person (or any other
Person that, directly or indirectly owns such Capital Stock as its sole assets)
and the income and proceeds therefrom.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not
designated an Unrestricted Subsidiary by the Board of Directors.
"S&P" means Standard and Poor's Corporation and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time.
"SECURITY AGREEMENT" means the security agreement dated as of the date
hereof among the Company, the Trustee and the Collateral Agent.
"SERVICES AGREEMENT" means the Services Agreement dated as of December
29, 1993 between the Company and ------------------ AES.
"SHAREHOLDER LOAN" means Indebtedness of a Project Company that is
payable to a holder of Equity Interests in such Project Company.
"SPECIAL PROCEEDS EVENT" means (i) any Asset Sale of the assets,
property or Capital Stock of any Existing Subsidiary or Existing Joint Venture
(or any other Person that, directly or indirectly, owns such Capital Stock as
its sole assets), (ii) any Designated Financing or (iii) any Restricted
Designation Event.
"SPECIAL PROCEEDS" means, with respect to any Special Proceeds Event,
the Net Available Cash from such Special Proceeds Event; PROVIDED that the Net
Available Cash from a Special Proceeds Event relating to an Existing Subsidiary
shall not constitute Special Proceeds if and to the extent that: (A) the
aggregate amount of Net Available Cash from all Special Proceeds Events excluded
from the definition of Special Proceeds under this proviso after the Issue Date
does not exceed $30 million; (B) at the date of such Special Proceeds Event, the
Fixed Charge Coverage Ratio is greater than 2.25:1.0; and (C) with respect to
any Asset Sale, the Facilities owned by each of the Existing Subsidiaries and
each of the Existing Joint Ventures have commenced commercial operation; and
PROVIDED FURTHER, that the Net Available Cash from any Special Proceeds Event
relating to an Existing Joint Venture shall not constitute Special Proceeds if
and to the extent that (A) at the date thereof, the Fixed Charge Coverage Ratio
is greater than 2.25:1.0 and (B) with respect to any Asset Sale, the Facilities
owned by each of the Existing Subsidiaries and each of the Existing Joint
Ventures have commenced commercial operation.
"STATED MATURITY" means, with respect to any security, the date
specified in such security as the fixed date on which the principal is due and
payable, including pursuant to any mandatory redemption provision (but excluding
any provision providing for the repurchase of such security at the option of the
holder thereof upon the happening of any contingency).
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
contractually subordinated or junior in right of payment to the Notes or any
other Indebtedness of the Company.
"SUBSIDIARY" means, as applied to any Person, any corporation or other
entity of which a majority of the outstanding Voting Shares is, at the time,
directly or indirectly, owned by such Person.
"TAX" means any tax, duty, levy, impost, assessment or other
governmental charge of a similar nature (including penalties, interest and any
other liabilities related thereto.
"TAXING AUTHORITY" means any government or political subdivision or
territory or possession of any government or any authority or agency therein or
thereof having power to tax.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date first above written.
"TRUSTEE" means the party named as such above until a successor
replaced it and thereafter means the successor.
"TRUST OFFICER" means any officer of the Trustee within its Corporate
Trust and Agency Group assigned by the Trustee to administer its corporate trust
matters or to whom any corporate trust matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as
in effect from time to time.
"UNRELATED BUSINESS" means any business other than the Line of
Business.
"UNRESTRICTED COMPANIES" means the Unrestricted Subsidiaries and
Unrestricted Joint Ventures and "Unrestricted Company" means any of them.
"UNRESTRICTED JOINT VENTURE" means: (i) any Eligible Joint Venture that
at the time of determination shall be designated an Unrestricted Joint Venture
by the Board of Directors in the manner provided below; (ii) any Joint Venture
of an Unrestricted Subsidiary; or (iii) any Joint Venture of the Company that is
not an Eligible Joint Venture. The Board of Directors may designate any Eligible
Joint Venture (including any newly acquired or newly formed Eligible Joint
Venture) to be an Unrestricted Joint Venture unless such Eligible Joint Venture
owns any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any other Restricted Joint Venture; provided, that either (A) the
Eligible Joint Venture to be so designated has total assets of $1,000 or less or
(B) if such Eligible Joint Venture has assets greater than $1,000, that such
designation would be an investment permitted pursuant to the provisions under
Section 3.03. The Board of Directors may designate any Unrestricted Joint
Venture to be a Restricted Joint Venture; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) the Company could Incur $1.00 of
additional Indebtedness pursuant to Subsection 3.04(a) and no Default or Event
of Default shall have occurred and be continuing. Any such designation by the
Board of Directors shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions; PROVIDED, HOWEVER, that the failure to so file such
resolution and/or Officers' Certificate with the Trustee shall not impair or
affect the validity of such designation.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any Project Company that is not a
Subsidiary or Joint Venture of the Subsidiary to be so designated; provided,
that either (A) the Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than $1,000, that such
designation would be permitted pursuant to Section 3.03. The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the
Company; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness
pursuant to Section 3.04(a) and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions;
PROVIDED, HOWEVER, that the failure to so file such resolution and/or Officers'
Certificate with the Trustee shall not impair or affect the validity of such
designation.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America which, in either case under
clauses (i) or (ii) are not callable or redeemable before the maturity thereof.
"VOTING SHARES," with respect to any Person, means the Capital Stock
having the general voting power under ordinary circumstances to vote on the
election of the members of the board of directors or other governing body of
such Person (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency) and, with respect to the Company, shall include the Class A
Common Stock and the Class B Common Stock and any other Voting Shares of the
Company.
"WHOLLY OWNED SUBSIDIARY" means a Subsidiary (other than an
Unrestricted Subsidiary) all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. OTHER DEFINITIONS.
TERM DEFINED IN SECTION
---- ------------------
"Additional Amounts"............................... 3.06
"Change of Control Offer".......................... 3.08
"Change of Control Purchase Date".................. 3.08
"Event of Default"................................. 5.01
"Excess Proceeds".................................. 3.12(b)
"Excess Proceeds Offer"............................ 3.12(b)
"Global Note"...................................... 2.01
"Intermediate Holding Company"..................... 3.20
"Notice of Default"................................ 5.01
"Offer"............................................ 3.12(d)
"Offer Amount"..................................... 3.12(d)
"Paying Agent"..................................... 2.03
"Purchase Date".................................... 3.12(d)
"Registrar"........................................ 2.03
"Restricted Payment"............................... 3.03(a)
"Successor Corporation"............................ 4.01
"Special Proceeds Offer"........................... 3.12(d)
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder or Noteholder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the indenture securities means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, and any
accounting term not otherwise defined has the meaning assigned to it and shall
be construed in accordance with, GAAP;
(c) "OR" is not exclusive
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) "INCLUDING" means including, without limitation; (g) unsecured debt
shall not be deemed to be subordinate or junior to secured debt merely by virtue
of its nature as unsecured debt;
(h) the principal amount of any non-interest bearing or other discount
security at any date shall be the principal amount thereof that would be shown
on a balance sheet of the issuer dated such date prepared in accordance with
generally accepted accounting principles and accretion of principal on such
security shall be deemed to be the Incurrence of Indebtedness; and
(i) the principal amount (if any) of any Preferred Stock shall be the
greatest of (i) the stated value, (ii) the redemption price or (iii) the
liquidation preference of such Preferred Stock.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication, shall be
substantially in the form of Exhibit A annexed hereto, which is part of this
Indenture. The Notes may have notation, legends or endorsements required by law,
stock exchange rule or usage. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the form of Note annexed hereto
as Exhibit A shall constitute, and are expressly made, a part of this Indenture.
To the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
The Notes shall be issued initially in the form of a single permanent
global note in fully registered form without interest coupons substantially in
the form of Exhibit A with such legends as may be applicable thereto, only in
denominations of $1,000 and integral multiples thereof (the "Global Note"),
deposited with the Trustee as custodian for the Depositary and registered in the
name of Cede & Co., as nominee of the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The Global Note shall
bear such legend as may be required or reasonably requested by the Depositary.
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Authorized Officer shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes.
If an Authorized Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual signature
of an authorized signatory of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 1 of Exhibit A upon a written
order of the Company signed by two Authorized Officers (except as otherwise
provided in Section 2.07). Such order shall specify the amount of the Notes to
be authenticated and the date on which the original issue of Notes is to be
authenticated. The aggregate principal amount of Notes outstanding at any time
may not exceed that amount except as provided in Section 2.07.
The Trustee shall initially act as authenticating agent and may
subsequently appoint another Person acceptable to the Company as authenticating
agent to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or an Affiliate of the Company. Provided that the
authenticating agent has entered into an agreement with the Company concerning
authentication agent's duties, the Trustee shall not be liable for any act or
any failure of the authenticating agent to perform any duty either required
herein or authorized herein to be performed by such person in accordance with
this Indenture.
Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Note which has been duly authenticated and delivered by
the Trustee.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "PAYING AGENT" includes any additional paying agent and
the term "REGISTRAR" includes any co-registrar.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture. The
agreement shall implement the provisions of this Indenture that relate to such
agent. The Company shall promptly notify the Trustee of the name and address of
any such agent and change in the address of such agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 6.07. The
Company or any Subsidiary or Affiliate of the Company may act as Paying Agent,
Registrar, co-registrar or transfer agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
On or prior to 11:00 a.m., eastern standard time, on each due date of
the principal and interest on any Note (including any redemption date fixed
under the terms of such Note or this Indenture) the Company shall deposit with
the Paying Agent a sum of money, in immediately available funds, sufficient to
pay such principal and interest in funds available when such becomes due. The
Company shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal
of or interest on the Notes (whether such money has been paid to it by the
Company or any other obligor on the Notes) and shall notify the Trustee of any
default by the Company (or any other obligor on the Notes) in making any such
payment. If the Company or a Subsidiary or an affiliate of the Company acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund for the benefit of the Noteholders. If the Company
defaults in its obligation to deposit funds for the payment of principal and
interest the Trustee may, during the continuation of such default, require a
Paying Agent to pay all money held by it to the Trustee. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed by it. Upon doing so, the Paying Agent (other
than the Company or a Subsidiary or Affiliate of the Company) shall have no
further liability for the money delivered to the Trustee.
SECTION 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee at least five Business Days before each Interest Payment Date and at
such other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Noteholders and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE; DEFINITIVE NOTE.
(a) The Notes shall be transferable only upon the surrender of a Note
for registration of transfer. When a Note is presented to the Registrar or a
co-registrar with a request to register a transfer, the Registrar shall register
the transfer as requested if the requirements of Section 8-401(1) of the Uniform
Commercial Code are met (and the Registrar shall be entitled to assume such
requirements have been met unless it receives written notice to the contrary)
and, if so required by the Trustee or the Company, if the Note presented is
accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Company, duly executed by the registered owner or by his or her
attorney duly authorized in writing. When Notes are presented to the Registrar
or a co-registrar with a request to exchange them for an equal principal amount
of Notes of other denominations, the Registrar shall make the exchange as
requested if the same requirements are met. To permit registration of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Notes at the Registrar's or co-registrar's request. No service charge shall be
made for any registration of transfer or exchange of the Notes, but the Company
may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange pursuant to
Section 2.10 or 8.05 of this Indenture). The Company shall not be required to
make and the Registrar need not register transfers or exchanges of Notes
selected for redemption (except, in the case of Notes to be redeemed in part,
the portion thereof not to be redeemed) or for a period of 15 days before a
selection of Notes to be redeemed or 15 days before an interest payment date.
(b) Prior to the due presentation for registration of transfer of any
Note, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note is overdue, and none of the Company, the Trustee, the
Paying Agent, the Registrar or any co-registrar shall be affected by notice to
the contrary.
(c) Notwithstanding any other provisions of this Section 2.06, unless
and until it is exchanged in whole or in part for Notes in definitive registered
form, the Global Note representing all or a portion of the Notes may not be
transferred except as a whole by the Depositary to a nominee of such Depositary
or by a nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
(d) If the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the Global Notes or if at any time the
Depositary shall no longer be registered under the next sentence of this
paragraph, the Company shall appoint a successor Depositary with respect to the
Notes. Each Depositary appointed pursuant to this Section 2.06 must, at the time
of its appointment and at all times while it serves as Depositary, be a clearing
agency registered under the Exchange Act and any other applicable statute or
regulation. The Company will execute, and the Trustee will authenticate and
deliver upon a written order of the Company signed by two Authorized Officers,
Notes in definitive registered form in any authorized denominations representing
such Notes in exchange for the Global Note if (i) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for the Global
Note or if at any time the Depositary ceases to be a clearing agency registered
under the Exchange Act at any time when it is required to be and, in either
case, a successor Depositary for the Notes is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware that the
Depositary is no longer so registered, (ii) the Company determines in accordance
with the next paragraph of this subsection (d) that the Global Note shall be
exchanged or exchangeable for Notes in definitive registered form or (iii) an
Event of Default has occurred and is continuing.
The Company may at any time and in its sole discretion determine that
the Notes shall no longer be represented by the Global Note. In such event the
Company will execute, and the Trustee will authenticate and deliver upon a
written order of the Company signed by two Authorized Officers, Notes in
definitive registered form in any authorized denominations representing such
Notes in exchange for such Global Note.
(e) Upon the exchange of the Global Note for Notes in definitive
registered form without coupons, in authorized denominations, such Global Note
shall be canceled by the Trustee. Notes in definitive registered form issued in
exchange for the Global Note pursuant to this Section 2.06 shall be registered
in such names and in such authorized denominations as the Depositary for the
Global Note pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Trustee. The Trustee shall deliver such Notes to
or as directed by the Persons in whose names such Notes are so registered.
All Notes issued upon any transfer or exchange pursuant to the terms of
this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
SECTION 2.07. REPLACEMENT NOTES.
If a mutilated security is surrendered to the Registrar or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken and the Holder furnishes to the Company and the Trustee evidence to their
satisfaction of such loss, destruction or wrongful taking, the Company shall
issue and the Trustee shall, in the absence of notice to the Company or the
Trustee that such Note has been acquired by a bona fide purchaser, authenticate
a replacement Note if the requirements of Section 8-405 of the Uniform
Commercial Code are met (and the Registrar shall be entitled to assume such
requirements have been met unless it receives written notice to the contrary)
and if there is delivered to the Company and the Trustee such security or
indemnity as may be required to save each of them harmless, satisfactory to the
Company or the Trustee, as the case may be. The Company and the Trustee may
charge the Holder for their expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, and those described in this section as not outstanding.
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Note is held by a bona fide purchaser.
If all the principal and interest on any Notes are considered paid
under Section 3.01, such Notes cease to be outstanding under this Indenture and
interest on such Notes shall cease to accrue. If the Paying Agent (other than
the Company or a Subsidiary or an Affiliate of the Company) holds in accordance
with this Indenture on a redemption date or maturity date money sufficient to
pay all principal and interest due on that date then on and after that date such
Notes cease to be outstanding and interest on them ceases to accrue (unless
there shall be a default in such payment).
If a Note is called for redemption, the Company and the Trustee need
not treat the Note as outstanding in determining whether Holders of the required
principal amount of Notes have concurred in any direction, waiver or consent.
Subject to Section 2.09, a Note does not cease to be outstanding
because the Company or an Affiliate thereof holds the Note.
SECTION 2.09. DETERMINATION OF HOLDERS' ACTION.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, amendment, waiver or consent, Notes owned
by or pledged to the Company, any other obligor upon the Notes or any Affiliate
of the Company or such other obligor shall be disregarded and deemed not to be
outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes which the Trustee knows are so owned or pledged shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without unreasonable delay,
the Company shall prepare and the Trustee, upon the written order of the Company
signed by two Authorized Officers, shall authenticate definitive Notes in
exchange for temporary Notes. Until such exchange, temporary Notes shall be
entitled to the same rights, benefits and privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment or cancellation and shall destroy the same or otherwise
dispose of canceled Notes as the Company directors by written order signed by
two Authorized Officers. The Company may not issue new Notes to replace Notes
that it has paid or delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it shall
pay defaulted interest, plus any interest payable on the defaulted interest to
the extent permitted by law, in any lawful manner. The Company may pay the
defaulted interest to the Persons who are Noteholders on a subsequent special
record date which date shall be at least five Business Days prior to the payment
date. The Company shall fix the special record date and payment date. At least
15 days before the special record date, the Company (or the Trustee, in the name
of and at the expense of the Company) shall mail to Noteholders a notice that
states the special record date, payment date and amount of interest to be paid.
ARTICLE 3
COVENANTS
SECTION 3.01. PAYMENT OF NOTES.
(a) The Company shall pay the principal of and interest on the Notes on
the dates and in the manner provided in the Notes. The Company shall pay
interest on overdue principal at the rate borne by the Notes; it shall pay
interest on overdue installments of interest at the rate borne by the Notes to
the extent lawful. Principal and interest shall be considered paid on the date
due (including a redemption date) if the Trustee or the Paying Agent (other than
the Company or a Subsidiary or an Affiliate of the Company) has received from or
on behalf of the Company on or prior to 11:00 a.m., eastern standard time, on
that date, in immediately available funds, money sufficient to pay all principal
and interest then due. To the extent that the Trustee or the Paying Agent shall
not have received all or any part of such money at such time, the Trustee shall
request the Collateral Agent to transfer to the Trustee from the Debt Service
Reserve Account an amount equal to any such defficiency.
(b) At least five Business Days prior to the first interest payment
date and, if there has been any change with respect to the matters set forth in
the below-mentioned certificate, at least five Business Days prior to each
interest payment date thereafter, the Company shall furnish the Trustee with an
Officers' Certificate instructing the Trustee as to any circumstances in which
payments of principal of or interest on the Notes due on such date shall be
subject to deduction or withholding for or on account of any taxes described in
Section 3.06 and the rate of any such deduction or withholding. If any such
deduction or withholding shall be required and if the Company therefore becomes
liable to pay Additional Amounts, if any, pursuant to Section 3.06, then, at
least five Business Days prior to each interest payment date, the Company will
furnish the Trustee with a certificate which specifies the amount required to be
withheld on such payment to Holders of the Notes and the Additional Amounts, if
any, due to Holders of the Notes, and will pay to the Trustee such Additional
Amounts, if any, as shall be required to be paid to such Holders.
SECTION 3.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the address of the Trustee set
forth in Section 11.02 of this Indenture.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby initially designates the office of Bankers Trust
Company in the Borough of Manhattan, the City of New York, as such office of the
Company in accordance with Section 2.03.
SECTION 3.03. LIMITATION ON RESTRICTED PAYMENTS.
(a) So long as any of the Notes are outstanding, the Company shall not,
and shall not permit any Project Company to, directly or indirectly, (i) declare
or pay (either in cash or property) any dividend on or make any distribution or
similar payment of any sort in respect of its Equity Interests (including any
payment in connection with any merger or consolidation involving the Company) to
the direct or indirect holders of its Equity Interests (other than dividends or
distributions payable solely in its Non-Convertible Capital Stock or rights to
acquire its Non-Convertible Capital Stock and dividends or distributions by a
Project Company that are paid to the Company or a Wholly Owned Subsidiary and to
the other holders of Equity Interests in such Project Company (A) in accordance
with the joint venture contract, articles of association or other constituent
document governing such Project Company or (B) as permitted by applicable law),
(ii) purchase, redeem, defease or otherwise acquire or retire for value any
Equity Interests of the Company or AES, or, with respect to the Company,
exercise any option to exchange any Equity Interests that by their terms are
exchangeable solely at the option of the Company (other than into Capital Stock
of the Company which is neither Exchangeable Stock nor Redeemable Stock), (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity or scheduled repayment thereof or scheduled sinking
fund payment thereon, any Subordinated Indebtedness or (iv) make any Investment,
other than a Permitted Investment (each such payment described in clauses
(i)-(iv) of this paragraph, a "Restricted Payment"), unless at the time of and
after giving effect to the proposed Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing (or would result therefrom);
(2) the Company would be permitted to Incur an additional $1.00 of
Indebtedness pursuant to the provisions of Section 3.04(a); and
(3) the aggregate amount of all such Restricted Payments subsequent to
the Issue Date shall not exceed the sum of
(A) 50% of aggregate Consolidated Net Income accrued during
the period (treated as one accounting period) from December 1, 1996
to the end of the most recent fiscal quarter for which financial
statements are available (or if such Consolidated Net Income is a
deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company
after the Issue Date from the sale of Equity Interests (other than
Redeemable Stock or Exchangeable Stock) of the Company to any person
other than the Company, any of its Subsidiaries or an employee stock
ownership plan;
(C) the amount by which the principal amount of, and any
accrued interest on, Indebtedness of the Company or its Restricted
Subsidiaries (other than Shareholder Loans) is reduced on the
Company's Consolidated balance sheet upon the conversion or exchange
(other than by a Subsidiary) subsequent to the Issue Date of any
Indebtedness of the Company or any Restricted Subsidiary converted
or exchanged for Capital Stock (other than Redeemable Stock or
Exchangeable Stock) of the Company (less the amount of any cash, or
the value of any other property, distributed by the Company or any
such Restricted Subsidiary upon such conversion or exchange); and
(D) an amount equal to the net reduction in Investments after
the Issue Date in Unrestricted Companies resulting from payments of
interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company
or any Project Company from Unrestricted Companies or from
redesignations of Unrestricted Companies as Project Companies
(valued in each case as provided in the definition of
"Investments"), not to exceed in the case of any Unrestricted
Company the amount of Investments previously made by the Company or
any Project Company in such Unrestricted Company.
(b) The failure to satisfy the conditions set forth in clauses (2) and
(3) of Subsection 3.03(a) shall not prohibit any of the following as long as the
condition set forth in clause (1) of Subsection 3.03(a) is satisfied (except as
set forth below):
(i) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Subsection 3.03(a); PROVIDED that, solely for purposes of this clause
(i), it shall not be necessary to satisfy the condition set forth in clause
(1) of Subsection 3.03(a) at the date of payment if such clause is
satisfied at the date of declaration;
(ii) any purchase, redemption, defeasance, or other acquisition or
retirement for value of Capital Stock of the Company or Subordinated
Indebtedness made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Redeemable Stock or Exchangeable Stock and other than stock issued or sold
to a Subsidiary or to an employee stock ownership plan), PROVIDED, that
such purchase, redemption, defeasance or other acquisition or retirement
shall not be included in the calculation of Restricted Payments made for
purposes of clause (3) of Subsection and PROVIDED, FURTHER, that the Net
Cash Proceeds from such sale shall be excluded from sub-clause B of clause
(3) of Subsection 3.03(a);
(iii) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness made by exchange for, or
out of the proceeds of the substantially concurrent Incurrence of for cash
(other than to a Subsidiary), new Indebtedness of the Company, PROVIDED,
HOWEVER, that (A) such new Indebtedness shall be contractually subordinated
in right of payment to the Notes at least to the same extent as the
Indebtedness being so redeemed, repurchased, defeased, acquired or retired,
(B) such new Indebtedness has a Stated Maturity either (1) no earlier than
the Stated Maturity of the Indebtedness redeemed, repurchased, defeased,
acquired or retired or (2) after the Stated Maturity of the Notes and (C)
such Indebtedness has an Average Life equal to or greater than the Average
Life of the Indebtedness redeemed, repurchased, defeased, acquired or
retired, and provided further, that such purchase, redemption, defeasance
or other acquisition or retirement shall not be included in the calculation
of Restricted Payments made for purposes of clause (3) of Subsection
3.03(a); and
(iv) any purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness upon a Change of Control
or an Asset Sale to the extent required by this Indenture or other
agreement pursuant to which such Subordinated Indebtedness was issued, but
only if (A) in the case of a Change of Control, the Company has made an
offer to repurchase the Notes as described under Section 3.08 or (B) in the
case of an Asset Sale, the Company or the applicable Project Company, as
the case may be, has applied the Net Available Cash from such Asset Sale in
accordance with the provisions of Section 3.12; and
(v) Restricted Payments not otherwise permitted by the foregoing
provisions in an aggregate amount not in excess of $10 million.
SECTION 3.04. LIMITATION ON INCURRENCE OF INDEBTEDNESS.
(a) The Company shall not, and shall not permit any Project Company to,
directly or indirectly, Incur any Indebtedness, except that the Company may
Incur Indebtedness if, after giving effect thereto, the Fixed Charge Coverage
Ratio would be greater than (i) 1.75:1.0 through November 30, 1998, (ii)
2.00:1.0 from December 1, 1998 through November 30, 2001, and (iii) 2.25:1.0
thereafter.
(b) Notwithstanding the foregoing, this section shall not limit the
ability of the Company or any Project Company to Incur the following
Indebtedness:
(i) Indebtedness under the Notes and this Indenture;
(ii) Refinancing Indebtedness;
(iii) Indebtedness of the Company which is owned to and held by a
Wholly Owned Subsidiary and Indebtedness of a Project Company which is owed
to and held by the Company or a Wholly Owned Subsidiary, provided, however,
that any subsequent issuance or transfer of any Capital Stock which results
in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary
or any transfer of such Indebtedness (other than to the Company or a Wholly
Owned Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the Company or by a Project Company, as
the case may be;
(iv) Acquired Indebtedness that is Non-Recourse Debt;
(v) Indebtedness of the Company or a Project Company outstanding on
the Issue Date;
(vi) Indebtedness under any Currency Agreement or Interest Rate
Agreement in each case entered into in the ordinary course of the financial
management of the Company and the Project Companies and not for speculative
purposes; provided that, in the case of any Currency Agreement, such
Currency Agreement does not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vii) Indebtedness incurred in connection with a purchase of the
Notes as required in connection with a Change of Control Triggering Event;
provided that the aggregate principal amount of such indebtedness does not
exceed 101% of the aggregate principal amount of the Notes purchased
pursuant to such Change of Control Triggering Event (plus the amount of
reasonable fees and expenses, including underwriting discounts and
commissions, incurred by the Company in connection with obtaining such
Indebtedness) and that such Indebtedness does not mature prior to the
Stated Maturity of the Notes so purchased;
(viii) Indebtedness referred to in clause (viii) of the
definition of Permitted Investments;
(ix) Non-Recourse Debt of a Project Company (other than any
Existing Subsidiary);
(x) Shareholder Loans to the extent that the aggregate principal
amount of Shareholder Loans of a Project Company is not greater than an
amount equal to the principal amount of Shareholder Loans of such Project
Company payable to the Company or a Wholly Owned Subsidiary divided by the
Company's percentage ownership of the Capital Stock of such Project
Company;
(xi) Non-Recourse Debt of any Existing Subsidiary Incurred to pay
for construction cost overruns; provided that the aggregate principal
amount of all such Non-Recourse Debt incurred under this clause (xi) shall
not exceed $15 million;
(xii) Non-Recourse Debt of any Existing Subsidiary Incurred to
provide for working capital; provided that the aggregate principal amount
outstanding at any time of all such Non-Recourse Debt under this clause
(xii) shall not exceed $10 million; and
(xiii) other Indebtedness Incurred by the Company or any Project
Company (other than an Existing Subsidiary) in an aggregate principal
amount outstanding at any time of not more than 5% of Consolidated Net
Worth.
(c) Notwithstanding Sections 3.04(a) and (b), the Company shall not
Incur any Indebtedness if the proceeds thereof are used, directly or indirectly,
to repay, prepay, redeem, defease, retire, refund or refinance any Subordinated
Indebtedness unless such repayment, prepayment, redemption, defeasance,
retirement, refunding or refinancing is not prohibited by Section 3.03 or unless
such Indebtedness shall be contractually subordinated to the Notes at least to
the same extent as such Subordinated Indebtedness.
SECTION 3.05. LIMITATION ON PAYMENT RESTRICTIONS AFFECTING PROJECT
COMPANIES.
The Company shall not, and shall not permit any Project Company to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Project Company to (i) pay
dividends to or make any other distributions on its Capital Stock, or pay any
Indebtedness or other obligations owed to the Company or any other Project
Company, (ii) make any loans or advances to the Company or any Project Company
or (iii) transfer any of its property or assets to the Company or any other
Project Company; PROVIDED, HOWEVER, that the foregoing shall not apply to:
(a) any encumbrance or restriction existing pursuant to this Indenture
or any other agreement or instrument as in effect or entered into on the Issue
Date;
(b) any encumbrance or restriction with respect to any Person or the
assets of such Person acquired by the Company or any Project Company and
existing at the time of such acquisition; PROVIDED, HOWEVER, that such
encumbrance or restriction was not Incurred in connection with or in
contemplation of such Project Company becoming a Project Company;
(c) any encumbrance or restriction pursuant to an agreement effecting a
refinancing of Indebtedness referred to in clause (a) or (b) above or contained
in any amendment or modification with respect to such Indebtedness; provided,
however, that the encumbrances and restrictions contained in any such agreement,
amendment or modification are no less favorable in any material respect with
respect to the matters referred to in clauses (i), (ii) and (iii) above than the
encumbrances and restrictions with respect to the Indebtedness being refinanced,
amended or modified;
(d) in the case of clause (iii) above, customary non-assignment
provisions of (A) any leases governing a leasehold interest or (B) any supply,
license or other agreement entered into in the ordinary course of business of
the Company or any Project Company;
(e) any restrictions with respect to a Project Company imposed pursuant
to an agreement entered into for the sale or disposition of all or substantially
all of the Capital Stock or assets of such Project Company pending the closing
of such sale or disposition;
(f) any encumbrances or restrictions imposed pursuant to the terms of
Non-Recourse Debt incurred pursuant to Section 3.04(b)(x), provided that such
encumbrances or restrictions, in the written opinion of the President or Chief
Financial Officer of the Company, (x) are required in order to obtain such
financing, (y) are not materially more restrictive, taken as a whole, than
encumbrances and restrictions customarily accepted (or, in the absence of any
industry custom, reasonably acceptable), in substantially non-recourse project
financings and (z) apply only to the assets of the Project Company that has
Incurred such Non-Recourse Debt, the Capital Stock of such Person (or any other
Person that, directly or indirectly, owns such Capital Stock as its sole assets)
and the income and proceeds therefrom;
(g) any encumbrance or restriction existing by reason of applicable
law; and
(h) any restriction under a joint venture, shareholders' or similar
agreement to pay dividends or make other distributions, so long as there is a
contemporaneous agreement providing for the payment of dividends or the making
of distributions according to a schedule or calculation notwithstanding such
restriction.
Nothing contained in this Section 3.05 shall prevent the Company or any
Project Company from (1) creating, incurring, assuming or suffering to exist any
Liens otherwise permitted in Section 3.07 or (2) restricting the sale or other
disposition of property or assets of the Company or any Project Company that
secure Indebtedness.
SECTION 3.06. PAYMENT OF ADDITIONAL AMOUNTS.
All payments of principal and interest in respect of each Note shall be
made free and clear of, and without withholding or deduction for, any taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within Bermuda or any other jurisdiction
in which the Company is organized or any authority therein or thereof having
power to tax or from which any payment is made with respect to the Notes, unless
such withholding or deduction is required by law or by regulation or
governmental policy having the force of law. In the event that any such
withholding or deduction in respect of principal or interest is so required, the
Company shall pay such additional amounts ("Additional Amounts") as will result
in receipt by each Holder of any Note of such amounts as would have been
received by such Holder or the beneficial owner with respect to such Note had no
such withholding or deduction been required, except that no Additional Amounts
shall be payable:
(a) for or on account of:
(i) any tax, duty, assessment or other governmental charge
that would not have been imposed but for
(A) the existence of any present or former connection
between such Holder or the beneficial owner of such Note and
Bermuda or such other jurisdiction in which the Company is
organized, as the case may be, other than merely holding
such Note, including, without limitation, such Holder or the
beneficial owner of such Note being or having been a
national, domiciliary or resident of or treated as a
resident thereof or being or having been present or engaged
in a trade or business therein or having or having had a
permanent establishment therein;
(B) presentation of such Note (where presentation is
required) more than thirty (30) days after the date on which
the payment in respect of such Note became due and payable
or provided for, whichever is later, except to the extent
that such Holder would have been entitled to such Additional
Amounts if it had presented such Note for payment on any day
within such period of thirty (30) days; or
(C) the presentation of such Note for payment in
Bermuda or any political subdivision thereof or therein,
unless such Note could not have been presented for payment
elsewhere;
(ii) any estate, inheritance, gift, sale, transfer, personal
property or similar tax, assessment or other governmental charge;
(iii) any tax, assessment or other governmental charge that
is imposed or withheld by reason of the failure of such Holder or the
beneficial owner of such Note to comply with a request by the Company
addressed to such Holder (A) to provide information concerning the
nationality, residence or identity of such Holder or such beneficial owner
or (B) to make any declaration or other similar claim or satisfy any
information or reporting requirement, which, in the case of (A) or (B), is
required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all
or part of such tax, assessment or other governmental charge;
(iv) any tax, duty, assessment or governmental charge which
is payable other than by withholding or deduction from payments with
respect to the Notes; or
(v) any combination of items (1), (2), (3) and (4);
(b) with respect to any payment of the principal of or interest on such
Note to such Holder (including a fiduciary or partnership) to the extent that
the beneficial owner of such Note would not have been entitled to such
Additional Amounts had it been the Holder of the Note.
Whenever there is mentioned, in any context, the payment of principal
or interest in respect of any Note or the net proceeds received on the sale or
exchange of any Note, such mention shall be deemed to include the payment of
Additional Amounts provided for in this Indenture to the extent that, in such
context, Additional Amounts are, were or would be payable in respect thereof
pursuant to this Indenture.
SECTION 3.07. LIMITATION ON LIENS.
The Company shall not, and shall not permit any Project Company to
directly or indirectly, incur or permit to exist any Lien of any nature
whatsoever on any of its properties (including, without limitation, Capital
Stock), whether owned at the date of such Indenture or thereafter acquired,
unless contemporaneously therewith or prior thereto the Notes are equally and
ratably secured other than:
(a) pledges or deposits made by such Person under workers'
compensation, unemployment insurance laws or similar legislation, or good faith
deposits in connection with bids, tenders, contracts (other than for payment of
Indebtedness) or leases to which such Person is a party, or deposits to secure
statutory or regulatory obligations of such Person or deposits of cash or United
States government bonds to secure surety, appeal or performance bonds to which
such Person is a party, or deposits as security for contested taxes or import
duties or for the payment of rent, in each case Incurred in the ordinary course
of business;
(b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens, in each case, arising in the ordinary course of business and
with respect to amounts not yet due or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; or other Liens arising out of
judgments or awards against such Person with respect to which such Person shall
then be diligently prosecuting appeal or other proceedings for review;
(c) Liens for property taxes not yet subject to penalties for
non-payment or which are being contested in good faith and for which appropriate
provision as shall be required in conformity with GAAP, if any, shall have been
made;
(d) Liens in favor of issuers or surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business; PROVIDED, HOWEVER, that such letters of credit
may not constitute Indebtedness;
(e) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real properties or liens incidental to the conduct
of the business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness or other extensions of credit and
which do not in the aggregate materially adversely affect the value of said
properties or materially impair their use in the operation of the business of
such Person;
(f) Liens securing Indebtedness Incurred to finance the construction or
purchase of, or repairs, improvements or additions to, property; provided,
however, that the Lien may not extend to any other property owned by the Company
or a Project Company and the Indebtedness secured by the Lien may not be issued
more than 270 days after the later of the acquisitions, completion of
construction, repair, improvement, addition or commencement of full operation of
the property subject to the Lien;
(g) Liens existing on the Issue Date;
(h) Liens on property or shares of stock of a Person at the time such
Person becomes a Project Company, PROVIDED, HOWEVER, that any such Lien may not
extend to any other property owned by the Company or any Project Company;
(i) Liens on property at the time the Company or a Project Company
acquires the property, including any acquisitions by means of a merger or
consolidation with or into the Company or a Project Company; PROVIDED, HOWEVER,
that such Liens are not incurred in connection with, or in contemplation of,
such merger or consolidation; and PROVIDED, FURTHER, that the Lien may not
extend to any other property owned by the Company or any Project Company;
(j) Liens securing Indebtedness or other obligations of a Project
Company owing to the Company or a Wholly Owned Subsidiary;
(k) Liens incurred by a Person other than the Company or a Project
Company on assets that are the subject of a Capitalized Lease Obligation to
which the Company or a Project Company is a party; PROVIDED, HOWEVER, that any
such Lien may not secure Indebtedness of the Company or Project Company (except
by virtue of clause (viii) of the definition of "Indebtedness") and may not
extend to any other property owned by the Company or any Project Company;
(l) Liens Incurred by a Project Company to secure Non-Recourse Debt
Incurred pursuant to paragraphs (ix), (xi) or (xii) of Section 3.04(b), provided
that such Liens (x) are required in order to obtain such financing, (y) are not
materially more restrictive, taken as a whole, than Liens customarily accepted
(or, in the absence of any industry custom, reasonably acceptable), in
substantially non-recourse project financings and (z) apply only to the assets
of the Person that has incurred such Non-Recourse Debt, the Capital Stock of
such Person (or any other Person that, directly or indirectly, owns such Capital
Stock as its sole assets) and the income and proceeds therefrom;
(m) Liens not in respect of Indebtedness consisting of the interest of
the lessor under any lease Incurred in the ordinary course of business and not
otherwise prohibited by this Indenture;
(n) Liens which constitute banker's liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with any
bank or other financial institution, whether arising by operation of law or
pursuant to contract;
(o) Liens Incurred pursuant to the Security Agreement; and
(p) Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions, renewals or
replacements) as a whole, or in part, of any Indebtedness secured by any Lien
referred to in the foregoing clauses (f), (g), (h) and (i), PROVIDED, HOWEVER,
that (x) such new Lien shall be limited to all or part of the same property that
secured the original Lien (plus improvements on such property) and (y) the
Indebtedness secured by such Lien at such time is not increased (other than by
an amount necessary to pay fees and expenses, including premiums, related to the
refinancing, refunding, extension, renewal or replacement of such Indebtedness).
SECTION 3.08. CHANGE OF CONTROL.
In the event of a Change of Control Triggering Event, the Company shall
make an offer to purchase (the "CHANGE OF CONTROL OFFER") the Notes then
outstanding at a purchase price of not less than 101% of the principal amount
(excluding any premium) thereof plus accrued and unpaid interest to the Change
of Control Purchase Date (as defined below) on the terms set forth in this
section. The date on which the Company shall purchase the Notes pursuant to this
section (the "CHANGE OF CONTROL PURCHASE DATE") shall be no earlier than 30
days, nor later than 60 days, after the notice referred to below is mailed,
unless a longer period shall be required by law. The Company shall notify the
Trustee in writing promptly after any Change of Control Triggering Event of the
Company's obligation to offer to purchase all of the Notes.
Notice of a Change of Control Offer shall be mailed by the Company to
the Holders of the Notes at their last registered address (with a copy to the
Trustee and the Paying Agent) within thirty (30) days after a Change of Control
Triggering Event has occurred. The Change of Control Offer shall remain open
from the time of mailing until a date not more than five (5) Business Days
before the Change of Control Purchase Date. The notice shall contain all
instructions and materials necessary to enable such Holders to tender (in whole
or in part) the Notes pursuant to the Change of Control Offer. The notice, which
shall govern the terms of the Change of Control Offer, shall state:
(a) that the Change of Control Offer is being made pursuant to this
section;
(b) the purchase price and the Change of Control Purchase Date;
(c) that any Note not surrendered or accepted for payment will continue
to accrue interest;
(d) that any Note accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Purchase Date;
(e) that any Holder electing to have a Note purchased (in whole or in
part) pursuant to a Change of Control Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Paying Agent at the address specified in the
notice (or otherwise make effective delivery of the Note pursuant to book-entry
procedures and the related rules of the applicable depositories) at least five
(5) Business Days before the Change of Control Purchase Date; and
(f) that any Holder will be entitled to withdraw his or her election if
the Paying Agent receives, not later than three (3) Business Days prior to the
Change of Control Purchase Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his or her election to have the Note purchased.
On the Change of Control Purchase Date, the Company shall (i) accept
for payment the Notes, or portions thereof, surrendered and properly tendered,
and not withdrawn, pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent, no later than 11:00 a.m. eastern standard time, money, in
immediately available funds, sufficient to pay the purchase price of all Notes
or portions thereof so accepted and (iii) deliver to the Trustee, no later than
11:00 a.m. eastern standard time, Notes so accepted together with an Officers'
Certificate stating that such Notes have been accepted for payment by the
Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so
accepted payment in an amount equal to the purchase price. Holders whose Notes
are purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this section, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this section by virtue thereof.
SECTION 3.09. COMPLIANCE CERTIFICATE.
(a) The Company shall, within 120 days after the close of each fiscal
year following the issuance of the Notes, file with the Trustee an Officer's
Certificate, covering the period from the date of issuance of the Notes to the
end of the fiscal year in which the Notes were issued, in the case of the first
such certificate, and covering the preceding fiscal year in the case of each
subsequent certificate, and stating whether or not, to the knowledge of each
such executing Officer, the Company has complied with and performed and
fulfilled all covenants on its part contained in this Indenture and is not in
default in the performance or observance of any of the terms or provisions
contained in this Indenture, and, if any such signer has obtained knowledge of
any default by the Company in the performance, observance or fulfillment of any
such covenant, term or provision specifying each such default and the nature
thereof. For the purpose of this Section 3.09, compliance shall be determined
without regard to any grace period or requirement of notice provided pursuant to
the terms of this Indenture.
(b) The Officers' Certificate described in Section 3.09(a) shall also
set forth (i) a calculation of the Fixed Charge Coverage Ratio as of the date of
such certificate and (ii) a calculation of the amount required to be maintained
by the Company pursuant to Section 3.13, as of the end of the most recent fiscal
quarter for which financial information is available, setting forth, in each
such case, each component of the calculation thereof.
SECTION 3.10. COMMISSION REPORTS.
The Company shall deliver to the Trustee and to the Holders, within 30
days after the filing with the Commission, copies of the annual and quarterly
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may by rules and regulations
prescribe) which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act. In the event the Company is at any time
no longer subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act or otherwise report on an annual and quarterly basis on forms
provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, it shall, for so long as the Notes
remain outstanding, file with the Trustee and the Commission and mail to each
Holder at such Holder's registered address, within 30 days after the Company
would have been required to file such documents with the Commission, copies of
the annual audited financial statements and quarterly unaudited financial
statements, along in each case with a discussion and analysis thereof, all in
the form the Company would have been required to file with the Commission if the
Company had continued to be subject to such Section 13 or 15(d). The Company
shall not be obligated to file any such reports with the Commission if the
Commission does not permit such filings. The Company shall also be required to
deliver, together with each annual and quarterly financial statements delivered
pursuant to this paragraph, a calculation of the Fixed Charge Coverage Ratio as
of the date such financial statements are filed or otherwise released. The
Company also shall comply with the other provisions of TIA ss.314(a).
SECTION 3.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Project Company to,
directly or indirectly, enter into, permit to exist, renew or extend any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of any assets or property or the rendering
of any services) with any Affiliate of the Company (other than a Project
Company) unless (i) the terms of such transaction or series of related
transactions are (A) no less favorable to the Company or such Project Company,
as the case may be, than would be obtainable in a comparable transaction or
series of related transactions in arm's-length dealings with an unrelated third
party and (B) set forth in writing, if such transaction or series of related
transactions involve aggregate payments or consideration in excess of
$1,000,000, and (ii) with respect to a transaction or series of related
transactions involving the sale, purchase, lease or exchange of property or
assets having a value in excess of $5,000,000, such transaction or series of
transactions has been approved by a majority of the disinterested members of the
Board of Directors or, if there are no disinterested members of the Board of
Directors, the Board of Directors shall have received a written opinion of a
internationally recognized investment banking firm stating that such transaction
or series of transactions is fair to the Company or such Project Company from a
financial point of view.
The foregoing provisions do not prohibit:
(i) the payment of reasonable fees to directors of the Company
and the Project Companies who are not employees of the Company or a
Project Company;
(ii) any transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries not otherwise
prohibited by the terms of this Indenture;
(iii) the payment of any Restricted Payment which is expressly
permitted to be paid pursuant to Section 3.03(b);
(iv) any issuance of securities or other reasonable payments,
awards or grants, in cash or otherwise, pursuant to, or the funding of,
employment arrangements approved by the Board of Directors;
(v) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board of
Directors;
(vi) loans or advances to employees in the ordinary course of
business;
(vii) any repurchase, redemption or other retirement of Equity
Interests of the Company held by employees of the Company or any of the
Project Companies upon death, disability or termination of employment
at a price not in excess of the fair market value thereof approved by
the Board of Directors or other governing body of such Project Company;
(viii) the extension, renewal, entry into or payment pursuant
to any services agreement with AES that provides for the payment by the
Company to AES of fees on terms that are not more advantageous to AES
than as provided under the Services Agreement as in effect on the Issue
Date; and
(ix) any agreement to do any of the foregoing.
Any transaction which has been determined, in the written opinion of an
independent internationally recognized investment banking firm, to be fair, from
a financial point of view, to the Company or the applicable Project Company,
shall be deemed to be in compliance with this section.
SECTION 3.12. LIMITATION ON SALES OF ASSETS AND REFINANCINGS.
(a) The Company shall not, and shall not permit any Project Company to,
consummate any Asset Sale other than to the Company or a Wholly Owned Subsidiary
unless (i) the Company or such Project Company, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value, as determined in good faith by the Board of Directors, as evidenced by a
Board Resolution, of the shares or assets disposed of pursuant to such Asset
Sale, (ii) at least 75% of the consideration thereof received by the Company or
such Project Company is in the form of cash or cash equivalents which are
promptly converted into cash by the Person receiving such payment and (iii) an
amount equal to 100% of the Net Available Cash is applied by the Company (or
such Project Company, as the case may be) as set forth herein.
(b) To the extent that the fair market value (as determined in good
faith by the Board of Directors, as evidence by a Board Resolution) of any
asset, property or Capital Stock disposed of in any Asset Sale (other than an
Asset Sale of the assets, property or Capital Stock of any Existing Subsidiary
or Existing Joint Venture), together with the fair market value of all other
assets, property, or Capital Stock sold, transferred or otherwise disposed of in
such Asset Sales received during the twelve month period preceding the date of
such Asset Sale, exceeds 5% of Consolidated Net Tangible Assets, then within
three hundred sixty-five (365) days (such period being the "APPLICATION PERIOD")
following the consummation of an Asset Sale, the Company or such Project Company
shall apply the Net Available Cash from such Asset Sale as follows: (i) to the
extent the Company or such Project Company elects, to reinvest in Additional
Assets (including by means of an investment in Additional Assets by a Project
Company with Net Available Cash received by the Company or another Project
Company or by means of an exchange of assets that achieves a similar effect);
(ii) to the extent of the balance of such Net Available Cash after application
in accordance with clause (i) and to the extent the Company or such Project
Company elects (or is required by the terms of any Indebtedness or any
Indebtedness of such Project Company), to prepay, repay or purchase Indebtedness
of the Company (other than Notes or Subordinated Indebtedness) or Indebtedness
of any Project Company (other than Non-Recourse Debt, Indebtedness owed to the
Company or an Affiliate of the Company or Preferred Stock); PROVIDED, that in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (ii) above, the Company or such Project Company shall retire such
Indebtedness and cause the related loan commitment (if any) to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased; or (iii) to the extent of the balance of the Net Available Cash after
application in accordance with the preceding clauses (i) and (ii) (the "EXCESS
PROCEEDS"), the Company shall, within 30 days after the end of the Application
Period, except as provided below, make an offer to purchase the Notes (an
"EXCESS PROCEEDS OFFER") at a purchase price of not less than 100% of the
principal amount (excluding any premium) plus accrued and unpaid interest
pursuant to and subject to the conditions set forth in this Indenture. To the
extent that any Net Available Cash from any Asset Sale remains after an Excess
Proceeds Offer, the Company or such Project Company may utilize such remaining
Net Available Cash in any manner not otherwise prohibited by this Indenture.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company as an entirety to a Person in a transaction
permitted under Article 4, the Successor Corporation shall be deemed to have
sold the properties and assets of the Company not so transferred for purposes of
this Section 3.12; and shall comply with the provisions of this Section 3.12
with respect to such deemed sale as if it were an Asset Sale.
(c) The Company shall not be required to make an Excess Proceeds Offer
if the amount of Excess Proceeds is less than $5,000,000 for any particular
Asset Sale (which lesser amounts shall not be carried forward for purposes of
determining whether an Excess Proceeds Offer is required with respect to the Net
Available Cash from any subsequent Asset Sale).
(d) (1) The Company shall, within 30 days after the occurrence of any
Special Proceeds Event, cause all Special Proceeds with respect to such Special
Proceeds Event to be deposited into the Special Proceeds Account held by the
Collateral Agent and the Company shall, to the extent of the amounts on deposit
in the Special Proceeds Account, except as provided below, make an offer to
purchase the Notes (a "SPECIAL PROCEEDS OFFER," and together with an Excess
Proceeds Offer, an "OFFER"), at a purchase price of not less than 101% of the
principal amount (excluding any premium) plus accrued and unpaid interest
pursuant to and subject to the conditions set forth in this Indenture. To the
extent that any Special Proceeds remain after a Special Proceeds Offer, the
Collateral Agent shall retain such amounts on deposit in the Special Proceeds
Account in the form of cash or Dollar Permitted Investments. Under this
Indenture, the Company shall not be required to make a Special Proceeds Offer
unless the amount held by the Collateral Agent in the Special Proceeds Account
is greater than $5,000,000.
(2) The Company will make an Offer by mailing by first class mail to
each Holder, with a copy to the Trustee, within 30 days after the end of the
relevant Application Period or Special Proceeds Event, a written notice stating
that the Holder may elect to have his Notes purchased by the Company either in
whole or in part (subject to proration as hereinafter described in the event the
Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at
the applicable purchase price. The notice shall specify a purchase date not less
than 30 days, nor more than 60 days, after the date of such notice (the
"PURCHASE DATE") and shall contain the information required in a notice for a
Change of Control Offer, to the extent applicable.
(3) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "OFFER
AMOUNT") and (ii) (A) in the case of an Excess Proceeds Offer, the allocation
pursuant to which such Offer is being made and the compliance of such allocation
with the provisions of Section 3.12(a) or (B) in the case of a Special Proceeds
Offer, the calculation of Special Proceeds arising from such Special Proceeds
Event. On such date, the Company shall also deposit with the Collateral Agent,
in the case of a Special Proceeds offer or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust), in the
case of an Excess Proceeds Offer funds in an amount equal to the Offer Amount to
be held for payment in accordance with the provisions of this section and the
Security Agreement. Upon the expiration of the period for which the Offer
remains open (the "OFFER PERIOD"), the Company shall deliver, or cause to be
delivered, to the Trustee the Notes or portions thereof which have been properly
tendered to and are to be accepted by the Company. The Collateral Agent or the
Paying Agent, as the case may be, shall promptly, and in any event within one
(1) Business Day following the Purchase Date, mail or deliver payment to each
tendering Holder in the amount of the purchase price. In the event that the
aggregate purchase price of the Notes delivered, or caused to be delivered, by
the Company to the Trustee is less than the Offer Amount, the Collateral Agent
or the Paying Agent, as the case may be, shall deliver the excess to the Company
immediately after the expiration of the Offer Period and the delivery to the
Trustee of the Notes or portions thereof that have been properly tendered to and
are to be accepted for payment by the Company.
(4) Holders electing to have a Note purchased will be required to
surrender the Note, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Note duly completed, to the Company or the Paying Agent,
as specified in, and at the address specified in, the notice at least ten (10)
Business Days prior to the Purchase Date. Holders will be entitled to withdraw
their election if the Trustee or the Paying Agent receives, not later than three
Business Days prior to the Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note which was delivered for purchase by the Holder and a
statement that such Holder is withdrawing his election to have such Note
purchased. If at the expiration of the Offer Period the aggregate principal
amount of Notes surrendered by Holders exceeds the Offer Amount, the Company
shall elect the Notes to be purchased on a pro rata basis (with such adjustments
as may be deemed appropriate by the Company so that only Notes in denominations
of $1,000, or integral multiples thereof, shall be purchased) and shall notify
the Trustee of its selection in a writing signed by two Authorized Officers.
Holders whose Notes are purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered.
(e) At the time the Company delivers Notes to the Trustee which are to
be accepted for purchase, the Company will also deliver an Officers' Certificate
stating that such Notes are to be accepted by the Company pursuant to and in
accordance with the terms of this section. A Note shall be deemed to have been
accepted for purchase at the time the Collateral Agent or the Paying Agent, as
the case may be, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(f) The Company shall comply to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and other securities laws or
regulations in connection with the repurchase of Notes pursuant to this section.
To the extent that the provisions of any securities laws or regulations conflict
with provisions of this section, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this section by virtue thereof. If the Company is prohibited
by applicable law from making the Offer or purchasing Notes thereunder, the
Company need not make an Offer pursuant to this section for so long as such
prohibition is in effect.
SECTION 3.13. MAINTENANCE OF CERTAIN CASH PROCEEDS.
At any time (x) prior to the later to occur of (i) the commencement of
commercial operation of each of the Existing Joint Ventures and Existing
Subsidiaries and (ii) January 1, 2000 or (y) at which the Fixed Charge Coverage
Ratio is less than 2.0:1.0, the Company shall maintain (on an unconsolidated
basis) cash and Permitted Investments of the type referred to in clauses (vi)
and (vii) of the definition thereof (exclusive of any amounts held in the Debt
Service Reserve Account or the Special Proceeds Account) in an amount equal to
or greater than the Existing Project Company Net Cash Flow for the period from
the Restricted Date to the date of determination. For purposes hereof, the
"Restricted Date" means December 1, 1996 or, if the Fixed Charge Coverage Ratio
shall at any time have been equal to or greater than 2.0:1.0, then the most
recent date on which the Fixed Charge Coverage Ratio shall have decreased to
below 2.0:1.0.
SECTION 3.14. PAYMENT OF STAMP DUTY AND OTHER TAXES.
The Company will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise under the laws of Bermuda from the execution, delivery or registration of
the Notes or any other document or instrument referred to herein.
SECTION 3.15 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge, or cause to be paid or discharged,
before any material penalty accrues thereon all material taxes, assessments and
governmental charges levied or imposed upon the Company or any Restricted
Subsidiary or upon the income, profits or property of the Company or any
Restricted Subsidiary; PROVIDED, HOWEVER, that the Company shall not be required
to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves, if the same shall be required in accordance with GAAP, have been made.
SECTION 3.16. NOTICE OF DEFAULTS AND OTHER EVENTS.
In the event that any Indebtedness of the Company or any Project
Company having an outstanding principal amount in excess of $5,000,000 (or its
foreign currency equivalent) individually or in the aggregate has been or could
be declared due and payable before its maturity because of the occurrence of any
event of default under such Indebtedness (including any Default under this
Indenture), the Company, promptly after it becomes aware thereof, will give
written notice thereof to the Trustee.
SECTION 3.17. MAINTENANCE OF INSURANCE.
The Company shall cause each Project Company to maintain insurance
policies covering such risks, in such amounts and with such terms as are
normally carried by similarly situated foreign invested companies engaged in the
Line of Business in the country in which such Project Company is located.
SECTION 3.18. LIMITATION ON ISSUANCE OF SUBSIDIARY CAPITAL STOCK.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to issue or sell any shares of such Restricted Subsidiary's Capital
Stock (including options, warrants or other rights to purchase shares of Capital
Stock) except, to the extent not otherwise prohibited by this Indenture, (i) to
the Company or another Restricted Subsidiary that is a Wholly Owned Subsidiary
of the Company, or (ii) if the Net Cash Proceeds from such issuance or sale are
applied, to the extent required to be applied, pursuant to Section 3.12.
SECTION 3.19. LIMITATION ON CHANGES IN THE NATURE OF THE BUSINESS.
The Company and the Project Companies shall engage only in the Line of
Business as well as any other activities reasonably related to the Line of
Business.
SECTION 3.20. LIMITATION ON CERTAIN SUBSIDIARY INVESTMENTS.
The Company will not permit any Project Company with an interest in a
Facility to make any Investment in or merge with any other Person with an
interest in another Facility or in an Unrelated Business.
Notwithstanding the foregoing, subject to any applicable restrictions
imposed by Section 3.03 the Company may permit one or more of its Subsidiaries
(each, an "Intermediate Holding Company") to serve as a holding company for the
Company's direct and indirect interests in Facilities and Unrelated Businesses;
provided that: (i) each such Intermediate Holding Company's direct and indirect
interest in any Facility or Unrelated Business shall be limited to the ownership
of Capital Stock or Indebtedness of a Person with a direct or indirect interest
in such Facility or Unrelated Business; (ii) no consensual encumbrance or
restriction of any kind shall exist on the ability of any Intermediate Holding
Company to make the payments, distributions, loans, advances or transfers
referred to in clauses (i) through (iii) of the first paragraph of Section 3.05;
(iii) no Intermediate Holding Company shall incur, assume, create or suffer to
exist any Indebtedness other than Indebtedness to the Company; and (iv) no Lien
shall exist upon any assets of such Intermediate Holding Company whether now or
hereafter acquired, except for Liens upon the Capital Stock of a Subsidiary of
an Intermediate Holding Company securing Indebtedness of such Subsidiary.
SECTION 3.21. GOVERNMENT APPROVALS.
The Company shall, and shall cause each Project Company to, at all
times (i) obtain and maintain in full force and effect all government
authorizations, approvals and consents relating to any Project Company or
Facility and (ii) preserve and maintain good and valid title to its properties
and assets (subject to Section 3.07 hereof), except in any such case where any
failure to comply with clause (i) or (ii) would not reasonably be expected to
have a material adverse effect on the business or results of operations of the
Company and its Restricted Subsidiaries, taken as a whole, or the ability of the
Company to perform its obligations under this Indenture or the Notes.
SECTION 3.22. COMPLIANCE WITH LAWS.
The Company shall, and shall cause each Project Company to, comply with
all applicable laws, rules, regulations and orders of, and all applicable
restrictions imposed by, any governmental authority or regulatory body in
respect of the conduct of its business and the ownership of its properties,
except to the extent that any failure to comply therewith would not reasonably
be expected to have a material adverse effect on the business or results of
operations of the Company and its Restricted Subsidiaries, taken as a whole, or
the ability of the Company to perform its obligations under this Indenture or
the Notes.
SECTION 3.23 OPERATIONS AND MAINTENANCE.
The Company shall, and shall cause each Project Company to, in all
material respects operate and maintain each Facility in accordance with prudent
industry operating and maintenance practices generally accepted in the Line of
Business.
ARTICLE 4
CONSOLIDATION AND MERGER
SECTION 4.01. MERGER AND CONSOLIDATION .
The Company shall not, in a single transaction or through a series of
related transactions, consolidate, merge or amalgamate with or into any other
corporation or sell, assign, convey, transfer or lease or otherwise dispose of
all or substantially all of its properties and assets as an entirety to any
Person or group of affiliated Persons, unless:
(i) either (A) the Company shall be the continuing Person, or
(B) the Person (if other than the Company) formed by such consolidation
or into which the Company is merged or to which the properties and
assets of the Company as an entirety are transferred (the "Successor
Corporation") shall be a corporation organized and existing under the
laws of Bermuda, the United States (or any State thereof or the
District of Columbia) or any other member country of the Organization
for Economic Cooperation and Development and shall expressly assume, by
an indenture supplemental hereto, executed and delivered to the
Trustee, in form and substance reasonably satisfactory to the Trustee,
all the obligations of the Company under this Indenture and the Notes;
(ii) immediately before and immediately after giving effect to
such transaction on a pro forma basis (and treating any Indebtedness
which becomes an obligation of the Company (or the Successor
Corporation if the Company is not the continuing obligor under this
Indenture) or any Restricted Subsidiary as a result of such transaction
as having been Incurred by such Person at the time of such
transaction), no Default shall have occurred and be continuing;
(iii) the Company shall have delivered or caused to be
delivered, to the Trustee: (A) an Officers' Certificate stating that
such consolidation, merger or amalgamation or such transfer complies
with Article 4 hereof and that all conditions precedent under this
Indenture provided for or relating to such transaction have been
complied with; (B) an Opinion of Counsel of local counsel of recognized
standing as to the legal issues relating thereto; and (C) an Opinion of
Counsel of United States independent counsel of recognized standing to
the effect that the Holders of the Notes will not recognize income,
gain or loss for United States federal income tax purposes as a result
of such consolidation, merger or amalgamation or such transfer and will
be subject to United States federal income tax (if subject to United
States federal income tax at all either before or after such
consolidation, merger or amalgamation or such transfer) on the same
amount and in the same manner and at the same time as would have been
the case if such consolidation, merger or amalgamation or such transfer
had not occurred;
(iv) the Successor Corporation shall expressly agree to
indemnify each Holder of a Note against any tax, assessment or
governmental charge payable by withholding or deduction thereafter
imposed on such Holder or with respect to the payment of principal and
interest on the Notes solely as a consequence of such consolidation,
merger or amalgamation or such transfer;
(v) immediately after giving effect to such transaction on a
pro forma basis (and treating any Indebtedness which becomes an
obligation of the Company (or the Successor Corporation if the Company
is not the continuing obligor under this Indenture) or a Restricted
Subsidiary in connection with or as a result of such transaction as
having been Incurred by such Person at the time of such transaction),
the Company (or the Successor Corporation if the Company is not the
continuing obligor under this Indenture) shall have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of
the Company immediately prior to such transaction; and
(vi) immediately after giving effect to such transaction on a
pro forma basis the Company (or the Successor Corporation if the
Company is not the continuing obligor under this Indenture) would be
able to Incur at least $1.00 of additional Indebtedness pursuant to
Section 3.04(a).
SECTION 4.02. SUCCESSOR SUBSTITUTED.
(a) Upon any such consolidation, merger or amalgamation, or any
conveyance, transfer, or disposition of all or substantially all of the
properties or assets of the Company in accordance with Section 4.01, but not in
the case of a lease, the Successor Corporation shall succeed to and be
substituted for the Company under this Indenture and the Notes, and the Company
shall thereupon be released from all obligations hereunder and under the Notes
and the Company, as the predecessor corporation, may thereupon or at any time
thereafter be dissolved, wound up or liquidated. The Successor Corporation
thereupon may cause to be signed, and may issue either in its own name or in the
name of the Company, all or any of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee; and, upon the order of the Successor Corporation instead of the Company
and subject to all the terms, conditions and limitations prescribed in this
Indenture, the Trustee shall authenticate and shall deliver any Notes which the
Successor Corporation thereafter shall cause to be signed and delivered to the
Trustee for that purpose. All the Notes so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Notes theretofore or
thereafter issued in accordance with the terms of this Indenture as though all
such Notes had been issued at the date of the execution hereof.
(b) In the case of any consolidation, merger, amalgamation or transfer
described in Section 4.02(a) above, such changes in form (but not in substance)
may be made in the Notes thereafter to be issued as may be appropriate.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" means any of the following events:
(a) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
(b) default in the payment of the principal of any Note when the same
becomes due and payable at maturity or otherwise or a failure to redeem or
purchase Notes when required pursuant to this Indenture or the Notes;
(c) default in performance of any other covenants or agreements in this
Indenture, the Notes or the Security Agreement and the default continues for 30
days after the date on which written notice of such default is given to the
Company by the Trustee or to the Company and the Trustee by Holders of at least
25% in aggregate principal amount of the Notes then outstanding hereunder;
(d) there shall have occurred either (i) a default by the Company or
any Project Company under any instrument or instruments under which there is or
may be secured or evidenced any Indebtedness of the Company or any Project
Company (other than the Notes or any Non-Recourse Debt) having an outstanding
principal amount of $5,000,000 (or its foreign currency equivalent) or more
individually or in the aggregate that has caused the holders thereof to declare
such Indebtedness to be due and payable prior to its Stated Maturity or (ii) a
default by the Company or any Project Company in the payment when due or any
portion of the principal under any instrument or instruments under which there
is or may be secured or evidenced any Indebtedness of the Company or any Project
Company (other than the Notes or any Non-Recourse Debt), and such unpaid portion
exceeds $5,000,000 (or its foreign currency equivalent) individually or in the
aggregate and is not paid, or such default is not cured or waived, within any
grace period applicable thereto, unless such Indebtedness is discharged within
20 days of the Company or a Project Company becoming aware of such default;
PROVIDED, HOWEVER, that the foregoing shall not apply to any default on
Non-Recourse Indebtedness;
(e) any final judgment or order (not covered by insurance) for the
payment of money shall be rendered against the Company or any Project Company in
an amount in excess of $5,000,000 (or its foreign currency equivalent)
individually or in the aggregate for all such final judgments or orders against
all such Persons (treating any deductibles, self-insurance or retention as not
so covered) and shall not be discharged, and there shall be any period of 60
consecutive days following entry of the final judgment or order in excess of
$5,000,000 (or its foreign currency equivalent) individually or in the aggregate
during which a stay of enforcement of such final judgment or order, by reason of
a pending appeal or otherwise, shall not be in effect;
(f) (i) other than in accordance with the provisions of this Indenture
or the Security Agreement, for any reason, other than the satisfaction in full
and discharge of the obligations secured thereby, the Collateral Agent shall
cease to have a first priority security interest in the Collateral or (ii) other
than in accordance with the provisions of this Indenture, the Company asserts in
writing that the Security Agreement has ceased to be or is not in full force and
effect;
(g) the Company or any Restricted Subsidiary pursuant to any Bankruptcy
Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
(iii) consents to the appointment or taking possession by a
Bankruptcy Custodian of the Company or such Restricted Subsidiary or for any
substantial part of the property of any of them.
(iv) make a general assignment for the benefit of its creditors,
or
(v) admits in writing its inability to generally pay its debts as
such debts become due;
or takes any comparable action under any foreign laws relating to
insolvency; and
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law, that:
(i) is for relief against the Company or any Restricted
Subsidiary in an involuntary case,
(ii) appoints a Bankruptcy Custodian of any of the Company or any
Restricted Subsidiary or for all or substantially all of its property, or
(iii) orders the winding up or liquidation of the Company or any
Restricted Subsidiary;
or any similar relief is granted under any similar laws of another
jurisdiction; and the order or decree remains unstayed and in effect for 60
days.
Any notice of Default given by the Trustee or Noteholders under this
section must specify the Default, demand that it be remedied and state that the
notice is a "Notice of Default."
The Company shall file annually with the Trustee a certificate
describing any Default by the Company in the performance of any conditions or
covenants that has occurred under this Indenture and its status. The Company
shall deliver to the Trustee, within 30 days after the occurrence thereof,
written notice of any event which with the giving of notice or the lapse of time
or both would become an Event of Default under clause (c), (d), (e) or (h)
hereof.
Subject to the provisions of Sections 6.01 and 6.02, the Trustee shall
not be charged with knowledge of any Event of Default unless written notice
thereof shall have been given to the Trustee by the Company, the Paying Agent,
any Holder or an agent of any Holder.
SECTION 5.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (g) and (h) of Section 5.01 with respect to the Company or any
Restricted Subsidiary) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in principal amount of the Notes then
outstanding by notice to the Company and the Trustee, may declare the principal
of and any accrued and unpaid interest on all the Notes to be due and payable.
Upon such declaration the principal and interest shall be due and payable
immediately. If an Event of Default specified in clause (g) or (h) of Section
5.01 with respect to the Company or any Restricted Subsidiary occurs, the
principal of and interest on all the Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Noteholders. The Holders of a majority in principal amount of
the Notes then outstanding by notice to the Trustee may rescind any such
declaration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived, except nonpayment of principal or interest that has become due solely
because of such declaration. No such rescission shall affect any subsequent or
other Default or Event of Default or impair any consequent right.
SECTION 5.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 5.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the Notes then
outstanding by notice to the Trustee may waive an existing Default and its
consequences except (a) a Default in the payment of the principal of or interest
on any Note or (b) a Default in respect of a provision that under Section 8.02
cannot be amended without the consent of each Noteholder affected. When a
Default is waived, it is deemed cured, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any consequent right.
SECTION 5.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, or, subject to Section 6.01, that the
Trustee determines is unduly prejudicial to the rights of other Noteholders, or
would involve the Trustee in personal liability; PROVIDED, HOWEVER, that the
Trustee may take any other action deemed proper by the Trustee that is not
inconsistent with such direction. Prior to taking any action hereunder, the
Trustee shall be entitled, subject to the duty of the Trustee during a Default
to act with the required standard of care, to indemnification reasonably
satisfactory to it against all risk, losses and expenses caused by taking or not
taking such action. Subject to Section 6.01, the Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of the Noteholders pursuant to this
Indenture, unless such Noteholders shall have provided to the Trustee security
or indemnity reasonably satisfactory to it against the costs, expenses and
liabilities which might be incurred in compliance with such request or
direction.
SECTION 5.06. LIMITATION ON SUITS.
A Noteholder may pursue a remedy with respect to this Indenture or the
Notes only if:
(a) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the Notes then
outstanding make a written request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee security reasonably
satisfactory to it or indemnity against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(e) the Holders of a majority in principal amount of the Notes then
outstanding do not give the Trustee a direction inconsistent with the request
during such 60-day period.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 5.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder, except to the extent
that the institution or prosecution of any such suit or the entry of judgment
therein would result in the surrender, impairment, waiver or loss of the Lien on
the Collateral.
SECTION 5.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 5.01(a) or (b) occurs and
is continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Company for the whole amount of principal and
interest remaining unpaid (together with interest on such unpaid interest to the
extent lawful) and the amounts provided for in Section 6.07.
SECTION 5.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
and take such other actions including participating as a member or otherwise in
any committees of creditors appointed in the matter as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the amounts provided in Section 6.07) and the Noteholders allowed in any
judicial proceedings relative to the Company, its creditors or its property and,
unless prohibited by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other Person performing
similar functions, and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee and, in the event that
the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 6.07. To
the extent that the payment of any such amount due to the Trustee under Section
6.07 out of the estate in any such proceeding shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Notes may be entitled to receive in such proceeding whether
in liquidation or under any plan of reorganization or arrangement or otherwise.
SECTION 5.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 6.07;
Second: to Noteholders for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal and
interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this section. At least 15 days before such record date,
the Company shall give written notice to each Noteholder and the Trustee of the
record date, the payment date and amount to be paid.
SECTION 5.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 5.07, or a suit by Holders of more than 10% in principal
amount of the Notes.
SECTION 5.12. WAIVER OF STAY OR EXTENSION LAWS.
The Company shall not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company
hereby expressly waives all benefit or advantage of any such law, and shall not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in their exercise, as a prudent Person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirement of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of
this section.
(ii) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.02, 5.04 or 5.05.
(iv) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, unless it receives indemnity
satisfactory to it against any risk, loss, liability or expense.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this section.
(e) The Trustee, in its capacity as Trustee and Registrar and Paying
Agent, shall not be liable to the Company, the Noteholders or any other Person
for interest on any money received by it, including, but not limited to, money
with respect to principal of or interest on the Notes, except as the Trustee may
agree with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(i) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate, an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on any such Officers' Certificate or Opinion
of Counsel.
(ii) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed
with due care.
(iii) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or
within its rights or powers PROVIDED, HOWEVER, that the Trustee's
conduct does not constitute wilful misconduct, negligence or bad
faith.
(iv) The Trustee may consult with counsel, and the advice or
opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice of such counsel.
(v) The Trustee shall not be obligated to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or any other paper or document.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or an
Affiliate with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights. However, the Trustee is subject to Sections
6.04 and 6.11.
SECTION 6.04. TRUSTEES DISCLAIMER.
The Trustee shall not be responsible for and makes no representation as
to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes, it shall not
be responsible for any statement in the Notes other than its authentication. The
Trustee shall have no duty to ascertain or inquire as to the performance of the
Company's covenants in Article 3 hereof.
SECTION 6.05. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if it
is known to a Trust Officer of the Trustee, the Trustee shall mail to
Noteholders a notice of the Default or Event of Default within 90 days after a
Trust Officer of the Trustee has actual knowledge of the occurrence thereof.
Except in the case of a Default in any payment on any Note, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Noteholders.
SECTION 6.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 11.09, the
Trustee shall mail to Noteholders a brief report dated as of such date that
complies with TIA ss. 313(a) if required by that Section. The Trustee also shall
comply with TIA ss. 313(b)(2).
A copy of each report at the time of its mailing to Noteholders shall
be filed with the Commission and each stock exchange on which the Notes are
listed. The Company shall promptly notify the Trustee when the Notes are listed
on any stock exchange and of any delisting thereof.
SECTION 6.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket
disbursements, expenses and advances incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee and its officers, directors,
employees and agents for, and hold it and them harmless against, any claim,
loss, liability or expense, including, but not limited to, reasonable attorneys'
fees, disbursements and expenses, incurred by it or them arising out of or in
connection with the administration of this trust and the performance of its or
their duties hereunder including the costs and expenses of defending itself or
themselves against any claim or liability in connection with the exercise or
performance of any of its or their powers or duties hereunder or under the
Security Agreement. The Trustee shall notify the Company promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company shall
defend the claim and the Trustee shall cooperate in the defense. The Trustee may
have separate counsel and the Company shall pay the reasonable fees and expenses
of such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee as a result of the negligence or
wilful misconduct of the Trustee.
To secure the Company's payment obligations in this section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(g) or (h) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 6.07 with respect to any
Lien arising hereunder shall survive the resignation or removal of the Trustee,
the discharge of such obligations pursuant to Article F of this Indenture and
the termination of this Indenture.
SECTION 6.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this section.
The Trustee may resign at any time by so notifying the Company. The
Holders of a majority in principal amount of the Notes then outstanding may, by
written notice to the Trustee, remove the Trustee by so notifying the Trustee
and the Company. The Company, by notice to the Trustee, shall remove the Trustee
if:
(a) the Trustee fails to comply with Section 6.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or public officer takes charge of the trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Notes then outstanding may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10 any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and the Company. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee, subject to the Lien provided for in
Section 6.07.
SECTION 6.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 6.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA ss.
310(b). Nothing herein shall prevent the Trustee from filing with the Commission
the application referred to in the second-to-last paragraph of TIA ss. 310(b).
SECTION 6.11. PREFERENTIAL COLLECTIONS OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), except with respect to
any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned
or been removed is subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 7
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 7.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.
If (a) the Company delivers to the Trustee all outstanding Notes (other
than Notes replaced pursuant to Section 2.07) for cancellation or (b) all
outstanding Notes have become due and payable and the Company irrevocably
deposits with the Trustee as trust funds solely for the benefit of the Holders
for that purpose funds sufficient to pay at maturity the principal of and all
accrued interest on all outstanding Notes (other than Notes replaced pursuant to
Section 2.07), and if, in either case, the Company pays all other sums payable
hereunder by the Company, then, subject to Section 7.06, this Indenture shall
cease to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
SECTION 7.02. DEFEASANCE AND DISCHARGE OF INDENTURE.
The Company will be deemed to have paid and will be discharged from any
and all obligations in respect of the Notes on the 123rd day after the date of
the deposit referred to in clause (i) hereof, and the provisions of this
Indenture will no longer be in effect with respect to the Notes, in each case
subject to the penultimate paragraph of this Section 7.03, and the Trustee, at
the reasonable request of and at the expense of the Company, shall execute
proper instruments acknowledging the same, except as to (a) rights of
registration of transfer and exchange, (b) substitution of apparently mutilated,
defaced, destroyed, lost or stolen Notes, (c) rights of Holders to receive
payments of principal thereof and interest thereon, (d) the Company's
obligations under Section 3.02, (e) the rights, obligations and immunities of
the Trustee hereunder including, without limitation, those arising under Section
6.07 hereof, (f) the rights of the Holders as beneficiaries of this Indenture
with respect to the property so deposited with the Trustee payable to all or any
of them and (g) the rights, obligations and immunities which survive as provided
in the penultimate paragraph of this Section 7.02; provided that the following
conditions shall have been satisfied:
(i) with reference to this Section 7.02, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirement of Section 6.10) or
Paying Agent (other than the Company or a Subsidiary or Affiliate of the
Company) and conveyed all right, title and interest for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders, in and to, (A) money in an amount, (B) U.S. Government Obligations
that, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one Business Day
before the due date of any payment referred to in this clause (i), money in
an amount or (C) a combination thereof in an amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, without consideration of any reinvestment of interest
and after payment of all federal, state and local taxes or other fees,
charges and assessments in respect thereof payable by the Trustee or Paying
Agent, the principal of and interest on the outstanding Notes when due;
provided that the Trustee or Paying Agent shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal and interest with respect to
the Notes;
(ii) such deposit shall not result in or constitute a Default or
result in a breach or violation of, or constitute a Default under, any
other agreement or instrument to which the Company is a party or by which
it is bound;
(iii) no Default shall have occurred and be continuing on the
date of such deposit or during the period ending on the 123rd day after
such date of deposit;
(iv) the Company shall have delivered to the Trustee (A) either
(1) a ruling directed to the Trustee received from the Internal Revenue
Service to the effect that the Holders will not recognize income, gain or
loss for federal income tax purposes as a result of the Company's exercise
of its option under this Section 7.02 and will be subject to federal income
tax on the same amount and in the same manner and at the same times as
would have been the case if such option had not been exercised or (2) an
Opinion of Counsel from recognized tax counsel licensed to practice law in
the United States (who may not be an employee of the Company) to the same
effect as the ruling described in clause (1), which must refer to and be
based upon a ruling to that effect published by the Internal Revenue
Service, unless there has been a change in the applicable federal income
tax law since the date of this Indenture such that a ruling from the
Internal Revenue Service is no longer required and (B) an Opinion of
Counsel to the effect that (1) the creation of the defeasance trust does
not violate the Investment Company Act of 1940, and (2) the Holders of the
Notes have a valid security interest in the trust funds subject to no prior
Liens under the New York Uniform Commercial Code;
(v) the Company shall have delivered to the Trustee an Opinion of
Counsel licensed to practice law in Bermuda to the effect that under the
laws of Bermuda, the Holders of the Notes (other than Bermuda Persons) will
not recognize gain for Bermuda tax purposes and payments from the
defeasance trust to any such Holder will not be subject to withholding
payments under the laws of Bermuda; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.02 have been complied with.
Notwithstanding the foregoing clause (i), prior to the end of the 123
day period referred to in clause (iv)(B)(2) above, none of the Company's
obligations under this Indenture shall be discharged. Subsequent to the end of
such 123-day period with respect to this Section 7.02, the Company's obligations
in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.12, 3.01, 3.02, 3.06, 6.07,
7.04, 7.05 and 7.06 shall survive until the Notes are no longer outstanding.
Thereafter, only the Company's obligations in Sections 6.07, 7.04, 7.05 and 7.06
shall survive. If and when a ruling from the Internal Revenue Service or Opinion
of Counsel referred to in clause (iv)(A) above is able to be provided
specifically without regard to, and not in reliance upon, the continuance of the
Company's obligations under Section 3.01, then the Company's obligations under
such Section 3.01 shall cease upon delivery to the Trustee of such ruling or
Opinion of Counsel and compliance with the other conditions precedent provided
for herein relating to the defeasance contemplated by this Section 7.02.
After any such irrevocable deposit and the fulfillment of the other
requirements of this Section 7.02, the Trustee upon request shall acknowledge in
writing the discharge of the Company's obligations under the Notes and this
Indenture except for those surviving obligation in the immediately preceding
paragraph.
SECTION 7.03. DEFEASANCE OF CERTAIN OBLIGATIONS.
The Company may omit to comply with any term, provision or condition
set forth in clauses (v) and (vi) of Section 4.01 and Section 3.03 through 3.23,
and clause (c) of Section 5.01 with respect to clauses (v) and (vi) of Section
4.01 and Sections 3.03 through 3.23, and clauses (d), (e) and (f) of Section
5.01 shall be deemed not to be Events of Default, in each case with respect to
the outstanding Notes if:
(i) with reference to this Section 7.03, the Company has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee (or another trustee satisfying the requirements of Section 6.10) or
Paying Agent (other than the Company or a Subsidiary or Affiliate of the
Company) and conveyed all right, title and interest for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders, in and to, (A) money in an amount, (B) U.S. Government Obligations
that, through the payment of interest and principal in respect thereof in
accordance with their terms, will provide, not later than one Business Day
before the due date of any payment referred to in this clause (i), money in
an amount or (C) a combination thereof in an amount, sufficient, in the
opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge, without consideration of any reinvestment of interest
and after payment of all federal, state and local taxes or other fees,
charges and assessments in respect thereof payable by the Trustee or Paying
Agent, the principal of and interest on the outstanding Notes when due;
provided that the Trustee or Paying Agent shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to the payment of such principal and interest with respect to
the Notes;
(ii) such deposit will not result in or constitute a Default or
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by which
it is bound;
(iii) no Default shall have occurred and be continuing on the
date of such deposit;
(iv) the Company has delivered to the Trustee (A) an Opinion of
Counsel from recognized tax counsel licensed to practice law in the United
States (who may not be an employee of the Company) to the effect that the
Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and defeasance of certain obligations
and will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred; and (B) an Opinion of Counsel to
the effect that (1) the creation of the defeasance trust does not violate
the Investment Company Act of 1940, and (2) the Holders of the Notes have a
valid security interest in the trust funds subject to no prior Liens under
the New York Uniform Commercial Code;
(v) the Company shall have delivered to the Trustee an Opinion of
Counsel licensed to practice law in Bermuda to the effect that under the
laws of Bermuda the Holders of the Notes (other than Bermuda Persons) will
not recognize gain for Bermuda tax purposes and payments from the
defeasance trust to any such Holder will not be subject to withholding
payments under the laws of Bermuda; and
(vi) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 7.03 have been complied with.
SECTION 7.04. APPLICATION OF TRUST MONEY.
Subject to Section 7.06 of this Indenture, the Trustee or Paying Agent
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 7.02 or 7.03 of this Indenture, as the case may be, and
shall apply the deposited money and the money from U.S. Government Obligations
in accordance with this Indenture to the payment of principal of and interest on
the Notes. The Trustee shall be under no obligation to invest such money or U.S.
Government Obligations except as it may agree with the Company and in no event
shall the Trustee have any liability for, or in respect of, any such investment
made as agreed with the Company.
SECTION 7.05. REPAYMENT TO COMPANY.
Subject to Sections 6.07, 7.02 and 7.03 of this Indenture, the Trustee
and the Paying Agent shall promptly pay to the Company upon written request any
excess money held by them at any time and thereupon shall be relieved from all
liability with respect to such money. The Trustee and the Paying Agent shall pay
to the Company upon written request any money held by them for the payment of
principal or interest that remains unclaimed for two years; PROVIDED, HOWEVER,
that the Company shall if requested by the Trustee or the Paying Agent, give the
Trustee or such Paying Agent indemnification reasonably satisfactory to it
against any and all liability which may be incurred by it by reason of such
payment; and provided, further, that the Trustee or such Paying Agent before
being required to make any payment may cause to be published at the request and
expense of the Company once in a newspaper of general circulation in the City of
New York or mail to each Holder entitled to such money at such Holder's address
as set forth in the Note Register notice that such money remains unclaimed and
that after a date specified therein (which shall be at least 30 days from the
date of such publication or mailing) any unclaimed balance of such money then
remaining will be repaid to the Company. After payment to the Company, Holders
entitled to such money must look to the Company for payment as general creditors
unless an applicable law designates another person, and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
SECTION 7.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 7.02 or 7.03 of this
Indenture, as the case may be, by reason of any legal proceedings or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 7.02 or 7.03 of this Indenture, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with Section
7.02 or 7.03 of this Indenture, as the case may be; provided that, if the
Company has made any payment of principal of or interest on any Notes because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE 8
AMENDMENTS AND SUPPLEMENTS
SECTION 8.01. WITHOUT CONSENT OF HOLDERS.
(a) The Company and the Trustee may amend or supplement the Indenture
without notice to or the consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 4;
(3) to provide for uncertificated Notes in addition to
certificated Notes; provided, however, that the uncertificated
Notes are issued, in registered form for purposes of Section
163(f) of the Internal Revenue Code of 1986, as amended, or in a
manner such that the uncertificated Notes are described in Section
163(f)(2)(b) of the Code;
(4) to add guarantees with respect to the Notes or to further
secure the Notes;
(5) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred
upon the Company;
(6) to comply with the requirements of the Commission in
connection with qualification of this Indenture under the TIA;
(7) to establish and maintain the Liens of the Security
Agreement; or
(8) to make any change that does not adversely affect the
rights of any Noteholder.
(b) The Company and the Trustee may amend or supplement the Security
Agreement without notice to or the consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 4;
(3) to add additional guarantees with respect to the Notes or
to further secure the Notes;
(4) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred
upon the Company;
(5) to comply with the requirements of the Commission in
connection with qualification of this Indenture under the TIA;
(6) to establish and maintain the Liens of the Security
Agreement; or
(7) to make any change that does not adversely affect the
rights of any Noteholder.
(c) After an amendment or supplement under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing
such amendment or supplement. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect the validity of
an amendment or supplement under this section.
SECTION 8.02. WITH CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture, the
Notes or the Security Agreement with the written consent of the Holders of a
majority in principal amount of the Notes then outstanding. However, without the
consent of each Noteholder affected, an amendment or supplement under this
Section may not
(a) reduce the amount of Notes the Holders of which must consent to an
amendment or supplement;
(b) reduce the rate of or change the time for payment of interest on
any Note;
(c) change the currency or consideration of payment of the Notes;
(d) reduce the principal of or change the Stated Maturity of any Note;
(e) reduce the premium payable upon the redemption of any Note or
change the time at which any Note may or shall be redeemed in accordance with
Article 10;
(f) amend, change or modify the obligations of the Company to make or
consummate any offer pursuant to Section 3.08 or 3.12 or modify any of the
provisions or definitions with respect thereto;
(g) permit the release or termination of all or substantially all of
the Liens of the Collateral Agent on the Collateral or deprive the Holders of
all or substantially all of the security afforded by the Liens of the Security
Agreement or this Indenture;
(h) release the Company from its obligations under this Indenture other
than pursuant to Article 4 hereof;
(i) permit the creation of any Lien (other than Liens permitted under
Section 3.07) on the Collateral or any part thereof or terminate the Liens of
the Collateral Agent on the Collateral or any part thereof or deprive the
holders of the security afforded by the Liens of the Security Agreement or this
Indenture;
(j) change the obligation of the Company to pay Additional Amounts; and
(k) make any change in Section 5.04, Section 5.07 or this second
sentence of this Section 8.02.
It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof. After an amendment or supplement under this Section becomes
effective, the Company shall mail to Noteholders a notice briefly describing
such amendment or supplement. The failure to give such notice to all
Noteholders, or any defect therein, shall not impair or affect the validity of
an amendment or supplement under this section.
SECTION 8.03. SUPPLEMENTAL INDENTURES.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a supplemental indenture that complies with the TIA as then in
effect.
SECTION 8.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or supplement under this Article or a waiver under
Article 6 becomes effective, a consent to it by a Holder of a Note is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
a Note if the Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
After an amendment or supplement becomes effective, it shall bind every
Noteholder.
SECTION 8.05. NOTATION ON OR EXCHANGE OF NOTES.
If an amendment changes the terms of a Note, the Trustee may require
the Holder of the Note to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note regarding the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Note shall not affect the validity of such amendment.
SECTION 8.06. TRUSTEE TO SIGN AMENDMENTS.
The Trustee shall sign any supplemental indenture which sets forth an
amendment or supplement authorized pursuant to this Article if the amendment or
supplement does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may but need not sign it. In
signing such supplemental indenture the Trustee shall be entitled to receive,
and (subject to Section 6.01) shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel stating that such supplemental
indenture is authorized or permitted by this Indenture and, with respect to an
amendment or supplement pursuant to Section 8.02, evidence of the consents of
Holders required in connection therewith.
SECTION 8.07. FIXING OF RECORD DATES.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to take any action under this
Indenture by vote or consent. Except as provided herein, such record date shall
be the later of 30 days prior to the first solicitation of such consent or vote
or the date of the most recent list of Noteholders furnished to the Trustee
pursuant to Section 2.05 prior to such solicitation. If a record date is fixed,
those Persons who were Noteholders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to take such action by vote
or consent or to revoke any vote or consent previously given, whether or not
such Persons continue to be Holders after such record date; PROVIDED, HOWEVER,
that unless such vote or consent is obtained from the Holders (or their duly
designated proxies) of the requisite principal amount of outstanding Notes prior
to the date which is the 120th day after such record date, any such vote or
consent previously given shall automatically and without further action by any
Holder be canceled and of no further effect.
ARTICLE 9
SECURITY AGREEMENT
SECTION 9.01. SECURITY AGREEMENT. (a) In order to secure the
obligations of the Company under this Indenture, the Company, the Collateral
Agent and the Trustee have entered into the Security Agreement to create the
Liens of the Security Agreement and for related matters.
(b) The Company covenants and agrees that it has full right, power and
lawful authority to grant, bargain, sell, release, convey, hypothecate, assign,
mortgage, pledge and transfer the Collateral, in the manner and form done, or
intended to be done, in this Indenture and the Security Agreement. The Company
further covenants and agrees that the Security Agreement and the actions taken
hereunder and thereunder create, or will create, a perfected first priority Lien
on the Collateral which they purport to create, prior to all other Liens.
(c) As among the Holders, the Collateral as now or hereafter
constituted shall be held for the equal and ratable benefit of the Holders
without preference, priority or distinction of any thereof over any other by
reason of difference in time of issuance, sale or otherwise, as security for the
Company's obligations under this Indenture and the Notes.
SECTION 9.02. HOLDERS' CONSENT. Each Holder, by its acceptance of a
Note, (i) consents and agrees to the terms of the Security Agreement and
authorizes and approves the Trustee's execution thereof, and (ii) agrees that
such Holder is bound by the terms thereof and that such Holder may not take any
action contrary thereto.
SECTION 9.03. TRUST INDENTURE ACT OF 1939 REQUIREMENTS. The release of
any Collateral from the terms of the Security Agreement or the release of, in
whole or in part, the Liens created by the Security Agreement, will not be
deemed to impair the Liens of the Security Agreement in contravention of the
provisions hereof and of the Security Agreement if and to the extent the
Collateral or Liens are released pursuant to the terms of the Security
Agreement. Each of the Holders acknowledges that a release of Collateral or
Liens strictly in accordance with the terms of the Security Agreement will not
be deemed for any purpose to be an impairment of the Liens in contravention of
the terms of this Indenture or the Security Agreement.
SECTION 9.04. RELEASE UPON TERMINATION OF THE COMPANY'S OBLIGATIONS.
(a) In the event that the Company delivers an Officers' Certificate
certifying that the Company has complied with Sections 7.01 and, if applicable,
Section 7.02 with respect to the Notes, or that all obligations under this
Indenture have been satisfied and discharged in accordance with this Indenture,
the Trustee shall deliver to the Company and the Collateral Agent on behalf of
the Holders, a notice disclaiming, relinquishing and releasing (without recourse
or warranty) any and all rights it has in respect of the Collateral and any
other instruments or documents evidencing or effecting such release in such form
as the Company may reasonably request.
(b) Any release of any portion of the Collateral made strictly in
compliance with the provisions of this Section 9.04 shall not be deemed to
impair the Liens created by the Security Agreement in contravention of the
provisions of this Indenture.
(c) RELEASE OF COLLATERAL. To the extent applicable, the Company shall
comply with clause Section 314(d) of the TIA relating to the release of property
from the Lien of the Security Agreement.
SECTION 9.05. RETIREMENT OF NOTES. The Trustee shall direct the
Collateral Agent to release such amounts held in the Special Proceeds Account
and the Trustee shall apply such amounts from time to time to the payment
(including any premium) of the principal on the Notes, at maturity or to the
purchase thereof pursuant to a Special Proceeds Offer together with accrued
interest, if any, required to be paid in connection with any such purchase or
payment at maturity as the Company shall request, upon receipt by the Trustee of
the following:
(a) a Board Resolution directing the application pursuant to this
Section 9.05 of the Collateral and prescribing the method of purchase, the price
or prices to be paid and the maximum principal (including any premium) amount of
Notes of such Series to be purchased and any other provisions of this Indenture
governing such purchase;
(b) an Officers' Certificate dated not more than five days prior to the
date of the relevant application, stating that all conditions precedent and
covenants herein and in the Security Agreement provided for relating to such
application of the Collateral have been complied with; and
(c) an Opinion of Counsel stating that the documents and the amounts in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, in
immediately available funds, if any, which have been or are therewith delivered
to and deposited with the Collateral Agent or the Trustee, as the case may be,
for the purposes of payment of the principal (including any premium) and
interest on the Notes at maturity or to purchase thereof pursuant to a Special
Proceeds Offer conform to the requirements of this Indenture and the Security
Agreement and that all conditions precedent herein and in the Security Agreement
provided for relating to such application of Collateral have been complied with.
Upon compliance with the foregoing provisions of this Section 9.05, the
Trustee shall apply funds released from the Collateral Accounts as directed and
specified by such Board Resolution up to, but not exceeding, the principal
amount (including any premium) of the Notes so paid or purchased together with
accrued interest, if any, required to be paid in connection with any such
purchase or payment at maturity.
A Board Resolution expressed to be irrevocable directing the
application of funds from the Collateral Accounts under this Section 9.05 to the
payment of the principal (including any premium), and accrued interest if any,
shall, for all purposes of this Indenture, be deemed the equivalent of the
deposit of money with the Trustee in trust for such purpose. Such funds from the
Collateral Accounts shall not, after compliance with the foregoing provisions of
this Section 9.05, be deemed to be part of the Collateral.
ARTICLE 10
REDEMPTION
SECTION 10.01. NOTICE TO TRUSTEE.
If the Company elects to redeem Notes pursuant to paragraph 7 or 8 of
the Notes, it shall notify the Trustee of the redemption date and the principal
amount (not including any premium in respect thereof) of Notes to be redeemed
and the paragraph of the Notes pursuant to which the redemption will occur.
The Company shall give the notices provided for in this Section at
least 40 days before the redemption date (unless a shorter period shall be
satisfactory to the Trustee). Such notice shall be accompanied by an Officers'
Certificate to the effect that such redemption will comply with the conditions
herein. If fewer than all the Notes are to be redeemed, the record date relating
to such redemption shall be selected by the Company and given to the Trustee,
which record date shall be not less than 15 days after the date of notice to the
Trustee.
SECTION 10.02. SELECTION OF NOTES TO BE REDEEMED.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed on a pro rata basis or by lot or by any other
method that complies with applicable legal and securities exchange requirements,
if any, and that the Trustee consider fair and appropriate and in accordance
with methods generally used at the time of selection by fiduciaries in similar
circumstances, PROVIDED, HOWEVER, that no Note of $1,000 in original principal
amount or less shall be redeemed in part. The Trustee shall make the selection
not more than 45 days before the redemption date from outstanding Notes not
previously called for redemption. The Trustee may select for redemption portions
of the principal of Notes that have denominations larger than $1,000. Notes and
portions of them selected by the Trustee shall be in amounts of $1,000 or whole
multiples of $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
SECTION 10.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail a notice of redemption to each Holder whose Notes are to
be redeemed at the address set forth for such Holder on the register referred to
in Section 2.03. Such notice, once delivered by the Company or to the Trustee,
will be irrevocable.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) the name and address of the Paying Agent;
(d) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(e) if fewer than all the outstanding Notes are to be redeemed, the
aggregate principal amount of the Notes to be redeemed together with the
identification and principal amounts of the particular Notes to be redeemed;
(f) that, unless the Company defaults in making the redemption payment,
interest accrued to the date fixed for redemption and any Additional Amounts
will be paid as specified in the notice and that interest on Notes called for
redemption ceases to accrue on and after the redemption date; and
(g) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's written request, made at least 45 days before a
redemption date, unless a shorter period shall be satisfactory to the Trustee,
the Trustee shall give the notice of redemption provided for in this section in
the Company's name and at its expense.
SECTION 10.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the redemption date at the redemption price. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued and unpaid interest to the redemption date.
SECTION 10.05. DEPOSIT OF REDEMPTION PRICE.
Prior to 11:00 a.m., eastern standard time, the redemption date, the
Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary
of the Company is the Paying Agent, shall segregate and hold in trust) money
sufficient to pay the redemption price of and accrued and unpaid interest on all
Notes to be redeemed on that date other than Notes or portions of Notes called
for redemption which have been delivered by the Company to the Trustee for
cancellation.
SECTION 10.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
execute and the Trustee shall authenticate for the Holder (at the Company's
expense) a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 10.07. OPTIONAL REDEMPTION FOR CHANGES IN WITHHOLDING TAXES.
The Notes may be redeemed, in whole but not in part, at the option of
the Company, at any time, upon giving of notice as provided in Section 10.03 at
a redemption price equal to 100% of the principal amount at maturity thereof,
together with accrued and unpaid interest to the date fixed by the Company for
redemption, if the Company determines and certifies to the Trustee in an
Officers' Certificate immediately prior to the giving of such notice that, as a
result of any change in, or amendment to, the laws or treaties (including any
regulations or rulings promulgated thereunder) of Bermuda or such other
jurisdiction in which the Company is then organized, as the case may be (or any
political subdivision or taxing authority thereof or therein), affecting
taxation, or any change in official position regarding the application,
interpretation or administration of such laws, treaties, regulations or rulings
(including a holding, judgment or order by a court of competent jurisdiction),
which change, amendment, application, interpretation or administration is
announced or becomes effective on or after the date hereof with respect to any
payment due or to become due under the Notes or this Indenture, the Company is,
or on the next interest payment date would be, required to pay Additional
Amounts on or in respect thereof and such obligation to pay Additional Amounts
cannot be avoided by the taking of reasonable measures by the Company; provided
that no such notice of redemption shall be given earlier than 90 days prior to
the earliest date on which the Company would be obligated to make such
withholding if a payment in respect of the Notes were then due.
Prior to the publication and mailing of any notice of redemption of the
Notes pursuant to Section 10.03, the Company will deliver to the Trustee an
Opinion of Counsel or written advice of a qualified tax expert, such counsel or
tax expert being reasonably acceptable to the Trustee, that the Company has or
will become obligated to pay Additional Amounts as a result of such change,
amendment, application, interpretation or administration.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by any of TIA ss. 310 to 317, inclusive, through operation of
TIA ss. 318(c), such imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication shall be in writing and delivered in
person, or mailed by first-class mail (certified, return receipt requested),
addressed as follows:
if to the Company:
AES China Generating Co., Ltd.
3/f(w) Golden Bridge Plaza
No. 1(A) Jianguomenwai Avenue
Beijing, 10020, People's Republic of China
Attention: Chief Financial Officer
if to the Trustee:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group / Debt Administration
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications. Any
notice to the Trustee under this Indenture shall be deemed given only when
received by the Trustee at the address specified in this Section 11.02.
Any notice or communication to a Noteholder shall be mailed by
first-class mail to the Noteholder's address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Noteholders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall, if requested by the Trustee,
furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent (including any covenants compliance with which constitutes
a condition precedent), if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory
to the Trustee stating that, in the opinion of such counsel (which may rely upon
an Officers' Certificate as to factual matters), all such conditions precedent
have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each Officers' Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in this Indenture other
than certificates provided pursuant to Section 3.09 shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or a meeting of
Noteholders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. SUCCESSORS; NO RECOURSE AGAINST OTHERS.
(a) All agreements of the Company in this Indenture and the Notes shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.
(b) All liability of the Company described in the Notes insofar as it
relates to any director, officer, employee or stockholder, as such, of the
Company is waived and released by each Noteholder.
SECTION 11.08. DUPLICATE ORIGINALS.
The parties may sign any number of copies of this Indenture. One signed
copy is enough to prove this Indenture.
SECTION 11.09. OTHER PROVISIONS.
The first certificate pursuant to Section 3.09 shall be for the fiscal
year ending November 30, 1997.
The reporting date for Section 6.06 is November 30 of each year. The
first reporting date is November 30, 1997.
SECTION 11.10. GOVERNING LAW.
The laws of the State of New York govern this Indenture and the Notes,
without regard to the conflicts of laws rules thereof.
SECTION 11.11. CONSENT TO JURISDICTION.
The Company irrevocably submits to the jurisdiction of the United
States District Court for the Southern District of New York, any court in the
State of New York located in the city and county of New York, and any appellate
court from any thereof, in any action, suit or proceeding brought against it and
related to or in connection with the Notes or this Indenture or for recognition
or enforcement of any judgment and the Company irrevocably and unconditionally
agrees that all claims in respect of any such suit or action or proceeding may
be heard or determined in such New York State court or, to the extent permitted
by law, in such federal court. The Company agrees that a final judgment in any
such action, suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. To
the extent permitted by applicable law, the Company hereby waives and agrees not
to assert by way of motion, as a defense or otherwise in any such suit, action
or proceeding, any claim that it is not personally subject to the jurisdiction
of such courts, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that the Notes or this Indenture or the subject matter hereof or thereof may
not be litigated in or by such courts. The Company hereby irrevocably appoints
and designates The Prentice-Hall Corporation System, Inc., as its true and
lawful attorney and duly authorized agent for acceptance of service of legal
process. The Company agrees that service of such process upon The Prentice-Hall
Corporation System, Inc. at 375 Hudson Street, New York, New York 10014-3660,
shall constitute personal service of such process upon the Company. Nothing
contained in this Agreement shall limit or affect the rights of any party hereto
to serve process in any other manner permitted by law or (other than the
Company) to initiate legal proceedings against the Company or its property in
the courts of any jurisdiction.
SECTION 11.12. JUDGMENT CURRENCY.
If for the purpose of obtaining judgement in any court it is necessary
to convert a sum due hereunder to the Holder of a Note in U.S. dollars into
another currency (the "judgment currency"), the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures such Holder
could purchase U.S. dollars with the judgment currency in New York City two
Business Days preceding the day on which final judgment is given. The obligation
of the Company in respect of any sum payable by it to the Holder of a Note
hereunder shall, notwithstanding any judgment in a judgment currency other than
U.S. dollars, be discharged only to the extent that on the Business Day
following receipt by such Holder of any sum adjudged to be so due in the
judgment currency, such Holder may in accordance with normal banking procedures
purchase U.S. dollars with the judgment currency; if the amount of the U.S.
dollars so purchased is less than the sum originally due upon the Note, the
Company agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify such Holder against such loss, and if the amount of the U.S.
dollars so purchase exceeds the sum originally due to such Holder, such Holder
agrees to remit to the Company such excess, provided that such Holder shall have
no obligation to remit any such excess as long as the Company shall have failed
to pay such Holder any obligations due and payable under this Indenture or such
Note, in which case such excess may be applied to such obligations of the
Company hereunder in accordance with the terms of this Indenture or such Note.
SECTION 11.13. EFFECT OF HEADINGS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 11.14. WAIVER OF IMMUNITY.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgement, attachment in aid or
execution, or otherwise) with respect to itself or its property, such party
hereby irrevocably waives such immunity in respect of its obligations hereunder
to the extent permitted by applicable law and, without limiting the generality
of the foregoing, agrees that the waivers set forth in this paragraph shall have
effect to the fullest extent permitted under the Foreign Sovereign Immunities
Act of 1976 of the United States and are intended to be irrevocable for purposes
of such Act.
SECTION 11.15. TAX CONSIDERATIONS.
It is the intention of the Company that for U.S. Federal, state and
local income tax purposes: (i) neither the Noteholders nor the Trustee shall be
at any time the owner of the Collateral for U.S. Federal, state or local tax
purposes and (ii) the trust estate created hereby is intended solely to be a
security arrangement and not a trust and neither the Trustee nor the Noteholders
shall file any returns, reports or other documents or take any position
inconsistent therewith for U.S. Federal, state or local tax law purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as set forth on the first page hereof.
(SEAL) AES CHINA GENERATING CO. LTD.
By: /s/ Jeffrey A. Safford
---------------------------------
Jeffrey A. Safford
Vice President, Chief Financial
Officer and Secretary
Attest:
/s/ Paul T. Hanrahan
---------------------------------
Paul AT. Hanrahan
President and Chief Executive
Officer
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Dorothy Robinson
---------------------------------
Dorothy Robinson
Assistant Secretary
Attest:
/s/ Peter M. Lagatta
---------------------------------
Peter M. Lagatta
Assistant Treasurer
<PAGE>
EXHIBIT A
(Form of Face of Note)
[The following two paragraphs are to be reproduced on the Global Note.]
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co., or such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co., or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until it is exchanged in whole or in part for Notes in
definitive registered form, this certificate may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
AES CHINA GENERATING CO. LTD.
10 1/8% Notes Due 2006
$180,000,000
No. CUSIP No.: 000983AA4
AES China Generating Co. Ltd., a corporation organized under the laws
of Bermuda (the "Company"), promises to pay to Cede & Co., or registered
assigns, the principal sum of One Hundred Eighty Million United States dollars
(US$180,000,000) on December 15, 2006.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Note are set forth on the reverse hereof.
Such provisions shall for all purposes have the same effect as though fully set
forth at this place.
This Note shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly signed by the Trustee acting under
the Indenture.
A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer under its corporate
seal.
Date: December 19, 1996
AES CHINA GENERATING CO. LTD.
By:---------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION:
BANKERS TRUST COMPANY, as Trustee,
certifies that this is one
of the Notes
referred to in the Indenture.
By:--------------------------------
Authorized Signature
A-2
<PAGE>
(Form of Reverse of Note)
AES CHINA GENERATING CO. LTD.
10 1/8% Notes Due 2006
(1) INDENTURE. The Note is one of a duly authorized issue of debt
securities (the "Notes") of the Company limited to $180,000,000 in aggregate
principal amount issued under an Indenture dated as of December 19, 1996 (the
"Indenture") among the Company and Bankers Trust Company, a New York banking
Corporation, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss.77aaa-77bbbb) (the "TIA").
Capitalized terms used herein but not defined are used as defined in the
Indenture. The Notes are subject to all such terms, and Noteholders are referred
to the Indenture and the TIA for a statement of such terms.
(2) RANKING. The Notes rank at least pari passu in right of payment
with all existing and future unsecured Indebtedness of the Company.
(3) SECURITY AGREEMENT. As provided in the Security Agreement dated as
of December 19, 1996, among the Company, Bankers Trust Company, as Trustee, and
Bankers Trust Company, as collateral agent (the "Collateral Agent"), the
Company's obligations under the Indenture and the Notes are secured by a lien
on, and a security interest in, the Collateral granted in favor of the
Collateral Agent for the benefit of the Trustee on behalf of the Noteholders.
The rights of the Trustee in and to the Collateral are governed by the terms of
the Security Agreement.
(4) INTEREST. The Company promises to pay interest on the principal
amount of this Note at the rate per annum shown above. The Company will pay
interest semiannually on June 15 and December 15 of each year, commencing June
15, 1997, to Holders of record on June 1 and December 1 of each year,
respectively. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from December 19,
1996. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
(5) METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the persons who are registered Holders of Notes
at the close of business on the record date next preceding the interest payment
date even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
A-3
<PAGE>
(6) PAYING AGENT, REGISTRAR. Initially, Bankers Trust Company, a New
York banking corporation, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice. The Company may act as
Paying Agent or Registrar.
(7) OPTIONAL REDEMPTION. Except as set forth in the following
paragraph, the Company may not redeem the Notes prior to December 15, 2001. On
and after such date, the Company may redeem the Notes at any time, in whole, or
from time to time in part, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date,
if redeemed during the 12-month period beginning December 15:
YEAR REDEMPTION PRICE
---- ----------------
2001 105.063%
2002 102.531%
2003 and thereafter 100.000%
(8) OPTIONAL REDEMPTION FOR CHANGES IN WITHHOLDING TAXES. The Notes may
be redeemed, in whole but not in part, at the option of the Company, at any
time, at a redemption price equal to 100% of the principal amount at maturity
thereof, together with accrued and unpaid interest to the date fixed by the
Company for redemption, if as a result of any change in, or amendment to, the
laws or treaties (including any regulations or rulings promulgated thereunder)
of Bermuda or such other jurisdiction in which the Company is then organized, as
the case may be (or any political subdivision or taxing authority thereof or
therein), affecting taxation, or any change in official position regarding the
application, interpretation or administration of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application, interpretation or
administration is announced or becomes effective on or after the Date hereof
with respect to any payment due or to become due under the Notes or the
Indenture, the Company is, or on the next interest payment date would be,
required to pay Additional Amounts on or in respect thereof.
(9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at the address set forth for such Holder on the register
referred to in Section 2.03 of the Indenture. Unless the Company shall default
in payment of the redemption price plus accrued interest, on and after the
redemption date interest ceases to accrue on such Notes or portions of them
called for redemption. Notes in denominations larger than $1,000 may be redeemed
in part but only in whole multiples of $1,000.
(10) DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption (except, in the case of a Note to be redeemed in part, the portion
thereof not to be
A-4
<PAGE>
redeemed) or for a period of 15 days before a selection of Notes to be redeemed
or 15 days before an interest payment date.
(11) CHANGE OF CONTROL OFFER. Upon a Change of Control Triggering
Event, the Company shall make an offer to purchase the Notes then outstanding at
a purchase price of not less that 101% of the principal amount thereof
(excluding any premium), plus accrued and unpaid interest to the date of
purchase.
(12) EXCESS PROCEEDS OFFER. To the extent of the balance of the Net
Available Cash after application thereof after certain Asset Sales in accordance
with the Indenture, the Company shall make an offer to purchase the Notes at a
purchase price of not less than 100% of the principal amount (excluding any
premium), plus accrued and unpaid interest to the date of purchase.
(13) SPECIAL PROCEEDS OFFER. The Company shall, within 30 days after
the occurrence of any Special Proceeds Event, cause all Special Proceeds with
respect to such Special Proceeds Event to be deposited into a Collateral Account
with the Collateral Agent and the Company shall, to the extent of the amounts on
deposit in the Special Proceeds collateral account, subject to certain
exceptions, make an offer to purchase the Notes at a purchase price of not less
that 101% of the principal amount (excluding any premium), plus accrued and
unpaid interest to the date of purchase.
(14) DEFEASANCE. Subject to certain conditions, the obligations under
the Notes and the Indenture may be terminated, at any time, if the Company
deposits with the Trustee money, U.S. Government Obligations or a combination
thereof for the payment of principal and interest on the Notes to redemption or
maturity, as the case may be.
(15) PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes, except that interest (other than
defaulted interest) will be paid to the person that was the registered Holder on
the relevant record date for such payment of interest.
(16) AMENDMENTS AND WAIVERS. Subject to certain exceptions, (i) the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of a majority in principal amount of the Notes then outstanding; and
(ii) any existing default may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. Without the consent
of any Noteholder, the Indenture or the Notes may be amended or supplemented to
cure any ambiguity, omission, defect or inconsistency, to provide for assumption
of Company's obligations to Noteholders, to provide for uncertificated Notes in
addition to or in place of certificated Notes (subject to certain conditions),
to provide for additional guarantees with respect to the Notes or to further
secure the Notes, to add additional covenants or surrender any of the Company's
rights, to comply with the requirements of the Commission in connection with
qualification under the TIA, to establish or maintain the Liens of the Security
Agreement or to make any change that does not adversely affect the rights of any
Noteholder.
(17) REMEDIES. If an Event of Default occurs and is continuing, the
Trustee or Holders of at least 25% in aggregate principal amount of the Notes
then outstanding may declare
A-5
<PAGE>
all the Notes to be due and payable immediately. Noteholders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require an indemnity before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the Notes then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Noteholders notice of any continuing default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest. The Company must furnish an annual compliance
certificate to the Trustee.
(18) NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based thereon or, in respect thereof. Each Noteholder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
(19) AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of an authorized signatory of the Trustee or an
authenticating agent thereof.
(20) ABBREVIATIONS. Customary abbreviations may be used in the name of
a Noteholder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY NOTEHOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE, WHICH HAS IN IT THE TEXT OF THIS NOTE.
REQUESTS MAY BE MADE TO: AES CHINA GENERATING CO. LTD., 9/F., ALLIED CAPITAL
RESOURCES BLDG., 32-38 ICE HOUSE STREET, CENTRAL, HONG KONG, ATTN.: CHIEF
FINANCIAL OFFICER.
A-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint -------------------- agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date:------------------------ Signed:-------------------------------
-------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPTION OF HOLDER TO ELECT PURCHASE FORM
If you wish to elect to have this Note purchased by the Company pursuant to
Section 3.08 or 3.12 of the Indenture, check this box: [ ]
If you wish to elect to have only part of this Note purchased by the Company
pursuant to Section 3.08 or 3.12 of the Indenture, state the amount: $----------
A-7
<PAGE>
*As set forth in the Indenture, any purchase pursuant to Section 3.08
or 3.12 is subject to proration in the event the offer is oversubscribed.
Date:------------------------ Signed:-------------------------------
-------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:------------------------------------------------------------
A-8
Exhibit 4.2
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co., or such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co., or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
Unless and until it is exchanged in whole or in part for Notes in
definitive registered form, this certificate may not be transferred except as a
whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or by DTC or any such nominee to a successor Depositary or a
nominee of such successor Depositary.
AES CHINA GENERATING CO. LTD.
10 1/8 % Notes Due 2006
$180,000,000
No. CUSIP No.: 000983AA4
AES China Generating Co. Ltd., a corporation organized under the laws
of Bermuda (the "Company"), promises to pay to Cede & Co., or registered
assigns, the principal sum of One Hundred Eighty Million United States dollars
(US$180,000,000) on December 15, 2006.
Interest Payment Dates: June 15 and December 15
Record Dates: June 1 and December 1
Additional provisions of this Note are set forth on the reverse hereof.
Such provisions shall for all purposes have the same effect as though fully set
forth at this place.
This Note shall not be valid or obligatory until the certificate of
authentication hereon shall have been duly signed by the Trustee acting under
the Indenture.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officer under its corporate
seal.
Date: December 19, 1996
AES CHINA GENERATING CO. LTD.
By:---------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION:
BANKERS TRUST COMPANY, as Trustee,
certifies that this is one
of the Notes
referred to in the Indenture.
By:-------------------------------
Authorized Signature
<PAGE>
Reverse of Note
AES CHINA GENERATING CO. LTD.
10 1/8 % Notes Due 2006
(1) INDENTURE. The Note is one of a duly authorized issue of debt
securities (the "Notes") of the Company limited to $180,000,000 in aggregate
principal amount issued under an Indenture dated as of December 19, 1996 (the
"Indenture") among the Company and Bankers Trust Company, a New York banking
Corporation, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code ss.ss.77aaa-77bbbb) (the "TIA").
Capitalized terms used herein but not defined are used as defined in the
Indenture. The Notes are subject to all such terms, and Noteholders are referred
to the Indenture and the TIA for a statement of such terms.
(2) RANKING. The Notes rank at least pari passu in right of payment
with all existing and future unsecured Indebtedness of the Company.
(3) SECURITY AGREEMENT. As provided in the Security Agreement dated as
of December 19, 1996, among the Company, Bankers Trust Company, as Trustee, and
Bankers Trust Company, as collateral agent (the "Collateral Agent"), the
Company's obligations under the Indenture and the Notes are secured by a lien
on, and a security interest in, the Collateral granted in favor of the
Collateral Agent for the benefit of the Trustee on behalf of the Noteholders.
The rights of the Trustee in and to the Collateral are governed by the terms of
the Security Agreement.
(4) INTEREST. The Company promises to pay interest on the principal
amount of this Note at the rate per annum shown above. The Company will pay
interest semiannually on June 15 and December 15 of each year, commencing June
15, 1997, to Holders of record on June 1 and December 1 of each year,
respectively. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from December 19,
1996. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
(5) METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the persons who are registered Holders of Notes
at the close of business on the record date next preceding the interest payment
date even though Notes are canceled after the record date and on or before the
interest payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Company will pay principal and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal and interest by check
payable in such money. It may mail an interest check to a Holder's registered
address.
(6) PAYING AGENT, REGISTRAR. Initially, Bankers Trust Company, a New
York banking corporation, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice. The Company may act as
Paying Agent or Registrar.
(7) OPTIONAL REDEMPTION. Except as set forth in the following
paragraph, the Company may not redeem the Notes prior to December 15, 2001. On
and after such date, the Company may redeem the Notes at any time, in whole, or
from time to time in part, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest to the redemption date,
if redeemed during the 12-month period beginning December 15:
YEAR REDEMPTION PRICE
- ---- ----------------
2001 ....................................105.063%
2002 ....................................102.531%
2003 and thereafter ....................................100.000%
(8) OPTIONAL REDEMPTION FOR CHANGES IN WITHHOLDING TAXES. The Notes may
be redeemed, in whole but not in part, at the option of the Company, at any
time, at a redemption price equal to 100% of the principal amount at maturity
thereof, together with accrued and unpaid interest to the date fixed by the
Company for redemption, if as a result of any change in, or amendment to, the
laws or treaties (including any regulations or rulings promulgated thereunder)
of Bermuda or such other jurisdiction in which the Company is then organized, as
the case may be (or any political subdivision or taxing authority thereof or
therein), affecting taxation, or any change in official position regarding the
application, interpretation or administration of such laws, treaties,
regulations or rulings (including a holding, judgment or order by a court of
competent jurisdiction), which change, amendment, application, interpretation or
administration is announced or becomes effective on or after the Date hereof
with respect to any payment due or to become due under the Notes or the
Indenture, the Company is, or on the next interest payment date would be,
required to pay Additional Amounts on or in respect thereof.
(9) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at the address set forth for such Holder on the register
referred to in Section 2.03 of the Indenture. Unless the Company shall default
in payment of the redemption price plus accrued interest, on and after the
redemption date interest ceases to accrue on such Notes or portions of them
called for redemption. Notes in denominations larger than $1,000 may be redeemed
in part but only in whole multiples of $1,000.
(10) DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and whole multiples of $1,000.
The transfer of Notes may be registered and Notes may be exchanged as provided
in the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption (except, in the case of a Note to be redeemed in part, the portion
thereof not to be redeemed) or for a period of 15 days before a selection of
Notes to be redeemed or 15 days before an interest payment date.
(11) CHANGE OF CONTROL OFFER. Upon a Change of Control Triggering
Event, the Company shall make an offer to purchase the Notes then outstanding at
a purchase price of not less that 101% of the principal amount thereof
(excluding any premium), plus accrued and unpaid interest to the date of
purchase.
(12) EXCESS PROCEEDS OFFER. To the extent of the balance of the Net
Available Cash after application thereof after certain Asset Sales in accordance
with the Indenture, the Company shall make an offer to purchase the Notes at a
purchase price of not less than 100% of the principal amount (excluding any
premium), plus accrued and unpaid interest to the date of purchase.
(13) SPECIAL PROCEEDS OFFER. The Company shall, within 30 days after
the occurrence of any Special Proceeds Event, cause all Special Proceeds with
respect to such Special Proceeds Event to be deposited into a Collateral Account
with the Collateral Agent and the Company shall, to the extent of the amounts on
deposit in the Special Proceeds collateral account, subject to certain
exceptions, make an offer to purchase the Notes at a purchase price of not less
that 101% of the principal amount (excluding any premium), plus accrued and
unpaid interest to the date of purchase.
(14) DEFEASANCE. Subject to certain conditions, the obligations under
the Notes and the Indenture may be terminated, at any time, if the Company
deposits with the Trustee money, U.S. Government Obligations or a combination
thereof for the payment of principal and interest on the Notes to redemption or
maturity, as the case may be.
(15) PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes, except that interest (other than
defaulted interest) will be paid to the person that was the registered Holder on
the relevant record date for such payment of interest.
(16) AMENDMENTS AND WAIVERS. Subject to certain exceptions, (i) the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of a majority in principal amount of the Notes then outstanding; and
(ii) any existing default may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding. Without the consent
of any Noteholder, the Indenture or the Notes may be amended or supplemented to
cure any ambiguity, omission, defect or inconsistency, to provide for assumption
of Company's obligations to Noteholders, to provide for uncertificated Notes in
addition to or in place of certificated Notes (subject to certain conditions),
to provide for additional guarantees with respect to the Notes or to further
secure the Notes, to add additional covenants or surrender any of the Company's
rights, to comply with the requirements of the Commission in connection with
qualification under the TIA, to establish or maintain the Liens of the Security
Agreement or to make any change that does not adversely affect the rights of any
Noteholder.
(17) REMEDIES. If an Event of Default occurs and is continuing, the
Trustee or Holders of at least 25% in aggregate principal amount of the Notes
then outstanding may declare all the Notes to be due and payable immediately.
Noteholders may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee may require an indemnity before it enforces the Indenture
or the Notes. Subject to certain limitations, Holders of a majority in principal
amount of the Notes then outstanding may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Noteholders notice of any
continuing default (except a Default in payment of principal or interest) if it
determines that withholding notice is in their interest. The Company must
furnish an annual compliance certificate to the Trustee.
(18) NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based thereon or, in respect thereof. Each Noteholder by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
(19) AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of an authorized signatory of the Trustee or an
authenticating agent thereof.
(20) ABBREVIATIONS. Customary abbreviations may be used in the name of
a Noteholder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts
to Minors Act).
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY NOTEHOLDER UPON WRITTEN REQUEST AND
WITHOUT CHARGE A COPY OF THE INDENTURE, WHICH HAS IN IT THE TEXT OF THIS NOTE.
REQUESTS MAY BE MADE TO: AES CHINA GENERATING CO. LTD., 9/F., ALLIED CAPITAL
RESOURCES BLDG., 32-38 ICE HOUSE STREET, CENTRAL, HONG KONG, ATTN.: CHIEF
FINANCIAL OFFICER.
<PAGE>
- --------------------------------------------------------------------------------
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ---------------------- agent to transfer this Note on
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date:------------------------ Signed:-------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPTION OF HOLDER TO ELECT PURCHASE FORM
If you wish to elect to have this Note purchased by the Company
pursuant to Section 3.08 or 3.12 of the Indenture, check this box: [ ]
If you wish to elect to have only part of this Note purchased by the
Company pursuant to Section 3.08 or 3.12 of the Indenture, state the amount:
$-----------------
<PAGE>
*As set forth in the Indenture, any purchase pursuant to Section 3.08
or 3.12 is subject to proration in the event the offer is oversubscribed.
Date:------------------------ Signed:-------------------------------
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee:------------------------------------------------------------
Exhibit 4.3
SECURITY AGREEMENT
among
AES CHINA GENERATING CO. LTD.,
BANKERS TRUST COMPANY,
as Trustee
and
BANKERS TRUST COMPANY,
as Collateral Agent
------------------------------
Dated as of December 19, 1996
------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS.............................................. 1
SECTION 1.02. OTHER DEFINITIONS........................................ 4
SECTION 1.03. GENERIC TERMS............................................ 4
ARTICLE 2
THE COLLATERAL
SECTION 2.01. GRANT OF SECURITY INTEREST IN THE COLLATERAL............. 4
SECTION 2.02. PRIORITY................................................. 5
SECTION 2.03. THE SECURED PARTY'S INTEREST............................. 5
SECTION 2.04. NO TRANSFER OF DUTIES.................................... 6
SECTION 2.05. PERFECTION OF SECURITY INTEREST.......................... 6
SECTION 2.06. MAINTENANCE OF COLLATERAL................................ 7
SECTION 2.07. TERMINATION DATE AND RELEASE OF RIGHTS................... 8
ARTICLE 3
THE COLLATERAL ACCOUNTS
SECTION 3.01. ESTABLISHMENT OF THE COLLATERAL ACCOUNTS................. 8
SECTION 3.02. DEPOSITS IN THE COLLATERAL ACCOUNTS...................... 9
SECTION 3.03. MAINTENANCE OF THE DEBT SERVICE RESERVE ACCOUNT.......... 9
SECTION 3.04. INVESTMENT OF FUNDS IN THE COLLATERAL ACCOUNTS........... 10
SECTION 3.05. GENERAL PROVISIONS REGARDING THE COLLATERAL ACCOUNTS..... 11
SECTION 3.06. DISTRIBUTIONS FROM THE DEBT SERVICE RESERVE ACCOUNT...... 12
SECTION 3.07. DISTRIBUTION FROM THE SEPCIAL PROCEEDS ACCOUNT........... 12
ARTICLE 4
COVENANTS OF THE COMPANY
SECTION 4.01. PRESERVATION OF COLLATERAL............................... 13
SECTION 4.02. OPTIONS AS TO COLLATERAL................................. 13
SECTION 4.03. NOTICES.................................................. 14
SECTION 4.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALING OF ASSETS... 14
SECTION 4.05. NONINTERFERENCE, ETC. ................................... 14
SECTION 4.06. COMPANY CHANGES.......................................... 14
ARTICLE 5
REMEDIES ON OCCURRENCE OF AN INDENTURE DEFAULT
SECTION 5.01. LIQUIDATION AND SALE OF COLLATERAL....................... 15
SECTION 5.02. WAIVER OF AN INDENTURE DEFAULT........................... 16
i
<PAGE>
SECTION 5.03. RESTORATION OF RIGHTS AND REMEDIES....................... 16
SECTION 5.04. NO REMEDY EXCLUSIVE...................................... 17
ARTICLE 6
THE SECURED PARTY
SECTION 6.01. APPOINTMENT.............................................. 17
SECTION 6.02. SECURED PARTY'S AUTHORITY................................ 17
SECTION 6.03. DEGREE OF CARE........................................... 17
ARTICLE 7
THE COLLATERAL AGENT
SECTION 7.01. APPOINTMENT AND POWERS................................... 18
SECTION 7.02. PERFORMANCE OF DUTIES.................................... 18
SECTION 7.03. LIMITATION ON LIABILITY.................................. 19
SECTION 7.04. RELIANCE UPON DOCUMENTS.................................. 19
SECTION 7.05. SUCCESSOR COLLATERAL AGENT............................... 20
SECTION 7.06. INDEMNIFICATION.......................................... 22
SECTION 7.07. COMPENSATION AND REIMBURSEMENT........................... 22
SECTION 7.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT... 22
SECTION 7.09. WAIVER OF SET-OFFS....................................... 23
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. FURTHER ASSURANCES....................................... 23
SECTION 8.02. WAIVER................................................... 24
SECTION 8.03. AMENDMENTS............................................... 24
SECTION 8.04. SEVERABILITY............................................. 24
SECTION 8.05. NOTICES; PAYMENTS AND TRANSFERS OF FUNDS................. 24
SECTION 8.06. TERMS OF THIS AGREEMENT.................................. 26
SECTION 8.07. ASSIGNMENT; THIRD-PARTY RIGHTS........................... 26
SECTION 8.08. CONSENT OF SECURED PARTY................................. 26
SECTION 8.09. TRIAL BY JURY WAIVED..................................... 26
SECTION 8.10. GOVERNING LAW............................................ 26
SECTION 8.11. CONSENT TO JURISDICTION.................................. 26
SECTION 8.12. COUNTERPARTS............................................. 27
SECTION 8.13. HEADINGS................................................. 27
ii
<PAGE>
SECURITY AGREEMENT, dated as of December 19, 1996, among AES China
Generating Co. Ltd., a corporation organized under the laws of Bermuda (the
"Company"), Bankers Trust Company, a New York banking corporation, in its
capacity as Trustee (as defined below) under the Indenture (as defined below),
and Bankers Trust Company, a New York banking corporation, in its capacity as
collateral agent (the "Collateral Agent").
R E C I T A L S
---------------
WHEREAS, the Company proposes to issue U.S.$180,000,000 aggregate
principal amount of its 10 1/8 % Notes due 2006 (the "Notes");
WHEREAS, the Notes are being issued pursuant to an Indenture, dated as
of the date hereof (as amended or supplemented from time to time in accordance
with the terms thereof, the "Indenture"), among the Company and Bankers Trust
Company, as trustee (together with its permitted successors thereunder and any
successor trustee appointed pursuant to the provisions thereof, the "Trustee");
WHEREAS, as security for the payment and performance of all of the
obligations of the Company now or hereafter existing under this Agreement, the
Notes and the Indenture, the Company has agreed to grant a security interest in
all of its right, title and interest in and to the Collateral (as defined
herein) on the terms and conditions set forth herein.
A G R E E M E N T S
-------------------
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the adequacy, receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree for the benefit of the Trustee on
behalf of the Noteholders as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein without
definition are used as defined in the Indenture. In addition, the following
terms shall have the following meanings:
"APPROVED DEPOSITARY" means The Depository Trust Company and its
successors.
"AUTHORIZED OFFICERS" means (i) with respect to the Company, Authorized
Officers as defined in the Indenture and (ii) with respect to the Trustee or the
Collateral Agent, Trust Officers as defined in the Indenture.
"CLOSING DATE" means December 19, 1996.
"COLLATERAL ACCOUNTS" means the Debt Service Reserve Account and the
Special Proceeds Account.
"COLLATERAL AGENT" means Bankers Trust Company in its capacity as
collateral agent on behalf of the Secured Party, including its successors in
interest, until a successor Person shall have become the Collateral Agent
pursuant to Section 7.05, and thereafter "Collateral Agent" shall mean such
successor Person.
"COLLATERAL MANAGEMENT RIGHTS" means the powers and rights granted to
the Secured Party in Section 6.02.
"DEBT PAYMENT RESERVE" means, on any date, an amount equal to the
aggregate amount of interest due and payable on the Notes on the next succeeding
Interest Payment Date.
"DOLLAR," "DOLLAR" and "$" means the lawful currency of the United
States.
"ELIGIBLE ACCOUNT" means a Dollar denominated demand deposit account
that (i) is maintained with a depository institution or trust company, the
principal offices of which are located in the Borough of Manhattan, The City and
State of New York, and which is organized and existing under the laws of the
United States or the State of New York and subject to supervision and
examination by U.S. federal or New York State banking authorities and the
long-term unsecured debt obligations of which are assigned a rating of "A-" or
higher by S&P and "A3" or higher by Moody's or the short-term unsecured debt
obligations of which are assigned a rating of "A-1" by S&P and "P-1" by Moody's
or (ii) is a segregated Dollar denominated trust account with the Collateral
Agent.
"ENFORCEMENT EXPENSES" means all reasonable costs, expenses, attorneys'
fees and disbursements, accountants' fees and disbursements, fees and
disbursements of financial and technical advisors and all other sums expended or
incurred by the Collateral Agent in connection with the exercise of any duty,
obligation, right, power, option, privilege or remedy under this Agreement,
including, without limitation, in connection with (i) the protection or
preservation of any Collateral, (ii) any action, litigation or proceeding
relating to any of the Collateral, and (iii) the foreclosure on, and acquisition
or sale of, the Collateral or any portion thereof.
"INDENTURE DEFAULT" means "Event of Default" as defined in the
Indenture.
"INTERIM RESERVE" means an amount equal to all scheduled payments of
interest on the Notes due and payable on or prior to June 15, 1998.
"LIQUIDATION PROCEEDS" means all cash or other property received by the
Collateral Agent (without making any deduction for Enforcement Expenses) which
represents proceeds from the sale or other disposition of any of the Collateral.
"NOTEHOLDER" means the registered holder of any Note pursuant to the
terms thereof and the Indenture.
"PAYMENT DATE" means any date on which interest on the Notes is due and
payable.
"PRC" means the Peoples's Republic of China.
"SECURED PARTY" means the Trustee, acting for the benefit of the
Noteholders, the Trustee in its individual capacity and the Collateral Agent, as
their respective interests may appear.
"SECURITY INTEREST" means the Lien on and security interest in the
Collateral granted pursuant to Section 2.01(a).
"TERMINATION DATE" means the earlier of (i) the date on which all
amounts payable on the Notes and pursuant to the Indenture and this Agreement
have been paid in full and (ii) the date on which the Company shall have
satisfied the provisions of Section 7.03 or 7.04 of the Indenture.
"U.S." or "UNITED STATES" means the United States of America.
"UNCERTIFICATED U.S. GOVERNMENT SECURITY" means any Dollar Permitted
Investment which is issued in the form of an entry made on the records of a
Federal Reserve Bank.
SECTION 1.02. OTHER DEFINITIONS.
TERMS DEFINED IN SECTION
----- ------------------
Collateral......................................................2
Collateral Agent.........................................Preamble
Company..................................................Preamble
Debt Service Reserve Account..............................3.01(a)
Dollar Permitted Investments.................................3.04
Indenture................................................Recitals
Maturing Securities..........................................3.04
Notes....................................................Recitals
Notices......................................................8.05
Secured Obligations..........................................2.03
Secured Party's Interest.....................................2.03
Special Proceeds Account..................................3.01(b)
Trustee..................................................Recitals
SECTION 1.03. GENERIC TERMS. The terms "hereof," "herein" or
"hereunder," unless otherwise modified by more specific reference, shall refer
to this Agreement in its entirety. Unless otherwise indicated in context, the
terms "Article" or "Section" shall refer to an Article or Section of this
Agreement. The definition of a term shall include the singular, the plural, the
past, the present, the future, the active and the passive forms of such term.
ARTICLE 2
THE COLLATERAL
SECTION 2.01. GRANT OF SECURITY INTEREST IN THE COLLATERAL
(a) In order to secure the full and punctual payment of, and the
performance of all of the Secured Obligations, the Company hereby assigns,
grants, pledges, transfers and conveys to the Collateral Agent, for the benefit
of the Secured Party, on behalf of the Noteholders, all of its right, title and
interest, including, to the fullest extent permitted by law, all rights, powers
and options (but none of the obligations, except to the extent required by law)
in and to, and hereby grants to the Collateral Agent, for the benefit of the
Secured Party, on behalf of the Noteholders, a lien on, and security interest
in, all of such party's right, title and interest in and to the following assets
(all being collectively referred to as the "Collateral"):
(i) the Collateral Accounts and all amounts on deposit
therein at any time, including all amounts deposited therein on the
Closing Date;
(ii)all of the Company's right, title and interest in and to
investments (including Dollar Permitted Investments) made with proceeds
of the property described in clause (i) above or made with amounts on
deposit in the Collateral Accounts; and
(iii) all distributions, revenues, products, substitutions,
benefits, profits and proceeds, in whatever form, of any of the
foregoing including, without limitation, any monies, agreements or
securities received by the Collateral Agent in accordance with Section
7.02 or 7.03 of the Indenture.
(b) In order to effectuate the provisions and purposes of this
Agreement, including the perfection of the Security Interest in the Collateral
granted pursuant to Section 2.01(a), the Company shall take such steps as are
necessary or reasonably requested by the Collateral Agent or the Secured Party
for the preservation, protection, perfection, maintenance or continuation of
such Security Interest, including, but not limited to, the execution and filing
of appropriate financing statements or notices regarding the granting of a Lien
on the Collateral in the United States, Hong Kong, the PRC or Bermuda.
SECTION 2.02. PRIORITY. The Company intends the Security Interest in
favor of the Secured Party to be prior to all other Liens in respect of the
Collateral and will take all actions necessary to obtain and maintain, in favor
of the Collateral Agent, for the benefit of the Secured Party, a first priority
lien on, and a first priority perfected security interest in, the Collateral.
Subject to the provisions hereof specifying the rights and powers of the Secured
Party from time to time to control certain specified matters relating to the
Collateral, the Secured Party shall have all of the rights, remedies and
resources with respect to the Collateral afforded a secured party under the
Uniform Commercial Code of the State of New York and all other applicable law in
addition to, and not in limitation of, the other rights, remedies and recourse
granted to the Secured Party by this Agreement or any other law relating to the
creation and perfection of liens on, and security interests in, the Collateral.
SECTION 2.03. THE SECURED PARTY'S INTEREST. The "Secured Party's
Interest" shall mean the interest of the Trustee in the Collateral, to secure
the full and punctual payment of all amounts from time to time owing by the
Company to the Noteholders, the Trustee and the Collateral Agent, and the
performance by the Company of all of its other obligations from time to time
owing to the Noteholders, the Trustee, and the Collateral Agent under this
Agreement, the Notes and the Indenture (collectively, the "Secured Obligations")
including, without duplication, the following:
(a) the payment of the principal of the Notes, together with all
interest and Additional Amounts, if any, thereon and any other amounts payable
with respect thereto as provided therein or in the Indenture;
(b) the payment of all other amounts payable to, and the performance of
all other obligations owing to, the Noteholders, the Trustee and the Collateral
Agent pursuant to the terms of this Agreement, the Notes and the Indenture,
including, without limitation, all reasonable costs, expenses, attorneys' fees
and disbursements, accountants' fees and disbursements and other sums, fees and
disbursements expended or incurred by the Trustee or any of its officers,
directors, employees or agents (including the Collateral Agent) in connection
with the exercise by the Trustee or any such officers, directors, employees or
agents, pursuant to this Agreement, the Notes or the Indenture, of any duty,
obligation, right, power, option, privilege or remedy as collateral assignee of
the Collateral, hereunder or under the Notes, to the extent not previously
recovered by the Trustee, including, without limitation, all reasonable
attorneys' fees and expenses and all other reasonable and necessary amounts paid
or advanced from time to time by the Trustee or any of its agents (A) in
connection with (1) the protection or preservation of the Security Interest, (2)
the enforcement of any rights or remedies hereunder or under the Notes and (3)
any action, litigation or proceeding relating to this Agreement or the Notes, or
the Collateral or any portion thereof; and (B) by reason of or in connection
with the acquisition, ownership or sale of the Collateral or any portion
thereof.
The Secured Party's Interest, and all right, title and interest of the
Secured Party in, to and under the Collateral and this Agreement shall continue
until terminated pursuant to Section 2.07.
Section 2.04. No Transfer of Duties. The Security Interest is granted
as security only and shall not impose any obligation on the Secured Party or the
Collateral Agent to perform or observe any term, covenant, condition or
agreement of the Company herein or with respect to any of the Collateral or
impose any liability on the Secured Party or the Collateral Agent for any act or
omission on the part of the Company relating hereto or thereto or for any breach
of any representation or warranty on the part of the Company contained herein or
therein or made in connection herewith or therewith.
SECTION 2.05. PERFECTION OF SECURITY INTEREST.
(a) Upon each investment of funds in the Collateral Accounts in Dollar
Permitted Investments which consist of Uncertificated U.S. Government
Securities, the Collateral Agent shall cause such Uncertificated U.S. Government
Securities to be held by the Collateral Agent as Collateral under this
Agreement.
(b) Upon each investment of funds in the Collateral Accounts in Dollar
Permitted Investments other than Uncertificated U.S. Government Securities or
securities which have been deposited with an Approved Depositary, the Collateral
Agent shall (i) cause the securities or other instruments evidencing such Dollar
Permitted Investments (A) in the case of instruments, to be issued in the name
of the Collateral Agent or its nominee and (B) to be delivered to the Collateral
Agent either in suitable form for transfer by delivery or accompanied by duly
executed instruments of transfer or assignment in blank, with signatures
appropriately guaranteed, to be held by the Collateral Agent as Collateral under
this Agreement, and (ii) in the case of any Dollar Permitted Investment
described in clause (c) of the definition thereof, (A) cause the securities
underlying such obligation to be delivered to the Collateral Agent either in
suitable form for transfer by delivery or accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, to be held by the Collateral Agent as Collateral under this
Agreement, and (B) notify the counterparty to such obligation that such
obligation is subject to the Lien of this Agreement.
(c) Upon each investment of funds in the Collateral Accounts in Dollar
Permitted Investments which have been deposited with an Approved Depositary, the
Collateral Agent shall cause the Approved Depositary to make appropriate entries
to the account of the Collateral Agent on the books of such Approved Depositary
to reflect the transfer of all securities which have been deposited with such
Approved Depositary to the Collateral Agent and to deliver to the Collateral
Agent a written confirmation of the book-entry transfer of such securities into
such account, to be held by the Collateral Agent as Collateral under this
Agreement.
(d) If required for the validity or perfection of the Security Interest
herein, on or prior to the Closing Date, the Company shall file in Bermuda any
registration statements that are necessary in connection with the execution and
delivery of this Agreement and the granting and perfection of the Security
Interest hereunder. The Company shall promptly notify the Collateral Agent of
any filings made pursuant to this Section 2.05(d) and deliver to the Collateral
Agent copies of such filings pursuant to the notice provisions set forth in
Section 8.05.
SECTION 2.06. MAINTENANCE OF COLLATERAL.
(a) SAFEKEEPING BY THE COLLATERAL AGENT. The Collateral Agent agrees to
maintain all Collateral received by it and all records and documents relating
thereto at the office of the Collateral Agent specified in Section 8.05. The
Collateral Agent shall keep all Collateral and documentation related thereto in
its possession separate and apart from all other property that it is holding in
its possession and from its own general assets and shall maintain accurate
records pertaining to the Dollar Permitted Investments, the Collateral Accounts
and all other Collateral in such a manner as shall enable the Secured Party and
the Company to verify the accuracy of such record keeping. The Collateral
Agent's books and records shall at all times show that the Collateral in its
possession is held by the Collateral Agent as agent of the Secured Party and is
not the property of the Collateral Agent. The Collateral Agent will promptly
report to the Trustee and the Company any failure on its part to hold the
Collateral as provided in this subsection 2.06(a) and will promptly take
appropriate action to remedy any such failure.
(b) ACCESS. The Collateral Agent shall permit each of the Company and
the Trustee, or its duly authorized representatives, attorneys, auditors or
designees, to inspect the Collateral in the possession of or otherwise under the
control of the Collateral Agent pursuant hereto at such reasonable times during
normal business hours as the Company or the Trustee may reasonably request with
prior written notice.
SECTION 2.07. TERMINATION DATE AND RELEASE OF RIGHTS. On the
Termination Date, the rights, remedies, powers, duties, authority and
obligations conferred on the Collateral Agent and the Secured Party pursuant to
this Agreement shall terminate and be of no further force and effect, and all
rights, remedies, powers, duties, authority and obligations of the Collateral
Agent and the Secured Party with respect to the Collateral shall be
automatically released. On the Termination Date, the Collateral Agent and the
Trustee will, at the expense of the Company, (i) execute such instruments of
transfer and release, in recordable form if necessary, in favor of the Company
as the Company may reasonably request, (ii) deliver any Collateral in its
possession to the Company or its designee, and (iii) otherwise transfer and
release the lien of this Agreement and transfer and release and deliver to the
Company or its designee the Collateral.
ARTICLE 3
THE COLLATERAL ACCOUNTS
SECTION 3.01. ESTABLISHMENT OF THE COLLATERAL ACCOUNTS.
(a) DEBT SERVICE RESERVE ACCOUNT. The Collateral Agent shall, on or
prior to the Closing Date, establish, in the Borough of Manhattan, The City and
State of New York, a segregated account, which shall be an Eligible Account,
designated "Debt Service Reserve Account - Bankers Trust Company, as Collateral
Agent under the Security Agreement dated as of December 19, 1996 with AES China
Generating Co. Ltd., et al." (the "Debt Service Reserve Account").
The Collateral Agent shall not commingle funds in the Debt Service
Reserve Account with any other moneys and shall hold all moneys deposited from
time to time in the Debt Service Reserve Account and all investments made with
such moneys as part of the Collateral.
(b) SPECIAL PROCEEDS ACCOUNT. Prior to the delivery to it by the
Company of any Special Proceeds, the Collateral Agent shall establish, in the
Borough of Manhattan, The City and State of New York, a segregated account,
which shall be an Eligible Account, designated "Special Proceeds Account
- -Bankers Trust Company, as Collateral Agent under the Security Agreement dated
as of December 19, 1996 with AES China Generating Co. Ltd., et al." (the
"Special Proceeds Account").
The Collateral Agent shall not commingle funds in the Special Proceeds
Account with any other moneys and shall hold all moneys deposited in the Special
Proceeds Account and all investments made with such moneys as part of the
Collateral.
SECTION 3.02. DEPOSITS IN THE COLLATERAL ACCOUNTS.
(a) On the Closing Date, the Company shall transfer to the Collateral
Agent for deposit by the Collateral Agent in the Debt Service Reserve Account an
amount equal to the Interim Reserve and the Debt Payment Reserve. Thereafter,
the Collateral Agent shall deposit in the Debt Service Reserve Account all
interest, principal and premium payments from Dollar Permitted Investments made
by the Collateral Agent with respect to the Collateral held in the Debt Service
Reserve Account.
(b) The Company shall transfer an amount equal to Special Proceeds to
the Collateral Agent for deposit in the Special Proceeds Account. If the Company
receives any Special Proceeds, such proceeds shall be deemed to have been
received in trust for the benefit of the Collateral Agent and shall be
transferred to the Collateral Agent for deposit in the Collateral Accounts as
soon as practicable. Thereafter, the Collateral Agent shall deposit in the
Special Proceeds Account all interest, principal and premium payments from
Dollar Permitted Investments made by the Collateral Agent with respect to the
Collateral held in the Special Proceeds Account.
SECTION 3.03. MAINTENANCE OF THE DEBT SERVICE RESERVE ACCOUNT. From the
Closing Date until June 15, 1998, the Company shall maintain on deposit with the
Collateral Agent an amount in the Debt Service Reserve Account in Dollars at
least equal to the sum of (i) the Interim Reserve, less the aggregate amount of
interest paid to Holders on all prior Interest Payment Dates, and (ii) the Debt
Payment Reserve. After June 15, 1998, and on or prior to the Stated Maturity of
the Notes, the Company shall be required to maintain on deposit in the Debt
Service Reserve Account an amount in Dollars at least equal to the Debt Payment
Reserve except that if funds in the Debt Service Reserve Account have been
withdrawn by the Collateral Agent and paid to the Trustee to pay interest due on
any Interest Payment Date, the Company shall have a period of 90 days after any
Interest Payment Date to make additional deposit into the Debt Service Reserve
Account such that the balance on deposit therein is at least equal to the Debt
Payment Reserve.
SECTION 3.04. INVESTMENT OF FUNDS IN THE COLLATERAL ACCOUNTS.
(a) So long as no Indenture Default shall have occurred and be
continuing, all funds in the Collateral Accounts shall be invested and
reinvested by the Collateral Agent in Dollar Permitted Investments in accordance
with written instructions given to the Collateral Agent by the Company or, in
the absence of such instructions, in the types of obligations as set forth in
clause (a) of the definition of "Dollar Permitted Investments" in the Indenture,
provided, however, that if any Indenture Default shall have occurred and be
continuing, the Collateral Agent shall invest funds in the Collateral Accounts
in Dollar Permitted Investments only in accordance with the written instructions
of the Trustee. If no written direction with respect to the Collateral Accounts
is received by the Collateral Agent during any period in which an Indenture
Default has occurred and is continuing, investment of funds in the Collateral
Accounts shall be made in the types of Dollar Permitted Investments that were
held by the Collateral Agent immediately prior to the occurrence of such
Indenture Default. All income or other gain from the investment of moneys
deposited in each Collateral Account shall be deposited in such Collateral
Account immediately upon receipt, and any loss resulting from the investment of
moneys deposited in either Collateral Account shall be charged to such
Collateral Account. Each investment made in the Debt Service Reserve Account
pursuant to this Section 3.04(a) on any date shall mature not later than the
Payment Date next succeeding the day such investment is made; provided, that if,
on the date of any investment, the Collateral Agent holds in the Debt Service
Reserve Account Dollar Permitted Investments maturing not later than the next
succeeding Payment Date ("Maturing Securities") and the aggregate principal and
interest payable on such Maturing Securities would be sufficient to pay all
amounts due on the Secured Obligations on such Payment Date, the Collateral
Agent shall invest any remaining funds in the Debt Service Reserve Account in
Dollar Permitted Investments which mature not later than the next succeeding
Payment Date for which Maturing Securities are insufficient to pay all amounts
then due on the Secured Obligations.
(b) Prior to or contemporaneously with the making of any investment
pursuant to Section , the Collateral Agent shall take such steps as may be
necessary to comply with the applicable provisions of Section 2.05.
SECTION 3.05. GENERAL PROVISIONS REGARDING THE COLLATERAL ACCOUNTS.
(a) Promptly upon the establishment (initially or upon any relocation)
of the Debt Service Reserve Account and the Special Proceeds Account, the
Collateral Agent shall advise the Company and the Trustee in writing of the name
of the officer of such depository institution who is responsible for overseeing
such Collateral Account, the Collateral Account number and the individuals whose
names appear on the signature cards for such Collateral Account, if applicable.
(b) Prior to the deposit of any funds therein pursuant hereto, the
Company shall cause each depository institution with which a Collateral Account
is established (including the Collateral Agent) to execute and deliver to the
Trustee an irrevocable written agreement, in form and substance satisfactory to
the Trustee, waiving, to the extent permitted under applicable law, (i) any
banker's or other statutory or similar Lien and (ii) any right of set-off or
other similar right under applicable law with respect to the Collateral Account
held by it and agreeing to notify the Company, the Collateral Agent and the
Trustee of any charge or claim against or with respect to the Collateral Account
held by it. The Collateral Agent shall give the Company and the Trustee prior
written notice of any change in the depositary institution in which any
Collateral Account is established or in any related Collateral Account
information. Anything herein to the contrary notwithstanding, unless consented
to by the Trustee in advance and in writing, the Collateral Agent shall not have
any right to change the depositary institution in which any Collateral Account
is established.
(c) On or before each Payment Date, the Collateral Agent shall prepare
a collateral report containing a description of the Collateral and setting forth
in reasonable detail the principal balance, as of the last day of the
immediately preceding month, of the Dollar Permitted Investments and shall
furnish copies of such report to the Trustee and the Company.
(d) If at any time either Collateral Account ceases to be an Eligible
Account, the Collateral Agent shall establish, in accordance with the
requirements of Section, a successor Collateral Account thereto which shall be
an Eligible Account at a depository institution acceptable to the Trustee.
(e) Any investment of funds in the Collateral Accounts shall be made in
accordance with Section in the name of the Collateral Agent or in the name of
any nominee of the Collateral Agent. Subject to the other provisions hereof, the
Collateral Agent shall have sole control over each such investment and the
income thereon, and any certificate or other instrument evidencing any such
investment, if any, shall be delivered directly to the Collateral Agent,
together with each document of transfer, if any, necessary to transfer title to
such investment to the Collateral Agent in a manner which complies with Section
2.05 and this section 3.05.
(f) All moneys on deposit in the Collateral Accounts, together with any
Dollar Permitted Investments in which such moneys may be invested or reinvested,
and any gains from such investments, shall constitute Collateral hereunder
subject to the Security Interest of the Collateral Agent for the benefit of the
Secured Party.
(g) Subject to Section 7.03, the Collateral Agent shall not be liable
for any loss on any Dollar Permitted Investment, except for losses attributable
to the failure of the Collateral Agent to comply with its obligations hereunder
or to make payments on Dollar Permitted Investments as to which the Collateral
Agent, in its commercial capacity, is obligated.
SECTION 3.06. DISTRIBUTIONS FROM THE DEBT SERVICE RESERVE ACCOUNT.
Unless an Indenture Default shall have occurred and be continuing, on each
Payment Date, the Collateral Agent shall withdraw and distribute funds from the
Debt Service Reserve Account in the following priorities:
FIRST, the Collateral Agent shall transfer to the Trustee in accordance
with Section an amount equal to the amount of interest due and payable
on the Notes on such Payment Date; provided that on each Payment Date
after June 15, 1998, the Collateral Agent shall only transfer such
amount if and to the extent it has received notice from the Trustee
that the Trustee has not received an amount from the Company that is
sufficient to pay the full amount of interest payable on such Payment
Date.
SECOND, the Collateral Agent shall transfer to the Trustee in
accordance with Section for release to the Company any amounts held by
the Collateral Agent in excess of the amounts required to be held by
the Collateral Agent pursuant to Section.
SECTION 3.07. DISTRIBUTION FROM THE SPECIAL PROCEEDS ACCOUNT. In the
event of a Special Proceeds Offer, the Collateral Agent shall transfer to the
Trustee in accordance with Section all funds in the Special Proceeds Account for
application by the Trustee in accordance with and subject to the provisions of
Section 3.12 and Article 10 of the Indenture.
ARTICLE 4
COVENANTS OF THE COMPANY
SECTION 4.01. PRESERVATION OF COLLATERAL. Subject to the rights, powers
and authorities granted to the Collateral Agent and the Secured Party in this
Agreement, the Company shall take such action as is necessary with respect to
the Collateral in order to preserve, maintain and service such Collateral and to
permit (subject to the rights of the Secured Party) the Collateral Agent to
perform its obligations with respect to such Collateral as provided herein. The
Company will do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, such instruments of transfer or take such
other steps or actions as may be necessary, or reasonably required by the
Trustee, to perfect the Security Interest granted hereunder in the Collateral,
to ensure that such Security Interest rank prior to all other Liens and to
preserve the priority of such Security Interest and the validity and
enforceability thereof. Upon a delivery or substitution of Collateral, the
Company shall, to the fullest extent possible, take such actions as are
necessary and appropriate and that may be taken by the Company to create for the
benefit of the Collateral Agent a valid first priority security interest in the
Collateral so delivered and to deliver such Collateral to the Collateral Agent,
free and clear of any other Lien, together with satisfactory assurances thereof,
and to pay any reasonable costs incurred by the Secured Party, the Collateral
Agent, the Company (including its agents) or otherwise in connection with such
delivery.
SECTION 4.02. OPINIONS AS TO COLLATERAL. Not more than 90 days nor less
than 30 days prior to each date on which the Company proposes to take any action
contemplated by Section 4.06, the Company shall, at its own cost and expense,
furnish to the Trustee and the Collateral Agent an Opinion of Counsel either (i)
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording, filing, rerecording, amendment and refiling of this
Agreement, any supplements and any other requisite documents and with respect to
the execution, filing, refiling or amendment of any financing statements and
continuation statements as are necessary to perfect, maintain and protect the
Security Interest of the Collateral Agent, on behalf of the Secured Party, in
the Collateral against all creditors of and purchasers from the Company, and
that such security Interest shall remain valid, effective and of a first
priority, and reciting the details of such action, or (ii) stating that, in the
opinion of such counsel, no such action is necessary to maintain such perfected
Security Interest. Such Opinion of Counsel shall describe each recording,
filing, rerecording, amendment and refiling of this Agreement, any supplements
and any other requisite documents and the execution and filing or refiling as
amended of any financing statements and continuation statements that will, in
the opinion of such counsel, be required to perfect, maintain and protect the
Security Interest of the Collateral Agent, on behalf of the Secured Party for a
period, if applicable, specified in the Opinion, continuing until a date not
earlier than 18 months from the date of such Opinion.
SECTION 4.03. NOTICES. In the event the Company acquires knowledge of
the occurrence and continuance of any Indenture Default or any event which, with
the giving of notice or lapse of time, or both, would become an Indenture
Default, the Company shall immediately give written notice thereof to the
Collateral Agent and the Trustee, setting forth the details thereof and the
action which the Company is taking or proposes to take with respect thereto.
SECTION 4.04. WAIVER OF STAY OR EXTENSION LAWS; MARSHALING OF ASSETS.
The Company covenants, to the fullest extent permitted by applicable law, that
it will not at any time insist on, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any appraisement, valuation, stay, extension
or redemption law wherever enacted, now or at anytime hereafter in force, in
order to prevent or hinder the enforcement of this Agreement or any sale of the
Collateral or any part thereof, or the possession thereof by any purchaser at
any sale under Article 7; and the Company, to the fullest extent permitted by
applicable law, for itself and all who may claim under it, hereby waives the
benefit of all such laws, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Secured Party or the Collateral
Agent, but will suffer and permit the execution of every such power as though no
such law had been enacted. The Company, for itself and all who may claim under
it, waives, to the fullest extent permitted by applicable law, all right to have
the Collateral marshaled upon any foreclosure or other disposition thereof.
SECTION 4.05. NONINTERFERENCE, ETC. The Company shall not (i) waive or
alter any of its rights under the Collateral (or any agreement or instrument
relating thereto) without the prior written consent of the Trustee; or (ii) fail
to pay any tax, assessment, charge or fee levied or assessed against the
Collateral, or fail to defend any action, if such failure to pay or defend may
be reasonably likely to adversely affect the priority or enforceability of the
Company's right, title or interest in and to the Collateral or the Collateral
Agent's Security Interest in the Collateral.
SECTION 4.06. COMPANY CHANGES
(a) CHANGE IN NAME, STRUCTURE, ETC. The Company shall not change its
name, identity, or corporate or legal structure in any manner unless, prior to
such change, such party shall have effected any necessary or appropriate
recordations of assignments or amendments thereto and filings of financing
statements or amendments thereto and shall have delivered to the Collateral
Agent and the Trustee an Opinion of Counsel of the type described in Section
4.02.
(b) RELOCATION OF COMPANY. The Company shall give the Trustee and the
Collateral Agent at least 15 Business Days prior written notice of any
relocation of its principal executive office. If the Company relocates (i) its
principal executive office or principal place of business from Beijing, PRC, or
(ii) the locations where it keeps or holds any Collateral from New York, New
York or any records relating to any Collateral from Beijing, PRC, it shall give
prior notice thereof to the Trustee and the Collateral Agent in accordance with
Section 8.05 and shall effect whatever appropriate recordations and filings are
necessary and shall provide an Opinion of Counsel to the Trustee and the
Collateral Agent, to the effect described in Section 4.06.
ARTICLE 5
REMEDIES ON OCCURRENCE OF AN INDENTURE DEFAULT
SECTION 5.01. LIQUIDATION AND SALE OF COLLATERAL. If an Indenture
Default has occurred and is continuing:
(a) The Trustee may exercise any and all Collateral Management Rights
and, in connection therewith, in its sole discretion, may elect to preserve all
or part of the Collateral and direct the Collateral Agent to collect and convert
into cash all or any part of the Collateral. If the Trustee directs the
Collateral Agent to collect and convert into cash all or any part of the
Collateral, the Collateral Agent shall sell, assign and deliver for cash the
whole or any part of the Collateral for cash, at public or private sale, in such
manner and upon such terms and conditions as the Trustee shall have directed in
writing; provided that, prior to any such sale, the Collateral Agent, on behalf
of the Secured Party, shall have given notice to the Company that it has been
directed by the Trustee to liquidate all or any part of the Collateral and shall
have given such other notices and taken such other steps as the Trustee has
advised the Collateral Agent in writing or as are required by law or regulation
to be given or taken prior to the sale of such property. Any sale shall be
conducted in a commercially reasonable manner. To the extent permitted by
applicable law, the Collateral Agent shall be authorized at any sale made under
this Section 5.01 (if the Trustee deems it advisable and directs the Collateral
Agent to do so) to restrict the prospective bidders or purchasers to Persons to
whom such sale may be made without registration under any applicable securities
laws. The Trustee and the Collateral Agent shall be entitled to obtain from the
Company all records and documentation in the possession of the Company
pertaining to any Collateral. Upon consummation of any such sale, the Trustee,
or the Collateral Agent acting on behalf of and at the direction of the Trustee,
shall have the right to assign, transfer, endorse and deliver to the purchaser
or purchasers thereof, free and clear of any Lien, the Collateral, or any
portion thereof or any interest therein, so sold. To facilitate the foregoing,
the Company hereby irrevocably appoints and empowers the Trustee and the
Collateral Agent, or either one acting alone, as its agents and
attorneys-in-fact, with full power of substitution, for the purpose of
executing, assigning and delivering and doing all things necessary to transfer
title to the Collateral, or any part thereof, in connection with a sale thereof
pursuant hereto. Each purchaser at any such sale shall hold the property
purchased by it absolutely free from any claim or right on the part of the
Company and the Secured Party; and the Company hereby irrevocably waives, to the
fullest extent permitted by applicable law, all rights of redemption, stay,
marshaling of assets or appraisal that the Company now has or may at any time in
the future have under applicable law or statute now existing or hereafter
enacted.
(b) In the event of any sale, collection, conversion or other
disposition into cash of the Collateral, or any part thereof, after deducting
any actual costs and expenses incurred in connection with any such disposition,
the Collateral Agent shall distribute the proceeds thereof to the Trustee for
distribution in accordance with the priorities set forth in the Indenture.
(c) The Collateral Agent and the Trustee, as the case may be, may
exercise the powers and rights granted by this Section 5.01, without notice or
demand to the Company, except as provided in Section 5.01(a).
SECTION 5.02. WAIVER OF AN INDENTURE DEFAULT. The Trustee, as Secured
Party, shall have the sole right to give effect hereunder to any waiver of an
Indenture Default pursuant to Section 5.04 of the Indenture by means of a
writing setting forth the terms, conditions and extent of such waiver, signed by
such Secured Party and delivered to the Collateral Agent and the Company. Any
such writing shall be binding on the Collateral Agent. Unless such writing
expressly provides to the contrary, the effect of any such writing shall extend
only to the specified event or occurrence which gave rise to the Indenture
Default so waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
SECTION 5.03. RESTORATION OF RIGHTS AND REMEDIE. If the Collateral
Agent or the Secured Party has instituted a proceeding to enforce any right or
remedy under this Agreement, and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Collateral
Agent or the Secured Party, then and in every such case the Company, the
Collateral Agent and the Secured Party shall, subject to any determination in
such proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Collateral
Agent and the Secured Party hereunder shall, subject to any determination in
such proceeding, continue as though no such proceeding had been instituted.
SECTION 5.04. NO REMEDY EXCLUSIVE. No right or remedy herein conferred
on or reserved to the Collateral Agent or the Secured Party hereunder is
intended to be exclusive of any other right or remedy, and every right or remedy
shall, to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at law, in
equity or otherwise; and each and every right, power and remedy, whether
specifically herein given or otherwise existing, may be exercised from time to
time and as often and in such order as may be deemed expedient by the Collateral
Agent or the Secured Party, and the exercise of any right, power or remedy shall
not be construed to be a waiver of the right to exercise at the same time or
thereafter any other right, power or remedy.
ARTICLE 6
THE SECURED PARTY
SECTION 6.01. APPOINTMENT. From and after the Closing Date until the
Termination Date, the Trustee shall be the Secured Party hereunder. No party
dealing with the Secured Party in connection with the exercise of its rights or
duties hereunder shall have any obligation to determine the right, power and
authority of the Secured Party to exercise such rights or the compliance of such
exercise with the provisions hereof, and each and every party may conclusively
rely on the existence of such right, power, authority and compliance.
SECTION 6.02. SECURED PARTY'S AUTHORIT. The Company hereby irrevocably
appoints the Secured Party its true and lawful attorney, with full power of
substitution, in the name of the Company, the Secured Party or otherwise, but at
the expense of the Company, to the extent permitted by law to exercise, at any
time and from time to time while any Indenture Default has occurred and is
continuing, any and all of the following powers with respect to all or any of
the Collateral: (i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue thereof, (ii) to
settle, compromise, compound, prosecute or defend any action or proceeding with
respect thereto, (iii) to sell, transfer, assign or otherwise deal with the same
or the proceeds thereof, and (iv) to extend the time of payment of any or all
thereof and to make any allowance or other adjustments with respect thereto;
provided that the foregoing powers and rights shall be exercised in accordance
with the provisions of Article 5 and Article 7.
SECTION 6.3. DEGREE OF CARE. Notwithstanding any term or provision of
this Agreement, the Secured Party shall incur no liability to the Company for
any action taken or omitted by the Secured Party in connection with the
Collateral, except for any gross negligence or wilfull misconduct on the part of
the Secured Party. The Secured Party shall be protected and shall incur no
liability to any such party in relying on the accuracy, acting in reliance on
the contents, and assuming the genuineness, of any notice, demand, certificate,
signature, instrument or other document believed by the Secured Party to be
genuine and to have been duly executed by the appropriate signatory, and (absent
manifest error or actual knowledge to the contrary) the Secured Party shall not
be required to make any independent investigation with respect thereto. The
Secured Party shall, at all times, be free independently to establish to its
reasonable satisfaction the existence or nonexistence, as the case may be, of
any fact the existence or nonexistence of which shall be a condition to the
exercise or enforcement of any right or remedy under this Agreement.
ARTICLE 7
THE COLLATERAL AGENT
SECTION 7.01. APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, the Secured Party hereby appoints Bankers Trust Company as
the Collateral Agent, and Bankers Trust Company hereby accepts such appointment
and agrees to act as Collateral Agent for the Secured Party, to maintain custody
and possession of the Collateral and to perform the other duties of the
Collateral Agent in accordance with the provisions of this Agreement. The
Secured Party hereby authorizes the Collateral Agent to take such action on its
behalf, and to exercise such rights, remedies, powers and privileges hereunder,
as the Secured Party may direct and as are specifically authorized to be
exercised by the Collateral Agent by the terms hereof, together with such
actions, rights, remedies, powers and privileges as are reasonably incidental
thereto. The Collateral Agent shall act on and in compliance with the
instructions of the Secured Party given in accordance with Section 8.05 promptly
following receipt of such instructions. Receipt of such instructions shall not
be a condition to the exercise by the Collateral Agent of its express duties
hereunder, except where this Agreement provides that the Collateral Agent is
permitted to act only following and in accordance with such instructions.
SECTION 7.02. PERFORMANCE OF DUTIES. Subject to the requirements of
this Agreement, the Collateral Agent may perform any of its duties hereunder by
or through agents, shall be entitled to consult with counsel and financial
advisors concerning matters pertaining to the agencies hereby created or its
duties hereunder and shall not be liable for actions taken, or omitted to be
taken, in good faith and in accordance with the advice of such counsel or
financial advisors. The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or as
directed by the Secured Party in accordance with Section 8.05. The Collateral
Agent shall not be required to take any discretionary actions hereunder, except
(i) at the direction and expense of the Secured Party given pursuant to Section
8.05 or (ii) as provided in Article 4 and Sections 3.05 and 3.06. The
relationship between the Collateral Agent and the Secured Party is that of agent
and principal only, and nothing herein shall be deemed to constitute the
Collateral Agent a trustee for the Secured Party or impose on the Collateral
Agent any obligations other than those for which express provision is made
herein.
SECTION 7.3. LIMITATION ON LIABILITY. Neither the Collateral Agent nor
the Secured Party, nor any of their respective directors, officers or employees,
shall be liable for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith, except that each of the Collateral Agent
and the Secured Party shall be liable for its own gross negligence or wilfull
misconduct; nor shall the Collateral Agent or the Secured Party be responsible
for the validity, effectiveness, value, sufficiency or enforceability against
the Company of this Agreement or the Collateral (or any part thereof).
Notwithstanding any term or provision of this Agreement, the Collateral Agent
shall incur no liability to the Company for any action taken or omitted by the
Collateral Agent in connection with the Collateral, except for the negligence or
wilfull misconduct on the part of the Collateral Agent, and, further, shall
incur no liability to the Secured Party except for a breach of the terms of this
Agreement or for gross negligence or wilfull misconduct in carrying out its
duties to the Secured Party. The Collateral Agent shall be protected and shall
incur no liability to any such party in relying upon the written instructions of
the Secured Party and in relying upon the accuracy, acting in reliance upon the
contents, and assuming the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Collateral
Agent to be genuine and to have been duly executed by the appropriate signatory,
and (absent actual knowledge to the contrary) the Collateral Agent shall not be
required to make any independent investigation with respect thereto. The
Collateral Agent may consult with qualified counsel, financial advisors or
accountants and shall not be liable for any action taken or omitted to be taken
by it hereunder in good faith and in accordance with the advice of such counsel,
financial advisors or accountants. The Collateral Agent shall not be under any
obligation to exercise any of the remedial rights or powers vested in it by this
Agreement unless it shall have received reasonable security or indemnity
satisfactory to the Collateral Agent against the costs, expenses and liabilities
which might be incurred by it.
None of the provisions contained in this Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there shall be reasonable ground for
believing that the repayment of such funds or adequate indemnity against such
liability is not reasonably assured to it.
SECTION 7.04. RELIANCE UPON DOCUMENTS. In the absence of bad faith or
gross negligence on its part, the Collateral Agent shall be entitled to rely on
any communication, instrument, paper or other document reasonably believed by it
to be genuine and correct and to have been signed or sent by the proper Person
or Persons and shall have no liability in acting, or omitting to act, where such
action or omission to act is in reasonable reliance upon any statement or
opinion contained in any such document or instrument.
SECTION 7.05. SUCCESSOR COLLATERAL AGENT.
(a) MERGER. Any Person into which the Collateral Agent may be converted
or merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any Person resulting from any such conversion, merger, consolidation, sale or
transfer to which the Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Collateral Agent hereunder) be and become a
successor Collateral Agent hereunder and be vested with all of the title to and
interest in the Collateral and all of the trusts, powers, discretions,
immunities, privileges and other matters as was its predecessor without the
execution or filing of any instrument or any further act, deed or conveyance on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
(b) RESIGNATION. The Collateral Agent and any successor Collateral
Agent may resign only with the prior written consent of the Trustee and shall
give not less than 60 days' prior written notice of any such permitted
resignation by registered or certified mail to the Trustee and the Company;
provided, that such resignation shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor
Collateral Agent and the acceptance in writing by such successor Collateral
Agent of such appointment and of its obligation to perform its duties hereunder
in accordance with the provisions hereof, (ii) delivery of the Collateral in the
possession of the Collateral Agent (or its New York agent) to such successor to
be held in accordance with the procedures specified in Article 2 and (iii)
receipt by the Trustee and the Company of an Opinion of Counsel to the effect
described in Section 4.02. Notwithstanding the preceding sentence, if by the
contemplated date of resignation specified in the written notice of resignation
delivered as described above no successor Collateral Agent or temporary
successor Collateral Agent has been appointed Collateral Agent or becomes the
Collateral Agent pursuant to Section 7.05(d) below, the resigning Collateral
Agent may petition a court of competent jurisdiction in Borough of Manhattan,
The City of New York, for the appointment of a successor.
(c) REMOVAL. The Collateral Agent may be removed by the Trustee at any
time upon 60 days' notice, with or without cause, by an instrument or concurrent
instruments in writing delivered to the Collateral Agent and the Company. A
temporary successor may be removed at any time to allow a successor Collateral
Agent to be appointed pursuant to Section 7.05(d). Any removal pursuant to this
subsection 7.05(c) shall take effect only upon the date which is the latest of
(i) the effective date of the appointment of a successor Collateral Agent and
the acceptance in writing by such successor Collateral Agent of such appointment
and of its obligation to perform its duties hereunder in accordance with the
provisions hereof, (ii) delivery of the Collateral in the possession of the
Collateral Agent to such successor to be held in accordance with the procedures
specified in Article 2 and (iii) receipt by the Trustee and the Company of an
Opinion of Counsel to the effect described in Section 4.02.
(d) ACCEPTANCE BY SUCCESSOR. Any successor Collateral Agent shall be a
bank or trust company (i) having its principal office in the Borough of
Manhattan, The City of New York, or in such other jurisdiction as the Secured
Party may approve and (ii) having a combined capital and surplus of at least
US$500,000,000. If such bank or trust company publishes reports of condition at
least annually, pursuant to law or to the requirements of a Federal, State or
District of Columbia supervising or examining authority, then for the purposes
of this subsection 7.05(d) the combined capital and surplus of such bank or
trust company shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. The Secured Party
shall have the sole right to appoint a successor Collateral Agent, subject only
to the requirements set forth in the preceding sentence and to the approval of
the Company, which approval shall not be unreasonably withheld. If the Company
and the Secured Party shall not have agreed within ten days on the selection of
a successor Collateral Agent, the Secured Party shall have the right to appoint
a temporary successor to act as the Collateral Agent. If by the 90th day after
appointment of such temporary successor Collateral Agent, the Secured Party and
the Company shall have remained unable to agree on the selection of a successor
Collateral Agent, such temporary successor shall automatically become the
successor Collateral Agent hereunder. Every temporary or permanent successor
Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
its predecessor and to the Trustee and the Company an instrument in writing
accepting such appointment hereunder; and the relevant predecessor shall
execute, acknowledge and deliver such other documents and instruments as will
effectuate the delivery of all Collateral in the possession of the Collateral
Agent to the successor Collateral Agent to be held in accordance with the
procedures specified in Articles 2 and 3, whereupon such successor, without any
further act, deed or conveyance, shall become fully vested with all the estates,
properties, rights, powers, duties and obligations of its predecessor. Such
predecessor shall, nevertheless, on the written request of the Trustee or the
Company, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. Every
predecessor Collateral Agent shall assign, transfer and deliver all Collateral
held by it as Collateral Agent hereunder to its successor as Collateral Agent.
Should any instrument in writing from the Company be reasonably required by a
successor Collateral Agent for more fully and certainly vesting in such
successor the estates properties, rights, powers, duties and obligations vested
or intended to be vested hereunder in the Collateral Agent, any and all such
written instruments shall, at the request of the temporary or permanent
successor Collateral Agent, be forthwith executed, acknowledged and delivered by
the Company. The designation of any successor Collateral Agent and the
instrument or instruments removing any Collateral Agent and appointing a
successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Collateral and, to the
extent required by applicable law, filed or recorded by the successor Collateral
Agent in each place where such filing or recording is necessary to effect the
transfer of the Collateral to the successor Collateral Agent or to protect the
Security Interest granted hereunder.
SECTION 7.06. INDEMNIFICATION. The Company shall indemnify the
Collateral Agent, its officers, directors, employees and agents for, and hold
the Collateral Agent, its officers, directors, employees and agents harmless
against, any claim, loss, liability or reasonable expense (including all
reasonable costs, expenses, attorneys' fees and disbursements) arising out of or
in connection with the Collateral Agent's acting as Collateral Agent hereunder,
except such loss, liability or expense as shall result from the negligence or
wilfull misconduct of the Collateral Agent or its officers, directors, employees
or agents. The obligation of the Company under this Section 7.06 shall survive
the termination of this Agreement and the resignation or removal of the
Collateral Agent.
SECTION 7.07. COMPENSATION AND REIMBURSEMENT. The Company agrees (i) to
pay to the Collateral Agent, from time to time, such compensation as may be
agreed in writing by the Company and the Collateral Agent for all services
rendered by it hereunder and (ii) to reimburse the Collateral Agent on request
for all reasonable expenses, disbursements and advances incurred or made by the
Collateral Agent in accordance with any provision of, or carrying out its duties
and obligations under, this Agreement (including the reasonable compensation and
fees and the reasonable expenses and disbursements of its agents, any
independent certified public accountants and counsel retained by it), except any
expense, disbursement or advance resulting from the negligence or wilfull
misconduct of the Collateral Agent.
SECTION 7.08. REPRESENTATIONS AND WARRANTIES OF THE COLLATERAL AGENT.
The Collateral Agent represents and warrants to the Company and to the Secured
Party as follows:
(a) DUE ORGANIZATION. The Collateral Agent is a New York banking
corporation, duly organized, validly existing and in good standing under the
laws of the United States, is duly authorized and licensed under applicable law
to conduct its business as presently conducted and meets the eligibility
requirements set forth in the first sentence of Section 7.05(d).
(b) CORPORATE POWER. The Collateral Agent has all requisite right,
power and authority to execute and deliver this Agreement and to perform all of
its duties hereunder and thereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the Collateral
Agent of this Agreement, and the performance by the Collateral Agent of its
duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings; and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by the
Collateral Agent, or the performance by the Collateral Agent, of this Agreement.
(d) VALID AND BINDING AGREEMENT. The Collateral Agent has duly executed
and delivered this Agreement and this Agreement constitutes a valid and binding
obligation of the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as (i) such enforceability may be limited by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 7.09. WAIVER OF SET-OFFS. The Collateral Agent hereby expressly
waives any and all rights of set-off that the Collateral Agent may otherwise at
any time have under applicable law with respect to any Collateral Account and
agrees that amounts in the Collateral Accounts shall at all times be held and
applied solely in accordance with the provisions of Article 3 and the other
provisions of this Agreement.
ARTICLE 8
MISCELLANEOUS
SECTION 8.01. FURTHER ASSURANCES. Each party hereto shall take such
action and deliver such instruments to any other party hereto, in addition to
the actions and instruments specifically provided for herein, as may be
reasonably requested or required to effectuate the purpose or provisions of this
Agreement or to confirm or perfect any transaction described or contemplated
herein. Within 20 days after the date hereof, the Company shall (i) take such
actions and deliver, file and record such instruments as may be necessary to
amend any financing statements relating to the Collateral which do not identify
the Secured Party, so that such financing statements identify the Secured Party
as such and so that the benefits thereof inure to the Secured Party and (ii)
furnish to the Secured Party copies of such instruments and evidence of the
filing and recording thereof.
SECTION 8.02. WAIVER. Any waiver by any party of any provision of this
Agreement or any right, remedy or option hereunder shall only prevent and estop
such party from thereafter enforcing such provision, right, remedy or option if
such waiver is given in writing and only as to the specific instance and for the
specific purpose for which such waiver was given. The failure or refusal of any
party hereto to insist in any one or more instances, or in a course of dealing,
on the strict performance of any of the terms or provisions of this Agreement by
any party hereto or the partial exercise of any right, remedy or option
hereunder shall not be construed as a waiver or relinquishment of any such term
or provision, but the same shall continue in full force and effect.
SECTION 8.03. AMENDMENTS. No amendment of this Agreement shall be
effective unless the same shall have been made or consented to in writing by
each of the parties hereto.
SECTION 8.04. SEVERABILITY. In the event that any provision of this
Agreement or the application thereof to any party hereto or to any circumstance
or in any jurisdiction governing this Agreement shall, to any extent, be invalid
or unenforceable under any applicable statute, regulation or rule of law, then
such provision shall be deemed inoperative to the extent that it is invalid or
unenforceable; and the remainder of this Agreement, and the application of any
such invalid or unenforceable provision to the parties, jurisdictions or
circumstances other than to whom or to which it is held invalid or
unenforceable, shall not be affected thereby, nor shall the same affect the
validity or enforceability of any other provision of this Agreement. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by the Collateral Agent or the Secured Party hereunder
is unavailable or unenforceable shall not affect in any way the ability of the
Collateral Agent or the Secured Party to pursue any other remedy available to
it.
SECTION 8.05. NOTICES; PAYMENTS AND TRANSFERS OF FUNDS. (i) All
notices, demands, certificates, requests, instructions and communications
hereunder ("notices") shall be in writing and shall be effective (a) five
Business Days after delivery to an air courier, or (b) on the date personally
delivered to an Authorized Officer of the party to which sent, or (c) on the
date transmitted by legible facsimile transmission upon written confirmation of
receipt and (ii) all payments and transfers of funds made by or on behalf of any
party hereto to any other party hereto pursuant to the terms hereof shall be
made by delivery of an official bank check in, or wire transfer of, immediately
available funds, in all cases addressed and sent to the recipient as follows:
If to the Company:
AES China Generating Co. Ltd.
9/F Allied Capital Resources Building
32-38 Ice House Street
Hong Kong
Attention: Chief Financial Officer
Telephone: (852) 2842-5111
Facsimile: (852) 2842-1673
Wire transfer instructions:
If to the Trustee:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group/Debt
Adminstration
Telephone: (212) 250-6573
Facsimile: (212) 250-0933
Wire transfer instructions:
If to the Collateral Agent:
Bankers Trust Company
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group/Debt
Adminstration
Telephone: (212) 250-6573
Facsimile: (212) 250-0933
Wire transfer instructions:
Any notices or documents sent by facsimile to the Collateral Agent
shall be promptly followed by an original copy thereof sent by mail. A copy of
each notice given hereunder to any party hereto shall also be given to each of
the other parties hereto. Each party hereto may, by notice given in accordance
herewith to each of the other parties hereto, designate any further or different
address to which subsequent notices shall be sent.
SECTION 8.06. TERMS OF THIS AGREEMENT. This Agreement shall take effect
on the Closing Date and shall continue in effect until the Termination Date. On
the Termination Date, this Agreement shall terminate, all obligations of the
parties hereunder shall cease and terminate and, subject to Section 2.07, the
Collateral, if any, held hereunder and not to be used or applied in discharge of
any obligations of the Company in respect of the Secured Obligations or
otherwise under this Agreement, shall be released to and in favor of the
Company, provided that the provisions of Sections 7.06 and 7.07 shall survive
any termination of this Agreement and the release or transfer of any Collateral
upon such termination.
SECTION 8.07. ASSIGNMENT; THIRD-PARTY RIGHTS. This Agreement shall be a
continuing obligation of the Company and shall (i) be binding upon the Company
and its respective successors and assigns and (ii) be binding upon and inure to
the benefit of and be enforceable by the Secured Party and the Collateral Agent,
and by their respective successors, transferees and assigns. The Company may not
assign this Agreement, or delegate any of its duties hereunder, without the
prior written consent of the Trustee and the Collateral Agent, provided that no
such consent shall be required in the case of a merger, consolidation,
amalgamation or other transaction effected in accordance with Article 4 of the
Indenture.
SECTION 8.08. CONSENT OF SECURED PARTY. In the event that the Secured
Party's consent is required under the terms hereof, it is understood and agreed
that, except as otherwise provided expressly herein, the determination whether
to grant or withhold such consent shall be made solely by the Secured Party in
its sole discretion.
SECTION 8.09. TRIAL BY JURY WAIVED. Each of the parties hereto waives,
to the fullest extent permitted by law, any right it may have to a trial by jury
in respect of any litigation arising directly or indirectly out of, under or in
connection with this Agreement, the Notes or the Indenture or any of the
transactions contemplated hereunder or thereunder. Each of the parties hereto
(a) certifies that no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it has been induced to enter into this Agreement, the Notes and the
Indenture to which it is a party by, among other things, this waiver.
SECTION 8.10. GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law thereof.
SECTION 8.11. CONSENT TO JURISDICTION. The Company hereby irrevocably
submits to the non-exclusive jurisdiction of the United States District Court
for the Southern District of New York, any court in the State of New York
located in the city and county of New York, and any appellate court from any
thereof, in any action, suit or proceeding brought against it and related to or
in connection with this Agreement, the Notes or the Indenture or the
transactions contemplated hereunder or thereunder or for recognition or
enforcement of any judgment and each of the parties hereto irrevocably and
unconditionally agrees that all claims in respect of any such suit or action or
proceeding may be heard or determined in such New York State court or, to the
extent permitted by law, in such federal court. Each of the parties hereto
agrees that a final judgment in any such action, suit or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. To the extent permitted by applicable law,
each of the parties hereby waives and agrees not to assert by way of motion, as
a defense or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of such courts, that the suit,
action or proceeding is brought in an inconvenient forum, that the venue of the
suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be litigated in or by such courts. The Company hereby
irrevocably appoints and designates The Prentice-Hall Corporation System, Inc.
having an address at the date hereof at 375 Hudson Street, New York, New York
10014-3660 as its true and lawful attorney and duly authorized agent for
acceptance of service of legal process. The Company agrees that service of such
process on The Prentice-Hall Corporation System, Inc., shall constitute personal
service of such process upon the Company. Nothing contained in this Agreement
shall limit or affect the rights of any party hereto to serve process in any
other manner permitted by law or (other than the Company) to commence legal
proceedings relating to this Agreement against the Company or its property in
the courts of any jurisdiction.
SECTION 8.12. COUNTERPARTS. This Agreement may be executed in two or
more counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
SECTION 8.13. HEADINGS. The headings of sections and paragraphs and the
Table of Contents contained in this Agreement are provided for convenience only.
They form no part of this Agreement and shall not affect its construction or
interpretation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth on the first page hereof. AES CHINA GENERATING CO. LTD.
By: /s/ Jeffrey A. Safford
----------------------------
Jeffrey A. Safford
Vice President, Chief Financial
Officer and Secretary
BANKERS TRUST COMPANY,
as Trustee under the Indenture
By: /s/ Dorothy Robinson
----------------------------
Dorothy Robinson
Assistant Secretary
BANKERS TRUST COMPANY,
as Collateral Agent
By: /s/ Dorothy Robinson
----------------------------
Dorothy Robinson
Assistant Secretary
Exhibit 10.40
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
AUHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
AND
HEFEI MUNICIPAL CONSTRUCTION AND INVESTMENT COMPANY
AND
AES ANHUI POWER COMPANY LTD.
COOPERATIVE JOINT VENTURE CONTRACT
FOR THE ESTABLISHMENT OF
ANHUI LIYUAN -AES POWER COMPANY LIMITED
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. GENERAL PROVISIONS..................................................3
ARTICLE 2. DEFINITIONS.........................................................3
ARTICLE 3. PARTIES TO THIS CONTRACT............................................5
ARTICLE 4. ESTABLISHMENT OF THE COMPANY.......................................6
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF THE COMPANY............................7
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL...................8
ARTICLE 7. ANNUAL CAPITAL RETURN..............................................12
ARTICLE 8. RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES....................13
ARTICLE 9. BOARD OF DIRECTORS.................................................16
ARTICLE 10. MANAGEMENT ORGANIZATION..........................................19
ARTICLE 11. SITE..............................................................19
ARTICLE 12. SALE OF ELECTRICITY...............................................20
ARTICLE 13. CONSTRUCTION......................................................20
ARTICLE 14. OPERATION AND MAINTENANCE OF THE POWER PANT.......................21
ARTICLE 15. LABOR MANAGEMENT..................................................21
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING..................................21
ARTICLE 17. TAXATION AND INSURANCE............................................24
ARTICLE 18. JOINT VENTURE TERM................................................25
ARTICLE 20. TERMINATION AND LIQUIDATION.......................................26
ARTICLE 21. FORCE MAJEURE.....................................................28
ARTICLE 22. SETTLEMENT OF DISPUTES............................................29
ARTICLE 23. APPLICABLE LAW...................................................31
ARTICLE 24. MISCELLANEOUS PROVISIONS.........................................31
APPENDIX 1. THE PROJECTED RETURN ON EQUITY PRINCIPAL OF THE PARTIES OVER THE
YEARS. ...........................................................35
<PAGE>
COOPERATIVE JOINT VENTURE CONTRACT
ARTICLE 1. GENERAL PROVISIONS
This Contract is made in Hefei city, Anhui province, the People's Republic of
China on this 18th day of March, 1996 by and among Anhui Liyuan Electric Power
Development Company Ltd.(hereinafter referred to as Party "A" ), Hefei Municipal
Construction and Investment Company (hereinafter referred to as Party "B") and
AES Anhui Power Company Ltd.(hereinafter referred to as Parity "C"). Each of
Party A, Party B and Party C shall hereinafter individually be referred to as a
"Party" and collectively as the "Parties".
After friendly consultations conducted in accordance with the principles of
equality and mutual benefit, the Parties have agreed to establish Anhui
Liyuan-AES Power Company Ltd.,a cooperative joint venture enterprise
(hereinafter referred to as the "Company") in accordance with the law of the
People's Republic of China on Sino-Foreign Cooperative Joint Venture Enterprises
(hereinafter referred to as the "Cooperative Joint Venture Law"), the Law of
Corporation of the People's Republic of China, other relevant laws and
regulations, and the provisions of this Contract. Therefore, the creation of
this Contract.
ARTICLE 2. DEFINITIONS
2.01 DEFINITIONS
For purposes of this Joint Venture Contract, the capitalized terms set forth
below shall have the following corresponding meanings:
1) "CONTRACT" means the cooperative joint venture contract for the
establishment and operation of the Anhui Liyuan-AES Power Company Limited.
2) "ARTICLES OF ASSOCIATION" means the Company's Articles of Association,
signed by the Parities, approved by the Company's Board of Directors and
the examining and approving authority, as amended when necessary with the
approval from the Board of Directors.
3) "COMPANY" means the Anhui Liyuan-AES Power Company Limited, a Sino-foreign
cooperative joint venture enterprise established by the Parties pursuant to
this Contract.
4) "BUSINESS LICENSE" means the business license issued to the Company by the
local branch of the State Administration for Industry and Commence.
5) "JOINT VENTURE TERM" means the term of the Joint Venture as defined in
Article 18 of this Contract.
6) "BOARD" or "BOARD OF DIRECTORS" means the highest authority of the Company
established in accordance with the provisions set forth in Article 9 of
this Contract.
7) "CHAIRMAN" or "CHAIRMAN OF THE BOARD OF DIRECTORS" means the Chairman of
the Company's Board of Directors appointed in accordance with Article 9 of
this Contract.
8) "VICE-CHAIRMAN" means vice-chairman of the Company's Board of Directors
appointed in accordance with Article 9 of this Contract.
9) "DIRECTOR(S)" means member(s) of the Company's Board of Directors appointed
in accordance with Article 9 of this Contract.
10) "GENERAL MANAGER" means the General Manager of the Company appointed in
accordance with Article 10 of this Contract.
11) "DEPUTY GENERAL MANAGER(S)" means the Deputy General Manager(s) appointed
in accordance with Article 10 of this Contract.
12) "POWER PLANT" means the entire facility and later extension hereto of a
50MW Class gas-steam combined cycle generating set and its control
equipment and all common services, ancillary equipment, facility and the
site.
13) "SITE" means the land in Hefei City, Anhui Province, China upon which the
Company's Power Plant facility and all required auxiliary facilities are
located.
14) "COMMENCEMENT OF OPERATION" means the date of commencement of commercial
operation of the Power Plant as defined in the Operation and Offtake
Contract executed between the Company and the Anhui Provincial Electric
Power Company.
15) "EPC CONTRACT" means the fixed price, fixed schedule, fixed scope and fixed
quality construction contract for the design, construction, completion and
commissioning of the Power Plant.
16) "INTERCONNECTION AGREEMENT" means the interconnection agreement entered
into by and between the Company and the Anhui Provincial Electric Power
Company.
17) "DESPATCH AGREEMENT" means the electric power despatch agreement entered
into between the company and the Anhui Provincial Electric Power Company.
18) "OPERATION AND OFFTAKE CONTRACT" means the long-term electricity sales
contract entered into between the Company and Anhui Provincial Power
Company which is entrusted by the former to operation, maintenance, repair
and management of the Power Plant.
19) "BANK SUPERVISION AGREEMENT" means an agreement between the Company and
bank within China for supervising each Party's distributable profit as
defined in Article 16.06
20) "LOAN CONTRACTS" means contracts to be entered into and between the Company
and domestic financial institutions and the overseas institutions arranged
by Party C to provide loans to the Company in accordance with Article 6.03
hereof.
21) "EXAMINING AND APPROVING AUTHORITY" means the Ministry of Foreign Trade and
Economic Cooperation of the People's Republic of China or its authorized
organization.
22) "AFFILIATE" means any company through ownership of voting stock or
otherwise, directly or indirectly, controlling or controlled by a Party,
the term "control" being used in the sense of power to elect directors or
to direct the operation and management of a company.
23) "OWNER'S ENGINEER" means a qualified engineering firm appointed by the
Company to supervise the execution of the work contracted for under the EPC
Contract.
24) "THIRD PART" means any party or parties other than the Parties to this
Contract.
25) "CHINA" means the People's Republic of China
26) "RMB" means the lawful currency of the People's Republic of China.
27) "USD"or "US$" means the lawful currency of the United States of America.
ARTICLE 3. PARTIES TO THIS CONTRACT
3.01 The Parties to this Contract are:
(a)Party A, Anhui Liyuan Electric Power Development Company Limited, a
state-owned enterprise, set up in accordance with the Chinese law and
registered in Anhui province, China, with its legal address at: No. 415
Wuhu Road, Hefei, Anhui Province, China.
Legal Representative of Party A:
Name: Cheng Guangjie
Position: Chairman
Nationality: Chinese
(b)Party B, Hefei Municipal Construction and Investment Company, a
state-owned enterprise, set up in accordance with the Chinese law and
registered in Hefei City, Anhui Province, China, with its legal address
at: No.186 Suzhou Road, Hefei, Anhui Province, China.
Legal Representative of Party B:
Name: Shen Dequan
Position: General manager.
Nationality: Chinese
(c)Party C, AES Auhui Power Company Ltd, a company registered in
British Virgin Islands with its legal address at: 9/F allied Capital
Resources Building, 32-38 Ice House Street, Central, Hong Kong
Legal Representative of Party C:
Name: Paul T. Hanranhan
Position: President
Nationality: U.S.A.
ARTICLE 4. ESTABLISHMENT OF THE COMPANY
4.01 Establishment of the Company
The Parties hereby agree to establish the Company in accordance with
the Sino-Foreign Cooperative Joint Venture Law, the Corporation Law and
other relevant laws and regulations of the People's Republic of China
and with the provisions of this Contract.
4.02 Name and Address of the Company
(a)The Chinese name of the Company shall be "[Chinese Text]" and its
English name is "Anhui Liyuan-AES Power Company Limited."
(b)The legal address of the Company shall be: No. 415 Wuhu Road, Hefei,
Anhui Province, China
4.03 Form of Organization of the Company
The form of organization of the Company shall be a limited liability
Company. Creditors of the Company shall have recourse solely to the
assets of the Company and not to the assets of the individual Parties.
Expect as otherwise provided herein, once a Party has paid in full its
contribution to the registered capital of the company and to provide or
arrange loans in accordance with this Contract, it shall not be
required to provide any further funds to or on behalf of the Company by
way of capital contribution, loan, advance, guarantee or otherwise. The
Company shall indemnify the Parties against any losses, damages or
liabilities in respect of any third party arising out of the
department, construction and operation of the Power Plant and the
operation of the Company. Subject to the aforementioned responsibility
limitations, all Parties to this Contract shall share risks and losses
incurred by the Company within the limits of its respective share in
registered capital contribution.
4.04 Laws and Decrees
The Company is an economic entity established pursuant to the laws of
the People's Republic of China. The Company has the legal status of an
independent legal person. The business activities of the Company shall
be governed and protected by the laws, decrees and relevant rules and
regulations of China.
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF THE COMPANY
5.01 Purpose of the Company
The Company's purpose is to build, own and operate the Power Plant, to
sell electric power to the grid and to achieve a projected return on
investment for the Parties.
5.02 Operation Scope of the Company
The operation scope of the Company is to generate electricity, to sell
it to the grid and to take charge of repair and maintenance services of
the Power Plant.
5.03 Construction Scale
The Company shall construct 1(50 MW Class gas-steam combined cycle
generating facility and its auxiliary facilities.
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
6.01 Total Investment
The total amount of investment required by the Company is presently
estimated to be US$29.98 million. Any increase in the registered
capital must be first agreed to by the Parties and unanimously approved
by the Board of Directors before being submitted to the relevant
authorized Examination and Approval Authority for approval. Increase in
registered capital will be met by the Parties in proportion to their
existing interest in the Company's registered capital.
6.02 Registered Capital
The total registered capital of the Company shall be US$15 million.
6.03 Financing
The financing for the balance between the total investment and the
registered capital shall be arranged by Party A and Party C
respectively. Party C shall undertake financing responsibility of not
exceeding the maximum amount of US$ 8 million. All the rest of the
financing needed by the Project shall be raised by Party A. The term
and conditions for financing shall be provided for in detail in the
loan contract.
6.04 Contributions of Registered Capital
(a)Party A's Contribution to the Registered Capital: Party A agrees to
contribute an amount of RMB equivalent to US$3 million to the
registered capital of the Company which represents 20% of the
registered capital of the Company. The value of Party A's contribution
in RMB shall be calculated at the medium price of the USD/ RMB exchange
rate as announced by the People's Bank of China on the date the
contribution is made.
(b)Party B's Contribution to the Registered Capital: Party B agrees to
contribute an amount of RMB equivalent to US$1.5 million to the
registered capital of the Company which represents 10% of the
registered capital of the Company .The value of Party B's contribution
in RMB shall be calculated at the medium price of the USD/RMB exchange
rate as announced by the People's Bank of China on the date the
contribution is made.
(c)Party C's Contribution to the Registered Capital: Party C agrees to
contributed an amount of US$10.5 million to the registered capital of
the Company which represents 70% of the registered capital of the
Company.
6.05 Payment of Registered Capital and Conditions Precedent Thereto
Each Party agrees to make their first contribution of registered
capital to the Company which shall not be less than 15% of the total
amount of their respective portions of registered capital share within
thirty (30) days after satisfaction of the conditions precedent listed
below. The second registered capital contribution (namely 85% of the
total registered capital ) shall be made in full several times within a
year after obtaining the copy of the business license. The Parties
agree to hold a meeting of the Board of Directors as soon as possible
after receiving the Business License of the Company to execute the
Contracts listed in Article 4 and decide on a schedule for the balance
of the registered capital in accordance with relevant regulations and
construction needs.
Conditions precedent to payment of registered capital are:
(a)The company and the Project has obtained all necessary relevant
government approvals.
(b)Issuance of Approval by the examining and approving authority
approving this Contract and Articles of Association of the Company.
(c)Issuance of a duplicate of the Company's Business License by the
local branch of the State Administration for Industry and commence of
China;
(d)Local Exchange Control Bureau's agreement to issuing a support
letter to arrange the conversion of RMB into foreign currency on a
priority basis and to approval of the Company access to foreign
exchange trading centre to convert foreign currencies so as to meet the
Company's needs for foreign currency.
(e)Execution and approval of the Operation and Offtake Contract, the
Loan Contracts, the EPC Contract, the Bank Supervision Agreement, the
Interconnection Agreement, the Dispatch Agreement and other agreements
related to this Contract. The approval shall be obtained from all
Chinese Government authorizes required to approve these contracts.
(f)Opening a bank account with a relevant bank in the name of the
company;
(g)Anhui Provincial Pricing Bureau, pursuant to relevant state
policies, has granted its approval to the estimated initial tariff and
the principle of the tariff adjustment as stipulated in the Operation
and Offtake Contract. This principle, once approved, shall be valid for
the entire term of this Contract unanimously.
(h)The Company has obtained relevant certificate to lawful use of the
Site in accordance with the provisions of the laws of China.
(i)The support letter in respect of the Company and this project issued
by Anhui Provincial government;
(j)Obtaining a legal opinion from attorney to the effect that the
Company has obtained all required approvals and that all the Contracts
listed in Article 6.05(e) are legal, effective and enforceable.
(k)Approval by each Party's Board of Directors authorizing each Party
to execute this Contract.
Each of the Parties shall be satisfied the conditions precedent. In the
event any of the conditions have not been met ninety days after the
Company has been issued the Business License, and the Parties do not
agree in writing to waive such conditions precedent or extend the time
for their fulfillment, any Party shall have the right to terminate this
Contract, should any Party terminate this Contract, no Party shall have
the right to require that party to made further contribution to the
registered capital nor shall any Party have the right to claim any
damage from that party.
If within thirty(30) days after satisfaction of the conditions
precedent, any Party has not made its contribution to the registered
capital of the company, or fails to make its contributions in
accordance with the schedule approved by the Board of Directors, the
party or Parties failing to make such contribution shall be changed
with a penalty equal to 0.05% of the delinquent part of payment on a
daily basis, from the date of the scheduled contribution until the date
of the actual contribution, and shall be in default under this
contract.
6.06 Drawdown of Loans
The Loans shall be deposited on time to the bank account of the Company
in accordance with the financial arrangements of the construction
schedule. The specific dates shall be set in the Loan Contracts.
Failure to make payments on time shall be treated in accordance with
the provisions of the Loan Contracts.
In case of financing requirement, the Company establish a RMB reserve
account so as to ensure the repayment of loans.
6.07 Investment Certificate
After any Party has made its contribution in full to the registered
capital, an accounting firm registered in China shall verify the
contribution and issue a contribution verification report. Thereupon,
an investment certificate signed by the Chairman and Vice-Chairman of
the Board shall be issued to such Party by the Company.
6.08 Assignment and security of Registered Capital and Ownership Interest
(a)Approval of the Board of Directors and Right of First Refusal: Any
Party to this Contract may assign, sell or otherwise transfer all or
part of its ownership interest in the Company (such Party being
hereinafter referred to as "the Transferring Party") to any Third Party
(hereinafter referred to as "the Transferee"), provided such transfer
gets a unanimous approval from the Board of Directors. Meanwhile, such
transfer will be allowed provided the other Parties have a right of
first refusal to purchase the ownership interest in the Company being
transferred under the same terms and conditions agreed between the
Transferring Party and the Transferee. The Transferring Party shall
notify the other parties in writing of the terms and conditions of the
transfer. If the other Parties do not exercise their right of first
refusal within thirty (30) days after receipt of such notice, they will
be deemed to have consented to the transfer. The Transferring Party may
then transfer its ownership interest in the Company provided the
Transferee executes a document by which it becomes a Party to this
Contract and expressly assumes the Transferring party's obligations
herein.
The requirement for unanimous approval by the Board of Directors do not
apply if a Party is assigning its rights to distributions from the
Company as security to obtain loans for itself or an affiliate nor
shall the Company take any collateral responsibility for it. If a Party
is assigning, selling or otherwise transferring all or any part of its
rights, title and ownership interest in the Company to an Affiliate,
the right of first refusal shall not apply.
(b)Government Approval: The sale or assignment shall become effective
only after the approval in received. Upon receipt of the approval from
such Examining and Approving Authority, the Company shall register the
change in ownership with the local branch of the state Administration
for Industry and Commence.
(c)Subject to the connect of Creditors and after going through China's
applicable legal proceedings, the Parties agree to mortgage and pledge
the Company's assets and ownership rights of the Contract to Creditors
in Accordance with financing requirements in order to obtain loans.
6.09 Increase of Registered Capital
Any increase in the registered capital must be first agreed to by the
Parties and unanimously approval by the Board of Directors before being
submitted to the original Examining and Approving Authority of this
Contract for approval. In principle, increases in registered capital
will be met by the Parties in proportion to their then existing
ownership interest in the Company's registered capital. Upon approval
by such Examining and Approving Authority, the Company shall register
the increase in registered capital with the local branch of the State
Administration for Industry and Commence.
6.10 Failure to Make Registered Capital Contributions.
In the event any Party fails to make its registered capital
contribution or any portion thereof as provided herein or fails to
provide its share of any increase in the Company's registered capital
as described in Article 6.09 above, then in addition to any other
rights the Company may have against the defaulting Party as described
in Article 6.05, the Company shall offer such unsubscribed portion of
registered capital to the non-defaulting Parties. The non-defaulting
Parties will be offered the unpaid portion of the defaulting Party in
proportion to each Party's registered capital contribution. Such change
in each Party's investment ratio and transfer in ownership interest of
registered capital as described in this paragraph shall be subject to
the approval of the Examining and Approving Authority of this contract.
6.11 Development Expenses
Development expenses shall only include the expenses incurred by and
agreed upon by the Parties for the sole purpose of the preliminary work
of the Power Plant and are estimated to be less than one million US
dollars. The Parties agree that the development expenses for Party A is
[***], [***] for Party B and [***] for Party C. All development
expenses shall be deemed as the Parties' loans to the Company whose
annual interest rate is [***] before the contributions of registered
capital are made by the Parties. After the Parties have made their
first contribution of registered capital, the aforesaid development
expenses will either be counted as part of the registered capital
contribution provided by the Parties or paid by the Company at the
financial closing date in accordance with the decision of the Board of
Directors.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 7. ANNUAL CAPITAL RETURN
7.01 The investment return rate for the Parties is calculated on the basis of
the Power Plant operating at full load with an annual equivalent operation hour
of [***] hours. After all taxes and contributions to required funds according to
relevant regulations are paid, the USD financial internal Return Rate (FIRR) on
equity for the Parties shall be [***]. Based on an annual equivalent full load
operation hour of [***] hours and an FIRR of [***], the annual capital returns
of the Parties calculated in USD are calculated and listed in Appendix 1.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
7.02 In the event that the annual equivalent full load of operating hours
exceeds [***] hours, the exceed net profit will be met by the Parties in
proportion to their existing interest in the Company's registered capital.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 8. RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES
8.01 Responsibilities and Obligations of Party A
In addition to other obligations under this Contract, Party A shall
have the following responsibilities:
(a)Be responsible for obtaining all necessary approvals, permits and
licenses for the establishment of the Company and have the obligation
to use its best efforts to obtain all necessary approvals and permits
for the ongoing operation of the Company, including but not limited to
assisting the Company in obtaining approval from Anhui Provincial
Pricing Bureau in connection with the estimated initial tariff and the
principle of tariff adjustment as stipulated in the Operation and
Offtake Contract;
(b)Assist the Company in conducting negotiations with land
administration authority and other relevant government authority in
connection with the Company's use of the site and assist in handling
all necessary formalities so as to ensure the Company's use of the site
in accordance with its scope of business during the entire joint
venture term (including the extension of the term thereafter);
(c)Assist the Company in obtaining all infrastructure needed, including
external water supply, power supply, fuel, transportation,
communications and other services on the most favorable terms and
conditions available;
(d)Assist the Company in applying for preferential tax treatment and
other investment incentives available under applicable laws and
regulations;
(e)Assist the Company in obtaining necessary approvals for importing
raw materials and machinery equipment, in importing machinery
equipment, fuel, materials, supplies and office equipment on
preferential terms, in procuring import licenses, in facilitating
customs formalities and in arranging for transportation of imported
equipment and materials between Chinese ports and the site;
(f)Assist the Company's expatriates to obtain all necessary entry visas
and work permits;
(g)Assist the Company in opening RMB and foreign currency bank accounts
as well as loan reserve account; assist the Company to obtain necessary
approvals to utilize various methods permitted under Chinese laws to
balance its foreign exchange as needed, including assisting Party C to
convert its capital returns into US dollars for remittance overseas;
(h)Arrange financings for the Company pursuant to relevant provisions
of this Contract and assist the Company in obtaining working capital
loans in business operation;
(i)Be responsible for drafting feasibility study report of the Power
Plant, submitting necessary engineering and technical documents for the
proposal and examination and approval of the project;
(j)Facilitate the execution of the Operation and Offtake Contract
between the Anhui Provincial Electric Power Company and the Company ,
ensure to purchase yearly minimum Offtake electricity and ensure safe
and stable generation of electricity in accordance with designed
capability during the term of the joint venture and their adherence to
the obligations thereunder;
(k)Handle other reasonable matters entrusted from time to time by the
Company.
8.02 Responsibilities and Obligations of Party B
In addition to its other obligations under this Contract, Party B shall
have the following responsibilities:
(a)Be responsible for obtaining all necessary approvals, permits and
licenses for the establishment of the Company and have the obligation
to use its best efforts to obtain all necessary approvals and permits
for the ongoing operation of the Company, including but not limited to
assisting the Company in obtaining approval from Anhui Provincial
Pricing Bureau in connection with the estimated initial tariff and the
principle of tariff adjustment as stipulated in the Operation and
Offtake Contract;
(b)Assist the Company in conducting negotiations with land
administration authority and other relevant government authority in
connection with the Company's use of the Site and assist in handling
all necessary formalities so as to ensure the Company's use of the Site
in accordance with its scope of business during the entire joint
venture term (including the extension of the term thereafter);
(c)Assist the Company in obtaining all infrastructure needed, including
external water supply, power supply, fuel, transportation,
communications and other services on the most favorable terms and
conditions available;
(d)Assist the Company in applying for preferential tax treatment and
other investment incentives available under applicable laws and
regulations;
(e)Assist the Company in obtaining necessary approvals for importing
raw materials and machinery equipment, in importing machinery
equipment, fuel, materials, supplies and office equipment on
preferential terms, in procuring import licenses, in facilitating
customs formalities and in arranging for transportation of imported
equipment and materials between Chinese ports and the Site.
(f)Assist the Company's expatriates to obtain all necessary entry visas
and work permits;
(g)Assist the Company in opening RMB and foreign currency bank accounts
as well as loan reserve account; assist the Company to obtain necessary
approvals to utilize various methods permitted under Chinese laws to
balance its foreign exchange as needed, including assisting Party C to
convert its capital returns into US dollars for remittance overseas;
(h)Assist the Company in obtaining working capital loans in business
operation;
(i)Handle other reasonable matters entrusted from time to time by the
Company.
8.03 Responsibilities and Obligations of Party C
In addition to its other obligations under this Contract, Party C shall
have the following responsibilities.
(a)Assist the Company in purchasing equipment, supplies and materials
inside or outside China to ensure that they are of the proper quantity
and quality;
(b)Introduce modern management techniques and financial management
expertise to the Company;
(c)Assist the Company staff and representatives in arranging foreign
visas for overseas training as required for the operation and
management of the Power Plant;
(d)Assist the Company in recruiting qualified expatriate personnel and
international consultants as required by the Company;
(e)Arrange financing for the Company pursuant to relevant provisions
hereof;
(f)Handle other reasonable matters entrusted from time to time by the
Company.
ARTICLE 9. BOARD OF DIRECTORS
9.01 Formation of the Board
(a)The Board of Directors shall be established on the date of
registration of the Company.
(b)The Board shall consist of seven (7) Directors including the
Chairman of the Board, two (2) of whom shall be appointed by Party A,
one (1) by Party B and four (4) by Party C. At the time this Contract
is executed and at any time a Director is appointed or removed, each
Party shall send written notice to the other Parties of the names of
its appointed or removed Directors.
(c)In general, each Director shall be appointed for a term of three
(3)years and may serve consecutive terms if reappointed by the original
appointing Party. Each Director shall serve and may be removed by the
Party who appointed that Director. In the event a Director vacates the
Board through retirement, resignation, illness, disability or death, or
in the event a Director is removed by the original appointing Party
that Party may appoint a successor to serve out the departing
Director's remaining term.
(d)Directors will serve without remuneration, but all reasonable costs
incurred by the Directors in performance of their duties as members of
the Board will be borne by the Company.
(e)Each Director may concurrently be appointed by the Board as General
Manager or Deputy General Manager. When a Director is concurrently a
managerial staff of the Company, he may only carry on day-to-day
managerial activities of the company in the capacity of General
Manager, Deputy General Manager, and may not exercise his director
functions in dealing with day-to-day managerial activities.
(f)The Chairman of the Board shall be appointed by Party A. He shall be
the legal representative of the Company, and will exercise his
authority within the limits prescribe by the Board and in compliance
with the Sino-Foreign Cooperative Enterprise Law and its Rules for
Implementation and the Corporation Law of P.R. China. He may not under
any circumstance contractually bind the Company or otherwise take any
action on behalf of the Company without prior approval of the Board .
Whenever he is unable to perform his responsibilities for any reason,
one Vice Chairman may be designated by him or the Board to temporality
assume his duties until he is able to resume his duties.
(g)There shall be two Vice Chairmen, one appointed by Party B and the
other appointed by Party C.
(h)The Company hereby indemnifies each Director against any claims
arising from that Director's action in his capacity as a Director of
the Company, except for such acts in violation of criminal laws.
9.02 Power of the Board.
(a)The Board of Directors shall be the highest authority of the
Company;
(b)Resolutions involving the following matters may only be adopted at a
duly constituted and convened meeting of the Board whereupon such
resolution receives the unanimous affirmative vote of each and every
Director of the Board voting in person or by proxy at such meeting;
(i)Amendment of the Joint Venture Contract and Articles of
Association;
(ii)Merger and integration of the Company with another
organization, or establishment of subsidiaries of the Company;
(iii)Dissolution of the Company;
(iv)Any increase or transfer of the registered capital of the
Company;
(v)Execution, supplement, modification, termination, substitution
or assignment by the Company of any credit or financing agreements
any Operation and Offtake Contract, and major construction,
contract or material contract;
(vi)Additional capital requirement or financing amounts above
total investment amounts as set forth in Article 6.01;
(vii)Appointment of General Manager and Deputy General Managers of
the Company;
(c)All other issues that require a resolution by the Board may be
raised at a duly convened meeting of the Board. Such resolution must be
adopted by the affirmative vote of a 2/3 of the Directors present at
such meeting in person or by proxy,
(d)Any matter to be decided by the Board may be decided without a
meeting if all Directors consent in writing to such matter. Such
written consent shall be filed with the minutes of the Board
proceedings and shall have the same force and effect as a unanimous
vote taken by the Directors physically present.
9.03 Meetings
(a)Annual Meetings: The first meeting of the Board of Directors shall
be held within thirty (30) days from the date the Company is issued a
Business License pursuant to this Contract. Thereafter, the Board shall
meet at least once every year. Meetings shall be held at the registered
address of the Company or such other address in China or abroad as is
designated by the Board. The Chairman of the Board shall set the
meeting's agenda after consultation with the Vice Chairmen of the
Board. The Chairman is responsible for convening and presiding over all
Board meetings.
(b)Proxy: Meeting may be attended by Directors in person or by proxy.
If a Director is unable to participate in a Board meeting, he may issue
a proxy and entrust a representative to participate in the meeting on
his behalf. The representative so entrusted shall have the rights and
powers as stated in the proxy;
(c)Interim Meetings: Interim meetings of the Board may be held provided
three(3) or more of the Directors submit written requests for such
meetings specifying the matters to be discussed. Within thirty (30)
days upon receipt of such written notice, the Chairman shall convene an
interim meeting of the Board. If the Chairman is unable to participate
in an interim meeting, in his absence the Vice Chairman taking his
place shall decide on the time and location of such interim meetings.
(d)Quorum: Five(5) Directors present in person or by proxy shall
constitute a quorum necessary for the conduct of business at any
meeting of the Board. If at any properly convened meeting, no quorum is
constituted because less than five (5)Directors are present in person
or by proxy, then the meeting shall be canceled, the Chairman may call
another meeting with seven (7) days' notice. Any Director absent from a
meeting without giving a reason therefor and without having appointed a
proxy shall be considered to have abstained from voting. Resolutions,
except those concerning the issues prescribed in Article 9.02 (b),
shall be valid if passed by a majority of the Directors present.
(e)Notice of Meeting: The notice of a Board meeting shall be sent to
all directors ten (10) days in advance of each meeting. The notice
shall state the time, venue and main agenda of the meeting, including
relevant documents and information.
(f)Minutes: The Board will cause complete and accurate summary of
minutes (in both English and Chinese) to be kept of all meetings
(including a copy of the notice of the meeting) and of business
transacted at such meetings. Minutes of all meetings of the Board shall
be distributed to all the Directors as soon as practicable after each
meeting but not later than ten (10) days from the date of such meeting.
Any director who wishes to propose any amendment or addition thereto
shall submit the same in writing to the Chairman and the Vice-Chairmen
within one (1) week after receipt of the proposed minutes. The minutes
shall be finalized by the Chairman and Vice-Chairman not later than
thirty (30) days after the relevant meeting and signed by all the
directors within one (1) week after receipt of the final minutes.
ARTICLE 10. MANAGEMENT ORGANIZATION
10.01 Management Organization;
The Company shall adopt a general manager responsibility system under
the leadership of the Board of Directors. The Company management shall
include a General Manager and two Deputy General Managers. The General
Manager shall be nominated by Party C and each of the two Deputy
General Managers nominated respectively by Party A and Party B and the
Board of Directors needs to unanimously approve the appointment of the
General Manager and the two Deputy General Managers for a term of three
(3) years. The General Manager and the Deputy General Managers may be
removed only by a majority resolution of the Board. If the General
Manager or the Deputy General Manager is removed by Board or if his
term of office expires a successor shall be nominated by the original
nominating Party for approval by the Board of Directors.
10.02 Responsibilities and Power of the General Manager
The General Manager shall at all times be responsible to the Board of
Directors and shall carry out all matters entrusted by the Board. The
General Manager shall be in charge of the financial affairs and the
day-to-day operation and management of the Company. And the Deputy
General Managers shall assist the General Manager in his work. The
General Manager and the Deputy General Managers shall meet regularly to
deal with important issues arising from the operation and management of
the Company.
ARTICLE 11. SITE
11.01 Site
The area of the Site for the Power Plant is approximately 80 MU.
Details regarding the Site are set forth in the Project Feasibility
Study Report.
The use of the Site shall include full access to all necessary public
roads in the vicinity, so that the Company staff and relevant personnel
of parties concerned may have full access to the Site, which shall also
include the right to use external connecting points to public
utilities.
Party A and Party B are duty bound to assist the Company in obtaining
the lawful land use right of the Site during the term of the Joint
Venture Contract so as to conform with the requirement of Chinese laws
and to ensure the construction and normal operation of the Power Plant.
ARTICLE 12. SALE OF ELECTRICITY
12.01 Sale of Electricity
The sale of electricity generated by the Power Plant shall be made
pursuant to the Operation and Offtake Contract entered into by and
between the Company and the Anhui Provincial Electric Power Company.
12.02 Tariff Determination
The tariff of the electricity generated by the Power Plant shall be
determined and adjusted in accordance with the provisions of the
Operation and Offtake Contract entered into by and between the Company
and the Anhui Provincial Electric Power Company, the estimated initial
tariff and the principle of tariff adjustment are subject to the
approval of relevant pricing authority.
ARTICLE 13. CONSTRUCTION
13.01 Construction Management
The Company will select an experienced Chinese or foreign company as
EPC contractor through public bidding. The EPC Contract shall be
comparable to internationally accepted parties in similar projects in
the areas of construction schedules, quality and others. The detailed
clauses shall be specified in the EPC Contract. The EPC Contractor
shall appoint designing and construction consultants who are rich in
constructing and managing gas-steam combined cycle generating set and
agreed to by the company.
13.02 Owner's Engineer
The Company will appoint an owner's engineer to exercise supervision
and management over the construction of the Power Plant.
ARTICLE 14. OPERATION AND MAINTENANCE OF THE POWER PANT
14.01 Operation and Maintenance
The Company will enter into an Operation and Offtake Contract with the
Anhui Provincial Electric Power Company which will be responsible for
the operation, maintenance and repair of the Power Plant and for
providing, on a long-term and stable basis, fuel whose quality must
cater to the operational requirement of the Power Plant.
The manager of the Power Plant is appointed by the Anhui Provincial
Electric Power Company after having consulted the Company and the
appointment shall be submitted to the Board of Directors of the Company
for the record.
ARTICLE 15. LABOR MANAGEMENT
15.01 Labor Management
The Company shall be responsible for its own labor management and is
responsible for recruitment, employment, dismissal, resignation, wages
and welfare of its working personnel in accordance with the "Label
Management Regulations of the PRC for Foreign Investment Enterprises"
(the "Labor Regulations") and other relevant regulations. The
organization chart, qualifications and number of employees shall be
determined by the Board of Directors in accordance with the operating
needs of the Company.
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING
16.01 Financial Principles
(a)The General Manager of the company shall be responsible for the
financial management of the Company.
(b)The Company shall prepare the Company's accounting system and
procedures in accordance with the "Accounting System of the People's
Republic of China for Foreign Investment Enterprises" and the
"Financial Management System of the People's Republic of China for
Foreign Investment Enterprises". The Company shall also conduct its
accounting in accordance with such internationally recognized
accounting standards as any foreign lender to the Company may require.
The Company shall practice the accrual system and the debit and credit
accounting system. The Company's accounting system and procedures shall
be submitted to the Board for approval. Once approved by the Board, the
accounting system and procedures shall be filed for the record with the
higher competent authority and with the relevant local department of
finance and tax authorities.
(c)The Company shall adopt RMB. as its bookkeeping base currency.
(d)All accounting records, vouchers and books of the Company shall be
made and kept in Chinese. At the request of Party C, some part of the
records and books will be provide to Party C in English . All Company
accounting statements shall be made and kept in English and Chinese.
16.02 Auditing
(a)The Company will engage an independent accounting firm registered in
China as its auditor to examine and verify the annual financial report.
Such accounting firm shall be of international standard and shall be
entrusted by the Board. The Company shall submit to the Parties an
annual statement of final accounts (including the audited profit and
loss statement and the balance sheet for the fiscal year) within two
(2) months after the end of the fiscal year. Such documentation will be
submitted together with an audit report prepared by the accounting firm
registered in China.
(b)Each Party may, at its own expense, appoint an accountant who is
either an accountant registered abroad or in China. On behalf of the
Party, the independent accountant may audit the Company's accounts.
Such accountants shall be given reasonable access to the Company's
financial records and shall keep confidential all documents under their
auditing.
(c)The Company shall present to the Parties balance sheets, profit and
loss statements and other supplementary information requested by the
Board on a monthly basis. Such information shall be provided to the
Parties both in English and Chinese.
16.03 Bank Accounts and Foreign Exchange Control
The Company shall open a foreign exchange account and a Renminbi
account at banks within or outside China; such bank shall be approved
by the State Administration of Exchange Control. The Company's foreign
exchange transactions shall be handled in accordance with the
regulations of China relating to foreign exchange control.
16.04 Foreign Exchange Balance
(a)In the event the Company borrows foreign currency from lenders not
located in China, the Company shall, in accordance with applicable
foreign exchange regulations of the People's Republic of China, open
USD cash accounts at a bank approved by relevant authorities for the
repayment of principal of and the payment of interest on foreign
currency loans.
(b)Funds in the Company's foreign exchange account shall be used as
determined by the Board of Directors to satisfy foreign exchange debt,
expenses, remittances of profit and other remittances in accordance
with relevant foreign exchange control regulations of the People's
Republic of China.
(c)All remittances to Party C due in accordance with the provisions of
this Contract shall be made to a foreign bank account designated by
Party C in US Dollars or in accordance with the foreign exchange
control regulations of China and the commitment of local foreign
exchange control authority. The Company shall pay for the fee incurred
in the conversion.
16.05 Fiscal Year
The Company shall adopt the calendar year as its fiscal year, which
shall begin on January 1 and end on December 31 of the same year. The
first fiscal year of the Company shall commence on the date when the
Company is established and granted a Business License, and shall end on
December 31 of the same year.
16.06 Revenues and Their Distribution
(a)The revenues due to the Company shall be distributed in accordance
with the following priority of payment
(i) Operation and fuel costs of the Power Plant;
(ii) Financial expenses(loan interest, exchange loss and financing
cost);
(iii) Cost of the Joint Venture Company, including administrative
expenses, insurance expenses, fees payable to auditors,
consultants and advisors and all other such expenses;
(iv) Income tax and other taxes;
(v) Repayment of loan principal;
(vi)Approved by the Board of Directors to cover losses of the
previous year;
(vii) Statutory funds;
(viii) Distributable profit;
(b)After the payment of any applicable related taxes and fees by the
Company, the Board will determine the annual allocations to the
statutory funds as required by Chinese laws and regulations. The sum of
the annual allocations to the statutory funds shall be less than 15% of
the after-tax profit of the year under consideration (unless otherwise
required by law). Any increase or decrease in the percentage to the
statutory funds shall be determined by the Board of Directors, in the
light of annual business operation.
(c)All distributable profits shall be distributed pursuant to amounts
as specified in Appendix 1 hereto. In view of the provision of Article
20 hereto that the fixed assets of the Company will be gratuitously
owned by Party A and Party B upon the expiration of the Joint Venture
term, if the distributable profit in a certain fiscal year during the
Joint Venture term (including the approved extension period) fails to
reach the estimated amount as listed in Appendix 1, the distribution
among the Parties shall be carried out in accordance with the following
priorities: (I) Party C (ii)Party A and Party B
(d)If the company carries losses from the previous year, the
development and reserve funds (the amounts of drawdown will be
determined by the Board ) from the cumulative statutory funds will
first be used to compensate for the losses in the previous year, if
that is still insufficient, then the profits of the current year shall
first be used to cover the losses in the previous year. No profit shall
be distributed by the company unless the deficit from the previous year
is made up. The profits carried out from previous year and retained by
the Company may be distributed together with the distributable profit
of the current year.
(e) Profits shall be distributed in accordance with the distribution
plan formulated in accordance with Appendix 1 of this Contract and the
above stipulation, without the necessity of being unanimously approved
by the Board of Directors. After having received the applicable
approval, the Company may predistribute profits every half a year.
Article 17. Taxation And Insurance
17.01 Taxes
(a)The Company and its Chinese and expatriate employees shall pay tax
under the relevant tax laws of China.
(b)Following approval of this Contract by the Examining and Approving
Authority, the Company will submit an application for confirmation of
the Company as a technically advanced enterprise in accordance with the
"Implementing measures of the Ministry of Foreign Cooperation Trade and
Economic on the Confirmation and Examination of Foreign-Invested
commodity Export Enterprises and Technologically Advanced Enterprises "
in order to obtain the most favorable tax rates.
17.02 Insurance
The insurance for the Company for various kinds of risks shall be
purchased from insurance companies registered within PRC. The Company
shall undertake to procure the types of insurance as required by
overseas creditors which include but are not limited to the following;
(a)Property All Risks Insurance, Construction All Risks Insurance and
Erection All Risks Insurance (including domestic transportation
insurance for equipment) before and after the completion of the Power
Plant and thereafter in respect of any upgrading or maintenance works
to the Power Plant;
(b)Property All Risks Insurance, Machinery Breakdown Insurance,
Business Interruption Insurance, Machinery Breakdown Business
Interruption Insurance, Bodily Injury Insurance, Personal Accident
Insurance and Additional Cover for Medical Expenses for the period
after the completion of the Power Plant; and
(c)Other necessary insurance coverage which the Board of Directors
decides on.
ARTICLE 18. JOINT VENTURE TERM
18.01 Joint Venture Term
The term of the Joint Venture established under this Contract shall
commence on the date the Company is granted a Business Licensed and
shall terminate sixteen (16) years thereafter (including one year of
construction). The fixed assets of the Company will be gratuitously
owned by Party A and Party B upon the expiration of the Joint Venture.
(including the expiration of the extended term of the JV pursuant to
Article 18.02)
18.02 Extensions to the Joint Venture Term
If it is estimated six months prior to the expiration of the term of
this Contract that if the non-fixed assets are liquidated in accordance
with Article 20.03 upon expiration of the term, the Parties can hardly
recover all their investments pursuant to Appendix 1 hereto, than the
directors of the Parties shall unanimously agree upon postponing the
Joint Venture term until the full recovery of investment by the
Parties, and application for approval in respect of extending the Joint
Venture term shall be promptly submitted to the Examining and Approving
Authority.
ARTICLE 19. DEFAULT
19.01 Default
In the event the Company is unable to continue its operation or achieve
the established objectives stipulated in this Contract due to failure
of a Party to fulfill its obligations under this Contract and its
Appendices, the non-defaulting Parties shall have the right to
terminate this Contract in accordance with Article 20 herein and the
liabilities arising from default shall be borne by the defaulting Party
as provided for in this Contract and its Articles of Association. The
defaulting Party shall make the consequent payment arising there from
to the non-defaulting Parties.
ARTICLE 20. TERMINATION AND LIQUIDATION
20.01 Termination
No Party shall have the right to terminates this Contract advanced if
the repayment of the principal and payment of interest on loan under
the Loan Contract have not been completely paid off. After the
completion of the payable period, the Party may terminate this Contract
advanced only under the following circumstances.
(i)The Parties unanimously agree in writing to terminate this Contract;
(ii)A Party materially breaches this Contract or violates the Articles
of Association, and such breach or violation is not cured within thirty
(30) days of written notice to the defaulting Party by a non-defaulting
Party;
(iii)The conditions or consequences of Force Majeure as hereafter
defined in Article 21 significantly interfere with the normal
functioning of the company for a period in excess of eighteen (18)
months and the Parties are unable to find an equitable solution
pursuant to Article 21 hereof;
(iv)The Operation and Offtake Contract and other major contracts are
terminated;
(v)The change of law causes significant adverse consequences to the
Company or any Party, while the economic benefits stipulated in Article
23.02 hereof are not adjusted accordingly.
20.02 Notification Procedure
Mere submission by any Party of a notice indicating a desire to
terminate this Contract shall not by itself constitute a termination of
this Contract. In the event that any Party gives notice pursuant to
Article 20.01 hereof of a desire to terminate this Contract, the
Parties shall, within a two (2) month period after such notice is
given, conduct negotiations and endeavor to resolve the situation which
resulted in the giving of such notice. In the event that the situation
which resulted in the giving of such notice is not cured and that
matters are not resolved to the satisfaction of the Parties within two
(2) months of such notice, the notifying Party may follow the relevant
procedures and laws and apply to the original Examining and Approving
Authority for the termination of the Contract. In the event a default
is committed by a Party to this Contract which results in the
termination of this Contract, the defaulting Party shall bear full
responsibility and costs associated with such default.
20.03 Liquidation
The Company shall carry out the procedures for liquidation of the
Company in accordance with the law of the People's Republic of China,
if this Contract is terminated earlier pursuant to Article 20.01
hereof.
Liquidation Committee: The Board of Directors shall form a Liquidation
Committee, comprising two(2) members appointed by Party A, one(1)
member appointed by Party B and four (4) members appointed by Party C.
The Liquidation Committee shall conduct a thorough examination of the
assets and liabilities of the Company and develop a liquidation plan in
compliance with this Contract and relevant laws and regulations of the
People's Republic of China for the liquidation of the Company. No
member of the Liquidation Committee shall have the power to take any
action binding on the Liquidation Committee, or the Board of Directors,
or the Company without the express authorization and the unanimous
consent of the entire Liquidation Committee. All actions taken by the
Liquidation Committee shall require the unanimous approval of the
entire Liquidation Committee. The Liquidation Committee will value and
liquidate the Company's assets based on the actual circumstances of the
Company valued as an ongoing concern, so as to cause the Parties to
receive the then market value for the assets.
Liquidation Plan: Upon earlier termination of this Contract pursuant to
paragraphs (a),(c), and (d) of Article 20.01 hereof, the liquidation
plan shall provide first for payment of the Company's debts and
expenses. Following such payments, the Company's assets shall be
distributed to the Parties proportionally in accordance with each
Party's registered capital share of the Company. Upon early termination
of the Contract pursuant to section 2 of Article 20.01, the defaulting
Party can participate in the aforementioned distribution only when it
has undertaken its responsibility for breach and indemnified the non
defaulting Party for the loss.
In the event of a situation as mentioned in paragraph (d) of Article
20.01, the Purchaser shall compensate an amount of termination cost to
the Company, pursuant to the Operation and Offtake Contract, the total
assets (including but not limited to fixed assets and circulating
assets) of the Company and the termination cost shall be distributed to
Party C on a priority basis, so that Party C can obtain anticipated
returns as estimated in Appendix I hereof, the remaining part shall be
distributed proportionally to Party A and Party B.
20.04 Normal Termination of Contract Upon Expiration of Joint Venture Term.
In addition to the extension of this contract as stipulated in Article
18.02 hereof, this Contract shall terminate upon expiration of the
joint venture term as designated in Article 18.01 hereof.
Upon the expiration of the joint venture term as stipulated in Article
18 without being extended, the total fixed assets of the Company will
be gratuitously turned over to Party "A" and Party "B" registered
capital which the cash from converted non-fixed assets shall be
distributed in accordance with the following Priorities:
(a)Repayment of the Company debts;
(b)To compensate for the difference between the actual returns obtained
by Party C and the estimated amounts as specified in Appendix 1 hereof;
(c)The residual amounts shall be distributed in proportion to the ratio
of investment made by the Parties;
ARTICLE 21. FORCE MAJEURE
21.01 Force Majeure
(a)"Force Majeure " includes but is not limited to any of the following
events:
i) War, hostilities or rebellion;
ii) Plague or other contagious diseases;
iii) Fire not caused by negligence or deliberateness;
iv) Lightening;
v) Earthquake;
vi) Other forces of nature, including natural disasters.
The aforesaid events shall have simultaneously the following six
characteristics:
i) Arising after the signing of this Contract;
ii) Unforeseen or unavoidable;
iii) Beyond the control of a Party concerned;
iv) Occurring within the Plant Site;
v) Directly preventing a Party from performing this Contract;
vi) Cannot be prevented in spite of utmost efforts being exerted by
that Party.
(b)If occurrence of an event of Force Majeure prevents a party from
fulfilling its obligations ( excluding capital contribution and payment
obligations) under this Contract, the Party may be suspended from
performing such obligations provided;
(i) Suspension of performance is of no greater scope and no longer
duration than is reasonably required to correct consequences caused
by the event of Force Majeure; and
(ii) Suspension of performance will not apply to any obligation to
make payments under this Contract.
(c)In the event any Party is unable to fulfill its obligation under
this Contract as a result of Force Majeure, the Party claiming Force
Majeure shall promptly inform the other two Parties in writing within
15 days of such occurrence. Such notification shall state the nature of
the event, the anticipated duration and any action taken by the
affected party to mitigate the effect. In the event of Force Majeure,
the Parties shall immediately consult with each other in order to find
an equitable solution and shall use all reasonable endeavors to
minimizes the consequences of such Force Majeure.
ARTICLE 22. SETTLEMENT OF DISPUTES
22.01 Conciliation and Mediation
Any dispute in connection with this Contract will be settled through
friendly consultation or conciliation among the Parties. Consultations
shall occur immediately upon the request of one Party to the other
Parties regarding disputes. Disputes may also be mediated by a third
party designated by the Parties to this Contract. If mediation is not
successful within 30 days, disputes may also be submitted to binding,
non-appealable arbitration for settlement.
22.02 Arbitration
The following rules and procedures shall apply to an arbitration of
disputes between the Parties under this Contract.
(a)Arbitration under this Contract will be conducted by an arbitral
tribunal in accordance with UNCITRAL arbitration rules contained in
Resolution 31/98 adopted by the United Nations General Assembly on
December 15, 1976 and entitled "Arbitration Rules of the United Nations
Commission on International Trade Law" or its amendments as in force at
the time such arbitration is commenced. Should there be a conflict
between the rules and provisions of this Contract and the arbitration
rules, the rules and provisions of this Contract shall govern.
(b)The arbitral tribunal shall have three (3) members. Each Party shall
designate one arbitrator within 30 days after giving or receiving
request for arbitration. The third arbitrator shall be appointed by the
other two arbitrators within 10 days of the appointment of the second
arbitrator. If any of the arbitrators are not appointed within the time
limits set forth in this section, arbitrators will be designated by the
Secretary General of the International Arbitration Center.
(c)All arbitrators must be fluent in Chinese and English .The
arbitration shall be conducted in Chinese and English. Any subsequent
arbitration award shall also be written in Chinese and English.
(d)The venue and organization for arbitration is Singapore
International Arbitration Centre or other international locations or
arbitration organizations agreed to by the Parties.
(e)The Parties agree to accept the arbitration award as final and
binding. The Parties renounce their right to appealing against the
arbitration award.
(f)The Parties agree to bear all costs as determined and allocated in
the arbitration award.
22.03 Continuing Rights and Obligations
The Parties shall continue to exercise their remaining respective
rights, and fulfill their remaining respective obligations under this
Contract except in respect of those matters under dispute.
22.04 Waiver of Immunity
To the extent the Parties may claim for themselves or their assets and
revenues, immunity from suit execution, attachment or other legal
process, the Parties agree not to claim such immunity and agree to
irrevocably waive such immunity to the fullest extent permitted by
applicable law.
ARTICLE 23. APPLICABLE LAW
23.01 Applicable Law
The validity, interpretation and implementation of this Contract shall
be governed by the laws of the People's Republic of China which are
published and publicly available. In the event that there is no
published and publicly available law in China governing a particular
matter relating to this Contract, reference shall be made to general
international commercial practices.
23.02 Economic Adjustment for Change of Law
As used herein "Change of Law" means the promulgation of any new laws,
rules or regulations in China or the amendment or interpretation of any
existing laws, rules or regulations in China relating to taxes, custom
duties, environmental issues or other matters concerning this Contract.
In the event that a Change of Law adversely and materially affects a
Party's economic benefit under this Contract, the Parties shall
promptly consult with each other and use their best endeavors to
implement adjustments necessary to maintain each Party's economic
benefits derived from this Contract. The basis of this adjustment shall
be no less favorable than the economic benefits it would have derived
if such laws, rules or regulations had not been promulgated or amended
or so interpreted.
23.03 Preferential Treatment
The Company and the Parties shall be entitled to any tax, investment or
other benefits or preferences that become available or publicly known
after the signing of this Contract and which are more favorable than
those set forth in this Contract.
ARTICLE 24. MISCELLANEOUS PROVISIONS
24.01 Environmental
The Company shall undertake environmental protection measures in
accordance with the "Law of the People's Republic of China on
Environmental Protection " and other relevant laws and regulations.
24.02 Waiver
To the extent permitted by Chinese Law, failure or delay on the part of
any Party hereto to exercise a right, power or privilege under this
Contract and the Appendices hereto shall not operate as a waiver
thereof or other rights, powers or privileges; nor shall any single or
partial exercise of a right, power or privilege preclude any other
future exercise thereof.
24.03 Binding Effect
This Contract is made for the benefit of the Parties and their
respective lawful successors and assignees and is legally binding on
them. This Contract may not be changed orally, but only by a written
instrument signed by all Parties and approved by the appropriate
Examining and Approving Authority.
24.04 Language
This Contract is executed in the Chinese language and in the English
language. Both language versions shall be equally effective.
24.05 Entire Agreement
This Contract and the Appendices attached to this Contract constitute
the entire agreement between the Parties with respect to the subject
matter of this Contract and supersede all prior discussions,
negotiations and agreements between them. In the event of any conflict
between the terms and provisions of this Contract and those of the
Articles of Association, the terms and provisions of this Contract
shall prevail.
24.06 Notices
Any notice or written communication provided for this Contract by any
Parties or the others, including but not limited to any and all offers,
writings, or notices to be given thereunder, shall be in writing made
in English and Chinese, and shall be sufficiently given if addressed as
set forth below and sent by registered mail or an internationally
recognized overnight courier services, hand delivered or transmitted
clearly by facsimile, however all facsimile shall be confirmed by
courier service delivered letter, promptly transmitted or addressed to
the appropriate Party. The date of actual receipt of a notice or
communication thereunder shall be deemed to be the effective date. All
notices and communications shall be sent to the appropriate address set
forth below, until the same is changed by notice given in writing to
the other Parties.
Party A: Anhui Liyuan Electric Power Development Company Limited
Address: No.415 Wuhu Road
Hefei, Anhui province
China
Telephone No: 86-551-3642775
Facsimile No: 86-551-3637642
Attention: Cheng Guangjie
Zip Code: 230061
Party B: Hefei Municipal Construction and Investment Company
Address: No. 186 Suzhou Road
Hefei, Anhui province
China
Telephone No: 86-551-2617410
Facsimile No: 86-551-2649751
Attention: Shen Dequan
Zip Code: 230001
Party C: AES - Anhui Power Company Ltd.
Address: 3/F, Golden Bridge Building No.1
Jianguomenwai Street, Beijing
China
Telephone: 86-10-5089619
Facsimile No: 86-10-5089628
Attention: Paul T. Hanranhan
Zip Code: 100020
24.08 Appendices
The Appendices listed below are made an integral part of this Contract
and are equally binding with Article 1 through Article 24 herein.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, each of the Parties hereto have caused this
Contract to be executed by their duly authorized representatives on the
date first set forth above.
PARTY A: Anhui Liyuan Electric Power Development Company Ltd.
Name:[Signature Illegible]
Title:
Nationality: Chinese
PARTY B: Hefei Municipal Construction and Investment Company.
Name:[Signature Illegible]
Title:
Nationality: Chinese
PARTY C: AES Anhui Power Company Limited.
Name:[Signature Illegible]
Title:
Nationality: U.S.A.
<PAGE>
Appendix 1. The Projected Return on Equity Principal of the Parties over the
Years.
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Exhibit 10.41
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
AES LOAN CONTRACT
for Anhui Liyuan-AES Power Company, Ltd.
This AES LOAN CONTRACT (this "Contract") is made and entered into as of
- ----------- 1996 by and between Anhui Liyuan-AES Power Company Limited ("the
Borrower"), a Sino-foreign cooperative joint venture enterprise organized and
existing under the laws of the People's Republic of China (Business License
number is --------) with its registered office at 415 Wuhu Road, Hefei City,
Anhui Province, China and AES Chigen Company (L), Ltd. (Company No.: LL00408)
("the Lender"), a Labuan company wholly-owned by AES CHINA GENERATING COMPANY
LTD with its China office at 3/F Jinqiao Dasha #1(A), Jian Guo Men Wai Dajie,
Beijing, China.
1. THE LOAN.
Subject to the terms and conditions of this Loan Contract, the Lender
agrees to make to the Borrower a loan in an aggregate amount not to exceed US$
8,000,000 such sum shall include interest accrued during construction as
provided in Section 3 hereof, (the "Loan"). This Loan is available for drawdowns
from time to time between the Effective Date as defined in Clause 24 of this
Contract and the "Availability Termination Date", which is the earlier of the
Guarantee Completion Date of the Facility or the actual Project Completion Date
as each term is defined in the EPC Contract Dated -------- between Anhui Mingda
Electric Power EPC Contract Company, Ltd., Anhui Liyuan-AES Power Company
Limited and Hefei Zhongli Energy Company Limited. In this Loan Contract, the
"Available Loan" means the aggregate amount of the Loan available for drawdown
by the Borrower from time to time prior to the Availability Termination Date
less the sum of (i) the amount of each drawdown which has been made under this
Loan Contract, (ii) the aggregate amount of the interest accrued on the
Outstandings (as defined in Section 2(a)) as at such time, and iii) all other
fees due to the Lender as defined in Section 3. Subject to the conditions set
forth in Section 6, drawdowns under the Loan shall be made.
(a) upon completion of the relevant milestone as set in the drawdown schedule
attached as Exhibit B;
(b) not less than 15 Banking Days before the proposed date for the making of
each draw down, the Lender has received from the Borrower a notice of
drawdown substantially in the form of Exhibit A (the "Notice of Drawdown"),
the receipt of such Notice of Drawdown shall oblige the Borrower to borrow
the amount of the drawdown requested therein on the date stated therein;
(c) the proposed amount of each drawdown is an amount not less than US$ 800,000
and an integral multiple of US$ 10,000 which is less than or equal to the
Available Loan;
(d) in the case of the first drawdown, such drawdown must be made within three
months of the Effective Date; and
(e) each drawdown shall be made on a day on which banks are authorized to open
for business in Hong Kong and New York, New York, the United States of
America (a "Banking Day").
2. MATURITY.
(a) The Borrower shall repay the aggregate outstanding principal amount
of the Loan (the "Outstandings") in accordance with the amortization schedule
attached as Exhibit C. In any event, the Borrower shall repay the Outstandings
in full on a date which falls ten (10) years after the Effective Date of this
Contract.
(b) Subject to Section 2(d), the Borrower may, if it has given to the
Lender not less than one month's prior written notice to that effect, cancel the
whole or any part (being an amount or integral multiple of US$ 1,000,000) of the
Available Loan.
(c) Subject to section 2(d), the Borrower shall have the right to
prepay all or any part of the Outstandings at any time after the Availability
Termination Date. Each of such optional prepayments shall be in an amount not
less than US$ 800,000 and shall be made with at least three months prior written
notice to the Lender. Without prejudice to the foregoing, the Borrower shall
only prepay on the then immediately succeeding Payment Date and such prepayment
shall include all interest accrued on such portion of the Outstandings being
repaid. Any portion of the Outstandings prepaid may not be reborrowed. The
prepayments of the Outstandings will be applied to satisfy the Borrower's
repayment obligations under Section 2(a) in inverse order of maturity to the
then remaining installments of principal to become due as set forth in Exhibit
C.
(d) The Borrower may only serve a notice of cancellation or prepayment
under Sections 2(b) and 2(c) respectively unless it has demonstrated to the
satisfaction of the Lender that there are then sufficient committed funds
available to the Borrower on an unsecured basis to meet all its needs in respect
of financing the construction and start-up of the Facility (as such term is
defined in Section 7(a)).
(e) Each notice of cancellation or, as the case may be, prepayment
shall specify the date on which such cancellation or, as the case may be,
prepayment is to be made and the amount to be cancelled or, as the case may be,
to be prepaid and shall oblige the Borrower to make such cancellation or, as the
case may be, prepayment on such date Provided that the Borrower may only specify
a Payment Date in respect of any prepayment to be made.
3. INTEREST AND FEES.
(a) INTEREST AND FEES: During the period beginning on the date of the
first drawdown hereunder and ending on the Availability Termination Date, (i)
interest shall accrue on the Outstandings from day to day at the rate of [***]
per annum and (ii) the Management Fee as defined Section 3(b) shall accrue on
the Outstandings from day to day as specified in Section 3(b). On the
Availability Termination Date, the Lender shall calculate the aggregate amount
of such interest and the Management Fee accrued as at the Availability
Termination Date (the "Availability Period Interest and Management Fee"). With
effect from the Availability Termination Date, the amount of the Availability
Period Interest and Management Fee shall be consolidated with the amount of the
Outstandings as at the Availability Termination Date and the sum of both amounts
shall thereafter be treated as the Outstandings. With effect from the
Availability Termination Date, the Borrower shall pay interest on the
Outstandings calculated aforesaid in this Section 3(a) from time to time at the
rate of [***] per annum plus the Management Fee as specified in Section 3(b).
Interest and Management Fee on the Outstandings shall be computed on the basis
of the actual number of days elapsed in a year of 360 days. Interest payments
shall be payable semiannually in arrears on the first Banking Day of each
January, and July starting from the second such date to occur after the
Availability Termination Date and on final maturity of the Loan (each such date,
a "Payment Date"). The Lender shall calculate and notify the Borrower of the
actual amount of each interest and management fee payment not less than 15 days
prior to each Payment Date.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(b) MANAGEMENT FEE: The Borrower shall pay to the Lender a management
fee of [***] per annum on the Outstandings from time to time provided in
Section 3(a).
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(c) CLOSING FEE: The Borrower shall pay to the Lender a financial
closing fee of [***] on the date of the first drawdown of this Loan.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4. METHOD OF PAYMENT.
All sums, including all principal, interest and fees, payable to the
Lender shall be paid in US Dollars not later than 10:00 a.m. Beijing time on
each Payment Date to the account of the Lender in Hong Kong (No. -------- ) at
Citibank, N.A., or such other account within or outside of China as the Lender
notifies to the Borrower for this purpose.
5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents as of this date and during the term of this
Loan Contract that:
(a) the Borrower is a Sino-foreign cooperative joint venture enterprise
duly established as a legal reason and existing in good standing under the laws
of the People's Republic of China;
(b) the execution, delivery and performance of this Loan Contract, and
each other document delivered in connection herewith and the execution of the
Borrower's rights hereunder or thereunder are within the Borrower's power, have
been duly authorized by all necessary legal corporate or other action, and do
not contravene any law or any contractual restriction binding on the Borrower;
(c) this Loan Contract is, and each other document delivered in
connection therewith or therewith when executed will be legal, valid and binding
obligations of the Borrower and are enforceable in accordance with their
respective terms;
(d) all governmental approvals necessary for the execution of this Loan
Contract, and each other document delivered in connection herewith have been
obtained and all governmental approvals necessary for the performance and
enforceability hereof and thereof shall have been obtained prior to and shall be
in full force and effect on the date of each drawdown hereunder;
(e) the obligations of the Borrower hereunder and under any other
document executed in connection herewith or therewith constitute the direct,
unconditional and general obligations of the Borrower and the sum of all of the
Borrower other indebtedness does not exceed RMB two hundred fifty thousand
except the loans agreed to by the Lender as specified in Appendix D hereto;
(f) the Borrower is not in default under any agreement or obligation to
which it is a party or by which it may be bound by reason of its execution,
delivery or performance of this Loan Contract; and
(g) under the laws of China in force at the date hereof, withholding
tax of ten per cent (10%) is required to be levied in respect of any interest
payment it may make hereunder;
(h) under the laws of China in force at the date hereof, the claims of
the Lender against the Borrower under this Loan Contract will rank at least pari
passu with the claims of all its other unsecured creditors save those whose
claims are preferred solely by any bankruptcy, insolvency, liquidation or other
similar laws of general application;
(i) in any proceedings taken in China in relation to this Loan Contract
and any other document executed in connection herewith, the choice of English
law as the governing law of this Loan Contract and any such other document and
any judgment obtained in England will be recognized and enforced, subject to the
provisions of the Civil Procedure Law of China;
(j) under the laws of China in force at the date hereof, it is not
necessary that this Loan Contract or any other document executed in connection
herewith be filed, recorded or enrolled with any court or other authority in
China or that any stamp, registration or similar tax be paid on or in relation
to this Loan Contract save for:
(i) the Borrower's compliance with the Foreign Debt Registration
procedures in relation to the Loan; and
(ii) payment of stamp duty of 0.005 per cent of the full amount of the
Loan on this Loan Contract by both parties to this Loan Contract
respectively;
(k) neither the Borrower nor the translations contemplated by this Loan
Contract is subject to currency deposits requirements (other than any
requirements imposed by the Foreign Debt Registration procedures in relation to
the Loan) of any nature under any applicable law or regulation of China, nor is
there any restriction or requirement (other than the requirement that the
Borrower complies with the Foreign Debt Registration procedures in relation to
the Loan and any generally applicable foreign exchange control regulation
imposed after the date hereof) of the laws or regulations of China which limits
the availability to the Borrower of US Dollars for the purpose of performing its
obligations hereunder to make payments in US Dollars or otherwise limits the
ability of the Borrower to perform such obligations.
(l) no Event of Default (as hereinafter defined), and no event which
with the giving of notice or the passing of time, or both, would constitute an
Event of Default, has occurred and is continuing.
6. CONDITIONS PRECEDENT.
The obligation of the Lender to make the Loan hereunder is subject to
the fulfillment, as determined solely by the Lender, of the following conditions
precedent at least five Banking Days prior to the proposed date of the first
drawdown of the Loan (except as otherwise indicated below) and the continued
fulfillment of such conditions on the date of the first drawdown:
(a) All documents, licenses, approvals and permits required in
connection with the establishment of the Borrower as a Sino-foreign cooperative
joint venture and the design, construction, ownership, operation and management
of the Power Plant (as defined in the Operations and Offtake Contract which is
defined in Exhibit E) shall have been obtained and are in full force and effect;
without limiting the generality of the foregoing, such approvals shall include
approval by the authorized authority of Ministry of Foreign Trade and Economic
Cooperation of China of the Joint Venture Contract and Borrower's Articles of
Association, approval by the Anhui Provincial Pricing Bureau of the pricing
formula set forth in Appendix A to the Operations and Offtake Contract as
defined in Exhibit E, approval by the relevant government department of the Land
Use Rights (as defined in the Joint Venture Contract), issuance of Borrower's
business license, approval regarding access to the foreign exchange adjustment
center or foreign exchange banks, and approvals referred to in Article 6.05 of
the Joint Venture Contract;
(b) All registered capital and other loans required to be funded under
the Joint Venture Contract by each party thereto as of such date shall have been
funded in full;
(c) The Lender shall have received satisfactory evidence of the due
authorization, execution and delivery by the Borrower of this Loan Contract, and
each other document delivered in connection herewith;
(d) The Lender shall have received certified copies of all governmental
approvals and filings required for the execution, delivery, performance and
enforceability of this Loan Contract and each other document delivered in
connection herewith or therewith and such approvals and filings are in full
force and effect;
(e) Each of the representations and warranties set forth in Section 5
is true and correct in all material respects;
(f) The Borrower shall have performed in all material respects its
obligations required to be performed under this Loan Contract;
(g) All contracts referred to in the Joint Venture Contract including
without limitation all Project Contracts (as defined in Exhibit E) and all other
material contracts required in connection with the construction of the Project
(as defined Operation and Offtake Contract) shall have been executed and
delivered by all parties thereto and are in full force and effect;
(h) The Lender's independent engineer (referred to in the EPC Contract)
or, at the request of the Lender, the Borrower, has certified in a manner
satisfactory to the Lender that all applicable construction milestones as set
forth in Exhibit B have been met;
(i) The Borrower shall has purchased the insurance policies required by
the Lender, as specified in the EPC Contract and Operations and Offtake Contract
and such policies shall be in full force and effect;
(j) The Borrower shall has signed each of the loan contracts listed in
the Exhibit D of this Contract.
(k) The Lender shall have received a favorable opinion of H&P Law
Office with respect to the transactions contemplated hereby and such other
approvals, opinions and documents as the Lender may reasonably request;
(l) Satisfactory Evidence that an amount equal to the proposed amount
to be drawn under the AES Loan Contract between the Lender and Hefei Zhongli
Energy Company Limited, dated on the same date as this Contract, has been drawn
or is to be drawn on the same date as the proposed date of such drawdown.
(m) Evidence satisfactory to the Lender that the Borrower has paid all
stamp duties payable under the laws of China in connection with all the executed
originals of this Loan Contract.
(n) Evidence satisfactory to the Lender that the borrowing contemplated
in this Loan Contract has been approved by the State Administration of Exchange
Control (including, but not limited to, the registration certificate for
external debt issued by the State Administration of Exchange Control (the
"Registration Certificate")).
(o) Copies, each certified a true copy by a duly authorized officer of
the Borrower, of each of the Project Contracts (referred to in Exhibit E).
(p) Evidence satisfactory to the Lender that the Borrower has appointed
an English process agent pursuant to Section 13(a).
7. COVENANTS.
(a) The Borrower shall at all times (i) preserve and maintain in full
force and effect its existence as a cooperative joint venture under the laws of
China, its qualification to do business in Anhui Province, China and in each
other jurisdiction in which the conduct of its business requires such
qualification and (ii) obtain and maintain in full force and effect all
documents, licenses, permits and governmental approvals required at any time in
connection with the construction, maintenance, ownership or operation of the
Facility (as defined in the EPC Contract).
(b) The Borrower shall (i) perform and observe all of its covenants and
agreements contained in any Project Contract or any other document relating to
the Facility to which it is a party and (ii) maintain in full force and effect
each of the Project Contracts.
(c) The Borrower shall comply, and shall ensure that the Facility is
constructed and operated, with all and any governmental requirements.
(d) The Borrower shall promptly provide to the Lender copies of the
Borrower's construction, operation and financial reports and other information
relating to the construction or operation of the Facility.
(e) The Borrower shall use the proceeds of the Loan solely for the
purpose of financing the construction and start-up of the Facility.
(f) The Borrower shall notify the Lender immediately of the occurrence
of any Event of Default or of any event which would become an Event of Default
with the passage of time or giving of notice or both.
(g) The Borrower shall not, without the prior written consent of the
Lender, assign, sell, pledge, mortgage, encumber or otherwise transfer any
interest in any assets of the Borrower other than transfers in the ordinary
course of its business that would not have a materially adverse effect on the
Borrower or the ability of the Borrower to perform its obligations hereunder.
(h) Prior to any due date for any repayment of the principal of and/or
the payment of interest on the Loan, the Borrower shall (A) use the Registration
Certificate and the notice regarding such repayment and/or payment to obtain
from the registration department a verification and approval certificate with
respect to such repayment and/or payment; and (B) use such verification and
approval certificate and the Registration Certificate to handle matters
regarding the remittance from the foreign debt account of the principal of and
interest on the Loan outside of China at the relevant bank.
(i) Prior to 31 January of each year, the Borrower shall submit to the
local foreign exchange administration a report stating the amount of foreign
currency purchased in the preceding year for the purpose of repaying the
principal of and paying the interest on the Loan and a plan regarding the
purchase of foreign currency for the current year, and the Borrower shall
provide copies, certified by a duly authorized officer of the Borrower, of each
such report together with evidence satisfactory to the Lender that the original
thereof has been delivered to the local foreign exchange administration.
(j) The Borrower shall not, without the prior written approval of the
Lender, seek to agree any waiver or seek any waiver from any of the lenders
party to the loan agreements set out in Exhibit D.
(k) The Borrower shall not, without the prior written consent of the
Lender, incur any further indebtedness save for indebtedness incurred in respect
of trade finance facilities with reputable banks to enable the Borrower to
purchase equipment, raw materials and services for the Project the aggregate
amount of which at any time does not exceed 250,000 RMB.
8. EVENTS OF DEFAULT.
(a) Each of the following events and occurrences shall constitute an
Event of Default under this Loan Contract:
(i) any representation or warranty of the Borrower proves to have
been untrue when made or deemed to be made or renewed; or
(ii) the Borrower fails to repay when due any principal amounts
of the Loan, or the Borrower fails to pay within three Banking Days
after the date due any interest or fee payment, due pursuant to the
terms of this Loan Contract, any document delivered in connection
herewith; or
(iii) the Borrower fails to perform or violates any other
provision of this Loan Contract (including without limitation the
covenants), or any document delivered in connection herewith, which
continues unremedied for 30 days after notice thereof from the Lender;
or
(iv) except as otherwise provided in clause (ii) above, the
Borrower fails to pay when due any indebtedness for which it is
liable, contingently or otherwise, or any such indebtedness is
accelerated or is required to be prepaid prior to the stated maturity
thereof; or
(v) any document, license, approval or permit required for the
performance or enforceability of the obligations of the Borrower under
this Loan Contract, or any other document delivered in connection
herewith expires or is not renewed upon expiration or is terminated or
revoked or modified in any material respect; or
(vi) any document, license, approval or permit required in
connection with the Project expires or is not renewed upon expiration
or is terminated or revoked or modified in any material respect; or
(vii) any Project Contract is materially breached by a party
thereto or such contract ceases to be in full force and effect; or
(viii) the Borrower becomes insolvent or unable to pay its debts
when due, or commits any act of bankruptcy including filing any
petition in any bankruptcy, winding-up or reorganization proceeding,
or acknowledges in writing its insolvency or inability to pay its
debts, or any petition relating to bankruptcy is filed with respect to
it by its creditors; or
(ix) one or more judgments aggregating at least US$ 100,000 (or
its equivalent in any currency) that is not covered by insurance is
entered against the Borrower and is not satisfied, vacated or bonded
pending appeal within 60 days after such entry; or
(x) the Project becomes or is declared a total loss or is beyond
economic repair in the opinion of an insurance expert appointed by the
Lender; or
(xi) any execution or distress is levied against, or encumbrance
takes possession by way of enforcement of security of the whole or any
part of the property, undertaking or assets of the Borrower; or
(xii) by or under the authority of any government (a) all, or
substantially all of, the management of the Borrower is displaced or
the authority of the Borrower in the conduct of its business is wholly
or partially curtailed or (b) all or a majority of its revenues or
assets is seized, nationalized, expropriated or compulsorily acquired;
or
(xiii) an Event of Default has occurred and is continuing or an
event which with the giving of notice or the passing of time, or both,
would constitute an Event of Default, under the AES Loan Contract
between the Lender and Hefei Zhongli Energy Company Limited dated [ ]
dated on the same date as this Contract.
(b) If an Event of Default shall occur and be continuing, the Lender
shall have no further obligation to make further drawdowns of the Loan to the
Borrower and the Lender may by notice to the Borrower declare all the
Outstandings and accrued interest thereon and other amounts payable hereunder to
be immediately due and payable, whereupon all such amounts shall become
forthwith due and payable without further demand or notice of any kind. In the
event of an Event of Default, the Lender shall also have the right to liquidate
the Borrower and its assets.
(c) If the Borrower fails to pay any sum payable under this Loan
Contract when due, the Lender shall charge the Borrower (i) US$ 10,000 default
fee which the Borrower hereby agrees shall be deemed to be due and payable on
the date of default and (ii) in addition to the normal interest defined in
Section 3(a) an additional two percent (2%) default interest per annum on such
sum for the period beginning from and including the due date to the date of
actual payment (after as well as before judgment) as conclusively determined by
the Lender.
9. ENTIRE AGREEMENT; AMENDMENTS.
This Loan Contract constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and may be amended only by an
instrument in writing signed by the parties hereto.
10. INDEMNITY.
(a) The Borrower shall pay all stamp duties in connection with this
Loan Contract, and each other document delivered in connection herewith and
shall reimburse the Lender for any other cost, expenses, loss or damage
(including without limitation any taxes but excluding taxes imposed on the net
income of the Lender by the jurisdiction of its registration and other costs
resulting from changes in law after the date hereof) incurred by the Lender in
connection with, (i) the negotiation, preparation and execution of this Loan
Contract including legal fees, or any other document delivered in connection
herewith and the completion of the transactions contemplated herein or therein,
and (ii) the preservation and/or enforcement of any of its rights under this
Loan Contract or any other document delivered herewith. The payment of such
stamp duties by the Borrower and the reimbursement by the Borrower of such other
cost, expenses, loss or damage (including taxes as stated above) shall be in
addition to, and without prejudice to, the Borrower's obligation to pay interest
as set forth in Sections 3(a) and 8(c) and to repay the principal amount in
accordance with Section 2(a) or pursuant to a declaration under Section 8(b).
(b) Without limiting the generality of clause (a) above, if the
Borrower shall be obligated to withhold and pay any taxes required under the
applicable laws of China or under any agreement between China and any country
which has jurisdiction over the Lender or the Borrower, the interest rate then
applicable hereunder shall be automatically and accordingly increased and such
that the additional interest payment shall ensure the net amounts received by
and retained the Lender after such withholding shall be equal to the amounts
which would have been received and retained by the Lender had no such
withholding been made.
(c) The indemnity provisions of this Section 10 shall survive the
repayment of the Loan and the termination of this Loan Contract.
11. NOTICE.
All notices hereunder shall be in writing and shall be either
personally delivered, or transmitted by postage prepaid registered air mail, or
by facsimile to the party addressed at the relevant address and facsimile number
set forth below and, in the case of the Lender, shall be expressly marked for
the attention of the department or officer identified with the Lender's
signature below and shall be deemed to have been made or delivered (in the case
of any communication made by letter) when left at that address or (as the case
may be) five (5) days after being deposited in the post (air mail, if such
letter is to be sent overseas) postage prepaid in an envelope addressed to it at
that address or (in the case of any communication made by facsimile) when
dispatched after a transmission report confirming due transmission to the
correct facsimile number and the correct number of pages transmitted. Either
party may change its address by written notice to the other.
12. GOVERNING LAW.
This Loan Contract shall be governed by and interpreted in accordance
with the laws of England without regard to the conflict of laws rules thereof.
13. SUBMISSION TO JURISDICTION.
(a) The Borrower hereby irrevocably for the benefit of the Lender
consents that any legal action or proceeding against it or any of its assets
with respect to any of the obligations arising under or relating to this Loan
Contract may be brought in any English court, as the Lender may elect, and by
execution and delivery of this Loan Contract, the Borrower hereby irrevocably
submits to and accepts with regard to any such action or proceeding, for itself
and in respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts. The Borrower hereby irrevocably agree to
designate, appoint and empower AES Electric in England (address: Burleigh House,
17-19 Whorl Way, Richard TW10 6AG, U.K.), as its agent to receive for and on its
behalf service of process in England in any legal action or proceeding with
respect to this Contract or any other document delivered in connection herewith.
The foregoing, however, shall not limit the rights of the Lender to serve
process in any other manner permitted by law or to bring any legal action or
proceeding or to obtain execution of judgment in any jurisdiction, including
without limitation the People's Republic of China.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Loan Contract or any other
document delivered in connection herewith in England and hereby further
irrevocably waives any claim it might now or hereafter have that England is not
a convenient forum for any such suit, action or proceeding.
14. ARBITRATION.
(a) Notwithstanding Section 13, the Lender may, in its sole discretion,
choose to submit any dispute arising out of or in connection with this Loan
Contract for binding arbitration in Stockholm, Sweden under the auspices of the
International Chamber of Commerce in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce as in effect on the
date of this Loan Contract (except to the extent this Section 14 specifies
different procedures in which event such procedures will govern the arbitration
to the extent so specified). The Lender may choose arbitration with respect to
any dispute at any time either before or after any filing of any claim, action
or proceeding with any court by either party, provided, however, that once the
Lender makes such a choice, the relevant dispute will be settled finally and
exclusively by arbitration irrespective of (i) whether any claim, action or
proceeding has already been commenced in any court, (ii) the magnitude of such
dispute or (iii) whether such dispute would otherwise be considered justifiable
or for resolution by a court or arbitrate tribunal. In the event that a claim,
action or proceeding has already been commenced in a court when the Lender
chooses to submit the relevant dispute for arbitration, both parties hereto will
immediately discontinue and withdraw the claim, action or proceeding from the
court so that the dispute may be handled exclusively by arbitration. Once a
dispute is submitted by the Lender to arbitration, the Borrower shall not have
any right to file any claim, action or proceeding in any court in respect of
such dispute or any matter relating to such dispute so that the dispute may be
handled exclusively by arbitration. Any action by the Lender to submit any
dispute for arbitration shall not prevent the Lender from bringing any claim,
action or proceeding in any court with respect to any other dispute.
(b) The Borrower shall not have any right to submit any dispute to
arbitration.
(c) Any settlement and award rendered through arbitration proceeding
will be final and binding upon the parties hereto if the decision is in writing
and contains a reasoned analysis explaining the arbitrators' reasons for
rendering the award. This Loan Contract and the rights and obligations of the
parties hereto will remain in full force and effect pending the award in such
arbitration proceeding, which award will determine whether and when termination
of this Loan Contract shall become effective.
(d) The arbitration will be conducted in English and Chinese.
(e) There will be three arbitrators. Each party will select one
arbitrator within 30 days after the Lender elects to commence arbitration. Such
arbitrators will be freely selected, and the parties hereto will not be limited
in their selection to any prescribed list. Within 30 days after the selection of
the latter of the two arbitrators selected by the parties, the two arbitrators
shall select the third arbitrator; if the two arbitrators do not select the
third within such 30 day period, the International Arbitration Court of the
International Chamber of Commerce will select the third arbitrator. If a party
does not appoint an arbitrator who has consented to participate within 30 days
after the selection of the first arbitrator, the relevant appointment will be
made by the International Arbitration Court of the International Chamber of
Commerce. The costs of the arbitration will be borne by the parties hereto as
determined by the arbitration tribunal taking into account the relative merits
of the positions of the parties.
(f) The parties hereto agree that the arbitrate award may be enforced
against the parties or their assets wherever they may be found and that a
judgment upon the arbitration award may be entered in any court having
jurisdiction thereof. Accordingly, the parties hereto irrevocably agree that any
action to enforce such judgment may be instituted wherever appropriate and each
party hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have now or hereafter to the laying of the venue or the
jurisdiction or the convenience of the forum of any such action and irrevocably
submits generally and unconditionally to the jurisdiction of any such court in
any such action.
15. BANKING DAY ADJUSTMENT.
If the date on which a payment is due is not a Banking Day, such date
shall be changed to the next succeeding Banking Day (or to the immediately
preceding Banking Day if the next succeeding Banking Day is in another calendar
month).
16. INFORMATION.
The Borrower shall provide the Lender with any and all such information
concerning the condition and operation of the Borrower, financial or otherwise,
as the Lender may from time to time request.
17. WAIVER; CUMULATIVE RIGHTS.
The failure or delay of the Lender to require performance by the
Borrower of any provisions of this Loan Contract shall not affect its right to
require performance of such provision unless and until such performance has been
waived in writing by the Lender. Each and every right granted to the Lender
hereunder or under any other document delivered in connection herewith, or
allowed to it at law or in equity, shall be cumulative and is not exclusive of
any rights or remedies provided by law and all such rights may be exercised in
part or in whole from time to time.
18. ASSIGNMENT.
This Loan Contract shall be binding upon and shall be enforceable by
the Borrower and the Lender and the their respective successors and assigns,
except that the Borrower shall have no right to assign or transfer its rights or
obligations hereunder.
19. SET-OFF.
Nothing herein contained shall limit the right of set-off, lender's
lien or counterclaim which may be available to the Lender under applicable law.
20. SEVERABILITY.
If any of the provisions contained in this Loan Contract, or any other
document delivered in connection herewith shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired.
21. COUNTERPARTS.
This Loan Contract may be signed in any number of counterparts. Any
single counterpart or a set of counterparts signed, in either case, by both
parties hereto shall constitute a full and original contract for all purposes.
22. LANGUAGE.
This Loan Contract shall be written and executed in both Chinese and
English versions. In the event of any inconsistency between the two versions,
the English version shall be the binding version.
23. CONSTRUCTION.
Unless otherwise stated, all references made in this Loan Contract to
"Sections", "Clauses" and "Exhibits" shall refer, respectively, to Sections of,
Clauses of and Exhibits to, this Loan Contract. References herein to this Loan
Contract include the Exhibits hereto.
24. EFFECTIVENESS.
This Loan Contract shall become effective on the date ("Effective
Date") each of the following requirement has been fulfilled: (i) the signing of
this Loan Contract hereof, (ii) the signing of the AES Loan Contract between the
Lender and Hefei Zhongli Energy Company Limited, (iii) the registration of this
Loan Contract with the State Administration of Exchange Control ("SAEC") or its
authorized government authority and the obtaining of a registration certificate
from the SAEC and, (iv) the registration of the AES Loan Contract between the
Lender and Hefei Zhongli Energy Company Limited with the State Administration of
Exchange Control or its authorized government authority and the obtaining of a
registration certificate from the SAEC.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Loan Contract to be executed by their respective duly
authorized signatories as of the day and year first written above.
BORROWER
- --------
Anhui Liyuan-AES Power Company Limited
By:[Signature Illegible]
-------------------------------
Name:
Title:
Facsimile: Witness [Signature Illegible]
LENDER
- ------
AES Chigen Company (L), Ltd.
By:[Signature Illegible]
-------------------------------
Name:
Title:
Facsimile: Witness [Signature Illegible]
<PAGE>
EXHIBIT A
FORM OF NOTICE OF DRAWDOWN
--------------------------
To: AES Chigen Company (L) Ltd.
From: Anhui Liyuan-AES Power Company Limited
Date: [--------], 199[-]
Dear Sirs,
1. We refer to the loan agreement dated [ ], 199[ ] (as amended from time to
time) (the "AES LOAN CONTRACT") and made between ourselves as borrower and
yourselves as lender. Terms defined in the AES Loan Contract shall have the
meaning in this notice.
2. Pursuant to the AES Loan Contract, we hereby give you notice that we wish
to borrow on [insert date of proposed drawdown] a part of the Loan in the
amount of $[ ] United States Dollars upon the terms and subject to the
conditions set out in the AES Loan Contract.
3. We confirm that, as at the date hereof, the representations set out in
Section 5 of the AES Loan Contract are true.
4. The proceeds of this drawdown should be credited to [insert the Borrower's
account details/the EPC Contractor's account details].
Yours faithfully,
- ------------------------------
(Authorized Signatory)
for and on behalf of
ANHUI LIYUAN-AES POWER COMPANY LIMITED
<PAGE>
EXHIBIT B
DRAWDOWN SCHEDULE
[TO BE DETERMINED BY THE BORROWER'S BOARD OF DIRECTORS]
DATE AMOUNT CONSTRUCTION MILESTONE
- ---- ------ ----------------------
<PAGE>
EXHIBIT C
AMORTIZATION SCHEDULE
---------------------
<TABLE>
<CAPTION>
THE FIRST BANKING DAY OF PRINCIPAL DUE
- ------------------------ -------------
<S> <C>
January 1999 Outstandings (on Availability Termination Date) / 16
July 1999 Outstandings (on Availability Termination Date) / 16
January 2000 Outstandings (on Availability Termination Date) / 16
July 2000 Outstandings (on Availability Termination Date) / 16
January 2001 Outstandings (on Availability Termination Date) / 16
July 2001 Outstandings (on Availability Termination Date) / 16
January 2002 Outstandings (on Availability Termination Date) / 16
July 2002 Outstandings (on Availability Termination Date) / 16
January 2003 Outstandings (on Availability Termination Date) / 16
July 2003 Outstandings (on Availability Termination Date) / 16
January 2004 Outstandings (on Availability Termination Date) / 16
July 2004 Outstandings (on Availability Termination Date) / 16
January 2005 Outstandings (on Availability Termination Date) / 16
July 2005 Outstandings (on Availability Termination Date) / 16
January 2006 Outstandings (on Availability Termination Date) / 16
July 2006 Remaining Principal Balance
</TABLE>
<PAGE>
EXHIBIT D
LIST OF THE BORROWER'S DEBTS OF OVER RMB ONE MILLION EACH
---------------------------------------------------------
<TABLE>
<CAPTION>
LOAN 1 LOAN 2
------ ------
<S> <C> <C>
LENDER Bank of China Bank of China
DATE OF THE LOAN
CONTRACT NO.
LOAN AMOUNT [***] [***]
LOAN TERM [***] [***]
LOAN INTEREST [***] [***]
LOAN CURRENCY [***] [***]
</TABLE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
EXHIBIT E
"EPC CONTRACT" means the contract dated [ ] and made between [ ] and [ ].
"INTERCONNECTION AGREEMENT" means the agreement dated [ ] and made between [ ]
and [ ].
"OPERATIONS AND OFFTAKE CONTRACT" means the contract dated [ ] and made between
[ ] and [ ].
"PROJECT CONTRACTS" means [the EPC Contract, Interconnection Agreement, the
Joint Venture Agreement, the Operations and Offtake Contract], the Power
Purchase and sale Contract[ and the Share Assets Agreement and "Project
Contract" shall mean each of them]. [list to be completed and confirmed with the
Borrower]
"SHARE ASSETS AGREEMENT" means the agreement dated [ ] and made between [ ] and
[ ].
Exhibit 10.42
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
ANHUI LIYUAN ELECTRIC POWER DEVELOPMENT COMPANY LIMITED
AND
HEFEI MUNICIPAL CONSTRUCTION AND INVESTMENT COMPANY
AND
AES ANHUI POWER COMPANY LTD.
COOPERATIVE JOINT VENTURE CONTRACT
FOR THE ESTABLISHMENT OF
HEFEI ZHONGLI ENERGY COMPANY LTD.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C> <C>
ARTICLE 1. GENERAL PROVISIONS............................................... 3
ARTICLE 2. DEFINITIONS...................................................... 3
ARTICLE 3. PARTIES TO THIS CONTRACT......................................... 5
ARTICLE 4. ESTABLISHMENT OF THE COMPANY..................................... 6
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF THE COMPANY.......................... 7
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL................ 7
ARTICLE 7. ANNUAL CAPITAL RETURN............................................ 12
ARTICLE 8. RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES.................. 12
ARTICLE 9. BOARD OF DIRECTORS............................................... 15
ARTICLE 10. MANAGEMENT ORGANIZATION.......................................... 18
ARTICLE 11. SITE............................................................. 18
ARTICLE 12. SALE OF ELECTRICITY.............................................. 19
ARTICLE 13. CONSTRUCTION..................................................... 19
ARTICLE 14. OPERATION AND MAINTENANCE OF THE POWER PLANT..................... 19
ARTICLE 15. LABOR MANAGEMENT................................................. 20
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING................................. 20
ARTICLE 17. TAXATION AND INSURANCE........................................... 23
ARTICLE 18. JOINT VENTURE TERM............................................... 24
ARTICLE 20. TERMINATION AND LIQUIDATION...................................... 24
ARTICLE 21. FORCE MAJEURE.................................................... 26
ARTICLE 22. SETTLEMENT OF DISPUTES........................................... 28
ARTICLE 23. APPLICABLE LAW................................................... 29
ARTICLE 24. MISCELLANEOUS PROVISIONS......................................... 30
APPENDIX 1. THE PROJECTED RETURN ON EQUITY PRINCIPAL OF THE PARTIES OVER THE YEARS.. 33
</TABLE>
<PAGE>
COOPERATIVE JOINT VENTURE CONTRACT
ARTICLE 1. GENERAL PROVISIONS
This Contract is made in Hefei city, Anhui province, the People's Republic of
China on this 18th day of March, 1996 by and among Anhui Liyuan Electric Power
Development Company Ltd. (hereinafter referred to as Party "A"), Hefei Municipal
Construction and Investment Company (hereinafter referred to as Party "B") and
AES Anhui Power Company Ltd.(hereinafter referred to as Party "C"). Each of
Party A, Party B and Party C shall hereinafter individually be referred to as a
"Party" and collectively as the "Parties".
After friendly consultations conducted in accordance with the principles of
equality and mutual benefit, the Parties have agreed to establish Anhui
Liyuan-AES Power Company Ltd., a cooperative joint venture enterprise
(hereinafter referred to as the "Company") in accordance with the law of the
People's Republic of China on Sino-Foreign Cooperative Joint Venture Enterprises
(hereinafter referred to as the "Cooperative Joint Venture Law"), the Law of
Corporation of the People's Republic of China, other relevant laws and
regulations, and the provisions of this Contract. Therefore, the creation of
this Contract.
ARTICLE 2. DEFINITIONS
2.01 Definitions
For purposes of this Joint Venture Contract, the capitalized terms set forth
below shall have the following corresponding meanings:
1) "CONTRACT" means the cooperative joint venture contract for the
establishment and operation of the Hefei Zhongli Energy Company Ltd..
2) "ARTICLES OF ASSOCIATION" means the Company's Articles of Association,
signed by the Parities, approved by the Company's Board of Directors and
the examining and approving authority, as amended when necessary with the
approval from the Board of Directors.
3) "COMPANY" means the Hefei Zhongli Energy Company Ltd., a Sino-foreign
cooperative joint venture enterprise established by the Parties pursuant to
this Contract.
4) "BUSINESS LICENSE" means the business license issued to the Company by the
local branch of the State Administration for Industry and Commence.
5) "JOINT VENTURE TERM" means the term of the Joint Venture as defined in
Article 18 of this Contract.
6) "BOARD" or "BOARD OF DIRECTORS" means the highest authority of the Company
established in accordance with the provisions set forth in Article 9 of
this Contract.
7) "CHAIRMAN" or "CHAIRMAN OF THE BOARD OF DIRECTORS" means the Chairman of
the Company's Board of Directors appointed in accordance with Article 9 of
this Contract.
8) "VICE-CHAIRMAN" means vice-chairman of the Company's Board of Directors
appointed in accordance with Article 9 of this Contract.
9) "DIRECTOR(S)" means member(s) of the Company's Board of Directors appointed
in accordance with Article 9 of this Contract.
10) "GENERAL MANAGER" means the General Manager of the Company appointed in
accordance with Article 10 of this Contract.
11) "DEPUTY GENERAL MANAGER(S)" means the Deputy General Manager(s) appointed
in accordance with Article 10 of this Contract.
12) "POWER PLANT" means the entire facility and later extension hereto of a
50MW class gas-steam combined cycle generating set and its control
equipment and all common services, ancillary equipment, facility and the
site.
13) "SITE" means the land in Hefei City, Anhui Province, China upon which the
Company's Power Plant facility and all required auxiliary facilities are
located.
14) "COMMENCEMENT OF OPERATION" means the date of commencement of commercial
operation of the Power Plant as defined in the Operation and Offtake
Contract executed between the Company and the Anhui Provincial Electric
Power Company.
15) "EPC CONTRACT" means the fixed price, fixed schedule, fixed scope and fixed
quality construction contract for the design, construction, completion and
commissioning of the Power Plant.
16) "INTERCONNECTION AGREEMENT" means the interconnection agreement entered
into by and between the Company and the Anhui Provincial Electric Power
Company.
17) "DESPATCH AGREEMENT" means the electric power despatch agreement entered
into between the company and the Anhui Provincial Electric Power Company.
18) "OPERATION AND OFFTAKE CONTRACT" means the long-term electricity sales
contract entered into between the Company and Anhui Provincial Power
Company which is entrusted by the former to operation, maintenance, repair
and management of the Power Plant.
19) "BANK SUPERVISION AGREEMENT" means an agreement between the Company and
bank within China for supervising each Party's distributable profit as
defined in Article 16.06
20) "LOAN CONTRACTS" means contracts to be entered into and between the Company
and domestic financial institutions and the overseas institutions arranged
by Party C to provide loans to the Company in accordance with Article 6.03
hereof.
21) "EXAMINING AND APPROVING AUTHORITY" means the Ministry of Foreign Trade and
Economic Cooperation of the People's Republic of China or its authorized
organization.
22) "AFFILIATE" means any company through ownership of voting stock or
otherwise, directly or indirectly, controlling or controlled by a Party,
the term "control" being used in the sense of power to elect directors or
to direct the operation and management of a company.
23) "OWNER'S ENGINEER" means a qualified engineering firm appointed by the
Company to supervise the execution of the work contracted for under the EPC
Contract.
24) "THIRD PARTY" means any party or parties other than the Parties to this
Contract.
25) "CHINA" means the People's Republic of China
26) "RMB" means the lawful currency of the People's Republic of China.
27) "USD" or "US$" means the lawful currency of the United States of America.
ARTICLE 3. PARTIES TO THIS CONTRACT
3.01 The Parties to this Contract are:
(a) Party A, Anhui Liyuan Electric Power Development Company Limited, a
state-owned enterprise, set up in accordance with Chinese law and
registered in Anhui province, China, with its legal address at:
No. 415 Wuhu Road, Hefei, Anhui Province, China.
Legal Representative of Party A:
Name: Cheng Guangjie
Position: Chairman
Nationality: Chinese
(b) Party B, Hefei Municipal Construction and Investment Company, a
state-owned enterprise, set up in accordance with Chinese law and
registered in Hefei City, Anhui Province, China, with its legal address
at: No. 186 Suzhou Road, Hefei, Anhui Province, China.
Legal Representative of Party B:
Name: Shen Dequan
Position: General manager.
Nationality: Chinese
(c) Party C, AES Anhui Power Company Ltd, a company registered in
British Virgin Islands with its legal address at: 9/F allied Capital
Resources Building, 32-38 Ice House Street, Central, Hong Kong
Legal Representative of Party C:
Name: Paul T. Hanranhan
Position: President
Nationality: U.S.A.
ARTICLE 4. ESTABLISHMENT OF THE COMPANY
4.01 Establishment Of The Company
The Parties hereby agree to establish the Company in accordance with
the Sino-Foreign Cooperative Joint Venture Law, the Corporation Law and
other relevant laws and regulations of the People's Republic of China
and with the provisions of this Contract.
4.02 Name and Address of the Company
(a) The Chinese name of the Company shall be "[Chinese text]", and its
English name is "Hefie zhongli Energy Company Ltd."
(b) The legal address of the Company shall be: No. 415 Wuhu Road,
Hefei, Anhui Province, China
4.03 Form of Organization of the Company
The form of organization of the Company shall be a limited liability
Company. Creditors of the Company shall have recourse solely to the
assets of the Company and not to the assets of the individual Parties.
Expect as otherwise provided herein, once a Party has paid in full its
contribution to the registered capital of the company and to provide or
arrange loans in accordance with this Contract, it shall not be
required to provide any further funds to or on behalf of the Company by
way of capital contribution, loan, advance, guarantee or otherwise. The
Company shall indemnify the Parties against any losses, damages or
liabilities in respect of any third party arising out of the
department, construction and operation of the Power Plant and the
operation of the Company. Subject to the aforementioned responsibility
limitations, all Parties to this Contract shall share risks and losses
incurred by the Company within the limits of its respective share in
registered capital contribution.
4.04 Laws and Decrees
The Company is an economic entity established pursuant to the laws of
the People's Republic of China. The Company has the legal status of an
independent legal person. The business activities of the Company shall
be governed and protected by the laws, decrees and relevant rules and
regulations of China.
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF THE COMPANY
5.01 Purpose of the Company
The Company's purpose is to build, own and operate the Power Plant, to
sell electric power to the grid and to achieve a projected return on
investment for the Parties.
5.02 Operation Scope of the Company
The operation scope of the Company is to generate electricity, to sell
it to the grid and to take charge of repair and maintenance services of
the Power Plant.
5.03 Construction Scale
The Company shall construct 1x50 MW Class gas-steam combined cycle
generating facility and its auxiliary facilities.
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
6.01 Total Investment
The total amount of investment required by the Company is presently
estimated to be US$29.98 million. Any increase in the registered
capital must be first agreed to by the Parties and unanimously approved
by the Board of Directors before being submitted to the relevant
authorized Examination and Approval Authority for approval. Increase in
registered capital will be met by the Parties in proportion to their
existing interest in the Company's registered capital.
6.02 Registered Capital
The total registered capital of the Company shall be US$15 million.
6.03 Financing
The financing for the balance between the total investment and the
registered capital shall be arranged by Party A and Party C
respectively. Party C shall undertake financing responsibility of not
exceeding the maximum amount of US$8 million. All the rest of the
financing needed by the Project shall be raised by Party A. The term
and conditions for financing shall be provided for in detail in the
loan contract.
6.04 Contributions of Registered Capital
(a) Party A's Contribution to the Registered Capital: Party A agrees to
contribute an amount of RMB equivalent to US$3 million to the
registered capital of the Company which represents 30% of the
registered capital of the Company. The value of Party A's contribution
in RMB shall be calculated at the medium price of the USD/RMB exchange
rate as announced by the People's Bank of China on the date the
contribution is made.
(b) Party B's Contribution to the Registered Capital: Party B agrees to
contribute an amount of RMB equivalent to US$1.5 million to the
registered capital of the Company which represents 10% of the
registered capital of the Company. The value of Party B's contribution
in RMB shall be calculated at the medium price of the USD/RMB exchange
rate as announced by the People's Bank of China on the date the
contribution is made.
(c) Party C's Contribution to the Registered Capital: Party C agrees to
contributed an amount of US$10.5 million to the registered capital of
the Company which represents 70% of the registered capital of the
Company.
6.05 Payment of Registered Capital and Conditions Precedent Thereto
Each Party agrees to make their first contribution of registered
capital to the Company which shall not be less than 15% of the total
amount of their respective portions of registered capital share within
thirty (30) days after satisfaction of the conditions precedent listed
below. The second registered capital contribution (namely 85% of the
total registered capital) shall be made in full several times within a
year after obtaining the copy of the business license. The Parties
agree to hold a meeting of the Board of Directors as soon as possible
after receiving the Business License of the Company to execute the
Contracts listed in Article 4 and decide on a schedule for the balance
of the registered capital in accordance with relevant regulations and
construction needs.
Conditions precedent to payment of registered capital are:
(a) The company and the Project has obtained all necessary relevant
government approvals.
(b) Issuance of Approval by the examining and approving authority
approving this Contract and Articles of Association of the Company.
(c) Issuance of a duplicate of the Company's Business License by the
local branch of the State Administration for Industry and commence of
China;
(d) Local Exchange Control Bureau's agreement to issuing a support
letter to arrange the conversion of RMB into foreign currency on a
priority basis and to approval of the Company access to foreign
exchange trading centre to convert foreign currencies so as to meet the
Company's needs for foreign currency.
(e) Execution and approval of the Operation and Offtake Contract, the
Loan Contracts, the EPC Contract, the Bank Supervision Agreement, the
Interconnection Agreement, the Dispatch Agreement and other agreements
related to this Contract. The approval shall be obtained from all
Chinese Government authorizes required to approve these contracts.
(f) Opening a bank account with a relevant bank in the name of the
company;
(g) Anhui Provincial Pricing Bureau, pursuant to relevant state
policies, has granted its approval to the estimated initial tariff and
the principle of the tariff adjustment as stipulated in the Operation
and Offtake Contract. This principle, once approved, shall be valid for
the entire term of this Contract unanimously.
(h) The Company has obtained relevant certificate to lawful use of the
Site in accordance with the provisions of the laws of China.
(i) The support letter in respect of the Company and this project
issued by Anhui Provincial government.
(j) Obtaining a legal opinion from attorney to the effect that the
Company has obtained all required approvals and that all the Contracts
listed in Article 6.05(e) are legal, effective and enforceable.
(k) Approval by each Party's Board of Directors authorizing each Party
to execute this Contract.
Each of the Parties shall be satisfied the conditions precedent. In the
event any of the conditions have not been met ninety days after the
Company has been issued the Business License, and the Parties do not
agree in writing to waive such conditions precedent or extend the time
for their fulfillment, any Party shall have the right to terminate this
Contract, should any Party terminate this Contract, no Party shall have
the right to require that party to made further contribution to the
registered capital nor shall any Party have the right to claim any
damage from that party.
If within thirty (30) days after satisfaction of the conditions
precedent, any Party has not made its contribution to the registered
capital of the company, or fails to make its contributions in
accordance with the schedule approved by the Board of Directors, the
party or Parties failing to make such contribution shall be changed
with a penalty equal to 0.05% of the delinquent part of payment on a
daily basis, from the date of the scheduled contribution until the date
of the actual contribution, and shall be in default under this
contract.
6.06 Drawdown of Loans
The Loans shall be deposited on time to the bank account of the Company
in accordance with the financial arrangements of the construction
schedule. The specific dates shall be set in the Loan Contracts.
Failure to make payments on time shall be treated in accordance with
the provisions of the Loan Contracts.
In case of financing requirement, the Company establish a RMB reserve
account so as to ensure the repayment of loans.
6.07 Investment Certificate
After any Party has made its contribution in full to the registered
capital, an accounting firm registered in China shall verify the
contribution and issue a contribution verification report. Thereupon,
an investment certificate signed by the Chairman and Vice-Chairman of
the Board shall be issued to such Party by the Company.
6.08 Assignment and security of Registered Capital and Ownership Interest
(a) Approval of the Board of Directors and Right of First Refusal: Any
Party to this Contract may assign, sell or otherwise transfer all or
part of its ownership interest in the Company (such Party being
hereinafter referred to as "the Transferring Party") to any Third Party
(hereinafter referred to as "the Transferee"), provided such transfer
gets a unanimous approval from the Board of Directors. Meanwhile, such
transfer will be allowed provided the other Parties have a right of
first refusal to purchase the ownership interest in the Company being
transferred under the same terms and conditions agreed between the
Transferring Party and the Transferee. The Transferring Party shall
notify the other parties in writing of the terms and conditions of the
transfer. If the other Parties do not exercise their right of first
refusal within thirty (30) days after receipt of such notice, they will
be deemed to have consented to the transfer. The Transferring Party may
then transfer its ownership interest in the Company provided the
Transferee executes a document by which it becomes a Party to this
Contract and expressly assumes the Transferring party's obligations
herein.
The requirement for unanimous approval by the Board of Directors do not
apply if a Party is assigning its rights to distributions from the
Company as security to obtain loans for itself or an affiliate nor
shall the Company take any collateral responsibility for it. If a Party
is assigning, selling or otherwise transferring all or any part of its
rights, title and ownership interest in the Company to an Affiliate,
the right of first refusal shall not apply.
(b) Government Approval: The sale or assignment shall become effective
only after the approval in received. Upon receipt of the approval from
such Examining and Approving Authority, the Company shall register the
change in ownership with the local branch of the state Administration
for Industry and Commence.
(c) Subject to the connect of Creditors and after going through China's
applicable legal proceedings, the Parties agree to mortgage and pledge
the Company's assets and ownership rights of the Contract to Creditors
in Accordance with financing requirements in order to obtain loans.
6.09 Increase of Registered Capital
Any increase in the registered capital must be first agreed to by the
Parties and unanimously approval by the Board of Directors before being
submitted to the original Examining and Approving Authority of this
Contract for approval. In principle, increases in registered capital
will be met by the Parties in proportion to their then existing
ownership interest in the Company's registered capital. Upon approval
by such Examining and Approving Authority, the Company shall register
the increase in registered capital with the local branch of the State
Administration for Industry and Commence.
6.10 Failure to Make Registered Capital Contributions
In the event any Party fails to make its registered capital
contribution or any portion thereof as provided herein or fails to
provide its share of any increase in the Company's registered capital
as described in Article 6.09 above, then in addition to any other
rights the Company may have against the defaulting Party as described
in Article 6.05, the Company shall offer such unsubscribed portion of
registered capital to the non-defaulting Parties. The non-defaulting
Parties will be offered the unpaid portion of the defaulting Party in
proportion to each Party's registered capital contribution. Such change
in each Party's investment ratio and transfer in ownership interest of
registered capital as described in this paragraph shall be subject to
the approval of the Examining and Approving Authority of this contract.
ARTICLE 7. ANNUAL CAPITAL RETURN
7.01 The investment return rate for the Parties is calculated on the basis of
the Power Plant operating at full load with an annual equivalent operation hour
of [***] hours. After all taxes and contributions to required funds according to
relevant regulations are paid, the USD financial internal Return Rate (FIRR) on
equity for the Parties shall be [***]. Based on an annual equivalent full load
operation hour of [***] hours and an FIRR of [***], the annual capital returns
of the Parties calculated in USD are calculated and listed in Appendix 1.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
7.02 In the event that the annual equivalent full load of operating hours
exceeds [***] hours, the exceed net profit will be met by the Parties in
proportion to their existing interest in the Company's registered capital.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 8. RESPONSIBILITIES AND OBLIGATIONS OF THE PARTIES
8.01 Responsibilities and Obligations of Party A
In addition to other obligations under this Contract, Party A shall
have the following responsibilities:
(a) Be responsible for obtaining all necessary approvals, permits and
licenses for the establishment of the Company and have the obligation
to use its best efforts to obtain all necessary approvals and permits
for the ongoing operation of the Company, including but not limited to
assisting the Company in obtaining approval from Anhui Provincial
Pricing Bureau in connection with the estimated initial tariff and the
principle of tariff adjustment as stipulated in the Operation and
Offtake Contract;
(b) Assist the Company in conducting negotiations with land
administration authority and other relevant government authority in
connection with the Company's use of the site and assist in handling
all necessary formalities so as to ensure the Company's use of the site
in accordance with its scope of business during the entire joint
venture term (including the extension of the term thereafter);
(c) Assist the Company in obtaining all infrastructure needed,
including external water supply, power supply, fuel, transportation,
communications and other services on the most favorable terms and
conditions available;
(d) Assist the Company in applying for preferential tax treatment and
other investment incentives available under applicable laws and
regulations; (e) Assist the Company in obtaining necessary approvals
for importing raw materials and machinery equipment, in importing
machinery equipment, fuel, materials, supplies and office equipment on
preferential terms, in procuring import licenses, in facilitating
customs formalities and in arranging for transportation of imported
equipment and materials between Chinese ports and the site;
(f) Assist the Company's expatriates to obtain all necessary entry
visas and work permits;
(g) Assist the Company in opening RMB and foreign currency bank
accounts as well as loan reserve account; assist the Company to obtain
necessary approvals to utilize various methods permitted under Chinese
laws to balance its foreign exchange as needed, including assisting
Party C to convert its capital returns into US dollars for remittance
overseas;
(h) Arrange financings for the Company pursuant to relevant provisions
of this Contract and assist the Company in obtaining working capital
loans in business operation;
(i) Be responsible for drafting feasibility study report of the Power
Plant, submitting necessary engineering and technical documents for the
proposal and examination and approval of the project;
(j) Facilitate the execution of the Operation and Offtake Contract
between the Anhui Provincial Electric Power Company and the Company,
ensure to purchase yearly minimum Offtake electricity and ensure safe
and stable generation of electricity in accordance with designed
capability during the term of the joint venture and their adherence to
the obligations thereunder;
(k) Handle other reasonable matters entrusted from time to time by the
Company.
8.02 Responsibilities and Obligations of Party B
In addition to its other obligations under this Contract, Party B shall
have the following responsibilities.
(a) Be responsible for obtaining all necessary approvals, permits and
licenses for the establishment of the Company and have the obligation
to use its best efforts to obtain all necessary approvals and permits
for the ongoing operation of the Company, including but not limited to
assisting the Company in obtaining approval from Anhui Provincial
Pricing Bureau in connection with the estimated initial tariff and the
principle of tariff adjustment as stipulated in the Operation and
Offtake Contract;
(b) Assist the Company in conducting negotiations with land
administration authority and other relevant government authority in
connection with the Company's use of the Site and assist in handling
all necessary formalities so as to ensure the Company's use of the Site
in accordance with its scope of business during the entire joint
venture term (including the extension of the term thereafter);
(c) Assist the Company in obtaining all infrastructure needed,
including external water supply, power supply, fuel, transportation,
communications and other services on the most favorable terms and
conditions available;
(d) Assist the Company in applying for preferential tax treatment and
other investment incentives available under applicable laws and
regulations;
(e) Assist the Company in obtaining necessary approvals for importing
raw materials and machinery equipment, in importing machinery
equipment, fuel, materials, supplies and office equipment on
preferential terms, in procuring import licenses, in facilitating
customs formalities and in arranging for transportation of imported
equipment and materials between Chinese ports and the Site;
(f) Assist the Company's expatriates to obtain all necessary entry
visas and work permits;
(g) Assist the Company in opening RMB and foreign currency bank
accounts as well as loan reserve account; assist the Company to obtain
necessary approvals to utilize various methods permitted under Chinese
laws to balance its foreign exchange as needed, including assisting
Party C to convert its capital returns into US dollars for remittance
overseas;
(h) Assist the Company in obtaining working capital loans in business
operation;
(i) Handle other reasonable matters entrusted from time to time by the
Company.
8.03 Responsibilities and Obligations of Party C
In addition to its other obligations under this Contract, Party C shall
have the following responsibilities.
(a) Assist the Company in purchasing equipment, supplies and materials
inside or outside China to ensure that they are of the proper quantity
and quality;
(b) Introduce modern management techniques and financial management
expertise to the Company;
(c) Assist the Company staff and representatives in arranging foreign
visas for overseas training as required for the operation and
management of the Power Plant;
(d) Assist the Company in recruiting qualified expatriate personnel and
international consultants as required by the Company;
(e) Arrange financing for the Company pursuant to relevant provisions
hereof;
(f) Handle other reasonable matters entrusted from time to time by the
Company.
ARTICLE 9. BOARD OF DIRECTORS
9.01 Formation of the Board
(a) The Board of Directors shall be established on the date of
registration of the Company.
(b) The Board shall consist of seven (7) Directors including the
Chairman of the Board, two (2) of whom shall be appointed by Party A,
one (1) by Party B and four (4) by Party C. At the time this Contract
is executed and at any time a Director is appointed or removed, each
Party shall send written notice to the other Parties of the names of
its appointed or removed Directors.
(c) In general, each Director shall be appointed for a term of three
(3) years and may serve consecutive terms if reappointed by the
original appointing Party. Each Director shall serve and may be removed
by the Party who appointed that Director. In the event a Director
vacates the Board through retirement, resignation, illness, disability
or death, or in the event a Director is removed by the original
appointing Party that Party may appoint a successor to serve out the
departing Director's remaining term.
(d) Directors will serve without remuneration, but all reasonable costs
incurred by the Directors in performance of their duties as members of
the Board will be borne by the Company.
(e) Each Director may concurrently be appointed by the Board as General
Manager or Deputy General Manager. When a Director is concurrently a
managerial staff of the Company, he may only carry on day-to-day
managerial activities of the company in the capacity of General
Manager, Deputy General Manager, and may not exercise his director
functions in dealing with day-to-day managerial activities.
(f) The Chairman of the Board shall be appointed by Party A. He shall
be the legal representative of the Company, and will exercise his
authority within the limits prescribe by the Board and in compliance
with the Sino-Foreign Cooperative Enterprise Law and its Rules for
Implementation and the Corporation Law of P.R. China. He may not under
any circumstance contractually bind the Company or otherwise take any
action on behalf of the Company without prior approval of the Board.
Whenever he is unable to perform his responsibilities for any reason,
one Vice Chairman may be designated by him or the Board to temporarily
assume his duties until he is able to resume his duties.
(g) There shall be two Vice Chairmen, one appointed by Party B and the
other appointed by Party C.
(h) The Company hereby indemnifies each Director against any claims
arising from that Director's action in his capacity as a Director of
the Company, except for such acts in violation of criminal laws.
9.02 Power of the Board.
(a) The Board of Directors shall be the highest authority of the
Company;
(b) Resolutions involving the following matters may only be adopted at
a duly constituted and convened meeting of the Board whereupon such
resolution receives the unanimous affirmative vote of each and every
Director of the Board voting in person or by proxy at such meeting;
(i) Amendment of the Joint Venture Contract and Articles of
Association;
(ii)Merger and integration of the Company with another
organization, or establishment of subsidiaries of the Company;
(iii)Dissolution of the Company;
(iv)Any increase or transfer of the registered capital of the
Company;
(v)Execution, supplement, modification, termination, substitution
or assignment by the Company of any credit or financing
agreements, any Operation and Offtake Contract, and major
construction contract or material contract;
(vi)Additional capital requirement or financing amounts above
total investment amounts as set forth in Article 6.01;
(vii)Appointment of General Manager and Deputy General Managers of
the Company;
(c) All other issues that require a resolution by the Board may be
raised at a duly convened meeting of the Board. Such resolution must be
adopted by the affirmative vote of a 2/3 of the Directors present at
such meeting in person or by proxy;
(d) Any matter to be decided by the Board may be decided without a
meeting if all Directors consent in writing to such matter. Such
written consent shall be filed with the minutes of the Board
proceedings and shall have the same force and effect as a unanimous
vote taken by the Directors physically present.
9.03 Meetings
(a) Annual Meetings: The first meeting of the Board of Directors shall
be held within thirty (30) days from the date the Company is issued a
Business License pursuant to this Contract. Thereafter, the Board shall
meet at least once every year. Meetings shall be held at the registered
address of the Company or such other address in China or abroad as is
designated by the Board. The Chairman of the Board shall set the
meeting's agenda after consultation with the Vice Chairmen of the
Board. The Chairman is responsible for convening and presiding over all
Board meetings.
(b) Proxy: Meeting may be attended by Directors in person or by proxy.
If a Director is unable to participate in a Board meeting, he may issue
a proxy and entrust a representative to participate in the meeting on
his behalf. The representative so entrusted shall have the rights and
powers as stated in the proxy.
(c) Interim Meetings: Interim meetings of the Board may be held
provided three (3) or more of the Directors submit written requests for
such meetings specifying the matters to be discussed. Within thirty
(30) days upon receipt of such written notice, the Chairman shall
convene an interim meeting of the Board. If the Chairman is unable to
participate in an interim meeting, in his absence the Vice Chairman
taking his place shall decide on the time and location of such interim
meetings.
(d) Quorum: Five (5) Directors present in person or by proxy shall
constitute a quorum necessary for the conduct of business at any
meeting of the Board. If at any properly convened meeting, no quorum is
constituted because less than five (5) Directors are present in person
or by proxy, then the meeting shall be canceled, the Chairman may call
another meeting with seven (7) days' notice. Any Director absent from a
meeting without giving a reason therefor and without having appointed a
proxy shall be considered to have abstained from voting. Resolutions,
except those concerning the issues prescribed in Article 9.02(b), shall
be valid if passed by a majority of the Directors present.
(e) Notice of Meeting: The notice of a Board meeting shall be sent to
all directors ten (10) days in advance of each meeting. The notice
shall state the time, venue and main agenda of the meeting, including
relevant documents and information.
(f) Minutes: The Board will cause complete and accurate summary of
minutes (in both English and Chinese) to be kept of all meetings
(including a copy of the notice of the meeting) and of business
transacted at such meetings. Minutes of all meetings of the Board shall
be distributed to all the Directors as soon as practicable after each
meeting but not later than ten (10) days from the date of such meeting.
Any director who wishes to propose any amendment or addition thereto
shall submit the same in writing to the Chairman and the Vice Chairmen
within one (1) week after receipt of the proposed minutes. The minutes
shall be finalized by the Chairman and Vice Chairman not later than
thirty (30) days after the relevant meeting and signed by all the
directors within one (1) week after receipt of the final minutes.
ARTICLE 10. MANAGEMENT ORGANIZATION
10.01 Management Organization;
The Company shall adopt a general manager responsibility system under
the leadership of the Board of Directors. The Company management shall
include a General Manager and two Deputy General Managers. The General
Manager shall be nominated by Party C and each of the two Deputy
General Managers nominated respectively by Party A and Party B and the
Board of Directors needs to unanimously approve the appointment of the
General Manager and the two Deputy General Managers for a term of three
(3) years. The General Manager and the Deputy General Managers may be
removed only by a majority resolution of the Board. If the General
Manager or the Deputy General Manager is removed by Board or if his
term of office expires a successor shall be nominated by the original
nominating Party for approval by the Board of Directors.
10.02 Responsibilities and Power of the General Manager
The General Manager shall at all times be responsible to the Board of
Directors and shall carry out all matters entrusted by the Board. The
General Manager shall be in charge of the financial affairs and the
day-to-day operation and management of the Company. And the Deputy
General Managers shall assist the General Manager in his work. The
General Manager and the Deputy General Managers shall meet regularly to
deal with important issues arising from the operation and management of
the Company.
ARTICLE 11. SITE
11.01 Site
The area of the Site for the Power Plant is approximately 80 MU.
Details regarding the Site are set forth in the Project Feasibility
Study Report.
The use of the Site shall include full access to all necessary public
roads in the vicinity, so that the Company staff and relevant personnel
of parties concerned may have full access to the Site, which shall also
include the right to use external connecting points to public
utilities.
Party A and Party B are duty bound to assist the Company in obtaining
the lawful land use right of the Site during the term of the Joint
Venture Contract so as to conform with the requirement of Chinese law
and to ensure the construction and normal operation of the Power Plant.
ARTICLE 12. SALE OF ELECTRICITY
12.01 Sale of Electricity
The sale of electricity generated by the Power Plant shall be made
pursuant to the Operation and Offtake Contract entered into by and
between the Company and the Anhui Provincial Electric Power Company.
12.02 Tariff Determination
The tariff of the electricity generated by the Power Plant shall be
determined and adjusted in accordance with the provisions of the
Operation and Offtake Contract entered into by and between the Company
and the Anhui Provincial Electric Power Company, the estimated initial
tariff and the principle of tariff adjustment are subject to the
approval of relevant pricing authority.
ARTICLE 13. CONSTRUCTION
13.01 Construction Management
The Company will select an experienced Chinese or foreign company as
EPC contractor through public bidding. The EPC Contract shall be
comparable to internationally accepted parties in similar projects in
the areas of construction schedules, quality and others. The detailed
clauses shall be specified in the EPC Contract. The EPC Contractor
shall appoint designing and construction consultants who are rich in
constructing and managing gas-steam combined cycle generating set and
agreed to by the company.
13.02 Owner's Engineer
The Company will appoint an owner's engineer to exercise supervision
and management over the construction of the Power Plant.
ARTICLE 14. OPERATION AND MAINTENANCE OF THE POWER PLANT
14.01 Operation and Maintenance
The Company will enter into an Operation and Offtake Contract with the
Anhui Provincial Electric Power Company which will be responsible for
the operation, maintenance and repair of the Power Plant and for
providing, on a long-term and stable basis, fuel whose quality must
cater to the operational requirement of the Power Plant.
The manager of the Power Plant is appointed by the Anhui Provincial
Electric Power Company after having consulted the Company and the
appointment shall be submitted to the Board of Directors of the Company
for the record.
ARTICLE 15. LABOR MANAGEMENT
15.01 Labor Management
The Company shall be responsible for its own labor management and is
responsible for recruitment, employment, dismissal, resignation, wages
and welfare of its working personnel in accordance with the "Label
Management Regulations of the PRC for Foreign Investment Enterprises"
(the "Labor Regulations") and other relevant regulations. The
organization chart, qualifications and number of employees shall be
determined by the Board of Directors in accordance with the operating
needs of the Company.
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING
16.01 Financial Principles
(a) The General Manager of the company shall be responsible for the
financial management of the Company.
(b) The Company shall prepare the Company's accounting system and
procedures in accordance with the "Accounting System of the People's
Republic of China for Foreign Investment Enterprises" and the
"Financial Management System of the People's Republic of China for
Foreign Investment Enterprises". The Company shall also conduct its
accounting in accordance with such internationally recognized
accounting standards as any foreign lender to the Company may require.
The Company shall practice the accrual system and the debit and credit
accounting system. The Company's accounting system and procedures shall
be submitted to the Board for approval. Once approved by the Board, the
accounting system and procedures shall be filed for the record with the
higher competent authority and with the relevant local department of
finance and tax authorities.
(c) The Company shall adopt RMB. as its bookkeeping base currency.
(d) All accounting records, vouchers and books of the Company shall be
made and kept in Chinese. At the request of Party C, some part of the
records and books will be provide to Party C in English. All Company
accounting statements shall be made and kept in English and Chinese.
16.02 Auditing
(a) The Company will engage an independent accounting firm registered
in China as its auditor to examine and verify the annual financial
report. Such accounting firm shall be of international standard and
shall be entrusted by the Board. The Company shall submit to the
Parties an annual statement of final accounts (including the audited
profit and loss statement and the balance sheet for the fiscal year)
within two (2) months after the end of the fiscal year. Such
documentation will be submitted together with an audit report prepared
by the accounting firm registered in China.
(b) Each Party may, at its own expense, appoint an accountant who is
either an accountant registered abroad or in China. On behalf of the
Party, the independent accountant may audit the Company's accounts.
Such accountants shall be given reasonable access to the Company's
financial records and shall keep confidential all documents under their
auditing.
(c) The Company shall present to the Parties balance sheets, profit and
loss statements and other supplementary information requested by the
Board on a monthly basis. Such information shall be provided to the
Parties both in English and Chinese.
16.03 Bank Accounts and Foreign Exchange Control
The Company shall open a foreign exchange account and a Renminbi
account at banks within or outside China; such bank shall be approved
by the State Administration of Exchange Control. The Company's foreign
exchange transactions shall be handled in accordance with the
regulations of China relating to foreign exchange control.
16.04 Foreign Exchange Balance
(a) In the event the Company borrows foreign currency from lenders not
located in China, the Company shall, in accordance with applicable
foreign exchange regulations of the People's Republic of China, open
USD cash accounts at a bank approved by relevant authorities for the
repayment of principal of and the payment of interest on foreign
currency loans.
(b) Funds in the Company's foreign exchange account shall be used as
determined by the Board of Directors to satisfy foreign exchange debt,
expenses, remittances of profit and other remittances in accordance
with relevant foreign exchange control regulations of the People's
Republic of China.
(c) All remittances to Party C due in accordance with the provisions of
this Contract shall be made to a foreign bank account designated by
Party C in US Dollars or in accordance with the foreign exchange
control regulations of China and the commitment of local foreign
exchange control authority. The Company shall pay for the fee incurred
in the conversion.
16.05 Fiscal Year
The Company shall adopt the calendar year as its fiscal year, which
shall begin on January 1 and end on December 31 of the same year. The
first fiscal year of the Company shall commence on the date when the
Company is established and granted a Business License, and shall end on
December 31 of the same year.
16.06 Revenues and Their Distribution
(a) The revenues due to the Company shall be distributed in accordance
with the following priority of payment
(i)Operation and fuel costs of the Power Plant;
(ii)Financial expenses (loan interest, exchange loss and financing
cost);
(iii)Cost of the Joint Venture Company, including administrative
expenses, insurance expenses, fees payable to auditors,
consultants and advisors and all other such expenses;
(iv)Income tax and other taxes;
(v)Repayment of loan principal;
(vi)Approved by the Board of Directors to cover losses of the
previous year;
(vii)Statutory funds;
(viii)Distributable profit;
(b) After the payment of any applicable related taxes and fees by the
Company, the Board will determine the annual allocations to the
statutory funds as required by Chinese laws and regulations. The sum of
the annual allocations to the statutory funds shall be less than 15% of
the after-tax profit of the year under consideration (unless otherwise
required by law). Any increase or decrease in the percentage to the
statutory funds shall be determined by the Board of Directors, in the
light of annual business operation.
(c) All distributable profits shall be distributed pursuant to amounts
as specified in Appendix 1 hereto. In view of the provision of Article
20 hereto that the fixed assets of the Company will be gratuitously
owned by Party A and Party B upon the expiration of the Joint Venture
term, if the distributable profit in a certain fiscal year during the
Joint Venture term (including the approved extension period) fails to
reach the estimated amount as listed in Appendix 1, the distribution
among the Parties shall be carried out in accordance with the following
priorities: (I) Party C (ii) Party A and Party B
(d) If the company carries losses from the previous year, the
development and reserve funds (the amounts of drawdown will be
determined by the Board) from the cumulative statutory funds will first
be used to compensate for the losses in the previous year, if that is
still insufficient, then the profits of the current year shall first be
used to cover the losses in the previous year. No profit shall be
distributed by the company unless the deficit from the previous year is
made up. The profits carried out from previous year and retained by the
Company may be distributed together with the distributable profit of
the current year.
(e) Profits shall be distributed in accordance with the distribution
plan formulated in accordance with Appendix 1 of this Contract and the
above stipulation, without the necessity of being unanimously approved
by the Board of Directors. After having received the applicable
approval, the Company may predistribute profits every half a year.
ARTICLE 17. TAXATION AND INSURANCE
17.01 Taxes
(a) The Company and its Chinese and expatriate employees shall pay tax
under the relevant tax laws of China.
(b) Following approval of this Contract by the Examining and Approving
Authority, the Company will submit an application for confirmation of
the Company as a technically advanced enterprise in accordance with the
"Implementing measures of the Ministry of Foreign Cooperation Trade and
Economic on the Confirmation and Examination of Foreign-Invested
commodity Export Enterprises and Technologically Advanced Enterprises"
in order to obtain the most favorable tax rates.
17.02 Insurance
The insurance for the Company for various kinds of risks shall be
purchased from insurance companies registered within PRC. The Company
shall undertake to procure the types of insurance as required by
overseas creditors which include but are not limited to the following;
(a) Property All Risks Insurance, Construction All Risks Insurance and
Erection All Risks Insurance (including domestic transportation
insurance for equipment) before and after the completion of the Power
Plant and thereafter in respect of any upgrading or maintenance works
to the Power Plant;
(b) Property All Risks Insurance, Machinery Breakdown Insurance,
Business Interruption Insurance, Machinery Breakdown Business
Interruption Insurance, Bodily Injury Insurance, Personal Accident
Insurance and Additional Cover for Medical Expenses for the period
after the completion of the Power Plant; and
(c) Other necessary insurance coverage which the Board of Directors
decides on.
ARTICLE 18. JOINT VENTURE TERM
18.01 Joint Venture Term
The term of the Joint Venture established under this Contract shall
commence on the date the Company is granted a Business Licensed and
shall terminate sixteen (16) years thereafter (including one year of
construction). The fixed assets of the Company will be gratuitously
owned by Party A and Party B upon the expiration of the Joint
Venture.(including the expiration of the extended term of the JV
pursuant to Article 18.02)
18.02 Extensions to the Joint Venture Term
If it is estimated six months prior to the expiration of the term of
this Contract that if the non-fixed assets are liquidated in accordance
with Article 20.03 upon expiration of the term, the Parties can hardly
recover all their investments pursuant to Appendix 1 hereto, then the
directors of the Parties shall unanimously agree upon postponing the
Joint Venture term until the full recovery of investment by the
Parties, and application for approval in respect of extending the Joint
Venture term shall be promptly submitted to the Examining and Approving
Authority.
ARTICLE 19. DEFAULT
19.01 Default
In the event the Company is unable to continue its operation or achieve
the established objectives stipulated in this Contract due to failure
of a Party to fulfill its obligations under this Contract and its
Appendices, the non-defaulting Parties shall have the right to
terminate this Contract in accordance with Article 20 herein and the
liabilities arising from default shall be borne by the defaulting Party
as provided for in this Contract and its Articles of Association. The
defaulting Party shall make the consequent payment arising therefrom to
the non-defaulting Parties.
ARTICLE 20. TERMINATION AND LIQUIDATION
20.01 Termination
No Party shall have the right to terminates this Contract advanced if
the repayment of the principal and payment of interest on loan under
the Loan Contract have not been completely paid off. After the
completion of the payable period, the Party may terminate this Contract
advanced only under the following circumstances.
(i)The Parties unanimously agree in writing to terminate this
Contract;
(ii)A Party materially breaches this Contract or violates the
Articles of Association, and such breach or violation is not cured
within thirty (30) days of written notice to the defaulting Party
by a non-defaulting Party;
(iii)The conditions or consequences of Force Majeure as hereafter
defined in Article 21 significantly interfere with the normal
functioning of the company for a period in excess of eighteen (18)
months and the Parties are unable to find an equitable solution
pursuant to Article 21 hereof;
(iv)The Operation and Offtake Contract and other major contracts
are terminated;
(v)The change of law causes significant adverse consequences to
the Company or any Party, while the economic benefits stipulated
in Article 23.02 hereof are not adjusted accordingly.
20.02 Notification Procedure
Mere submission by any Party of a notice indicating a desire to
terminate this Contract shall not by itself constitute a termination of
this Contract. In the event that any Party gives notice pursuant to
Article 20.01 hereof of a desire to terminate this Contract, the
Parties shall, within a two (2) month period after such notice is
given, conduct negotiations and endeavor to resolve the situation which
resulted in the giving of such notice. In the event that the situation
which resulted in the giving of such notice is not cured and that
matters are not resolved to the satisfaction of the Parties within two
(2) months of such notice, the notifying Party may follow the relevant
procedures and laws and apply to the original Examining and Approving
Authority for the termination of the Contract. In the event a default
is committed by a Party to this Contract which results in the
termination of this Contract, the defaulting Party shall bear full
responsibility and costs associated with such default.
20.03 Liquidation
The Company shall carry out the procedures for liquidation of the
Company in accordance with the law of the People's Republic of China,
if this Contract is terminated earlier pursuant to Article 20.01
hereof.
Liquidation Committee: The Board of Directors shall form a Liquidation
Committee, comprising two (2) members appointed by Party A, one (1)
member appointed by Party B and four (4) members appointed by Party C.
The Liquidation Committee shall conduct a thorough examination of the
assets and liabilities of the Company and develop a liquidation plan in
compliance with this Contract and relevant laws and regulations of the
People's Republic of China for the liquidation of the Company. No
member of the Liquidation Committee shall have the power to take any
action binding on the Liquidation Committee, or the Board of Directors,
or the Company without the express authorization and the unanimous
consent of the entire Liquidation Committee. All actions taken by the
Liquidation Committee shall require the unanimous approval of the
entire Liquidation Committee. The Liquidation Committee will value and
liquidate the Company's assets based on the actual circumstances of the
Company valued as an ongoing concern, so as to cause the Parties to
receive the then market value for the assets.
Liquidation Plan: Upon earlier termination of this Contract pursuant to
paragraphs (a),(c),and (d) of Article 20.01 hereof, the liquidation
plan shall provide first for payment of the Company's debts and
expenses. Following such payments, the Company's assets shall be
distributed to the Parties proportionally in accordance with each
Party's registered capital share of the Company. Upon early termination
of the Contract pursuant to section 2 of Article 20.01, the defaulting
Party can participate in the aforementioned distribution only when it
has undertaken its responsibility for breach and indemnified the non
defaulting Party for the loss.
In the event of a situation as mentioned in paragraph (d) of Article
20.01, the Purchaser shall compensate an amount of termination cost to
the Company, pursuant to the Operation and Offtake Contract, the total
assets (including but not limited to fixed assets and circulating
assets) of the Company and the termination cost shall be distributed to
Party C on a priority basis, so that Party C can obtain anticipated
returns as estimated in Appendix I hereof, the remaining part shall be
distributed proportionally to Party A and Party B.
20.04 Normal Termination of Contract Upon Expiration of Joint Venture Term.
In addition to the extension of this contract as stipulated in Article
18.02 hereof, this Contract shall terminate upon expiration of the
joint venture term as designated in Article 18.01 hereof.
Upon the expiration of the joint venture term as stipulated in Article
18 without being extended, the total fixed assets of the Company will
be gratuitously turned over to Party "A" and Party "B" registered
capital which the cash from converted non-fixed assets shall be
distributed in accordance with the following Priorities:
(a) Repayment of the Company debts;
(b) To compensate for the difference between the actual returns
obtained by Party C and the estimated amounts as specified in Appendix
1 hereof;
(c) The residual amounts shall be distributed in proportion to the
ratio of investment made by the Parties;
ARTICLE 21. FORCE MAJEURE
21.01 Force Majeure
(a) "Force Majeure" includes but is not limited to any of the following
events:
(i)War, hostilities or rebellion;
(ii)Plague or other contagious diseases;
(iii)Fire not caused by negligence or deliberateness;
(iv)Lightening;
(v)Earthquake;
(vi)Other forces of nature, including natural disasters.
The aforesaid events shall have simultaneously the following six
characteristics:
(i) Arising after the signing of this Contract;
(ii) Unforeseen or unavoidable;
(iii)Beyond the control of a Party concerned;
(iv) Occurring within the Plant Site;
(v) Directly preventing a Party from performing this Contract;
(vi) Cannot be prevented in spite of utmost efforts being
exerted by that Party.
(b) If occurrence of an event of Force Majeure prevents a party from
fulfilling its obligations (excluding capital contribution and payment
obligations) under this Contract, the Party may be suspended from
performing such obligations provided;
(i)Suspension of performance is of no greater scope and no longer
duration than is reasonably required to correct consequences
caused by the event of Force Majeure; and
(ii)Suspension of performance will not apply to any obligation to
make payments under this Contract.
(c) In the event any Party is unable to fulfill its obligation under
this Contract as a result of Force Majeure, the Party claiming Force
Majeure shall promptly inform the other two Parties in writing within
15 days of such occurrence. Such notification shall state the nature of
the event, the anticipated duration and any action taken by the
affected party to mitigate the effect. In the event of Force Majeure,
the Parties shall immediately consult with each other in order to find
an equitable solution and shall use all reasonable endeavors to
minimizes the consequences of such Force Majeure.
ARTICLE 22. SETTLEMENT OF DISPUTES
22.01 Conciliation and Mediation
Any dispute in connection with this Contract will be settled through
friendly consultation or conciliation among the Parties. Consultations
shall occur immediately upon the request of one Party to the other
Parties regarding disputes. Disputes may also be mediated by a third
party designated by the Parties to this Contract. If mediation is not
successful within 30 days, disputes may also be submitted to binding,
non-appealable arbitration for settlement.
22.02 Arbitration
The following rules and procedures shall apply to an arbitration of
disputes between the Parties under this Contract.
(a) Arbitration under this Contract will be conducted by an arbitral
tribunal in accordance with UNCITRAL arbitration rules contained in
Resolution 31/98 adopted by the United Nations General Assembly on
December 15, 1976 and entitled "Arbitration Rules of the United Nations
Commission on International Trade Law" or its amendments as in force at
the time such arbitration is commenced. Should there be a conflict
between the rules and provisions of this Contract and the arbitration
rules, the rules and provisions of this Contract shall govern.
(b) The arbitral tribunal shall have three (3) members. Each Party
shall designate one arbitrator within 30 days after giving or receiving
request for arbitration. The third arbitrator shall be appointed by the
other two arbitrators within 10 days of the appointment of the second
arbitrator. If any of the arbitrators are not appointed within the time
limits set forth in this section, arbitrators will be designated by the
Secretary General of the International Arbitration Center.
(c) All arbitrators must be fluent in Chinese and English. The
arbitration shall be conducted in Chinese and English. Any subsequent
arbitration award shall also be written in Chinese and English.
(d) The venue and organization for arbitration is Singapore
International Arbitration Centre or other international locations or
arbitration organizations agreed to by the Parties.
(e) The Parties agree to accept the arbitration award as final and
binding. The Parties renounce their right to appealing against the
arbitration award.
(f) The Parties agree to bear all costs as determined and allocated in
the arbitration award.
22.03 Continuing Rights and Obligations
The Parties shall continue to exercise their remaining respective
rights, and fulfill their remaining respective obligations under this
Contract except in respect of those matters under dispute.
22.04 Waiver of Immunity
To the extent the Parties may claim for themselves or their assets and
revenues, immunity from suit execution, attachment or other legal
process, the Parties agree not to claim such immunity and agree to
irrevocably waive such immunity to the fullest extent permitted by
applicable law.
ARTICLE 23. APPLICABLE LAW
23.01 Applicable Law
The validity, interpretation and implementation of this Contract shall
be governed by the laws of the People's Republic of China which are
published and publicly available. In the event that there is no
published and publicly available law in China governing a particular
matter relating to this Contract, reference shall be made to general
international commercial practices.
23.02 Economic Adjustment for Change of Law
As used herein "Change of Law" means the promulgation of any new laws,
rules or regulations in China or the amendment or interpretation of any
existing laws, rules or regulations in China relating to taxes, custom
duties, environmental issues or other matters concerning this Contract.
In the event that a Change of Law adversely and materially affects a
Party's economic benefit under this Contract, the Parties shall
promptly consult with each other and use their best endeavors to
implement adjustments necessary to maintain each Party's economic
benefits derived from this Contract. The basis of this adjustment shall
be no less favorable than the economic benefits it would have derived
if such laws, rules or regulations had not been promulgated or amended
or so interpreted.
23.03 Preferential Treatment
The Company and the Parties shall be entitled to any tax, investment or
other benefits or preferences that become available or publicly known
after the signing of this Contract and which are more favorable than
those set forth in this Contract.
ARTICLE 24. MISCELLANEOUS PROVISIONS
24.01 Environmental
The Company shall undertake environmental protection measures in
accordance with the "Law of the People's Republic of China on
Environmental Protection" and other relevant laws and regulations.
24.02 Waiver
To the extent permitted by Chinese Law, failure or delay on the part of
any Party hereto to exercise a right, power or privilege under this
Contract and the Appendices hereto shall not operate as a waiver
thereof or other rights, powers or privileges; nor shall any single or
partial exercise of a right, power or privilege preclude any other
future exercise thereof.
24.03 Binding Effect
This Contract is made for the benefit of the Parties and their
respective lawful successors and assignees and is legally binding on
them. This Contract may not be changed orally, but only by a written
instrument signed by all Parties and approved by the appropriate
Examining and Approving Authority.
24.04 Language
This Contract is executed in the Chinese language and in the English
language. Both language versions shall be equally effective.
24.05 Entire Agreement
This Contract and the Appendices attached to this Contract constitute
the entire agreement between the Parties with respect to the subject
matter of this Contract and supersede all prior discussions,
negotiations and agreements between them. In the event of any conflict
between the terms and provisions of this Contract and those of the
Articles of Association, the terms and provisions of this Contract
shall prevail.
24.06 Notices
Any notice or written communication provided for this Contract by any
Parties or the others, including but not limited to any and all offers,
writings, or notices to be given thereunder, shall be in writing made
in English and Chinese, and shall be sufficiently given if addressed as
set forth below and sent by registered mail or an internationally
recognized overnight courier services, hand delivered or transmitted
clearly by facsimile, however all facsimile shall be confirmed by
courier service delivered letter, promptly transmitted or addressed to
the appropriate Party. The date of actual receipt of a notice or
communication thereunder shall be deemed to be the effective date. All
notices and communications shall be sent to the appropriate address set
forth below, until the same is changed by notice given in writing to
the other Parties.
Party A: Anhui Liyuan Electric Power
Development Company Limited
Address: No. 415 Wuhu Road
Hefei, Anhui province
China
Telephone No: 86-551-3642775
Facsimile No: 86-551-3637642
Attention: Cheng Guangjie
Zip Code: 230061
Party B: Hefei Municipal Construction and
Investment Company
Address: No. 186 Suzhou Road
Hefei, Anhui province
China
Telephone No: 86-551-2617410
Facsimile No: 86-551-2649751
Attention: Shen Dequan
Zip Code: 230001
Party C: AES-Anhui Power Company Ltd.
Address: 3/F, Golden Bridge Building No. 1
Jianguomenwai Street, Beijing
China
Telephone: 86-10-5089619
Facsimile No: 86-10-5089628
Attention: Paul T. Hanranhan
Zip Code: 100020
24.08 Appendices
The Appendices listed below are made an integral part of this Contract
and are equally binding with Article 1 through Article 24 herein.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, each of the Parties hereto have caused this
Contract to be executed by their duly authorized representatives on the date
first set forth above.
PARTY A: Anhui Liyuan Electric Power Development Company Ltd.
Name:[Signature Illegible]
Title:
Nationality: Chinese
PARTY B:Hefei Municipal Construction and Investment Company.
Name:[Signature Illegible]
Title:
Nationality: Chinese
PARTY C: AES Anhui Power Company Limited.
Name:[Signature Illegible]
Title:
Nationality: U.S.A.
<PAGE>
APPENDIX 1.
THE PROJECTED RETURN ON EQUITY PRINCIPAL OF THE PARTIES OVER THE YEARS.
UNIT: USD
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Exhibit 10.43
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
AES LOAN CONTRACT
FOR HEFEI ZHONGLI ENERGY COMPANY, LTD.
This AES LOAN CONTRACT (this "Contract") is made and entered into as of
- ----------- 1996 by and between Hefei Zhongli Energy Company Limited ("the
Borrower"), a Sino-foreign cooperative joint venture enterprise organized and
existing under the laws of the People's Republic of China (Business License
number is --------) with its registered office at 415 Wuhu Road, Hefei City,
Anhui Province, China and AES Chigen Company(L), Ltd (Company No: LL00408) ("the
Lender"), a Labuan company wholly-owned by AES CHINA GENERATING COMPANY. LTD.
with its China office at 3/F Jinqiao Dasha #1(A), Jian Guo Men Wai Dajie,
Beijing, China.
1. THE LOAN.
Subject to the terms and conditions of this Loan Contract, the Lender
agrees to make to the Borrower a loan in an aggregate amount not to exceed US$
8,000,000 such sum shall include interest accrued during construction as
provided in Section 3 hereof, (the "Loan"). This Loan is available for drawdowns
from time to time between the Effective Date as defined in Clause 24 of this
Contract and the "Availability Termination Date", which is the earlier of the
Guarantee Completion Date of the Facility or the actual Project Completion Date
as each term is defined in the EPC Contract Dated -------- between Anhui Mingda
Electric Power EPC Contract Company, Ltd., Anhui Liyuan-AES Power Company
Limited and Hefei Zhongli Energy Company Limited. In this Loan Contract, the
"Available Loan" means the aggregate amount of the Loan available for drawdown
by the Borrower from time to time prior to the Availability Termination Date
less the sum of (i) the amount of each drawdown which has been made under this
Loan Contract, (ii) the aggregate amount of the interest accrued on the
Outstandings (as defined in Section 2(a)) as at such time, and iii) all other
fees due to the Lender as defined in Section 3. Subject to the conditions set
forth in Section 6, drawdowns under the Loan shall be made.
(a) upon completion of the relevant milestone as set in the drawdown schedule
attached as Exhibit B;
(b) not less than 15 Banking Days before the proposed date for the making of
each draw down, the Lender has received from the Borrower a notice of
drawdown substantially in the form of Exhibit A (the "Notice of Drawdown"),
the receipt of such Notice of Drawdown shall oblige the Borrower to borrow
the amount of the drawdown requested therein on the date stated therein;
(c) the proposed amount of each drawdown is an amount not less than US$800,000
and an integral multiple of US$10,000 which is less than or equal to the
Available Loan;
(d) in the case of the first drawdown, such drawdown must be made within three
months of the Effective Date; and
(e) each drawdown shall be made on a day on which banks are authorized to open
for business in Hong Kong and New York, New York, the United States of
America (a "Banking Day").
2. MATURITY.
(a) The Borrower shall repay the aggregate outstanding principal amount
of the Loan (the "Outstandings") in accordance with the amortization schedule
attached as Exhibit C. In any event, the Borrower shall repay the Outstandings
in full on a date which falls ten (10) years after the Effective Date of this
Contract.
(b) Subject to Section 2 (d), the Borrower may, if it has given to the
Lender not less than one month's prior written notice to that effect, cancel the
whole or any part (being an amount or integral multiple of US$1,000,000) of the
Available Loan.
(c) Subject to section 2(d), the Borrower shall have the right to
prepay all or any part of the Outstandings at any time after the Availability
Termination Date. Each of such optional prepayments shall be in an amount not
less than US$ 800,000 and shall be made with at least three months prior written
notice to the Lender. Without prejudice to the foregoing, the Borrower shall
only prepay on the then immediately succeeding Payment Date and such prepayment
shall include all interest accrued on such portion of the Outstandings being
repaid. Any portion of the Outstandings prepaid may not be reborrowed. The
prepayments of the Outstandings will be applied to satisfy the Borrower's
repayment obligations under Section 2 (a) in inverse order of maturity to the
then remaining installments of principal to become due as set forth in Exhibit
C.
(d) The Borrower may only serve a notice of cancellation or prepayment
under Sections 2 (b) and 2 (c) respectively unless it has demonstrated to the
satisfaction of the Lender that there are then sufficient committed funds
available to the Borrower on an unsecured basis to meet all its needs in respect
of financing the construction and start-up of the Facility (as such term is
defined in Section 7 (a)).
(e) Each notice of cancellation or, as the case may be, prepayment
shall specify the date on which such cancellation or, as the case may be,
prepayment is to be made and the amount to be cancelled or, as the case may be,
to be prepaid and shall oblige the Borrower to make such cancellation or, as the
case may be, prepayment on such date Provided that the Borrower may only specify
a Payment Date in respect of any prepayment to be made.
3. INTEREST AND FEES.
(a) INTEREST AND FEES: During the period beginning on the date of the
first drawdown hereunder and ending on the Availability Termination Date,(I)
interest shall accrue on the Outstandings from day to day at the rate of [***]
per annum and (ii) the Management Fee as defined Section 3(b) shall accrue on
the Outstandings from day to day as specified in Section 3(b). On the
Availability Termination Date, the Lender shall calculate the aggregate amount
of such interest and the Management Fee accrued as at the Availability
Termination Date ( the "Availability Period Interest and Management Fee"). With
effect from the Availability Termination Date, the amount of the Availability
Period Interest and Management Fee shall be consolidated with the amount of the
Outstandings as at the Availability Termination Date and the sum of both amounts
shall thereafter be treated as the Outstandings. With effect from the
Availability Termination Date, the Borrower shall pay interest on the
Outstandings calculated aforeesaid in this Section 3(a) from time to time at the
rate of [***] per annum plus the Management Feeas specified in Section 3(b).
Interest and Management Fee on the Outstandings shall be computed on the basis
of the actual number of days elapsed in a year of 360 days. Interest payments
shall be payable semiannually in arrears on the first Banking Day of each
January, and July starting from the second such date to occur after the
Availability Termination Date and on final maturity of the Loan (each such date,
a "Payment Date"). The Lender shall calculate and notify the Borrower of the
actual amount of each interest and management fee payment not less than 15 days
prior to each Payment Date.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(b) MANAGEMENT FEE: The Borrower shall pay to the Lender a management
fee of [***] per annum on the Outstandings from time to time provided in Section
3(a).
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(c) CLOSING FEE: The Borrower shall pay to the Lender a financial
closing fee of [***] on the date of the first drawdown of this Loan.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4. METHOD OF PAYMENT.
All sums, including all principal, interest and fees, payable to the
Lender shall be paid in US Dollars not later than 10:00 a.m. Beijing time on
each Payment Date to the account of the Lender in Hong Kong (No. -------- ) at
Citibank, N.A., or such other account within or outside of China as the Lender
notifies to the Borrower for this purpose.
5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents as of this date and during the term of this
Loan Contract that:
(a) the Borrower is a Sino-foreign cooperative joint venture enterprise
duly established as a legal reason and existing in good standing under the laws
of the People's Republic of China;
(b) the execution, delivery and performance of this Loan Contract, and
each other document delivered in connection herewith and the execution of the
Borrower's rights hereunder or thereunder are within the Borrower's power, have
been duly authorized by all necessary legal corporate or other action, and do
not contravene any law or any contractual restriction binding on the Borrower;
(c) this Loan Contract is, and each other document delivered in
connection herewith or therewith when executed will be legal, valid and binding
obligations of the Borrower and are enforceable in accordance with their
respective terms;
(d) all governmental approvals necessary for the execution of this Loan
Contract, and each other document delivered in connection herewith have been
obtained and all governmental approvals necessary for the performance and
enforceability hereof and thereof shall have been obtained prior to and shall be
in full force and effect on the date of each drawdown hereunder;
(e) the obligations of the Borrower hereunder and under any other
document executed in connection herewith or therewith constitute the direct,
unconditional and general obligations of the Borrower and the sum of all of the
Borrower' other indebtedness does not exceed RMB two hundred fifty thousand
except the loans agreed to by the Lender as specified in Appendix D hereto;
(f) the Borrower is not in default under any agreement or obligation to
which it is a party or by which it may be bound by reason of its execution,
delivery or performance of this Loan Contract; and
(g) under the laws of China in force at the date hereof, withholding
tax of ten per cent. (10%) is required to be levied in respect of any interest
payment it may make hereunder;
(h) under the laws of China in force at the date hereof, the claims of
the Lender against the Borrower under this Loan Contract will rank at least pari
passu with the claims of all its other unsecured creditors save those whose
claims are preferred solely by any bankruptcy, insolvency, liquidation or other
similar laws of general application;
(i) in any proceedings taken in China in relation to this Loan Contract
and any other document executed in connection herewith, the choice of English
law as the governing law of this Loan Contract and any such other document and
any judgment obtained in England will be recognized and enforced, subject to the
provisions of the Civil Procedure Law of China;
(j) under the laws of China in force at the date hereof, it is not
necessary that this Loan Contract or any other document executed in connection
herewith be filed, recorded or enrolled with any court or other authority in
China or that any stamp, registration or similar tax be paid on or in relation
to this Loan Contract save for:
(i) the Borrower's compliance with the Foreign Debt Registration
procedures in relation to the Loan; and
(ii) payment of stamp duty of 0.005 per cent . of the full amount
of the Loan on this Loan Contract by both parties to this Loan
Contract respectively;
(k) neither the Borrower nor the translations contemplated by this Loan
Contract is subject to currency deposits requirements (other than any
requirements imposed by the Foreign Debt Registration procedures in relation to
the Loan) of any nature under any applicable law or regulation of China, nor is
there any restriction or requirement (other than the requirement that the
Borrower complies with the Foreign Debt Registration procedures in relation to
the Loan and any generally applicable foreign exchange control regulation
imposed after the date hereof) of the laws or regulations of China which limits
the availability to the Borrower of US Dollars for the purpose of performing its
obligations hereunder to make payments in US Dollars or otherwise limits the
ability of the Borrower to perform such obligations.
(l) no Event of Default (as hereinafter defined), and no event which
with the giving of notice or the passing of time, or both, would constitute an
Event of Default, has occurred and is continuing.
6. CONDITIONS PRECEDENT.
The obligation of the Lender to make the Loan hereunder is subject to
the fulfillment, as determined solely by the Lender, of the following conditions
precedent at least five Banking Days prior to the proposed date of the first
drawdown of the Loan (except as otherwise indicated below) and the continued
fulfillment of such conditions on the date of the first drawdown:
(a) All documents, licenses, approvals and permits required in
connection with the establishment of the Borrower as a Sino-foreign cooperative
joint venture and the design, construction, ownership, operation and management
of the Power Plant (as defined in the Operations and Offtake Contract which is
defined in Exhibit E) shall have been obtained and are in full force and effect;
without limiting the generality of the foregoing, such approvals shall include
approval by the authorized authority of Ministry of Foreign Trade and Economic
Cooperation of China of the Joint Venture Contract and Borrower's Articles of
Association, approval by the Anhui Provincial Pricing Bureau of the pricing
formula set forth in Appendix A to the Operations and Offtake Contract as
defined in Exhibit E ), approval by the relevant government department of the
Land Use Rights (as defined in the Joint Venture Contract), issuance of
Borrower's business licence, approval regarding access to the foreign exchange
adjustment center or foreign exchange banks, and approvals referred to in
Article 6.05 of the Joint Venture Contract;
(b) All registered capital and other loans required to be funded under
the Joint Venture Contract by each party thereto as of such date shall have been
funded in full;
(c) The Lender shall have received satisfactory evidence of the due
authorization, execution and delivery by the Borrower of this Loan Contract, and
each other document delivered in connection herewith;
(d) The Lender shall have received certified copies of all governmental
approvals and filings required for the execution, delivery, performance and
enforceability of this Loan Contract and each other document delivered in
connection herewith or therewith and such approvals and filings are in full
force and effect;
(e) Each of the representations and warranties set forth in Section 5
is true and correct in all material respects;
(f) The Borrower shall have performed in all material respects its
obligations required to be performed under this Loan Contract,
(g) All contracts referred to in the Joint Venture Contract including
without limitation all Project Contracts (as defined in Exhibit E) and all other
material contracts required in connection with the construction of the Project
(as defined Operation and Offtake Contract) shall have been executed and
delivered by all parties thereto and are in full force and effect;
(h) The Lender's independent engineer (referred to in the EPC
Contract)or, at the request of the Lender, the Borrower, has certified in a
manner satisfactory to the Lender that all applicable construction milestones as
set forth in Exhibit B have been met;
(i) The Borrower shall has purchased the insurance policies required by
the Lender, as specified in the EPC Contract and Operations and Offtake Contract
and such policies shall be in full force and effect;
(j) The Borrower shall has signed each of the loan contracts listed in
the Exhibit D of this Contract.
(k) The Lender shall have received a favorable opinion of H&P Law
Office with respect to the transactions contemplated hereby and such other
approvals, opinions and documents as the Lender may reasonably request;
(l) Satisfactory Evidence that an amount equal to the proposed amount
to be drawn under the AES Loan Contract between the Lender and Anhui Liyuan-AES
Power Company, dated on the same date as this Contract, has been drawn or is to
be drawn on the same date as the proposed date of such drawdown.
(m) Evidence satisfactory to the Lender that the Borrower has paid all
stamp duties payable under the laws of China in connection with all the executed
originals of this Loan Contract.
(n) Evidence satisfactory to the Lender that the borrowing contemplated
in this Loan Contract has been approved by the State Administration of Exchange
Control (including, but not limited to, the registration certificate for
external debt issued by the State Administration of Exchange Control (the
"REGISTRATION CERTIFICATE")).
(o) Copies, each certified a true copy by a duly authorized officer of
the Borrower, of each of the Project Contracts (referred to in Exhibit E).
(p) Evidence satisfactory to the Lender that the Borrower has appointed
an English process agent pursuant to Section 13 (a).
7. COVENANTS.
(a) The Borrower shall at all times (i) preserve and maintain in full
force and effect its existence as a cooperative joint venture under the laws of
China, its qualification to do business in Anhui Province, China and in each
other jurisdiction in which the conduct of its business requires such
qualification and (ii) obtain and maintain in full force and effect all
documents, licenses, permits and governmental approvals required at any time in
connection with the construction, maintenance, ownership or operation of the
Facility (as defined in the EPC Contract).
(b) The Borrower shall (i) perform and observe all of its covenants and
agreements contained in any Project Contract or any other document relating to
the Facility to which it is a party and (ii) maintain in full force and effect
each of the Project Contracts.
(c) The Borrower shall comply, and shall ensure that the Facility is
constructed and operated, with all and any governmental requirements.
(d) The Borrower shall promptly provide to the Lender copies of the
Borrower's construction, operation and financial reports and other information
relating to the construction or operation of the Facility.
(e) The Borrower shall use the proceeds of the Loan solely for the
purpose of financing the construction and start-up of the Facility.
(f) The Borrower shall notify the Lender immediately of the occurrence
of any Event of Default or of any event which would become an Event of Default
with the passage of time or giving of notice or both.
(g) The Borrower shall not, without the prior written consent of the
Lender, assign, sell, pledge, mortgage, encumber or otherwise transfer any
interest in any assets of the Borrower other than transfers in the ordinary
course of its business that would not have a materially adverse effect on the
Borrower or the ability of the Borrower to perform its obligations hereunder.
(h) Prior to any due date for any repayment of the principal of and/or
the payment of interest on the Loan, the Borrower shall (A) use the Registration
Certificate and the notice regarding such repayment and/or payment to obtain
from the registration department a verification and approval certificate with
respect to such repayment and/or payment; and (B) use such verification and
approval certificate and the Registration Certificate to handle matters
regarding the remittance from the foreign debt account of the principal of and
interest on the Loan outside of China at the relevant bank.
(i) Prior to 31 January of each year, the Borrower shall submit to the
local foreign exchange administration a report stating the amount of foreign
currency purchased in the preceding year for the purpose of repaying the
principal of and/ paying the interest on the Loan and a plan regarding the
purchase of foreign currency for the current year. and the Borrower shall
provide copies , certified by a duly authorized officer of the Borrower, of each
such report together with evidence satisfactory to the Lender that the original
thereof has been delivered to the local foreign exchange administration.
(j) The Borrower shall not, without the prior written approval of the
Lender, seek to agree any waiver or seek any waiver from any of the lenders
party to the loan agreements set out in Exhibit D.
(k) The Borrower shall not, without the prior written consent of the
Lender, incur any further indebtedness save for indebtedness incurred in respect
of trade finance facilities with reputable banks to enable the Borrower to
purchase equipment, raw materials and services for the Project the aggregate
amount of which at any time does not exceed 250,000 RMB.
8. EVENTS OF DEFAULT.
(a) Each of the following events and occurrences shall constitute an
Event of Default under this Loan Contract:
(i) any representation or warranty of the Borrower proves to have
been untrue when made or deemed to be made or renewed; or
(ii) the Borrower fails to repay when due any principal amounts
of the Loan, or the Borrower fails to pay within three Banking Days
after the date due any interest or fee payment, due pursuant to the
terms of this Loan Contract , any document delivered in connection
herewith ; or
(iii) the Borrower fails to perform or violates any other
provision of this Loan Contract (including without limitation the
covenants), or any document delivered in connection herewith, which
continues unremedied for 30 days after notice thereof from the Lender;
or
(iv) except as otherwise provided in clause (ii) above, the
Borrower fails to pay when due any indebtedness for which it is
liable, contingently or otherwise, or any such indebtedness is
accelerated or is required to be prepaid prior to the stated maturity
thereof; or
(v) any document, license, approval or permit required for the
performance or enforceability of the obligations of the Borrower under
this Loan Contract, or any other document delivered in connection
herewith expires or is not renewed upon expiration or is terminated or
revoked or modified in any material respect; or
(vi) any document, license, approval or permit required in
connection with the Project expires or is not renewed upon expiration
or is terminated or revoked or modified in any material respect; or
(vii) any Project Contract is materially breached by a party
thereto or such contract ceases to be in full force and effect; or
(viii) the Borrower becomes insolvent or unable to pay its debts
when due, or commits any act of bankruptcy including filing any
petition in any bankruptcy, winding-up or reorganization proceeding,
or acknowledges in writing its insolvency or inability to pay its
debts, or any petition relating to bankruptcy is filed with respect to
it by its creditors; or
(ix) one or more judgments aggregating at least US$100,000 (or
its equivalent in any currency) that is not covered by insurance is
entered against the Borrower and is not satisfied, vacated or bonded
pending appeal within 60 days after such entry; or
(x) the Project becomes or is declared a total loss or is beyond
economic repair in the opinion of an insurance expert appointed by the
Lender; or
(xi) any execution or distress is levied against, or encumbrance
takes possession by way of enforcement of security of the whole or any
part of the property, undertaking or assets of the Borrower; or
(xii) by or under the authority of any government (a) all, or
substantially all of, the management of the Borrower is displaced or
the authority of the Borrower in the conduct of its business is wholly
or partially curtailed or (b) all or a majority of its revenues or
assets is seized, nationalized, expropriated or compulsorily acquired;
or
(xiii) an Event of Default has occurred and is continuing or an
event which with the giving of notice or the passing of time, or both,
would constitute an Event of Default, under the AES Loan Contract
between the Lender and Anhui Liyuan-AES Power Company Limited dated on
the same date as this Contract;
(b) If an Event of Default shall occur and be continuing, the Lender
shall have no further obligation to make further drawdowns of the Loan to the
Borrower and the Lender may by notice to the Borrower declare all the
Outstandings and accrued interest thereon and other amounts payable hereunder to
be immediately due and payable, whereupon all such amounts shall become
forthwith due and payable without further demand or notice of any kind . In the
event of an Event of Default, the Lender shall also have the right to liquidate
the Borrower and its assets.
(c) If the Borrower fails to pay any sum payable under this Loan
Contract when due, the Lender shall charge the Borrower i) US$10,000 default fee
which the Borrower hereby agrees shall be deemed to be due and payable on the
date of default and ii) in addition to the normal interest defined in Section 3
(a) an additional two percent (2%) default interest per annum on such sum for
the period beginning from and including the due date to the date of actual
payment (after as well as before judgment) as conclusively determined by the
Lender.
9. ENTIRE AGREEMENT; AMENDMENTS.
This Loan Contract constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and may be amended only by an
instrument in writing signed by the parties hereto.
10. INDEMNITY.
(a) The Borrower shall pay all stamp duties in connection with this
Loan Contract, and each other document delivered in connection herewith and
shall reimburse the Lender for any other cost, expenses, loss or damage
(including without limitation any taxes but excluding taxes imposed on the net
income of the Lender by the jurisdiction of its registration and other costs
resulting from changes in law after the date hereof) incurred by the Lender in
connection with, (i) the negotiation, preparation and execution of this Loan
Contract including legal fees, or any other document delivered in connection
herewith and the completion of the transactions contemplated herein or therein,
and (ii) the preservation and /or enforcement of any of its rights under this
Loan Contract or any other document delivered herewith. The payment of such
stamp duties by the Borrower and the reimbursement by the Borrower of such other
cost, expenses, loss or damage (including taxes as stated above) shall be in
addition to, and without prejudice to, the Borrower's obligation to pay interest
as set forth in Sections 3(a) and 8(c) and to repay the principal amount in
accordance with Section 2 (a) or pursuant to a declaration under Section 8(b).
(b) Without limiting the generality of clause (a) above, if the
Borrower shall be obligated to withhold and pay any taxes required under the
applicable laws of China or under any agreement between China and any country
which has jurisdiction over the Lender or the Borrower, the interest rate then
applicable hereunder shall be automatically and accordingly increased and such
that the additional interest payment shall ensure the net amounts received by
and retained the Lender after such withholding shall be equal to the amounts
which would have been received and retained by the Lender had no such
withholding been made.
(c) The indemnity provisions of this Section 10 shall survive the
repayment of the Loan and the termination of this Loan Contract.
11. NOTICE.
All notices hereunder shall be in writing and shall be either
personally delivered, or transmitted by postage prepaid registered air mail, or
by facsimile to the party addressed at the relevant address . and facsimile
number set forth below and , in the case of the Lender, shall be expressly
marked for the attention of the department or officer identified with the
Lender's signature below and shall be deemed to have been made or delivered (in
the case of any communication made by letter) when left at that address or (as
the case may be) five (5) days after being deposited in the post (air mail, if
such letter is to be sent overseas) postage prepaid in an envelope addressed to
it at that address or (in the case of any communication made by facsimile) when
dispatched after a transmission report confirming due transmission to the
correct facsimile number and the correct number of pages transmitted. Either
party may change its address by written notice to the other.
12. GOVERNING LAW.
This Loan Contract shall be governed by and interpreted in accordance
with the laws of England without regard to the conflict of laws rules thereof.
13. SUBMISSION TO JURISDICTION.
(a) The Borrower hereby irrevocably for the benefit of the Lender
consents that any legal action or proceeding against it or any of its assets
with respect to any of the obligations arising under or relating to this Loan
Contract may be brought in any English court, as the Lender may elect, and by
execution and delivery of this Loan Contract, the Borrower hereby irrevocably
submits to and accepts with regard to any such action or proceeding, for itself
and in respect of its property, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts. The Borrower hereby irrevocably agree to
designate, appoint and empower AES Electric in England (address: Burleigh House,
17-19 Whorl Way, Richard TW10 6AG, U.K.), as its agent to receive for and on its
behalf service of process in England in any legal action or proceeding with
respect to this Contract or any other document delivered in connection herewith.
The foregoing, however, shall not limit the rights of the Lender to serve
process in any other manner permitted by law or to bring any legal action or
proceeding or to obtain execution of judgment in any jurisdiction, including
without limitation the People's Republic of China.
(b) The Borrower hereby irrevocably waives any objection which it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Loan Contract or any other
document delivered in connection herewith in England and hereby further
irrevocably waives any claim it might now or hereafter have that England is not
a convenient forum for any such suit, action or proceeding.
14. ARBITRATION.
(a) Notwithstanding Section 13, the Lender may, in its sole discretion,
choose to submit any dispute arising out of or in connection with this Loan
Contract for binding arbitration in Stockholm, Sweden under the auspices of the
International Chamber of Commerce in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce as in effect on the
date of this Loan Contract (except to the extent this Section 14 specifies
different procedures in which event such procedures will govern the arbitration
to the extent so specified). The Lender may choose arbitration with respect to
any dispute at any time either before or after any filing of any claim, action
or proceeding with any court by either party, provided, however, that once the
Lender makes such a choice, the relevant dispute will be settled finally and
exclusively by arbitration irrespective of (i) whether any claim, action or
proceeding has already been commenced in any court, (ii) the magnitude of such
dispute or (iii) whether such dispute would otherwise be considered justifiable
or for resolution by a court or arbitrate tribunal. In the event that a claim,
action or proceeding has already been commenced in a court when the Lender
chooses to submit the relevant dispute for arbitration, both parties hereto will
immediately discontinue and withdraw the claim, action or proceeding from the
court so that the dispute may be handled exclusively by arbitration. Once a
dispute is submitted by the Lender to arbitration, the Borrower shall not have
any right to file any claim, action or proceeding in any court in respect of
such dispute or any matter relating to such dispute so that the dispute may be
handled exclusively by arbitration. Any action by the Lender to submit any
dispute for arbitration shall not prevent the Lender from bringing any claim,
action or proceeding in any court with respect to any other dispute.
(b) The Borrower shall not have any right to submit any dispute to
arbitration.
(c) Any settlement and award rendered through arbitration proceeding
will be final and binding upon the parties hereto if the decision is in writing
and contains a reasoned analysis explaining the arbitrators' reasons for
rendering the award. This Loan Contract and the rights and obligations of the
parties hereto will remain in full force and effect pending the award in such
arbitration proceeding, which award will determine whether and when termination
of this Loan Contract shall become effective.
(d) The arbitration will be conducted in English and Chinese.
(e) There will be three arbitrators. Each party will select one
arbitrator within 30 days after the Lender elects to commence arbitration. Such
arbitrators will be freely selected, and the parties hereto will not be limited
in their selection to any prescribed list. Within 30 days after the selection of
the latter of the two arbitrators selected by the parties, the two arbitrators
shall select the third arbitrator; if the two arbitrators do not select the
third within such 30 day period, the International Arbitration Court of the
International Chamber of Commerce will select the third arbitrator. If a party
does not appoint an arbitrator who has consented to participate within 30 days
after the selection of the first arbitrator, the relevant appointment will be
made by the International Arbitration Court of the International Chamber of
Commerce . The costs of the arbitration will be borne by the parties hereto as
determined by the arbitration tribunal taking into account the relative merits
of the positions of the parties.
(f) The parties hereto agree that the arbitrate award may be enforced
against the parties or their assets wherever they may be found and that a
judgment upon the arbitration award may be entered in any court having
jurisdiction thereof. Accordingly, the parties hereto irrevocably agree that any
action to enforce such judgment may be instituted wherever appropriate and each
party hereby irrevocably waives, to the fullest extent permitted by law, any
objection which it may have now or hereafter to the laying of the venue or the
jurisdiction or the convenience of the forum of any such action and irrevocably
submits generally and unconditionally to the jurisdiction of any such court in
any such action.
15. BANKING DAY ADJUSTMENT.
If the date on which a payment is due is not a Banking Day, such date
shall be changed to the next succeeding Banking Day (or to the immediately
preceding Banking Day if the next succeeding Banking Day is in another calendar
month).
16. INFORMATION.
The Borrower shall provide the Lender with any and all such information
concerning the condition and operation of the Borrower, financial or otherwise,
as the Lender may from time to time request.
17. WAIVER; CUMULATIVE RIGHTS.
The failure or delay of the Lender to require performance by the
Borrower of any provisions of this Loan Contract shall not affect its right to
require performance of such provision unless and until such performance has been
waived in writing by the Lender. Each and every right granted to the Lender
hereunder or under any other document delivered in connection herewith, or
allowed to it at law or in equity, shall be cumulative and is not exclusive of
any rights or remedies provided by law and all such rights may be exercised in
part or in whole from time to time.
18. ASSIGNMENT.
This Loan Contract shall be binding upon and shall be enforceable by
the Borrower and the Lender and the their respective successors and assigns,
except that the Borrower shall have no right to assign or transfer its rights or
obligations hereunder.
19. SET-OFF.
Nothing herein contained shall limit the right of set-off, lender's
lien or counterclaim which may be available to the Lender under applicable law.
20. SEVERABILITY.
If any of the provisions contained in this Loan Contract, or any other
document delivered in connection herewith shall be invalid, illegal or
unenforceable in any respect under any applicable law, the validity, legality
and enforceability of the remaining provisions contained herein or therein shall
not in any way be affected or impaired.
21. COUNTERPARTS.
This Loan Contract may be signed in any number of counterparts. Any
single counterpart or a set of counterparts signed, in either case, by both
parties hereto shall constitute a full and original contract for all purposes.
22. LANGUAGE.
This Loan Contract shall be written and executed in both Chinese and
English versions. In the event of any inconsistency between the two versions,
the English version shall be the binding version.
23. CONSTRUCTION.
Unless otherwise stated, all references made in this Loan Contract to
"Sections", "Clauses" and "Exhibits" shall refer, respectively, to Sections of,
Clauses of and Exhibits to, this Loan Contract. References herein to this Loan
Contract include the Exhibits hereto.
24. EFFECTIVENESS
This Loan Contract shall become effective on the date ("Effective
Date") each of the following requirement has been fulfilled: i) the signing of
this Loan Contract hereof ii) the signing of the AES Loan Contract between the
Lender and Anhui Liyuan-AES Power Company Limited, iii) the registration of this
Loan Contract with the State Administration of Exchange Control ("SAEC") or its
authorized government authority and the obtaining of a registration certificate
from the SAEC and, iv) the registration of the AES Loan Contract between the
Lender and Anhui Liyuan-AES Power Company Limited with the State Administration
of Exchange Control or its authorized government authority and the obtaining of
a registration certificate from the SAEC.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Loan Contract to be executed by their respective duly
authorized signatories as of the day and year first written above.
BORROWER Hefei Zhongli Energy Company Limited
By:[Signature Illegible]
---------------------------------
Name:
Title:
Facsimile:
LENDER AES Chigen Company (L), Ltd.
By:[Signature Illegible]
---------------------------------
Name:
Title:
Facsimile:
<PAGE>
EXHIBIT A
FORM OF NOTICE OF DRAWDOWN
--------------------------
To : AES Chigen Company (L) Ltd.
From: Hefei Zhongli Energy Company Limited
Date: [ ], 199[ ]
Dear Sirs,
1. We refer to the loan agreement dated [ ], 199[ ] (as amended from time to
time) (the "AES Loan Contract") and made between ourselves as borrower and
yourselves as lender. Terms defined in the AES Loan Contract shall have the
meaning in this notice.
2. Pursuant to the AES Loan Contract, we hereby give you notice that we wish
to borrow on [insert date of proposed drawdown] a part of the Loan in the
amount of $[ ] United States Dollars upon the terms and subject to the
conditions set out in the AES Loan Contract.
3. We confirm that, as at the date hereof, the representations set out in
Section 5 of the AES Loan Contract are true.
4. The proceeds of this drawdown should be credited to [ insert the Borrower's
account details /the EPC Contractor's account details].
Yours faithfully,
- ----------------------
(Authorized Signatory)
for and on behalf of
HEFEI ZHONGLI ENERGY COMPANY LIMITED
<PAGE>
EXHIBIT B
DRAWDOWN SCHEDULE
-----------------
[TO BE DETERMINED BY THE BORROWER'S BOARD OF DIRECTORS]
DATE AMOUNT CONSTRUCTION MILESTONE
- ---- ------ ----------------------
<PAGE>
EXHIBIT C
AMORTIZATION SCHEDULE
---------------------
<TABLE>
<CAPTION>
The first Banking Day of Principal Due
<S> <C>
January 1999 Outstandings (on Availability Termination Date) / 16
July 1999 Outstandings (on Availability Termination Date) / 16
January 2000 Outstandings (on Availability Termination Date) / 16
July 2000 Outstandings (on Availability Termination Date) / 16
January 2001 Outstandings (on Availability Termination Date) / 16
July 2001 Outstandings (on Availability Termination Date) / 16
January 2002 Outstandings (on Availability Termination Date) / 16
July 2002 Outstandings (on Availability Termination Date) / 16
January 2003 Outstandings (on Availability Termination Date) / 16
July 2003 Outstandings (on Availability Termination Date) / 16
January 2004 Outstandings (on Availability Termination Date) / 16
July 2004 Outstandings (on Availability Termination Date) / 16
January 2005 Outstandings (on Availability Termination Date) / 16
July 2005 Outstandings (on Availability Termination Date) / 16
January 2006 Outstandings (on Availability Termination Date) / 16
July 2006 Remaining Principal Balance
</TABLE>
<PAGE>
EXHIBIT D
LIST OF THE BORROWER'S DEBTS OF OVER RMB ONE MILLION EACH
<TABLE>
<CAPTION>
LOAN 1 LOAN 2
------ ------
<S> <C> <C>
LENDER Bank of China Bank of China
DATE OF THE LOAN
CONTRACT NO.
LOAN AMOUNT [***] [***]
LOAN TERM [***] [***]
LOAN INTEREST [***] [***]
LOAN CURRENCY [***] [***]
</TABLE>
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
EXHIBIT E
"EPC CONTRACT" means the contract dated [--------] and made between [-----] and
[--------]
"INTERCONNECTION AGREEMENT" means the agreement dated [----------] and made
between [----------] and [--------].
"OPERATIONS AND OFFTAKE CONTRACT" means the contract dated [----------] and made
between [----------] and [---------].
"PROJECT CONTRACTS" means [the EPC Contract, Interconnection Agreement, the
Joint Venture Agreement, the Operations and Offtake Contract [, the Power
Purchase and sale Contract] and the Share Assets Agreement and "Project
Contract" shall mean each of them]. [list to be completed and confirmed with the
Borrower]
"SHARE ASSETS AGREEMENT" means the agreement dated [------] and made between
[------] and [-----------------].
Exhibit 10.44
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
ANHUI PROVINCIAL ELECTRIC POWER CORPORATION
AND
ANHUI LIYUAN-AES POWER COMPANY LTD.
AND
HEFEI ZHONGLI ENERGY COMPANY LTD.
OPERATION AND OFFTAKE CONTRACT
OF
HEFEI COMBINED-CYCLE POWER PLANT
SEPTEMBER, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
CHAPTER 1 GENERAL.....................................................3
CHAPTER 2 DEFINITIONS.................................................3
CHAPTER 3 REPRESENTATIONS, WARRANTIES AND COMMITMENTS
OF THE PARTIES ............................................8
CHAPTER 4 CONDITIONS AND REQUIREMENTS FOR INTERCONNECTION OF THE
POWER PLANT................................................12
CHAPTER 5 METERING OF ELECTRICITY....................................13
CHAPTER 6 OPERATION OF THE POWER PLANT...............................13
CHAPTER 7 RESPONSIBILITIES OF PARTY B AND PARTY A....................17
CHAPTER 8 OTHER OPERATION MATTERS....................................19
CHAPTER 9 ON-GRID QUANTITY...........................................19
CHAPTER 10 ON-GRID TARIFF AND SETTLEMENT OF ELECTRICITY FEE...........20
CHAPTER 11 RESPONSIBILITY AND INDEMNITY...............................24
CHAPTER 12 DEFAULT AND TERMINATION....................................25
CHAPTER 13 FORCE MAJEURE..............................................27
CHAPTER 14 INSURANCE..................................................29
CHAPTER 15 GOVERNING LAWS AND DISPUTE RESOLUTION......................30
CHAPTER 16 ASSIGNMENT.................................................32
CHAPTER 17 NOTICE.....................................................32
CHAPTER 18 OTHER PROVISIONS...........................................33
APPENDIX 1 INVOICE FORMAT.............................................37
APPENDIX 2 AFTER-TAX CAPITAL RETURN...................................39
APPENDIX 3 CALCULATION OF TERMINATION FEES............................40
APPENDIX 4 ON-GRID TARIFF FORMULA.....................................41
APPENDIX 5 METERING AND RECORDING OF ELECTRICAL ENERGY................51
APPENDIX 6 PRE-OPERATION AND OPERATION SERVICES.......................53
APPENDIX 7 NECESSARY INSURANCE........................................59
APPENDIX 8 FUEL SPECIFICATION.........................................60
APPENDIX 9 FUEL OIL SUPPLY CONTRACT....................................61
<PAGE>
CHAPTER 1 GENERAL
This Operation and Offtake Contract (hereinafter referred to as "this
Contract") was entered into on ------- 1996 in Hefei City, the People's Republic
of China between the Anhui Provincial Electric Power Corporation on the one part
(hereinafter referred to as "Party A") and a consortium comprising Anhui
Liyuan-AES Power Company Ltd. and Hefei Zhongli Energy Company Ltd. on the other
part (each a Sino-foreign cooperative joint venture company, organized and
existing under the laws of the People's Republic of China and collectively
referred to as "Party B", and separately referred to as "Liyuan-AES" and "Hefei
Zhongli" respectively, together being jointly and severally responsible for the
liabilities and obligations of Party B hereunder). In this Contract, Party A and
Party B are individually termed as the "Party" or collectively as "the Parties".
The Parties reached the following agreement through friendly consultations in
accordance with relevant laws and regulations of the People's Republic of China
and on the basis of the principles of equality and mutual benefit.
CHAPTER 2 DEFINITIONS
2.01 DEFINITIONS
Unless otherwise stated in the provisions of this Contract, the
following terms, either in singular or plural, shall have the meanings set forth
below:
1) "AFTER-TAX CAPITAL RETURN" shall mean the amount in respect of
each Year set out in Appendix 2 representing the return to Party
B on its investment in the Power Plant at the Annual Minimum
On-Grid Quantity.
2) "ANNUAL ACTUAL ON-GRID QUANTITY" means the On-Grid Quantity of
electricity generated by the Power Plant as measured at the
Delivery Point, dispatched by Party A and which this Contract
requires is purchased by Party A in any Year.
3) "ANNUAL GENERATION PLAN" means the plan proposed in November of
each Year by Party A, agreed by Party B, that allows the Power
Plant to at least generate the Annual Minimum On-Grid Quantity.
4) "ANNUAL MINIMUM ON-GRID QUANTITY" shall mean the annual minimum
quantity to be generated by the Power Plant (prior to the Tariff
Commencement Date of the ST Unit is as specified in Clause 9.01
and thereafter will, subject to Clause 9.01(3), stand at [***]
kwh) which is sold to the Party A and purchased and to be paid on
time by Party A in accordance with the "Take or Pay" principle in
every Year during the Commercial Operation Period.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
5) "APPROVED GENERATION COST" shall mean in respect of a given Year,
the Planned Generation Cost(in RMB Fen per KWH), approved by the
Anhui Provincial Pricing Bureau.
6) "CHANGES OF LAW" shall mean the promulgation, implementation,
amendment, reinterpretation or repeal of any laws, taxes,
withholding taxes, regulations, rules or policies by any Chinese
governmental authority relevant to the construction, operation
and maintenance of the Power Plant, the production, delivery and
sale of electrical energy, or any other matters since the
execution of this Contract; or the promulgation, extension,
amendment or withdrawal of any approval, consent or permit by any
Chinese governmental authority relevant to the construction,
operation and maintenance of the Power Plant, the production,
delivery and sale of electrical energy or any other matters which
has resulted in the failure of Party B to achieve its After-tax
Capital Return or of the Investors to receive their expected
profit as set out in the Joint Venture Contracts or otherwise has
a material and adverse impact upon the rights and obligations of
Party B or the Investors in other respects.
7) "CERTIFICATE OF PERFORMANCE ACCEPTANCE" shall mean the
certificate which, according to Clause 5.3.3. of the EPC
Contract, shall be agreed to by the Owner's Engineer in writing
and signed by the Parties in respect of the achievement of
Performance Acceptance of a Generating Unit or the Power Plant.
8) "COMMERCIAL OPERATION DATE" shall mean in respect of a Generating
Unit or the Power Plant the date specified in the Certificate of
Performance Acceptance which is issued pursuant to Clause 5.3.3
of the EPC Contract.
9) "COMMERCIAL OPERATION PERIOD" shall mean the period from the
Commercial Operation Date of the Power Plant to the date of
termination of the Joint Venture Contract.
10) "COMMISSIONING" shall mean the testing of the Power Plant (
including Performance Test and Reliability Run) in accordance
with Article 5 of EPC Contract.
11) "DELIVERY POINT" means the physical point where the Power Plant
and the Grid are to be connected at the Site as more particularly
described in Clause 4.02.
12) "EPC CONTRACT" shall mean the engineering, procurement and
construction services contract entered into by and between Party
B and the EPC Contractor on -------- 1996.
13) "EPC CONTRACTOR" shall mean the Anhui Mingda Electric Power EPC
Contract Company Ltd.
14) "EXCESS ON-GRID QUANTITY" shall mean the portion of Annual Actual
On-grid Quantity which is in excess of the Annual Minimum On-Grid
Quantity in a Year.
15) "FUEL OIL SUPPLY CONTRACT" shall mean a contract entered into by
and between Party A as operator of the Power Plant and the fuel
oil supplier for the long-term supply of fuel oil to the Power
Plant that satisfies the Fuel Specification. For details see
Appendix 9 hereof.
16) "FUEL SPECIFICATION" means the fuel specification set out in
Appendix 8.
17) "GENERATING UNIT" shall mean any one of the two GT Units or the
ST Unit which form the component parts of the Power Plant.
18) "GT#1 UNIT" shall mean the first gas turbine generating unit
which is composed of PG6551B and its ancillary facilities and
which will go into operation first.
19) "GT#2 UNIT" shall mean the second gas turbine generating unit
which is composed of PG6551B and its ancillary facilities and
which will go into operation after the GT#1 Unit.
20) "INHERIT EQUIPMENT DEFECTS" shall mean the defects of the major
equipments of the Power Plant (gas turbine, steam turbine,
generator) which could not be found during the Commissioning and
warranty period, and is of manufacturing defects in nature, and
is not caused by normal wear and tear and degredation, and can
not be prevented with monitoring and maintenance(ie. such defects
causing the forced outages of the Power Plant exceeding
thirty(30) days accumulatively in a given Year). Such defects can
only be called Inherit Equipment Deftects if only the Parties
agree or after the conclusive determination by the Experts in
accordance with Section 15.03 of this Contract, and the Experts
can only be selected from world renowned independent engineering
firms or the members of related committee of the IEEE.
21) "INTERCONNECTION CONTRACT" shall mean the contract executed by
and between Party B and Party A for the connection of the Power
Plant to the Power Grid.
22) "INTERCONNECTION FACILITIES" means all facilities and equipment
including any telecommunications systems and equipment
telemetering equipment, transmission lines and associated
equipment transformers and associated equipment; relay and
switching equipment and protective devices and safety equipment
which must be constructed or installed to connect the Power Plant
to the first transmission tower of the Grid.
23) "INVESTOR" means each of Anhui Liyuan Electric Power Development
Company limited, Hefei municipal Construction and Investment
Company and AES Anhui Power Company Ltd.
24) "JOINT VENTURE CONTRACTS" shall mean the contracts executed on
March 18 , 1996 and --------, 1996 respectively by and between
Anhui Liyuan Electric Power Development Company Ltd., Hefei
Municipal Construction and Investment Company and AES-Anhui Power
Company Ltd. As well as all subsequent Admendments to the above
contracts in connection with the establishment and reorganization
of the Anhui Liyuan-AES Power Company Ltd. and the Hefei Zhongli
Energy Company Ltd.
25) "LAND AND FACILITY LEASE AGREEMENT" shall mean the agreement
entered into by and between Party B and the owner of the land
useright and facility in connection with the lawful use of part
of the land and facility within the Hefei Power Plant during the
term of the Joint Venture.
26) "LENDER" shall mean any legal person or natural person providing
financing for the Power Plant.
27) "LOAN REPAYMENT DATE" shall mean the date on which the principal,
interest, expenses, costs and all other amounts payable under the
US$ Loan Contracts have been completely repaid in accordance with
the US$ Loan Contracts.
28) "MONTH" shall mean a calendar month.
29) "ON-GRID QUANTITY" means quantity of active electricity measused
at the metering point and sold to Party A.
30) "ON-GRID TARIFF" shall mean the on-grid tariff per KWH which is
approved by Anhui Provincial Pricing Bureau. The On-grid Tariff
shall be determined and adjusted in accordance with the On-grid
Tariff Formula in Appendix 4.
31) "ON-GRID TARIFF FORMULA" shall mean the document agreed to by
both Parties and approved by the Anhui Provincial Pricing Bureau
which stipulates the initial On-grid Tariff and subsequent
On-grid tariff adjustment as more fully described in Appendix 4
hereof.
32) "OPERATION SERVICES" means the services described in Part II of
Appendix 6.
33) "OWNER'S ENGINEER" shall mean the independent engineering
consultant or engineering firm with international reputation
which is engaged by Party B to be responsible for monitoring and
supervising the EPC Contractor in performing the EPC Contract
including engineering, design, construction and performance
acceptance under the EPC Contract.
34) "POWER GRID" shall mean the electricity transmission grid of
Anhui Province.
35) "POWER PLANT" shall mean the total facilities of a combined cycle
generating set (the gross output under ISO condition is 115.2 MW)
consisting of 2 GT Units, one ST Unit, the heat recovery boilers
and the relevant equipment, the control equipment and all common
facilities, ancillary facilities the Interconnection Facilities
and the Site.
36) "PRE-OPERATION SERVICES" means the services described in Part I
of Appendix 6.
37) "PLANNED GENERATION COST" shall mean for a given Year the cost
per KWH to Party A of the generating the Annual Minimum On-Grid
Quantity calculated and agreed by Party A and Party B in
accordance with clause 10.03(1) and Appendix 4, and submitted to
the Anhui Provincial Pricing Bureau for approval.
38) "PRUDENT UTILITY PRACTICE" shall mean the international standard,
practices or methods generally followed for the design,
construction, commissioning, operation and maintenance of the
Power Plant and the generation and transmission of electricity on
the basis of the principles of safety, high efficiency, economy
and reliability and in compliance with the manufacturers
recommendations.
39) "QUARTER" shall mean a calendar quarter(for example, the first
quarter of a Year shall mean January, February and March)
40) "RENMINBI OR RMB" shall mean the lawful currency of the People's
Republic of China.
41) "STANDARD OIL CONSUMPTION" shall mean the oil consumed by the
Power Plant based on the Characteristic of gas turbine including
additional fuel consumption for degradation, stirrup and shut
down.
42) "SITE" shall mean the land located at Hefei City, Anhui Province,
People's Republic of China leased by Party B on which the Power
Plant will be constructed as more particularly described in
Appendix G of the EPC Contract.
43) "ST UNIT" shall mean the VEGA 206 steam turbine unit and its
ancillary facilities which will make use of exhaust heat of the
gas turbines to generate electricity.
44) "TAKE OR PAY" shall mean that except in the case of a Force
Majeure event stipulated in this Contract or Inherit Equipment
Defects or the Party B's default stipulated in the Section 12.02
hereof, Party A shall at least pay to Party B the amount for the
Annual Minimum On-Grid Quantity at the On-Grid Tariff. Even if
Party A decides to reduce its purchase quantity, or is unable to
purchase all the Annual Minimum On-Grid Quantity, it has to pay
to Party B the same amount as if it has purchased all the Annual
Minimum On-Grid Quantity.
45) "TARIFF COMMENCEMENT DATE" shall mean the earlier date of the
following: for the GT#1 and GT#2 Units: (i) the Commercial
Operations Date of both GT#1 and GT#2 Units, or (ii) August 1,
1997; for the ST Unit: (i) the Commercial Operations Date of ST
Unit, or (ii) July 1, 1998.
46) "TECHNICAL SPECIFICATION" means the design specification of the
Power Plant as referred to in the EPC Contract.
47) "US DOLLAR OR USD OR US$" shall mean the lawful currency of the
United States of America.
48) "US$ LOAN CONTRACTS" shall mean US$ loan contract or contracts
entered by Liyuan-AES and/or Hefei Zhongli with one or more
Lenders by which to obtain construction funds for the Power
Plant.
49) "US$ LOAN EXPENSES" shall mean the total amount payable by
Liyuan-AES and/or Hefei Zhongli to Lenders prior to the Loan
Repayment Date (including without limitation principal, interest,
expenses, costs or any other amounts) pursuant to the US$ Loan
Contracts.
50) "VARIABLE COST" shall mean the cost per KWH for fuel, water,
materials, repair and maintenance and all other costs and
expenses that vary directly with the production of electricity by
the Power Plant as approved by the Anhui Provincial Pricing
Bureau.
51) "YEAR" shall mean a calendar Year from January 1 to December 31.
CHAPTER 3 REPRESENTATIONS, WARRANTIES AND COMMITMENTS
OF THE PARTIES
3.01 THE PARTIES
The Parties to this Contract are as follows:
(1) Party A: Anhui Provincial Electric Power Corporation which is
established pursuant to Chinese laws and registered at the Bureau for Industry
and Commerce of Anhui Province. It has an independent status of a legal person
and its legal address is No. 415 Wuhu Road, Hefei City, Anhui Province.
Legal representative
Name: Guangjie Cheng
Title: General Manager
Nationality: Chinese
The Anhui Provincial Electric Power Corporation is an integrated
electric power enterprise of the Anhui Province of China is also one of the
member companies of the East China Electric Power Group of China. It is
responsible for the production, management, dispatch and construction of
electric power of the whole province, including the administration of the urban
and rural electric power trade of the whole province. The Corporation which has
42 units directly under its jurisdiction is engaged in diversified operation
including electric power production, management, dispatch, construction,
scientific research and education.
(2) Party B: a consortium comprising Anhui Liyuan-AES Power Company,
Ltd. and Hefei Zhongli Energy Company, Ltd. each of which are Sino-Foreign
cooperative joint ventures established and existing pursuant to Chinese laws.
(i) Anhui Liyuan-AES Power Company, Ltd. is a limited liability
company registered at the local bureau for industry and
commerce. Its legal address is No. 415 Wuhu Road, Hefei
City, Anhui Province.
Legal Representative
Name: Guangjie Cheng
Title: Chairman of the Board of Directors
Nationality: Chinese
(ii) Hefei Zhongli Energy Company, Ltd. is a limited liability
company registered at the local bureau for industry and
commerce. Its legal address is No. 415 Wuhu Road, Hefei
City, Anhui Province.
Legal Representative
Name: Guangjie Cheng
Title: Chairman of the Board of Directors
Nationality: Chinese
3.02 REPRESENTATIONS AND WARRANTIES
Owing to the shortage of electric power supply, particularly the
shortage of supply in peaking capacity in Anhui Province, Party B plans to
develop, construct and own the Hefei Combined-Cycle Power Plant in the northern
suburb of Hefei City, Anhui Province. The facilities of the Power Plant which
include two GT Units, one ST Unit and other relevant and ancillary facilities
will be interconnected with the Power Grid and be placed under the dispatch and
management of the Party A. The Power Plant will supply electrical energy to the
Power Grid and will be used by the Hefei city on a priority basis. Party B
hereby appoints Party A to operate and maintain the Power Plant.
As consideration for Party B's investment in the Power Plant, Party A
agrees to purchase the Annual Minimum On-Grid Quantity every Year in accordance
with the principle of "Take or Pay". Party A agrees to operate and maintain the
Power Plant in accordance with the terms of this Contract.
To that effect:
(a) Party A hereby represents and warrants that:
(1) Party A is a state-owned enterprise established in
accordance with Chinese laws and validly existing, it has
observed all applicable Chinese laws, and to the best of its
knowledge it is not aware of any pending legal action or is
subject to any legal proceedings which might lead to the
dissolution of Party A:
(2) Party A has all the necessary right and capacity for action
to enter into and perform this Contract, and has sufficient
financial resources necessary to make all payments required
to be made by it from time to time pursuant to this Contract
(including without limitation payment for the Annual Minimum
On-Grid Quantity) and has the capacity to undertake all its
other obligations and liabilities under this Contract.
(3) Party A has obtained all necessary approvals and support
from the provincial government departments and other
relevant departments for its execution and implementation of
this Contract;
(b) Anhui Liyuan-AES Power Company, Ltd. represents and warrants
as follows:
(1) Anhui Liyuan-AES is a Sino-Foreign cooperative joint venture
established in accordance with Chinese laws and validly
existing, it has observed all applicable Chinese laws, and
to the best of its knowledge it is not aware of any pending
legal action or is subject to any legal proceedings which
might lead to the dissolution of Liyuan-AES.
(2) Anhui Liyuan-AES has obtained all the necessary right and
capacity to execute and perform this Contract.
(c) Hefei Zhongli represents and warrants as follows:
(1) Hefei Zhongli is a Sino-Foreign cooperative joint venture
respectively established in accordance with Chinese laws and
validly existing, it has observed all applicable Chinese
laws, and to the best of its knowledge it is not aware of
any pending legal action or is subject to any legal
proceedings which might lead to the dissolution of Hefei
Zhongli.
(2) Hefei Zhongli has obtained all the necessary right and
capacity to execute and perform this Contract.
3.03 COMMITMENT
(a) Party A hereby undertakes as follows:
(1) Party A will operate and maintain the Power Plant and
Interconnection Facilities in accordance with the Prudent Utility
Practice and without unfavorable impact upon the Power Plant and shall
cause the Power Plant to be connected to the Power Grid, so that the
Power Plant can meet the requirements of the Technical Specifications
and the Interconnection Contract and conform to the health, safety and
environmental protection standards as imposed by relevant Chinese laws
and regulations;
(2) Party A shall issue dispatch instructions to the Power Plant in
accordance with the Technical Specifications and the Interconnection
Contract, and shall ensure that the Power Grid will accept electricity
generated by the Power Plant in accordance with such instructions; Any
dispatch instructions issued by Party A shall be in accordance with
Prudent Utility Practice, this Contract, the Interconnection Contract
and the Technical Specifications.
(3) Party A shall purchase on the basis of the On-grid Tariff all the
Annual Minimum On-Grid Quantity, and Excess On-Grid Quantity generated
by the Power Plant;
(4) Party A shall do its best efforts to assist Party B in obtaining
all necessary governmental approvals including without limitation the
approval of the Anhui Provincial Pricing Bureau of the On-Grid Tariff
(and its adjustment in accordance with the terms of this Contract).
(b) Party B hereby undertakes as follows:
(1) Party B shall appoint the Anhui Mingda Electric Power EPC Contract
Company Ltd., the wholly-owned subsidiary of Party A, as the EPC
Contractor, so as to ensure that the design and construction of the
Power Plant (including the Interconnection Facilities) will meet the
requirements of the Technical Specifications and the Interconnection
Contract and conform to the health, safety and environmental protection
standards as imposed by relevant Chinese laws and regulations;
(2) Party B hereby appoints Party A (and Party A hereby accepts the
appointment) to operate and maintain the Power Plant in accordance with
the Prudent Utility Practice so as not to produce any unfavorable
impact on the voltage level and frequency of the Power Grid;
(3) Party B shall, pursuant to the provisions of this Contract, sell
the Annual Minimum On-Grid Quantity, and Excess On-Grid Quantity
generated by the Power Plant to Party A.
CHAPTER 4 CONDITIONS AND REQUIREMENTS FOR
INTERCONNECTION OF THE POWER PLANT
4.01 INTERCONNECTION OF THE POWER PLANT WITH THE POWER GRID
Party A shall obtain all necessary approvals relevant to the
interconnection of the Power Plant with the Power Grid. Both Parties shall
strictly abide by the Interconnection Contract and ensure normal production of
the Power Plant and the safe operation of the Power Grid.
4.02 DELIVERY POINT
The Delivery Point shall mean either the first 220KV transmission tower
or from the Power Plant. Party A shall own and maintain the transmission
facilities from the Grid to the and the Delivery Point, while Party B shall own
and maintain the transmission facilities connecting the Power Plant and the
Delivery Point.
4.03 TRANSMISSION AND INTERCONNECTION
Party A shall be responsible for the design, construction, operation
and maintenance of any extension to the Grid ("the Grid Extension") required to
interconnect the Power Plant and the Grid. Party B entrusts the EPC Contractor
to be responsible for designing and constructing the Interconnection Facilities,
in accordance with the terms of the EPC Contract. Party A as the operator of the
Power Plant shall be responsible for the operation and maintenance of the
Interconnection Facilities. The constraction fund of [***] for the
Interconnection Facility and the Grid Extension has been encloded in the total
price of EPC Contract as stipulated in section 4.5 of the EPC Contract.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
The construction and testing of the Grid Extension by Party A shall
proceed simultaneously with the construction and testing of GT#1 Unit of the
Power Plant and shall be completed one month before the start-up and
synchronization of the GT#1 Unit. Party A's obligation to purchase the Annual
Minimum On-Grid Quantity and to pay electricity fee pursuant to this Contract
shall be calculated from the Tariff Commencement Date of the GT#1 and GT#2 Units
irrespective of whether or not the Grid Extension has been completed by that
date.
4.04 TELECOMMUNICATIONS
The communication and dispatch automation equipment between the Power
Plant and the Dispatch Center is a part of this Project. Party A shall own the
equipment between the Delivery Point and the Dispatch Center, while Party B
shall own the equipment between the Delivery Point and the Power Plant. All
procurement and installation of such equipment shall be performed by the EPC
Contractor according the EPC Contract and the total cost of the procurement and
installation of such equipment shall also be included in the total turnkey cost
of the EPC Contract.
CHAPTER 5 METERING OF ELECTRICITY
5.01 ON-GRID METERING DEVICE
The electrical energy metering point (the "Metering Point") is
installed at the higher voltage side of the main transformer of each Generating
Unit. Time-phased active and reactive electrical energy metering devices shall
be installed at the metering point. In order to meet the requirement of the
metering system of the Power Grid, Party B's metering device shall have the
function of meeting the technical requirements for total load and remote gauging
transmission of the Power Grid and shall be equipped with data memory
transmission and delivery device. The above metering devices will measure Party
B's on-grid electricity quantity in kwhs.
5.02 METERING OF ELECTRICITY FROM THE POWER GRID
After the Commercial operation of each Unit of the Power Plant is
synchronized for power generation, the high voltage auxiliary transformer shall
install metering device interconnected with the Power Grid which can measure the
quantity of electricity that Party B purchases from Party A. The price of such
electricity shall be the average of retail price of all power plants without
investment or loans from contral goverment in Anhui Province.
5.03 MANAGEMENT OF METERING DEVICES
Party B entrusts the EPC Contractor and Party A operator to be
responsible for purchasing, installing, replacing and managing the various sets
of metering devices of the above-mentioned metering points. The calibration of
the metering devices shall be done by qualified state-approved firms in
accordance with stipulations and jointly participated in by both Parties.
5.04 FAULT PROCESSING OF METERING DEVICES
In case of any anomaly or fault in metering devices during operation
which may affect the functioning of electrical energy metering devices, Party A
shall notify Party B on time and make arrangements to restore normal metering.
The method of metering and the On-Grid Quantity during abnormal period shall be
determined in accordance with the procedures stipulated in Appendix 5 hereof.
CHAPTER 6 OPERATION OF THE POWER PLANT
6.01 ENGAGEMENT OF OPERATION
Party B hereby engages Party A as operator of the Power Plant to
manage, operate and maintain the Power Plant and to provide Operation Services
and Pre-Operation Services as stipulated in this Contract as well as a supply of
fuel oil that satisfies the Fuel Specification. The term of engagement shall be
the same as the term of this Contract.
6.02 BASIC REQUIREMENTS
1) Party A shall perform of the Pre-Operation Services and the
Operation Services in compliance with the any laws and regulations of the
People's Republic of China and the provisions this Contract and the requirements
of the Interconnection Contract and the Dispatch Agreement relevant to the
operation and maintenance of the Power Plant. Party A will, on demand, indemnify
Party B on and from any costs, losses or expenses(including fines) incurred or
imposed as a consequence of any breach of this paragraph, and pay directly the
related expenses and penalties under the Interconnection Contract and the
Dispatch Agreement to the dispatcher of the Power Grid.
2) Party A shall operate the Power Plant in accordance with the Prudent
Utility Practice and shall perform the Operation Services on the basis of the
goal of achieving the After-tax Capital Return.
3) Party A shall ensure that the Power Plant is maintained and
overhauled on a regular and proper basis and that the Power Plant can generate
the greater of (i) the Annual Minimum On-Grid Quantity and (ii) the annual
actual demand of the Power Grid, every Year during the Commercial Operation
Period.
4) Party A shall operate the Power Plant in accordance with Technical
Specifications, operation regulations of the Ministry of Electric Power and in
compliance with the recommendation of the equipment manufactures, and shall try
in every possible way to generate as much electricity as possible on a stable
basis and within the allowable limits of the Power Grid.
6.03 PRE-OPERATION SERVICES
Party A shall perform the Pre-Operation Services and the other services
listed below from the date of execution of this Contract until the Commercial
Operation Date of the Power Plant.
1) Party A shall be responsible for doing a good job of production
readiness before the Commercial Operation Date of the Power Plant and to carry
out on-post training for production personnel.
2) provide all the necessary personnel and material for Party B so as
to enable Party B and the EPC Contractor to perform their obligations in
connection with the construction and Commissioning of the Power Plant.
3) provide relevant advises and support to Party B in connection with
the construction of the Power Plant and the Commissioning of the Generating
Units and participate in the Commissioning of the Generating Units pursuant to
requests put forward by Party B from time to time.
4) perform the Pre-Operation Services specified in Appendix 6 hereof.
6.04 OPERATION SERVICES
On and from the Commercial Operation Date, Party A shall provide the
following services:
1) To perform all its duties and obligations in connection with the
operation and maintenance of the Power Plant in accordance with the terms of
this Contract.
2) To provide relevant advises and support to Party B in connection
with the operation and maintenance of the Power Plant and pursuant to requests
put forward by Party B from time to time.
3) To provide the Operation Services specified in Appendix 6 hereof.
6.05 FUEL OIL SUPPLY
During the Commercial Operation Period, Party A shall be responsible
for supplying to the Power Plant on a long term basis fuel oil that satisfies
the Fuel Specification so as to ensure that the Power Plant has sufficient fuel
oil to generate the Annual Minimum On-Grid Quantity stipulated in Article 9
hereof and the Excess On-Grid Quantity that matches the annual actual demand of
the Power Grid at any time in the Commercial Operation Period. Subject to the
agreement from Party B, Party A shall enter into the Fuel Oil Supply Contract
for the long term supply of fuel oil to the Power Plant. For details see the
Fuel Oil Supply Contract in Appendix 9.
It shall be deemed the responsibility of Party A, if the fuel oil does
not satisfy the Fuel Specification or is in short supply, thus resulting in the
failure of the Power Plant to generate the Annual Minimum On-Grid Quantity and
the Excess On-Grid Quantity that matches the annual actual demand of the Power
Grid at any time in the Commercial Operation Period.
6.06 GENERATION PLAN AND COST BUDGET
Party A shall be responsible for formulating the Annual Generation Plan
and assisting Party B in calculating the Planned Generation Cost of the Power
Plant in November of each Year for the following Year. The Annual Generation
Plan shall guarantee the generation of the Annual Minimum On-Grid Quantity. The
Planned Generation Cost shall take into account the expected or potential
increase in the generation costs incurred in the succeeding Year. The Planned
Generation Cost shall become the Approved Generation Cost of the succeeding Year
upon approval of the Anhui Provincial Pricing Bureau and the approved Generation
lost shall be deducted from the Electricity Fee in accordance with Section
10.03, Section 10.04 and Appendix 1 of this Contract.
If on or after the end of a given Year the actual cost to Party A of
generating the Annual Minimum On-Grid Quantity is recognized by both Parties as
exceeding the Approved Generation Cost for the Year, the excess portion shall be
paid by Party A. Such excess plus the actual interest cost incurred by Party A
in funding such excess ("Total Excess Amount") shall be included in the proposed
On-grid Tariff of the succeeding Year. Upon approval by Anhui Provincial Pricing
Bureau, such Total Excess Amount shall become a part of the Approved Generation
Cost of the succeeding Year and be deducted from the monthly Electricity Fee
according to Section 10.03, Section 10.04, and Appendix 1 of this Contract.
If the On-grid Tariff for the succeeding Year is lower than the
proposed On-grid Tariff submitted for approval and the On-grid Tariff does not
include the full amount of the Total Excess Amount referred to in previous
paragraph, then the Total Excess Amount shall be divided in to two parts: (a)
the part not due to the changes in inflation and foreign exchange shall be borne
by the Party A and (b) the part due to the changes in inflation and foreign
exchange(if any) shall be borne by Party B and repaid to Party A in equal
Monthly installments at the end of each Month from the "Annual Adjustment Fees"
listed in Appendix 4.
If the actual cost to Party A of generating the Annual Minimum On-Grid
Quantity is lower than the Approved Generation Cost in any Year, taking into
account the efforts which Party A has made in the management and operation of
the Power Plant, Party B will (provided the Planned Generation Cost for the
following is not reduced by the Anhui Provincial Pricing Bureau) reward [***] of
the difference between the Approved Generation Cost and actual cost to Party A
of generating the Annual Minimum On-Grid Quantity.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
6.07 INFORMATION
At the request of Party B, Party A shall periodically furnish to Party
B information monthly in connection with the operation and maintenance of the
Power Plant and its performance of the Pre-Operation Services and the Operation
Services. Party A shall also, pursuant to Appendix 6 hereof, furnish to Party B
a monthly statement which includes a financial statement and a production
statement (For details, see Appendix 6 hereof). At any time during the
Commercial Operation Period, Party B has the right of access to all records and
information of the Power Plant.
6.08 STAFF
Party A shall, after consultations with Party B, appoint a qualified,
competent and experienced person as the manager of the Power Plant who is
concurrently the deputy general manager for operation of Party B and who shall
not be replaced without prior consultation with Party B. If such manager
resigns, or is dismissed, or fails to perform his (or her) duties for other
causes, Party A shall consult with Party B as soon as possible, so that another
qualified, competent and experienced person to fill this vacancy can be quickly
appointed.
6.09 SUBCONTRACTING
1) Party A shall not delegate or subcontract the entire Pre-Operation
or Operation Services to a third party or parties.
2) Subject to Section 6.09 1) hereof, Party A may with the prior
written consent of Party B, subcontract if necessary part of the Pre-Operation
Services or Operation Services to experts or other subcontractors, so as to
ensure that Party A can perform its responsibilities. Such subcontracting can
not relieve Party A from any of its duties, responsibilities or obligations
under this Contract. Party A shall be fully responsible for the actions and
defaults of its subcontractors just as they are Party A's own actions and
defaults.
6.10 STRICTNESS OF RESPONSIBILITY
The responsibility and liability of Party A under this Contract is
strict. Party A shall not be relieved of any of its responsibilities or
liabilities under this Contract because of Party B's performance, or
non-performance, or delayed performance of its obligations under this Contract,
or because of Party B's act or default.
CHAPTER 7 RESPONSIBILITIES OF PARTY B AND PARTY A
7.01 RESPONSIBILITIES OF PARTY B
1) INITIAL WORKING CAPITAL
Prior to the Commercial Operation Date of the GT#1 Unit, Liyuan-AES and
Hefei Zhongli shall provide Party A an initial working capital amounting to
[***].
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
2) PAYMENTS FOR PRE-OPERATION SERVICES
To enable Party A to perform the Pre-Operation Services pursuant to
Section 6.03 hereof and in view of the fact that the EPC Contractor is Party A's
wholly-owned subsidiary, Party A hereby acknowledges and agrees that the total
price of the EPC Contract, as stipulated in Section 4.1 of the EPC Contract,
payable to the EPC Contractor shall be deemed to include an amount in respect of
the Pre-Operation Services and no additional amount shall be payable to Party A
under this Contract in respect of the Pre-Operational Services.
3) PAYMENTS FOR OPERATION SERVICE
To enable Party A to perform the Operation Services as the operator of
the Power Plant, Party B shall pay Party A a monthly operation and management
fee. The operation and management fee shall be included in the Planned
Generation Cost of the succeeding Year. The operation and management fee shall
only be payable to Party A to the extent it is included in the Approved
Generation Cost as part of the On-grid Tariff for the succeeding Year.
4) BONUS FEES
Within 30 days after the end of each Year, Party A shall inform Party B
in written form the due amount of bonus payable for the previous Year in
accordance with this Contract ("Bonus Notice"). The amount of bonus shall
include the bonus for costsaving (as provided for in clause 6.06) and the bonus
for Excess On-Grid Quantity(as provided for in clause 9.03). Within 14 days of
receiving the Bonus Notice and the last Electricity Fee Payment of the year,
Party A and Party B shall settle the bonus payment.
7.02 RESPONSIBILITY OF PARTY A
Party A shall ensure that the Power Plant generates the Annual Minimum
On-Grid Quantity and shall purchase the Annual Minimum On-Grid Quantity in
accordance with the principle of "Take or Pay", and shall pay electricity fees
on time. Starting from the Commercial Operation Date, Party A shall in its own
name arrange and obtain necessary and supplementary working capital for
production according to needs and the accrued interest expenses therefrom shall
be included in the Planned Generation Cost submitted to the Anhui Provincial
Pricing Bureau for approval. Party A's obligation to make payment for the Annual
Minimum On-Grid Quantity in accordance with the principle of "Take or Pay" shall
not be affected by any circumstance, other than Force Majeure or the Party B's
default stipulated in Section 12.02 hereof, including without limitation:
(i) any delay in the construction or commissioning of the Power Plant or any
Unit of the Power Plant including the Interconnection Facilities;
(ii) any delay in the construction or commissioning of the Grid Extension;
(iii)the inability of the Power Plant to deliver the Annual Minimum On-Grid
Quantity for any reason including without limitation:
(a) any failure or inability of Party A to obtain fuel, spare parts or
replacement parts, services or other matters or things;
(b) any act or default of any employee, agent or officer of Party A,
(c) the inability of the Interconnection Facilities, the Grid Extension or
the Power Grid to receive or transmit electricity; or
(d) any outages at the Power Plant, whether scheduled or forced outages.
CHAPTER 8 OTHER OPERATION MATTERS
8.01 OPERATION PLAN
Prior to the end of November each Year, Party A shall formulate the
Annual Generation Plan for the following Year which determines the anticipated
term of outage because of major and minor overhaul as well as the anticipated
average load curve of power generation.
8.02 EMERGENCY PLAN
Party A shall hold regular meetings with Party B in respect of power
demands and offtake obligations, so that , subject to the above provisions,
Party A can amend the relevant operation schedule if necessary, but the
amendment of the operation schedule shall not affect the liability of Party A to
purchase the Annual Minimum On-Grid Quantity in accordance with the principle of
"Take or Pay".
8.03 RECORDS
The Parties shall keep complete and detailed records and all other
information which they need, so as to carry out properly this Contract.
The above-mentioned records shall be kept for at least 60 Months from
the date of formation, or for a longer period required by the supervisory
authorities having jurisdiction over the Parties, but the Parties are not
allowed to deal with or destroy any of the above records upon expiration of 60
months without 30 days' prior written notice to the other Party. Under the
circumstances of giving reasonable notice to any other Party at a proper time in
advance, any Party has the right to review in any business hours the operation
and dispatch records and information in connection with this Contract or Power
Grid which the other Party has kept within the term of keeping all the records
and information pursuant to this Article.
CHAPTER 9 ON-GRID QUANTITY
9.01 ANNUAL MINIMUM ON-GRID QUANTITY
Party A, as the operator and offtaker of the Power Plant shall
guarantee the Power Plant to generate the Annual Minimum On-Grid Quantity:
(1) GT#1 Unit and GT#2 Unit: From the Tariff Commencement Date of the
GT#1 and GT#2 Unit to the end of the same Year (Dec. 31) when the Tariff
Commencement Date of the ST Unit starts, the Annual Minimum On-Grid Quantity of
two Units shall be [***] KWH calculated pro rata if it less than a Year ( 365
days); plus
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(2) ST Unit: From the Tariff Commencement Date of the ST Unit to the
end of that Year (Dec. 31), the Annual Minimum On-Grid Quantity of the Unit
shall be [***] KWH calculated pro rata if it reaches a Year (365 days); or
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(3) From the first Year following the Tariff Commencement Date of the
ST Unit to the expiration of the term of the Joint Venture Contract, the Annual
Minimum On-Grid Quantity of the Power Plant each Year shall be [***] KWH.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
9.02 EXCESS ON-GRID QUANTITY
In order to maximize Party B's profits and to encourage Party A to
purchase as much electricity as is generated, Party A shall purchase the Excess
On-Grid Quantity at the On-grid Tariff, the net profits from this income after
deducting the Variable Cost and taxes payable by Party B will first be used to
make up any shortfalls in Party B's After-tax Capital Return in accordance with
Appendix 2 for the current Year, and then the remaining amount ("Remaining
Amount") distributed in accordance with the following principles:
(1) If the Annual Actual On-Grid Quantity exceeds the Annual Minimum
On-Grid Quantity by [***], then [***] of the Remaining Amount
shall be paid to Party A;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(2) If the Annual Actual On-Grid Quantity exceeds the Annual Minimum
On-Grid Quantity by more than [***], then [***] of the Remaining
Amount from any output in excess of [***] over the Annual Minimum
On-Grid Quantity shall be paid to Party A;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(3) The remaining portion shall be distributed to Party B.
9.03 VARIABLE COST
Party A shall also receive as operator the Variable Cost for each KWH
of Excess On-Grid Quantity but shall not be entitled to the Approved Generation
Cost.
CHAPTER 10 ON-GRID TARIFF AND SETTLEMENT OF ELECTRICITY FEE
10.1 ON-GRID TARIFF
Party A and Party B have, through full negotiations, reached unanimity
in respect of the On-grid Tariff on the following principles:
1) The composition of the On-grid Tariff
The composition of the On-grid Tariff shall be calculated and
adjusted in accordance with Appendix 4 hereof.
2) The principles for submitting the proposed On-grid Tariff for
approval
a) Theannual On-Grid Quantity of the Power Plant shall be the
Agreed Annual kilowatt-hours as defined in Appendix 4 which
also is the same as Annual Minimum On-Grid Quantity of [***]
kwh as specified in section 9.01 such number is set at the
time of signing this Contract based on [***] in the On- Grid
Tariff Formula of Article 2 of Appendix 4 and the
characteristics of gas turbine PG6551B;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
b) It is based on the amount of principal and interest
repayment as stipulated in the US$ Loan Contracts, the term
for repayment and the amount of anticipated After-tax
Capital Return (as provided for in Appendix 2) and Planned
Generation Cost during the term of the joint venture based
on the number of utilization hours as listed in the
preceding section;
c) To set up the Annual adjustment fees which will be used to
compensate for the increase in costs or any adverse effect
on amounts payable under the US$ Loan Contracts or the
After-tax Capital Return resulting from changes in such
factors as fuel costs, exchange rates, and taxation and any
other factors;
d) The performance parameter of a Generating Unit which was
determined before it was put into commercial operation shall
be one of the bases for calculation;
e) The total revenue of the Power Plant in each Year under the
above-mentioned conditions shall be sufficient to pay all
the costs expenses After-tax Capital Return and the other
items, composing the On-grid Tariff as detailed in Appendix
4.
3) Adjustment of On-grid Tariff
By the end of November of each Year after the Commercial
Operation Date of the Power Plant, Party B shall, in compliance
with the On-grid Tariff Formula in Appendix 4 hereof and the
adjustment mechanism provided for in Appendix 4, and taking into
consideration all the factors stipulated in Section 10.1 (1)and
(2), calculate the tariff and then submit the on-grid tariff for
the following Year after full consultation with Party A in order
to compensate any increase in cost resulting from the changes in
fuel, exchange rate, taxation and other factors.
4) Approval and Implementation of the On-grid Tariff
Party B shall be responsible for calculating the proposed tariff
and for submitting it to the Anhui Provincial Pricing Bureau for
approval after full consultation with Party A. The approved
On-grid Tariff shall be the settlement price for the On-Grid
Quantity and shall be strictly implemented by both Parties.
If the approved On-grid Tariff is lower than the proposed tariff
submitted for approval, Party A shall use its best efforts to
generate and purchase more On-Grid Quantity, so as to offset the
unfavorable impact on Party B resulting from the On-grid Tariff
being less than the proposed tariff submitted for approval.
10.02 ELECTRICITY FEE
1) On-Grid Quantity Before the Tariff Commencement Date
In accordance with the provision of Section 5.2.5 under the EPC
Contract and subject to the provision of Section 7.01 2) hereof, the revenue on
all the generated by each Generating Unit before its corresponding Tariff
Commencement Date shall belong to the EPC Contractor while all cost, including
fuel cost and generation cost, associated with such revenue shall be borne by
the EPC Contractor.
2) Failure to Accept Annual Minimum On-Grid Quantity
Starting from the Commercial Operation Date of the Power Plant, if
Party A fails to accept the Annual Minimum On-Grid Quantity, in addition to
paying the electricity fees for the Actual On-Grid Quantity in accordance with
the On-grid Tariff, Party A shall also pay a compensation fee for the difference
between the Annual Minimum On-Grid Quantity and the Actual On-Grid Quantity.
Such compensation fee shall be calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
3) Annual Minimum On-Grid Quantity and Excess On-Grid Quantity
Party A shall purchase all the Annual Minimum On-Grid Quantity and the
Excess On-Grid Quantity generated by the Power Plant in accordance with the
On-grid Tariff.
10.03 METHOD OF SETTLEMENT
1) Party B shall make a calculation of the On-grid Tariff and the
Planned Generation Cost. This Planned Generation Cost will be
part of the tariff calculation prior to the end of November of
each Year and submit it to the Anhui Provincial Pricing Bureau
for approval after full consultation with Party A. The Planned
Generation Cost shall include the Variable Cost, salary and
welfare overhaul expense and other costs of Party A as stipulated
in Appendix 4 hereof. In settling the electricity fees, both
Parties must strictly implement the Approved Generation Cost and
the On-grid Tariff.
2) Party A is both the operator and the offtaker of the Power Plant.
In respect of Party B, it is the Party A's strict responsibility
to ensure the generation of Annual Minimum On-Grid Quantity and
the purchase of Annual Minimum On-Grid Quantity. In order to
accelerate the turnover of funds, both Parties agree that the
electricity fees which Party A pays to Party B and the Approved
Generation Cost which Party B pays to Party A in respect of each
KWH of generation up to the level of the Annual Minimum On-Grid
Quantity shall adopt the method of offsetting and deduction. Only
Approved Generation Cost shall be deducted from each amount
payable by Party A pursuant to this Contract, together with the
provision of a tax payment receipt to Party B in connection with
the VAT and other Tax (as in Appendix 4 ) relevant to power
generation which is withheld by Party A, (the above tax payment
receipt shall be the amount to be paid in full in accordance with
the state regulation on electric power VAT and in which the VAT
for purchase is not withheld.) the balance after deduction shall
be remitted to the bank account designated by Party B in the form
of a written notice to Party B.
3) Party A shall open a special-purpose account for settling
electricity fees in the Anhui Branch of the Bank of China, and
will settle accounts with Liyuan-AES and Hefei Zhongli, Party A
shall guarantee that there is sufficient funds in the
special-purpose account for settling electricity fees so as to
pay all the accounts due and payable under this Contract
(including without limitation this Section 10.03 , Section 10.04
and Section 12.05). Liyuan-AES and Hefei Zhongli shall
respectively open accounts in the Anhui Branch of the Bank of
China whose account numbers are respectively
Liyuan-AES:---------, and Hefei Zhongli: --------; Party A shall
execute a relevant agreement with the Anhui Branch of the Bank of
China to cause the latter to transfer each [***] of all the
amounts respectively to the above two bank accounts from the
special-purpose account for settlement which Party A shall pay in
accordance with the stipulations of this Contract.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4) Party A shall pay electricity fees to Party B prior to the 14th
of each month which is equivalent to [***] of the electricity fee
of the preceding month actual on-grid quantity, and shall have
settled the electricity fees for the Minimum On-Grid Quantity of
the Preceding Quarter prior to the 14th of the first month of
each Quarter which shall be calculated as [***]; The electricity
fees for the first half of the year and the preceding year shall
be settled prior to July 14 and January 14 each Year on the basis
of the greater of the following On-Grid Quantity:
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(a) the minimum On-Grid Quantity calculated pro rata time,
(b) Actual On-Grid Quantity.
5) If Party B is requested to pay value added tax(VAT) or other Tax
(as in Appendix 4) in respect of any sums received from Party A
under this Contract, the amount of such business tax shall be
Other Tax (as in Appendix 4)shall be reimbursed to Party B by
Party A for Party B on demand.
10.04 INVOICES AND PAYMENT
1) The representatives appointed by Party A and Party B shall
jointly make meter readings on the first working day every month.
Party B shall deliver the invoice prior to the 7th of each month,
and Party A shall pay the amount of money specified in the
invoice within the term stipulated in Section 10.03(c) after
having received the invoice, interest shall be accrued for late
payment, and Party A shall pay to Party B late payment penalty on
the basis of [***] per day on an accumulative basis from the date
due and payable to the actual payment date.
Party A's excess payment or under payment as shown in any invoice shall
be deducted or increased from the payable amount due in the next invoice.
This Section is also applicable to any payments to be Paid under this
Contract by Party B to Party A.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
2) Invoice in dispute: Should there be any dispute over the invoice
amount, Party A shall still pay the full invoice amount to Party
B. Upon resolution of the dispute, if any amount is to be
refunded to Party A it shall include together with the interest
on the basis of [***] per day on an accumulative basis shall be
returned to Party A. Such interest shall accrue from the date
when Party A starts to pay according to the invoice until the
date when the required amount has been returned to Party A.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
3) Party A's payment obligations under this Contract are absolute,
unconditional and independent of any other transactions between
both Parties.
CHAPTER 11 RESPONSIBILITY AND INDEMNITY
11.01 Party A shall bear responsibility for and shall have no recourse to Party
B and/or its Contractor for the project-related property loss or damage
including damage to, premature, deterioration of or loss of the Power Plant,
personal injury and all expenses arising therefrom or relating thereto,
including but not limited to reasonable legal fees which must be suffered by
Party B and /or its Contractor arising out of Party A's negligence breach of the
Contract or other act or default. Party A also agrees to fully indemnify Party B
and/or its Contractor in respect of the above-mentioned conditions, but such
indemnity shall not be extended to any loss, damage, injury (or any relevant
claim) or relevant fees or expenses arising out of Party B's and/or its
Contractor's action or inaction or failure to take measures to reduce the
consequences.
11.02 Party B shall bear responsibility for and shall have no recourse to Party
A and/or its Contractor for the project-related property loss or damage,
personal injury and all expenses arising therefrom or relating thereto,
including but not limited to reasonable legal fees which must be suffered by
Party A and/or its Contractor arising out of Party B's negligence or improper
action. Party B also agrees to fully indemnify Party A and/or its Contractor in
respect of the above-mentioned conditions, but such indemnity shall not be
extended to any loss, damage, injury (or any relevant claim) or relevant fees or
expenses arising out of Party A's and/or its Contractor's action or inaction or
failure to take measures to reduce the consequences.
11.03 If any third party institutes a claim or legal proceedings against the
indemnified Party in respect of indemnity matters stipulated in this Contract,
the indemnified Party is entitled ( but is not obliged ) to respond to the
claim, to defend the claim or to institute legal action and may decide to
appoint an attorney to represent it in respect of any claims, defense or action,
and the relevant reasonable fees and expenses thereto shall be included in the
indemnity responsibility borne by the indemnifier pursuant to this Contract.
But if the indemnifier recognizes in written form to have indemnified
the indemnified in respect of all the losses pursuant to what is stipulated in
Sections 11.01 and 11.02, the indemnifier, after having promptly notified the
indemnified in advance and paid the indemnified for the reasonable fees and
expenses, is entitled to counterplead in respect of the claim or legal
proceedings, and to appoint an attorney by itself with all the relevant fees at
its own expense.
Without the prior consent of the other Party in written form, any Party
shall not settle or compromise presumptuously by itself any claim or legal
proceedings from which it is entitled to obtain indemnity from the other Party,
but the other Party shall not refuse to agree for no reason; unless the other
Party refuses to agree for no reason, if one Party is originally entitled to
obtaining indemnity from the other Party, but it presumptuously resolves such
claim or legal proceedings or makes a compromise thereto without the consent of
the other Party in written form, then the other Party can relieve any indemnity
obligation which it bears to the Party which makes the settlement or compromise.
The indemnity as stipulated in Sections 11.01 and 11.02 shall under no
circumstances be extended to indirect loss or damage, and neither Party shall
bear any responsibility in relation to indirect loss or damage arising out of
its performance of obligations or exercise of rights pursuant to this Contract.
CHAPTER 12 DEFAULT AND TERMINATION
12.01 TERM OF EFFECTIVENESS
This Contract shall come into effect on the date as defined in Section
18.01 hereof, and the purchase of electricity shall start from the Tariff
Commencement Date of the GT#1 and GT#2 Units until the termination of the Joint
Venture Contract unless otherwise sooner terminated in accordance with this
Contract.
12.02 DEFAULT
1) Unless the default of Party B is due to Party A's default, the
following events shall be considered as the default of Party B:
a) Liyuan-AES or Hefei Zhongli Energy goes bankrupt or become
insolvent and such condition has remained unremedied for
ninety (90) days;
b) Party B has abandoned this project for six (6) months.
2) The following event shall be considered as the default of Party
A:
a) Party A fails to make payment pursuant to this Contract and
such case has remained unremedied for forty five (45) days;
b) Party A breaches any other obligation stipulated in this
Contract and such case has remains unremedied for forty five
(45) days;
c) Party A as the operator of the Power Plant fails to generate
electricity for twenty (20) days (except for planned major
and minor overhaul and Force Majeure);
d) Party A, pursuant to laws, is dissolved or reorganized,
provided that Party A shall not be considered to be in
default if the reorganization does not affect the ability of
the reorganized entity to perform Party A's obligations
under this Contract and the re-organized entity has
undertaken unconditionally the obligations of Party A under
this Contract (the past or the future) .
12.03 TERMINATION IN ADVANCE
1) If any event described in Section 12.02 occurs, any Party may
terminate this Contract in advance and do so in accordance with
the following termination procedures:
a) The Party which exercises the right of terminating this Contract
shall notify the defaulting party of its intention to terminate
this Contract and shall describe in details the condition of
default;
b) After the defaulting party has received the termination notice,
it shall remedy or mitigate the condition of within forty five
(45) days or fifteen days (15) (in the case of failure to make
payment pursuant to this Contract. If such condition is not
remedied within the stipulated period, the Party which exercises
the right of terminating this Contract may issue the final
notification of termination to the defaulting Party.
2) Party B may terminate this Contract in advance if the Central,
Provincial or local government of the People's Republic of China
requisitions, levies by coercion, or nationalizes the assets or
rights and interests of Party B or the Investors.
3) Party B may terminate this Contract in advance if the On-grid
Tariff proposed by Party B to Anhui Provincial Pricing Bureau is
not approved at the level first proposed by Party B for two
consecutive Years.
12.04 NORMAL TERMINATION
If this Contract terminates upon its expiration, Party A shall repay
the initial working capital amounting to [***] to Party B.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
12.05 TERMINATION FEES
If this Contract is terminated by Party B because of Party A's default
or pursuant to Section 12.03 hereof, Party A shall forthwith pay to Party B
termination fees calculated in accordance with Appendix 3 : Calculation of
Termination Fees. After Party A has paid the termination fees, all Party B's
assets and rights and interest shall be transferred to Party A.
CHAPTER 13 FORCE MAJEURE
13.01 DEFINITION OF FORCE MAJEURE
"Force Majeure" shall mean any of the following events:
1) war, hostility or insurrection;
2) plague or other epidemics;
3) fire not caused by negligence or deliberate arson;
4) lightning;
5) earthquake;
6) other natural forces including natural calamities.
Provided that no event shall be regarded as a Force Majeure event
unless it simultaneously bears the following six features:
1) arising after the execution of this Contract;
2) unforeseen or unavoidable;
3) beyond the control of a relevant party;
4) occurring within the Power Plant Site;
5) directly hampering the performance of this Contract by one
Party; and
6) unpreventable in spite of all the best efforts made by the
relevant Party.
13.02 NOTIFICATION OF FORCE MAJEURE
1) The Party claiming Force Majeure (the "Force Majeure Party")
shall promptly notify the other Party of any Force Majeure event,
no later than five working days after the following date:
a) The commencement date of a Force Majeure event that causes
loss or damage to the Power Plant; or
b) The date that in the event of a Force Majeure event that
does not cause loss or damage to the Power Plant, such Party
knows or ought reasonably to know of the occurrence of the
Force Majeure event.
Notwithstanding the above, if the Force Majeure event results in the
suspension of communication so that the Force Majeure Party is unable to issue
the notice within the above-stipulated time limit, the Force Majeure Party shall
promptly issue notice as soon as the communication is restored but shall not be
later than one working day after the communication is restored to normal.
The Force Majeure Party shall within 15 days provide the details of the
Force Majeure event and the certificate issued by the local notary organization
or equivalent organization which will account for the reasons why a part or all
of the obligations of this Contract cannot be performed out or must be
postponed.
2) The Force Majeure Party must notify the other Party in respect of
the following:
a) The cessation of the Force Majeure event; and
b) The cessation of the impact of the Force Majeure event upon
the enjoyment of rights or performance of obligations of
such Party under this Contract.
The above notice shall be issued promptly after the conditions
mentioned in a) and b) above are known to such Party. With the exception of the
suspension of communication as stipulated in the second paragraph of Section
13.02 (1), the notice must under any of the above-mentioned circumstances, be
issued within two working days after having known the relevant conditions.
3) If notice of the Force Majeure event is not issued to the other Party
in strict compliance with the provisions of Section 13.02(1), a Party
shall not be entitled to claim relief from the Force Majeure event and
shall be relieved from performing to obligations under this Contract.
13.03 MITIGATION OF CONSEQUENCES
The Party affected by the Force Majeure event shall mitigate the
consequences of the Force Majeure event upon its enjoyment of its rights or the
performance of its obligations under this Contract.
13.04 DELAY CAUSED BY FORCE MAJEURE EVENT
Subject to Sections 13.02(3) and Section 13.03, if one or more Force
Majeure events or their consequences result in any Party's incapability or delay
in performing its obligations under this Contract, such Party shall to the
extent necessary be excused from performing its obligations hereunder while the
Force Majeure event (or its effects ) are in existence. Correspondingly, the
term of performance of contractual obligations by such Party, and the expiration
date of the Contract shall be extended. The number of days of postponement shall
be the same as those which one or more Force Majeure events have their sustained
impact upon the period of material and adverse affect upon such Party's
performance of its obligations under this Contract, or
Provided that notwithstanding anything else to the contrary referred to
above, no relief shall be granted to the affected Party to the extent that the
affected Party would not have been able to perform its obligations under this
Contract had the Force Majeure event not occurred.
The other Party shall not bear any liability for any loss or expense
suffered by the affected Party as a result of a Force Majeure event.
13.05 ADJUSTMENT TO THE ANNUAL MINIMUM ON-GRID QUANTITY BECAUSE OF FORCE
If Party A is a affected by a Force Majeure event and is entitled to
relief from the performance of its obligations hereunder in accordance with the
provisions of Section 13.01, 13.02, 13.03 and 13.04 then the Annual Minimum
On-Grid Quantity shall be adjusted as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Provided that the Annual Minimum On-Grid Quantity shall not under any
circumstances be reduced below that minimum volume necessary to ensure that
adequate revenue is derived by Party B to enable Liyuan-AES and Hefei Zhongli to
pay the US$ Loan Expenses due under the US$ Loan Contracts.
CHAPTER 14 INSURANCE
14.01 INSURANCE FROM THE PARTY B
Liyuan-AES and Hefei Zhongli shall jointly obtain and maintain the
insurance listed in Appendix 7 and shall include business interruption and lost
profit insurance caused by machinary breakdown. The insurance premium shall be
included in the On-grid Tariff.
14.02 INSURANCE FROM PARTY A
Party A shall in its own name obtain and maintain insurance in
connection with workers and staff and vehicles and as required by relevant laws
and regulations of the People's Republic of China.
14.03 ASSISTANCE WITH CLAIMS
Party A shall comply with all the demands of such insurance and shall
provide Party B all information and assistance within its capability to enable
Party B to make or process claims under its insurance. Party A shall promptly
notify Party B as soon as any accident or event bearing on insurance occurs.
CHAPTER 15 GOVERNING LAWS AND DISPUTE RESOLUTION
15.01 The execution, effectiveness, interpretation, performance and dispute
resolution of this Contract shall be in compliance with publicly available laws
promulgated in the People's Republic of China. Any specific matter in connection
with this Contract which is stipulated neither in the publicly available laws of
China nor in the international agreement or treaty to which China is a Party may
refer to generally accepted international practice. If there is any new
stipulation in Chinese laws during the implementation of this Contract and its
effectiveness is retrospective, the stipulation of the new law shall apply. If
any Change in Law affects the implementation of this Contract and the interests
of any of the investors, Party A and Party B shall promptly hold necessary
consultations and make necessary adjustment, and then submit the adjusted matter
to the relevant competent authority for examination and approval , so as to
ensure that the rights interests and financial returns of Liyuan-AES, Hefei
Zhongli, the Investors and Party A are not affected by any Change in Law.
15.02 DISPUTE RESOLUTION
Any dispute in relation to or arising from this Contract shall first of
all be settled by all means through friendly negotiations by all the Parties in
dispute. If the Parties in dispute fail to settle the dispute through friendly
negotiations within 14 days after the dispute in question, and if the matter in
dispute falls within the scope of technical or accounting expertise, or it is
agreed by the Parties in dispute to submit it to the experts for settlement or
according to the stipulation of this Contract, then any Party is entitled to
submit the above dispute to the experts for arbitration pursuant to Section
15.03; as to any other disputes any party is entitled to submit the dispute to
arbitrate settlement pursuant to Section 15.04.
15.03 EXPERT
1) Thenomination of the expert shall be agreed to by the Parties. If the
both Parties fail to designate jointly an expert acceptable to them,
both Parties shall each designate one expert and the two experts will
jointly designate a third expert to form an expert group.
2) Any Party to the dispute shall submit relevant dispute in the form of
written notice to experts for decision, and shall put forward a
written explanation in connection with the dispute.
3) Such expert has the full right to self-determination to decide on
relevant procedures within the permissible scope of law so as to
ensure impartial, prompt and economical settlement of the dispute, but
such expert must adopt the procedures which both Parties deem
appropriate for the settlement of the dispute.
4) Unless otherwise agreed to by both Parties, such expert shall decide
on the matter which is submitted to him (her) for arbitration.
5) Such decision must be delivered in written form to both Parties within
28 days after the submission of the written explanatory notes as
described in Section 15.03(2) hereof and shall include the result of
arbitration and the causes thereto.
6) Such expert makes a decision only in the capacity of an expert within
the scope of its professional function and not in the capacity of and
function as an arbitrator under applicable laws, therefore, any
articles and provisions of laws that are related to an arbitrator or
arbitration are not applicable to such expert and the decision he
(she) makes, or the procedures by which such expert makes a decision.
7) If any Party does not accept the experts decision, the Parties to the
dispute shall within 14 days and in accordance with the procedures
stipulated above, jointly call in another expert who shall be
empowered to settle the dispute. The submission of the dispute to the
second expert for resolution for the second time shall abide by the
stipulation of Section 15.03 hereof.
8) The decision made by the second expert for the second time is final,
definitely established and binding on all the Parties to the dispute
which have no right whatsoever to submit such decision to any court or
arbitral body.
9) The expert expenses shall be shared on an average basis by the both
Parties to the dispute, meantime, the Parties shall bear respectively
their expenses for preparing and submitting written explanatory notes
to experts.
15.04 CONSULTATION, MEDIATION, ARBITRATION
The Parties shall meet within seven (7) days after a Party has received
a written notice of a dispute from the other Party. Any dispute may be settled
through friendly consultation or conciliation among the Parties if they agree to
do so. Disputes may also be mediated by a third party appointed jointly by the
Parties . If the settlement of the dispute by consultation or mediation is not
successful within sixty (60) consecutive days of a Party's receipt of said
notice in respect of a dispute, the dispute may be submitted by any Party to
binding, non-appealable arbitration for final adjudication.
Arbitration Procedures
Any Party may, after serving notice to the other Party of its intention
for arbitration, submit the dispute to the China International Economic and
Trade Arbitration Commission for arbitration in accordance with its rules then
in force. The arbitrated award shall be final and binding on both Parties. The
costs of arbitration shall be borne by the losing Party unless otherwise
stipulated in the arbitration award.
The arbitration court shall be composed of three arbitrators with a
third arbitrator whose nationality shall be different from that of the other two
arbitrators. The arbitration shall be made in Chinese and English.
Unless the Parties otherwise agree, the arbitration shall occur in Beijing.
The Parties shall continue to perform all of their obligations and
responsibilities while the arbitration is in process.
CHAPTER 16 ASSIGNMENT
16.01 Neither Party shall assign or transfer their rights, benefits or
obligations under this Contract to any other Party except in the following
circumstances:
1) Assignment of Party A: Subject to the approval of Party B, Party A may
assign its rights and obligations under this Contract to its legal
successor. Such successor shall provide evidence to the satisfaction
of Party B of its ability, experience and economic strength to
continue to perform the obligations under this Contract. In addition,
such legal successor shall explicitly agree in written form that it is
completely bound by the obligations under this Contract.
2) Assignment of the Party B: Party B may assign its rights and
obligations under this Contract to its Corporation, subsidiaries,
Investors or associated company. Such assignment shall be for the
purpose of construction, ownership and operation of the project.
Meanwhile, the assignee shall fully agree in written form that it is
bound by the obligations of Party B under this Contract. Party B may
also assign its rights and obligations under this Contract or its
revenue from electricity operation to any financial institution or to
other Lenders as security. In case such financial institution or other
Lender exercises its rights under such assignment security, or such
financial institution or other Lender undertakes Party B's
obligations, the assignee shall perform Party B's obligations under
this Contract.
CHAPTER 17 NOTICE
17.01 (1) Any notice issued pursuant to this Contract shall be made in written
form, and shall be signed by the officially authorized staff or representative
or any of the following persons of the notice-issuing Party, and is delivered by
courier, or telex or fax to the following address or other address as may be
notified to the other Party by the following persons):
(a) Party A: Anhui Provincial Electric Power Corporation
Address: #415, Wuhu Road, Hefei City, Anhui Province
Fax No. : 86-551-3633393
Addressee: Cheng Guangjie
(b) Party B :
Anhui Liyuan-AES Power Company Ltd.
Address : #415, Wuhu Road, Hefei City
Fax No. : 86-551-3637642
Addressee : Thomas T.M. Wu
Hefei Zhongli Energy Company Ltd.
Address : #415, Wuhu Road, Hefei City
Fax No. : 86-551-3637642
Addressee : Thomas T.M. Wu
(2) Any of the above-mentioned notice shall be deemed to have been
delivered or received under the following circumstances;
(a) If delivered by hand, it is delivered to or placed in the
addressee's address;
(b) If delivered by mail, it is the fifth day (not Sunday or public
holiday) after mailing;
(c) If delivered by telex or fax, it is the next day; and any notice
sent by telex or fax shall be deemed to have been received after
confirming the correct response code of the text.
17.02 All the notices shall become effective at the actual time of receipt.
CHAPTER 18 OTHER PROVISIONS
18.01 CONDITIONS
The rights and obligations of both Parties under this Contract shall be based on
the following conditions as conditions precedent:
1) All the conditions precedent stipulated in Section 6.05 of each Joint
Venture Contract have been fulfilled;
2) The Fuel Oil Supply Contract and the Interconnection Contract have
been drafted in accordance with the stipulated form and have been
officially executed and come into full force.
The date of the fulfillment of the above-mentioned conditions precedent
shall be the date of effectiveness of this Contract, and Party B shall notify
Party A in written form within five working days after the date of
effectiveness.
18.02 PERFORMANCE GUARANTEE
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
18.03 WRITTEN AMENDMENT
The amendment of this Contract is subject to written agreement by the
both Parties.
18.04 HEADINGS
The headings contained in this Contract are inserted for the sake of
convenience, they do not constitute a part of this Contract, nor can the heading
be used in any form to interpret this Contract.
18.05 WAIVER
Failure of a Party to exercise and delay in exercising or carrying out
any right or remedial measure under this Contract does not constitute a waiver
of such right or remedial measure. Separate or partial exercising or carrying
out any right or remedial measure under this Contract does not exclude or
restrict further exercising or carrying out such right or remedial measure. The
right and remedial measure stipulated in this Contract are concurrently
applicable and does not exclude any right or remedial measure stipulated in
laws.
18.06 LANGUAGE
This Contract is written in English and Chinese. Both the English and
Chinese versions are equally authentic.
18.07 FINAL REPRESENTATION
This Contract (including all its appendices) represents the entire
understanding reached by the both Parties in respect of the subject matter of
this Contract and shall supersede any written or verbal understanding, proposal
or other document in relation to this Contract heretofore.
18.08 CONFIDENTIALITY
1) A Party shall keep confidential the Contract and confidential all
agreements and documents as well as all other information (whether
they are technical or commercial documents) which are related to the
construction, operation maintenance, management and financing of the
Power Plant, which are of a confidential nature. Except for the
purpose of performing the obligations under this Contract, all the
above-mentioned agreements, documents and information shall not be
made public or be disclosed or used in other form (except as
stipulated by law or relevant management authority, or being disclosed
to Party B's potential lenders, Party B's Investors, professional
consultants to all the Parties to this Contract or the professional
consultants to the above-mentioned lenders and Investors).
2) The stipulation in Section 18.08(1) is not applicable to the
following:
(a) Any information which is made public not because of violation of
this Contract;
(b) The receiving Party has already possessed the information before
the disclosure herein before, and such information was obtained
without undertaking any obligation of keeping it confidential;
(c) Any information which is obtained from a third party who may
freely disclose it without undertaking any obligation of keeping
it confidential.
18.09 SUCCESSOR AND ASSIGNEE
This Contract is binding on the Parties to this Contract and their
respective successors and permissible assignees.
18.10 PARTIAL INEFFECTIVENESS
If a part of any article of this Contract is adjudicated by a law of
competent jurisdiction to be unlawful, invalid or unenforceable, it shall not
affect the lawfulness, validity or enforceability of the other articles of this
Contract, nor shall it affect the lawfulness of any other provision of this
Contract.
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto have caused this Contract to be
executed by their duly authorized representatives on the date first set forth
above and have caused it to be effective.
Party A: Anhui Provincial Electric Power Corporation
Name : [Signature Illegible]
Title :
Nationality :
Party B: Anhui Liyuan-AES Power Company Ltd. Hefei Zhongli Energy Company Ltd.
Name : [Signature Illegible] Name : [Signature Illegible]
Title : Title :
Nationality : Nationality :
<PAGE>
APPENDIX 1 INVOICE FORMAT
Invoice for Electricity Fee Payment from Month: Date:
to Month: Date:
Date of Meter Recording:
Date of Table fill - in:
This month is the _ month of this Quarter,
The meter reading of the preceding month was-----------,
The meter reading of this month is----------,
The Actual On-Grid Tariff this month is -----------.
The Actual On-Grid Quantity of the first month of this Quarter is --------.
The Actual On-Grid Quantity of the second month of this Quarter is ---------.
The On-Grid Quantity of the third month of this Quarter is----------.
Payment due under the current month --------------.
Payment due from previous months---------------
Amount payable (Payment due under current month + Payment due from previous
months)-----------------
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Sum of money due =
1) For the first, second, fourth, fifth, seventh, eighty,
tenth, and eleventh month:
[***]
2) For the third and ninth month:
[***]
3) For the sixth month to be calculated in accordance with
the greater of the following two formulas:
[***]
4) for the twelfth month
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
APPENDIX 2 AFTER-TAX CAPITAL RETURN
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
APPENDIX 3 CALCULATION OF TERMINATION FEES
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
APPENDIX 4 ON-GRID TARIFF FORMULA
ANHUI LIYUAN-AES POWER COMPANY LTD.
HEFEI ZHONGLI ENERGY COMPANY LTD.
ON-GRID TARIFF FORMULA
<PAGE>
ARTICLE 1. AGREEMENT
The formula of calculating the On-grid Tariff of the Hefei 115MW Gas Turbine
Combined-cycle Power Plant is determined through the joint study and discussion
of all the Investors. The formation, structure and calculation method of this
formula have been unanimously agreed to and confirmed by all the Investors.
The Investors:
AES Anhui Power Company Limited
Anhui Liyuan Electric Power Development Company Ltd.
Hefei Municipal Construction & Investment Company
The Joint Ventures(hereinafter referred as the "Company"):
Anhui Liyuan-AES Power Company Ltd. (hereinafter refereed as "Liyuan-AES")
Hefei Zhongli Energy Company Ltd. (hereinafter refereed as "Hefei Zhongli")
<PAGE>
ARTICLE 2 THE APPROVED ON-GRID TARIFF
In the fourth quarter of each Year, Liyuan - AES and Hefei Zhongli shall
estimate and submit for approval the On-grid Tariff of the succeeding Year in
accordance with the following formula:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
where:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
The agreed annual kilowatt-hours (herein refereed as "Agreed Annual
Kilowatt-hours")refers to the Annual Minimum On-Grid Quantity [***] specified in
the Operation and Offtake Contract plus the auxiliary load of the Power Plant.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
The On-grid Tariff shall be estimated in Renminbi. The US dollar portion shall
be converted at the median price of the official foreign exchange rate on the
last business day prior to the estimation of the On-grid Tariff.
Full details and method of calculation are given in Article 3 and 4.
<PAGE>
ARTICLE 3 METHOD OF THE ON-GRID TARIFF CALCULATION
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
ARTICLE 4 ANNUAL ADJUSTMENT TO THE ON-GRID TARIFF
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
APPENDIX 5 METERING AND RECORDING OF ELECTRICAL ENERGY
1. [***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
2. Under normal operation, electricity from the Power Plant to the Power Grid
shall be transmitted through the --- KV step-up substation of the Power
Plant----------- and the -- KV transmission lion.
3. The accuracy of electrical Energy metering devices shall comply with
accuracy standards for Class 1 metering device, namely:
Active Power Meter: Grade 0.5
Reactive Power Meter: Grade 2.0
PT: Grade 0.2
CT: Grade 0.2
The metering devices shall be managed in accordance with "Regulations
for Management of Electric Energy Meters" promulgated by the Ministry of
Electric Power.
4. Under normal operation, the 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 KV start-up
transformer.
5. The electricity transmitted from the Power Plant to the Power Grid shall be
calculated in accordance with the following formula:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
This formula shall also be used for calculate the Actual On-Grid
Quantity.
6. The electricity transmitted from the Power Grid to the Power Plant shall be
the active power quantity measured by KWH meter Breaker #4, #5 and #6 at
the high voltage side of the start-up transformer.
7. Party B and Party A shall jointly designate the operator of the Power Plant
to be responsible for recording all KWH meters. At noon of the last day of
each month or at other time in the same day as agreed upon by the Parties,
Party B and Party A 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. Party B and Party A shall jointly appoint a qualified institution to
calibrate all meters and their auxiliary equipment every Year. At the time
when calibration takes place, Party B and Party A shall send
representatives to the site to witness the calibration. In case any Party
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.
9. If any Party finds, for some reason, that the above metering device is
inaccurate, that party shall immediately notify the other Party of the
situation. The inaccurate metering device shall be tested and recalibrated
promptly. The output of electric energy during the period of inaccuracy
shall be calculated at a temporary metering point determined by both
Parties.
<PAGE>
APPENDIX 6 PRE-OPERATION AND OPERATION SERVICES
PART I PRE-OPERATION SERVICES
Before the Commercial Operation Date of the units, Party A shall
provide the following pre-operation services:
1 PREPARATION FOR OPERATION
-------------------------
Party A shall
1.1 in consultation with the Party B establish the maintenance
and 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, formulate and submit to the Party B the operation
and safety codes applicable to the Power Plant (provisional copy).
Within three months after commencement of commercial operation of the
Power Plant, the above codes shall be improved and followed during
operation of the Power Plant. Copies of such codes shall be sent to
Party B for the record;
1.3 develop a complete set of training program for the Power Plant's O & M
employees to familiarize themselves with the Power Plant and to fulfill
their responsibility satisfactorily. The training program shall include
seminars, site visits, and training given by Construction contractor of
the Power Plant and equipment manufacturers. The training program shall
be based on technical data and manuals provided by the construction
contractor of the Power Plant, including information about start-up,
operation, basic maintenance, fire fighting and safety;
1.4 in consultation with the Party B, formulate a criteria for recruitment
of employees of the Power Plant, and recruit qualified and experienced
employees according to such criteria;
1.5 assist Party B in monitoring, operating and testing the Power Plant;
1.6 send to Party B and relevant operational (a) departments technical data
and final drawings provided by the construction contractor of the Power
Plant, while the original copy of which shall be debt in the safest
place in the Power Plant;
1.7 in consultation with Party B, formulate a list of all consumables,
spare parts, tools and materials needed by the Power Plant, and
purchase the above things needed by the Power Plant during the first
Year of commercial operation;
1.8 in consultation with Party B, formulate a detailed maintenance plan and
methods for the first Year of commercial operation of the Power Plant;
and in consideration of the rights and obligations of Party B,
formulate a skeleton plan for the scheduled overhaul for the first two-
Year commercial operation of the Power Plant.
2 START-UP, INTERCONNECTION, COMMISSIONING AND TEST
-------------------------------------------------
Party A shall
2.1 provide spare parts, consumables, fuel oil, water, coal and lubricants
necessary for timely, safe and stable start-up of the Units;
2.2 be responsible for implementing and ensuring the Units to meet the
conditions for interconnection as stipulated in Article 2 of the
Interconnection Contract;
2.3 provide sufficient numbers of qualified and experienced engineers to
perform start-up, commissioning, interconnection and 72-hour and 24-
hour performance tests of the Units;
2.4 Provide all necessary electrical energy for carrying out commissioning
of the Power Plant (including those 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 OPERATION SERVICES
1 RECRUITMENT AND TRAINING
------------------------
Party A Shall
1.1 ensure the required personnel 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 THE POWER PLANT
----------------------------
2.1 Party A shall maintain, operate, test and inspect the Power Plant:
1) to keep the Power Plant in good condition during the term of
the Joint Venture Contract.
2) to maintain high availability and efficiency of generation
facilities of the Power Plant:
3) to minimize the occurrence of accidents and damages, and to
minimize their duration.
2.2 provide to the Party B on a timely basis and at monthly 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 thermal power plants;
2.4 ensure 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 Party B
related to the operation of the Power Plant as stipulated in the
"Interconnection Contract" and "Dispatch Contract"; if any reduction of
power generation occurs due to Party A's responsibility, Party A (the
Operator of the Power Plant) shall indemnify the Party B for the losses
incurred by such reductions. As the operator of the Power Plant, Party
A shall indemnify the Party B for any penalties under Sections 3.7,
3.11 and 8.2 of the Interconnection Contract ;
2.6 be responsible for daily maintenance and overhaul as well as major and
minor repair, and for providing planned or provisional 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
----------
Party A shall
3.1 keep the Power Plant in good operation condition and maintain
appropriate level of spare parts reservation according to good utility
practice of similar thermal power plants;
3.2 manage the necessary 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 measures to minimize
injury to persons and damage to the Power Plant and promptly report to
the Party B the nature of such emergency or unusual event and its
consequences.
4. PROCUREMENT
-----------
Party A shall
4.1 check regularly the demands for spare parts, consumables and materials
of the Power Plant (taking into account the designed life of equipment,
actual overhaul records and any technical changes to the Power Plant),
and formulate corresponding plans and make purchasements 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 need of generating the Annual Minimum On-Grid Quantity.
5 STATEMENTS AND REPORTS
----------------------
Party A shall, before delivery of the first Unit for operation, provide
suggestions on forms of the following daily, monthly and annual reports, and
determine the forms in consultation with the Party B.
5.1 DAILY REPORTS
Party A shall provide the Party B with daily reports on the daily
operation of the Power Plant, including without limitation the following items:
1) net generation 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 personal injuries.
5.2 MONTHLY REPORTS
Party A shall, within the first 10 days of each month, provide to the
Party B a monthly report on the performance of the Units for the previous month.
The report shall include, but not be limited to the following:
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 and accidents of the Power
Plant during the previous month;
5) summary of unusual events and accidents during the previous
month, and measures already taken by Party A to mitigate the
effects.
5.3 ANNUAL REPORT
Party A shall, within 60 days after the end of each calendar Year,
submit to the JV Company an annual report which shall include but not be limited
to the following:
1) statistical summary of annual operation;
2) summary of repair and maintenance;
3) statistical summary of safety and accidents;
4) financial statement;
5) summary of any disputes relating to the Power Plant;
6) environmental monitoring;
7) other information reasonably required by Party B
5.4 OTHER REPORTS
Party A shall provide:
1) a safety report required by relevant authority in connection
with personal injuries or damages of the Power Plant
2) other reports reasonably required by Party B;
6. ACCESS TO THE POWER PLANT
-------------------------
6.1 Party A shall provide all necessary working and living facilities to
the resident representatives of the Party B in the Power plant.
6.2 Party A shall allow representatives or consultants from Party B to
inspect and monitor the operation of the Power Plant at any time.
6.3 Party A shall, upon request of Party B, allow Party B or its
representatives to have access at any time to any information, data and
records held by Party A.
7. OTHER RESPONSIBILITY
--------------------
Party A shall be responsible for responding to other demands on the
Power Plant raised by relevant authorities in charge of electric power.
<PAGE>
APPENDIX 7 NECESSARY INSURANCE
1 Third party Liability Insurance
2 Personal injury and Medical Insurance
3 Property All Risk Insurance ( Substitute Value)
4 Vehicle Insurance (Vehicles and the Third Party Liability Insurance)
5 Employer's Liability Insurance
6 Profit Loss Insurance-Limit: 6 month After tax - capital - Return and
US$ loan Expenses.
7 Water Transport and Land Transport Cargo Insurance
8 Boiler and Machinery (including construction and operation periods)
Insurance
All insurance shall be bought in accordance with the phase IV Wuhu Project
Operation insurance Contract in type term, limits, deductibles. expect as noted.
<PAGE>
APPENDIX 8 FUEL SPECIFICATION
ITEM VALUE
1) Alkyl 16 min 50
2) Distillate temperature
50%, oC, max 300
90%, oC, max 355
95%, oC, max 365
3) Viscose, 20 oC, cst, max 3-8
4) Residual carbon, (m/m) 0.4
10% Evaporation Remains
5) Ash, %(m/m) max 0.025
6) Sulfur contain, % max 0.2
7) Water contain, % max mark
8) Flash point, oC, min 60
9) Condensing point, oC, max 0
10) Copper corrosion, 50 oC, 3 hours qualified
11) Acid water dissolved no
12) Actual colloidal, ml/100mg, max 70
13) LHV, KJ/Kg 43,100
<PAGE>
APPENDIX 9 FUEL OIL SUPPLY CONTRACT
For this Appendix, please reference the Fuel Oil Supply Contract entered and
provided by Party A.
Exhibit 10.45
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
CHENGDU HUAXI ELECTRIC POWER (GROUP) COMPANY LTD.
AND CHINA NATIONAL AERO-ENGINE CORPORATION
AND
AES CHINA GENERATING COMPANY LIMITED
COOPERATIVE
JOINT VENTURE CONTRACT
FOR THE ESTABLISHMENT OF
SINO-FOREIGN CHENGDU AES KAIHUA GAS TURBINE POWER CO., LTD.
NOVEMBER 28, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. GENERAL PROVISIONS ............................1
ARTICLE 2. DEFINITIONS ...................................1
ARTICLE 3. PARTIES TO THIS CONTRACT ......................4
ARTICLE 4. ESTABLISHMENT OF COOPERATIVE JOINT
VENTURE COMPANY ...............................5
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF PRODUCTION
AND OPERATION .................................6
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND
REGISTERED CAPITAL ............................6
ARTICLE 7. ANNUAL CAPITAL RETURN ........................11
ARTICLE 8. RESPONSIBILITIES OF THE PARTIES ..............11
ARTICLE 9. BOARD OF DIRECTORS ...........................13
ARTICLE 10. MANAGEMENT ORGANIZATION ......................17
ARTICLE 11. SITE .........................................18
ARTICLE 12. SALE OF ELECTRICITY ..........................18
ARTICLE 13. CONSTRUCTION .................................18
ARTICLE 14. FUEL SUPPLY ..................................19
ARTICLE 15. LABOR MANAGEMENT .............................19
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING .............19
ARTICLE 17. TAXATION AND INSURANCE .......................22
ARTICLE 18. THE JOINT VENTURE TERM .......................23
ARTICLE 19. BREACH OF CONTRACT ...........................23
ARTICLE 20. TERMINATION AND LIQUIDATION ..................24
ARTICLE 21. FORCE MAJEURE ................................26
ARTICLE 22. SETTLEMENT OF DISPUTES .......................27
ARTICLE 23. APPLICABLE LAW ...............................28
ARTICLE 24. MISCELLANEOUS PROVISIONS .....................29
SIGNATURES ...............................................32
APPENDIX 1. RED LINE SITE MAP
APPENDIX 2. ANNUAL CAPITAL RETURNS
APPENDIX 3. ARTICLES OF ASSOCIATION
APPENDIX 4. LIST OF IMPORTED EQUIPMENT
APPENDIX 5. FORMATION OF EACH PARTY
<PAGE>
COOPERATIVE JOINT VENTURE CONTRACT
----------------------------------
ARTICLE 1. GENERAL PROVISIONS
THIS CONTRACT is made in Beijing, the People's Republic of China on this 28th
day of November, 1995 by and among -------------------- Chengdu Huaxi Electric
Power (Group) Shareholding Company Ltd. (hereinafter referred to as "Party A"),
China National Aero-engine Corporation (hereinafter referred to as "Party B")
and AES China Generating Company Limited (hereinafter referred to as "Party C").
Each of Party A, Party B and Party C shall hereinafter individually be referred
to as a "Party" and collectively as the "Parties".
After friendly consultations conducted in accordance with the principles of
equality and mutual benefit, the Parties have agreed to organize Sino Froeign
Chengdu AES KAIHUA GAS Turbine Power Company, Ltd. (the "Company") in accordance
with the Law of the People's Republic of China on Sino-Foreign Cooperative Joint
Venture Enterprises (the "Cooperative Joint Venture Law"),law of Corporation of
P.R. China other relevant laws and regulations, and the provisions of this
Contract. Therefore, the creation of this contract:
ARTICLE 2. DEFINITIONS
2.01 Definitions
For purposes of this Joint Venture Contact, the capitalized terms set
forth below shall have the following corresponding meanings:
1. "Affiliate": Any company, through ownership of voting stock or
otherwise, directly or indirectly, controlling or controlled
by a Party; the term "control" being used in the sense of
power to elect directors or to direct the management of a
company.
2. "Articles of Association": The Company's articles of
associations, signed by the Parties, approved by the Company's
Board of Directors and the Examination and Approval Authority,
as amended from time to time when necessary with the approval
from the Board of Directors, attached as Appendix 3.
3. "Bank Supervision Agreement": An agreement between the Company
and the Bank of China for supervising each Party's
distributable as defined in Article 16.01 (d) (v).
4. "Board" or "Board of Directors": The highest authority of the
Company established in accordance with procedures set forth in
Article 9 of this Contract.
5. "Business License": The business license issued to the Company
by the local branch of State Administration of Industry and
Commerce.
6. "Chairman": Chairman of the Company's Board of Directors
appointed in accordance with Article 9 of this Contract.
7. "China": The People's Republic of China.
8. "Company": Sino-Foreign ChengDu AES KAIHUA Gas Turbine Power
Company Ltd. , a cooperative joint venture limited liability
company organized by the Parties pursuant to this Contract.
9. "Commencement of Operation": Date on which the Company
declares the GT Plant in commercial operation defined as Date
of Commercial Operation in the Power Purchase Contract
executed between the Company and ChengDu Huaxi Electric Power
share holding company (Group).
10. "EPC Contract": the fixed price, fixed schedule and fixed
scope construction contract for the design, construction,
completion and commissioning of the GT Plant.
11. "Contract": The Cooperative Joint Venture Contract for the
establishment and operation of Sino-Foreign ChengDu AES KAIHUA
Gas Turbine Power Co., Ltd.
12. "DGM of Finance": Deputy General Manager of Finance of the
Company appointed in accordance with Article 10 of this
Contract. The DGM of Finance will also be the Chief Accountant
of the Company.
13. "DGM of Operations": Deputy General Manager of Operations of
the Company appointed in accordance with Article 10 of this
Contract. The DGM of Operations will also be the Chief
Engineer.
14. "Directors": Member of the Company's Board of Directors
appointed in accordance with Article 9 of this Contract.
15. "Despatch Agreement": The electric power despatch agreement
entered into between the Company and the ChengDu Power Bureau.
16. "Examination and Approval Authority": The Ministry of Foreign
Trade and Economic Cooperation of the People's Republic of
China or its authorized organization.
17. "Fuel Supply Contract": Supply contract for the long term
supply of Natural Gas to the GT Plant to be entered into by
and between the Company and the gas supplier.
18. "General Manager": General Manager of the Company appointed in
accordance with Article 10 of this Contract.
19. "GT Plant ": The entire facility of a 63 MW combined cycle gas
turbine generating plant, complete with power generation and
control equipment, and all common services, ancillary
equipment, facility and the site.
20. "Interconnection Agreement": The interconnection agreement
entered into by and between the Company and the ChengDu Power
Bureau.
21. "Joint Venture Term": The term of the cooperative joint
venture as defined in Article 18 of this Contract.
22. "Loan Contracts": Contracts to be entered into between the
Company and Party B and Party C or an entity arranged by the
aforesaid Parties and acceptable to all of the Parties, to
provide loans to the Company in accordance with Article 6.03
hereof.
23. "Owner's Engineer": qualified engineering firm retained by the
Company to supervise the execution of the work contracted for
under the EPC Contract.
24. "Power Bureau": The --------------- ChengDu Power Bureau, an
economic entity legally authorised to execute on-grid and
dispatch contracts, in charge of the transmitting,
distribution, of electricity in the ChengDu area.
25. "Power Purchase Contract": Contract to be entered into between
the Company and ChengDu Huaxi Electric Power Co. (Group) for
the long-term sale of electricity.
26. "RMB": The lawful currency of the People's Republic of China.
27. "Site": The land in CHENGDU CITY, SICHUAN PROVINCE, China upon
which the GT Plant and all required auxiliary facilities are
located.
28. "State Land Use Right Transfer Contracts": Contracts with the
same length as the Joint Venture Term to be entered into
between the Company and ---------- Land Administration Bureau
or his Authorized Organization for the land use right transfer
of the Site.
29. "Third Party": Any party or parties other than the parties of
the Contract .
30. "USD": The lawful currency of the United States of America.
31. "Vice Chairmen": Vice Chairmen of the Company's Board of
Directors appointed in accordance with Article 9 of this
Contract.
ARTICLE 3. PARTIES TO THIS CONTRACT
3.01 The Parties
The Parties to this Contract are :
(a) Party A, Huaxi Electric Power Company (Group) a corporation
registered in ChengDu City, Sichuan Province, China with its
legal address at: No.24 NanSanDuan Y.Huan road ChengDu City,
SiChuan Province, PRC
Legal Representative of Party A :
Name: Qu De Lin
Position: General Manager
Nationality: Chinese
(b) Party B , China National Aero-engine Corporation, a Chinese
economic legal entity registered in China with its legal
address at:
No. 16 Donghuangchenggen, Dongcheng District, Beijing, China .
Legal Representative of Party B:
Name: ZHOU Xiaoqing
Position: General Manager
Nationality: Chinese
(c) Party C, AES China Generating Company Limited, a company
registered in Bermuda with its legal address at 9/F., Allied
Capital Resources Building, 32-38 Ice House Street, Central,
Hong Kong.
Legal Representative of Party C :
Name: Paul T. Hanrahan
Position: President
Nationality: USA
For the legal person formation of party A & B, please see appendix 5.
ARTICLE 4. ESTABLISHMENT OF COOPERATIVE JOINT VENTURE COMPANY
4.01 Establishment of the Company
The Parties hereby agree to organize the Company in accordance with the
Sino-foreign Cooperative Joint Venture Law, Coparative Law, other
relevant laws and regulations of the Peoples Republic of China, and
with the provisions of this Contract.
4.02 Name and Address of the Company;
(a) The name of the Company shall be " O-D Ia (0)I x/ (degree)(R)
OA E(1) (pound)- ?- --(a) E1/4 --u O-D I P (1)-- E3/4 in
Chinese, and ChengDu AES KAIHUA GAS Turbine Power Co. Ltd." in
English.
(b) The legal address of the Company shall be Chengdu City,
Sichuan Province, China.
4.03 Limited Liability Company
The form of organization of the Company shall be a limited liability
company. Creditors of the Company shall have recourse solely to the
assets of the Company and not to the assets of the individual Parties.
Except as otherwise provided herein, once a Party has paid in full its
contribution to the registered capital of the Company and the loans in
accordance with the Contract, it shall not be required to provide any
further funds to or on behalf of the Company by way of capital
contribution, loan, advance, guarantee or otherwise. The Company shall
indemnify the Parties against any and all losses, damages, or
liabilities in respect of any third party claims arising out of the
operation of the Company. Subject to the aforementioned responsibility
limitations, all Parties to this Contract shall share risks and losses
incurred by the Company within the limit of its respective share in
registered capital contribution.
4.04 Laws and Decrees
The Company is an economic entity established pursuant to the laws of
the People's Republic of China. The Company has the legal status of an
independent legal person. The activities of the Company shall be
governed and protected by the laws, decrees and relevant rules and
regulations of the People's Republic of China.
ARTICLE 5. PURPOSE, SCOPE AND SCALE OF PRODUCTION AND OPERATION
5.01 Operation Purpose of the Company
The Company's operation objectives are to build, own and operate the GT
Plant located in ChengDu Sichuan Province, China, to sell electric
power to the grid and to achieve a satisfactory return on investment
for the Parties.
5.02 Scope of Company Business
The Company's scope of business will be to generate and sell
electricity to the grid.
5.03 Construction Scale
The company shall construct a 63 MW combined cycle gas turbine
generating plant.
ARTICLE 6. TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
6.01 Total Investment
The total amount of investment required by the Company is presently
estimated to be 29.8 million US Dollars.
6.02 Registered Capital
The registered capital of the Company shall be 11.92 million US
Dollars.
6.03 Loans
The balance between the total investment and the registered capital
will be contributed as loans provided or arranged by Party B and Party
C upto 17.88 million US Dollars. Any addition funding needed and
approved by the Board shall be provided by all Parties in accordance
with their share of Registered Capital. The terms and conditions of the
loans will be fully defined in the Loan Contracts.
6.04 Contributions of Registered Capital
(a) Party A's Contribution to Registered Capital: Party A agrees
to contribute an amount of RMB equivalent to 4.172 million US
Dollars to the registered capital of the Company. This amount
represents 35.00% of the registered capital of the Company.
The value of Party A's contribution in RMB shall be calculated
at the USD/RMB Exchange Rate as announced by the People's Bank
of China on the date the contribution is made.
(b) Party B's Contribution to Registered Capital: Party B agrees
to contribute 3.576 million US Dollars to the registered
capital of the Company. This amount represents 30.00% of the
registered capital of the Company.
(c) Party C's Contribution to Registered Capital: Party C agrees
to contribute 4.172 million US Dollars to the registered
capital of the Company. This amount represents 35% of the
registered capital of the Company.
6.05 Payment of Registered Capital and Conditions Precedent thereto
Each Party agrees to make their first contribution of registered
capital to the Company, which shall not be less than 15% of the total
amount of their respective portions of registered capital share, within
thirty (30) days after satisfaction of the conditions precedent listed
below. The Parties agree to hold a Board of Directors meeting as soon
as possible after receiving the Business License of the Company to
execute the contracts listed below and decide a contribution schedule
for the balance of the registered capital according to relevant
regulations and construction need.
Conditions precedent to payment of registered capital are:
(a) Issuance of approval by the Examination and Approval Authority
approving this Contract and the Articles of Association
without varying the terms hereof or imposing any additional
terms or conditions;
(b) Issuance of a duplicate of the Company's Business License by
the local branch of the State Administration for Industry and
Commerce of China;
(c) Approval from the local Foreign Exchange Administration
Bureau, approving that the Company will have the priority in
converting RMB into foreign exchange to satisfy its need for
foreign exchange.
(d) Execution and approval of the State Land Use Right Contract
for the Site, the Power Purchase Contract, the Fuel Supply
Contract, the CAREC Personnel Contract and the AES Personnel
Contract, the Loan Contracts, the EPC Contract, the Bank
Supervision Agreement, the Interconnection Agreement, the
Despatch Agreement and other aspects of the transactions
described in the Contract. Approval shall be from all Chinese
government authorities required to approve these Contracts
without varying the terms or imposing any additional terms or
conditions. If any of the above contracts do not require
approval in accordance with Chinese laws and regulations, no
Party may claim a lack of approval as a reason to not fund
their registered capital.
(e) Opening of a bank account with a relevant bank in the name of
the Company;
(f) Approval by the -------- Provincial Pricing Bureau of the
tariff formula in the Power Purchase Contract for the entire
term of the Contract which determines the price of electricity
sold by the Company to the Huaxi Electric Power Company
(Group) Ltd. in accordance with the Policy of fund raising for
power generating.
(g) Obtain a legal opinion from the legal counsel of each Party,
stating that the Joint Venture Company has obtained all
required approvals, and that all the contracts listed in
Article 6.05(d) are legal and enforceable.
(h) Approval by each parties board of directors to authorize each
party to enter into this Contract.
Each of the aforesaid conditions precedent must be met satisfactorily
to each of the Parties. In the event any of the above conditions have
not been met thirty (30) days after the Company has been issued a
duplicate of its Business License, and the Parties do not agree in
writing to waive such conditions precedent, or extend the time for
their fulfillment, any Party shall have the right to terminate this
Contract. Should any Party terminate the Contract, no Party shall have
the right to require that Party to make further contributions to the
registered capital nor shall any Party claim any damages from that
Party.
If within thirty (30) days after satisfaction of the conditions
precedent, any Party has not made its contribution to the registered
capital of the Company, or if a Party fails to make contributions in
accordance with the schedule approved by the Board, the Party or
Parties failing to make such contribution shall be charged with a
penalty equal to 0.05% of the delinquent part of payment on a daily
basis, from the date of the scheduled contribution until the date of
the actual contribution, and shall be in default under this Contract.
6.06 Drawdown of Loans
Loans provided or arranged by Party B and Party C shall be deposited to
the bank account of the Company in accordance with the financial
requirements of the construction progress. The specific dates shall be
set in the Loan Contracts. Failure to make payments on time will be
treated in accordance with the provisions of the Loan Contracts.
6.07 Investment Certificate
After each Party submits its contribution in full to the registered
capital, a certified public accountant registered in China will verify
the contribution and issue a contribution verification report.
Thereupon, the Company shall issue an investment certificate to each
Party having made its contribution, which will be signed by the
Chairman and the Vice Chairmen of the Board.
6.08 Assignment of Registered Capital
(a) APPROVAL OF THE BOARD OF DIRECTORS AND RIGHT OF FIRST REFUSAL:
Any Party to this Contract may assign, sell or otherwise
transfer all or part of its ownership interest in the Company
(such Party being hereinafter referred to as "the Transferring
Party") to any Third Party (hereinafter referred to as the
"Transferee"), provided such transfers get a unanimous
approval of the Board of Directors. Such transfers will be
allowed provided the other Parties have a right of first
refusal to purchase the interest in the Company being
transferred under the same terms and conditions agreed between
the Transferring Party and the Transferee. The Transferring
Party shall notify the other Parties in writing of the terms
and conditions of the transfer. If the other Parties do not
exercise their right of first refusal within thirty (30) days
after receipt of such notice, they will be deemed to have
consented to the transfer. The Transferring Party may then
transfer its ownership interest in the Company provided the
Transferee executes a document by which it becomes a Party to
this Contract and expressly assumes the Transferring Party's
obligations herein. The requirement for unanimous approval of
the Board do not apply if a Party is assigning its rights to
distributions from the Company as security to obtain loans for
itself or an Affiliate. Nor shall the Company take any
collatural responsibility for it. If a Party is assigning,
selling or otherwise transferring all or any part of its
rights, title and interest in the Company to an Affiliate, the
right of first refusal shall not apply.
(b) GOVERNMENT APPROVAL: Any sale or assignment of ownership
interest in the Company shall be submitted to the Examination
and Approval Authority of this Contract for examination and
approval. The sale or assignment shall become effective only
after the approval is received. Upon receipt of the approval
from such Examination and Approval Authority the Company shall
register the change in ownership with the local branch of the
State Administration for Industry and Commerce of China.
(c) SIMULTANEOUS TRANSFER OF REGISTERED CAPITAL AND LOANS
INTEREST: Any Party to this Contract assigning, selling or
otherwise transferring all or part of its registered capital
interest in the Company to any third party shall also
transfer, or cause to be transferred, a proportional share of
its loans to the Company.
6.09 Increase of Registered Capital
Any increase in the registered capital must be first agreed to by the
Parties and unanimously approved by the Board of Directors before being
submitted to the Examination and Approval Authority of this Contract
for approval. In principle, increases in registered capital will be met
by the Parties in proportion to their then existing interest in the
Company's registered capital. Upon approval by such Examination and
Approval Authority, the Company shall register the increase in
registered capital with the local branch of the State Administration
for Industry and Commerce of China.
6.10 Failure to Make Registered Capital Contributions
In the event any Party fails to make its registered capital
contribution (or any portion thereof) as provided herein or fails to
provide its share of any increase in the Company's registered capital
as described in Article 6.09 above, then in addition to any other
rights the Company may have against the defaulting Party as described
in Article 6.05, the Company shall offer such unsubscribed portion of
registered capital to the non-defaulting Parties. The non-defaulting
Parties will be offered the portion not paid by the defaulting Party in
proportion to each Party's registered capital contribution. Such change
in each Party's investment ratio and transfer in interest of registered
capital as described in this paragraph shall be subject to the approval
of the Examination and Approval Authority of this Contract.
6.11 Development Expenses
Development expenses shall only include the expenses incurred by the
Parties for the sole purpose of preliminary work of the GT Plant and
those agreed upon by the Parties. The Parties hereby agree that the
development expenses for Party A is [***] and Party B is [***]
respectively and for Party C is [***]. These amounts will be either
counted as part of the registered capital contribution provided by the
Parties or paid to the Parties by the Company, in accordance with the
decision of the Board.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 7. ANNUAL CAPITAL RETURN
7.01 The investment return rate for the Parties is calculated based on the
GT Plant operating at full load with an annual equivalent operation
hour of [***] hours. After all taxes and contribution to required funds
according to relevant regulations are paid, the USD financial internal
return rate (FIRR) on equity for the Parties shall be [***]. Based on
an annual equivalent full load operation hour of [***] hours, and an
FIRR of [***], the annual capital returns of the Parties calculated in
USD (including profit distribution) are calculated and listed in
Appendix 2.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
7.02 In the event that the annual equivalent full load operating hours
exceeds [***] hours, or the generation costs are reduced, the Parties
may get annual returns in the current year greater than those in
Appendix 2 in the current year.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 8. RESPONSIBILITIES OF THE PARTIES
8.01 Responsibilities of Party A
In addition to its other obligations under this Contract, Party A shall
have the following responsibilities :
(a) Be responsible for obtaining all necessary approvals, permits
and licenses for the establishment of the Company and have the
obligation to use their best efforts in obtaining all the
approvals necessary for the ongoing operation of the Company;
(b) Be responsible for carrying out all registration procedures
for land use right for the Site, and all other land use rights
needed by the Company, in a timely manner so as not to delay
development and construction of the GT Plant.
(c) Obtain, on behalf of the Company, all infrastructure needed,
including external water supply, power supply, Gas supply,
transportation, communications, and other services, on the
most favorable terms and conditions available;
(d) Assist the Company in applying for the most preferential tax
treatment and other investment incentives available under
applicable laws and regulations;
(e) Assist the Company in obtaining necessary approvals to import
raw materials and equipment. Assist the Company in arranging
for transportation of imported materials and equipment between
Chinese ports and the Site;
(f) Assist the Company with the procedures for procuring import
licenses and facilitating customs formalities for the import
of machinery and equipment, fuel, materials, supplies and
office equipment on preferential terms;
(g) Assist the Company's expatriates to obtain all necessary entry
visas and work permits;
(h) Assist the Company in opening Renminbi and foreign currency
bank accounts;
(i) Assist the Company in recruiting qualified Chinese personnel;
(j) Obtain necessary approvals for the Company to utilize various
methods permitted under Chinese law to balance its foreign
exchange as needed and to meet the Company's foreign exchange
needs, including Party C's ability to convert dividends and
return of capital into foreign exchange for remittance
overseas;
(k) Handle other reasonable matters entrusted by the Company from
time to time.
8.02 Responsibilities of Party B:
In addition to its other obligations under this Contract, Party B shall
have the following responsibilities :
(a) Be responsible for drafting feasibility study report of the
project, and submitting engineering and technical documents
necessary for the examination and approval of the project;
(b) Be responsible for importing machinery equipment as an agent
entrusted by the Company;
(c) Assist the Company's expatriates to obtain all necessary entry
visas and work permits;
(d) Assist the Company in appointing qualified O&M personnel of
the GT Power Plant and in arranging the training of
personnel;According to the needs of the Company, assist the
Company in the recruitment and employment of qualified
operations and maintenance personnel for the GT Plant; assist
the Company to arrange training;
(e) Be responsible for preparing the Company's engineering
construction proposals;
(f) Handle other reasonable matters entrusted by the Company from
time to time.
8.03 Responsibilities of Party C:
In addition to its other obligations under this Contract, Party C shall
have the following responsibilities :
(a) Assist the Company in purchasing equipment, supplies and
materials inside or outside China to ensure that they are of
the proper quantity and quality;
(b) Introduce modern management techniques and financial
management expertise to the Company;
(c) Assist Company staff and representatives in arranging foreign
visas/work permits for overseas training, as required for the
operation and management of the GT Plant;
(d) Assist the Company in recruiting qualified expatriate
personnel and international consultants, as required by the
Company;
(e) Handle other reasonable matters entrusted by the Company from
time to time.
(f) Assist the Company is obtaining working capital loan for the
operation of the GT Plant.
ARTICLE 9. BOARD OF DIRECTORS
9.01 Formation of the Board
(a) The Board of Directors shall be established on the date of
registration of the Company.
(b) The Board shall consist of nine(9) Directors including the
Chairman of the Board, three(3) of whom shall be appointed by
Party A, three(3) by Party B and three(3) by Party C. At the
time this Contract is executed and at any time a Director is
appointed or removed, each Party shall provide written notice
to the other Parties of the names of its appointed or removed
Directors.
(c) In general, each Director shall be appointed for a term of
four (4) years and may serve consecutive terms if reappointed
by the Party originally appointing him. Each Director shall
serve and may be removed by the Party who made that Director's
appointment. In the event a Director vacates the Board through
retirement, resignation, illness, disability or death, or in
the event a Director is removed by the Party who originally
appointed that Director, the Party who originally appointed
that Director may appoint a successor to serve out the
departing Director's remaining term.
(d) Directors will serve without remuneration, but all reasonable
costs incurred by the Directors in performance of their duties
as members of the Board will be borne by the Company.
(e) The Chairman of the Board shall be appointed by Party A. The
Chairman of the Board shall be the legal representative of the
Company. The Chairman will exercise his authority within the
limits prescribed by the Board and in compliance with the
Company Law of P.R. China and may not under any circumstance
contractually bind the Company or otherwise take any action on
behalf of the Company without prior approval of the Board.
Whenever the Chairman of the Board is unable to perform his
responsibilities for any reason, one Vice Chairman may be
designated by the Chairman or the Board to temporarily assume
the Chairman's duties until the Chairman is able to resume his
position as Chairman.
(f) There shall be two Vice Chairmen, one appointed by Party B and
one appointed by Party C.
(g) The Company hereby indemnifies each Director against any
claims arising from that Director's action in his capacity as
a Director of the Company, except for such acts in violation
of criminal laws.
9.02 Powers of the Board
(a) The Board of Directors shall be the highest authority of the
Company;
(b) Resolutions involving the following matters may only be
adopted at a duly constituted and convened meeting of the
Board whereupon such resolution receives the unanimous
affirmative vote of each and every Director of the Board
voting in person or by proxy at such meeting :
(i) Amendment of the Articles of Association;
(ii) Merger, integration of the Company with another
organization, or establishment of subsidiaries of the
Company;
(iii) Dissolution of the Company;
(iv) Increase or transfer of the registered capital of the
Company;
(v) Sale of any assets of the Company.
(vi) Execution, supplement, modification, termination,
substitution or assignment by the Company of any
credit or financing agreements, any power purchase
contract, long term fuel supply and transportation
contract, operation and management contract, and
major construction contract or other material
contract;
(vii) Additional capital requirement or financing amounts,
above total investment amounts as set forth in
Article 6.01;
(viii) Appointment of General Manager and Deputy General
Managers of the Company; and
(ix) Annual operation goals, financial budget, final
financial accounts and profit distribution plans of
the Company. If no unanimous agreement is achieved on
the profit distribution, the balance of the profit
shall be distributed after the allocation of 10% of
the after-tax profit to the required funds.
(c) All other issues that require a resolution by the Board may be
raised at a duly convened meeting of the Board. Such
resolution must be adopted by the affirmative vote of a
majority of the Directors present at such meeting in person or
by proxy. In the event that the Board has a tie vote , the
Chairman shall have the deciding vote.
(d) Any matter to be decided by the Board may be decided without a
meeting if all Directors consent in writing to such matter.
Such written consent will be filed with the minutes of the
Board proceedings and will have the same force and effect as a
unanimous vote taken by the Directors physically present.
9.03 Meetings
(a) ANNUAL MEETINGS: The first meeting of the Board of Directors
will be held within fifteen(15) business days from the date
the Company is issued a duplicate of its Business License
pursuant to this Contract. Thereafter, the Board shall meet at
least once every year. Meetings shall be held at the
registered address of the Company or such other address in
China or abroad as is designated by the Board. The Chairman of
the Board will set the meeting's agenda after consultation
with the Vice Chairmen of the Board, The Chairman is
responsible for convening and presiding over all meetings.
(b) PROXY: Meetings may be attended by Directors in person or by
proxy. If a Director is unable to participate in a Board
meeting, he may issue a proxy and entrust a representative to
participate in the meeting on his behalf. The representative
so entrusted shall have the rights and powers as stated in the
proxy.
(c) INTERIM MEETINGS: Interim meetings of the Board may be held
provided five(5) or more of the Directors submit written
requests for such meetings to the Chairman specifying the
matters to be discussed. Within thirty (30) days upon receipt
of such written notice, the Chairman will convene an interim
meeting of the Board. If the Chairman is unable to participate
in an interim meeting, in his absence the Vice Chairman taking
his place shall decide on the time and location of such
interim meetings.
(d) QUORUM: Six (6) Directors, including at least one Director
from each Party , present in person or by proxy shall
constitute a quorum necessary for the conduct of business at
any meeting of the Board . If at any properly convened
meeting, no quorum is constituted because less than six (6)
Directors are present in person or by proxy or there is not at
least one Director from each Party present in person or by
proxy then the meeting shall be cancelled, then the Chairman
shall call another meeting with seven (7) days' notice. Any
Director absent from a meeting without giving a reason
therefor and without having appointed a proxy shall be
considered to have abstained from voting. Resolutions, except
those concerning the issues prescribed in Article 9.02(b),
will be valid if passed by a majority of the Directors
present.
(e) NOTICE OF MEETING: The notice of a Board meeting shall be sent
to all directors fifteen (15) days in advance of each meeting.
The notice shall state the time,venue and main agenda of the
meeting. including relevant documents and information.
(f) MINUTES: The Board will cause complete and accurate minutes
(in both English and Chinese) to be kept of all meetings
(including a copy of the notice of the meeting) and of
business transacted at such meetings. Minutes of all meetings
of the Board shall be distributed to all the Directors as soon
as practicable after each meeting but not later than ten (10)
days from the date of such meeting. Any director who wishes to
propose any amendment or addition thereto shall submit the
same in writing to the Chairman and the Vice-Chairmen within
one (1) week after receipt of the proposed minutes. The
minutes shall be finalized by the Chairman and Vice-Chairmen
not later than thirty (30) days after the relevant meeting and
signed by all the directors within one (1) week after receipt
of the final minutes.
ARTICLE 10. MANAGEMENT ORGANIZATION
10.01 Management Organization
The Company shall adopt a management system under which the management
organization shall be responsible to and under the leadership of the
Board of Directors. The Company management shall include a General
Manager, a DGM of Operations, a DGM of Finance, and a number of
Department Managers. Party C shall nominate the General Manager, Party
B shall nominate DGM of Operations, who is concurrently the Chief
Engineer and Party A shall nominate the first DGM of Finance, who is
concurretly the Chief Account, and the Board of Directors needs to
unanimously approve the appointment of the General Manager and the two
Deputy General managers. The term of appointment for the General
Manager and the two Deputy General managers shall be four (4) years.
The General Manager and Deputy General managers may be removed only by
a majority resolution of the Board. If the General Manager or the
Deputy General Manager is removed by the Board or finishes his tenure,
a successor shall be nominated by the Parties for approval by the Board
of Directors.
10.02 Responsibilities and Powers of the General Manager
The General Manager shall at all times be responsible to the Board of
Directors and will carry out all matters entrusted by the Board. The
DGM of Operations and the DGM of Finance shall assist the General
Manager. The General Manager shall be in charge of the day-to-day
operation and management of the Company. The DGM of Operations shall be
in charge of the operation and maintenance of the GT Plant. The DGM of
Finance shall be responsible for the financial affairs of the Company.
The General Manager , the DGM of Operations and the DGM of Finance
shall meet regularly to discuss and solve important issues arising from
the operation and management of the Company.
10.03 Operation and Management
The Company will be responsible for the operation and management of the
GT Plant . The Company will endeavor to introduce modern management
techniques to ensure high availability and efficiency of the GT Plant.
ARTICLE 11. SITE
11.01 Site
The area of the Site for the GT Plant is approximately MU. Details
regarding the Site are set forth in the Red Line Site Map attached
hereto as Appendix 1.
11.02 Land Use Rights
The Company shall enter into a State Land Use Rights Transfer Contract
with the Chengdu Land Bureau and its authorized department in order to
obtain for at least the Term of this Contract land use right of the
Site for a term no less than the term of the Joint Venture Contract.
ARTICLE 12. SALE OF ELECTRICITY
12.01 Power Sales
The sale of electricity produced by the GT Plant will be made pursuant
to the Power Purchase Contract entered into by and between the Company
and Huaxi Electric Power (Group) Shareholding Company Ltd. The PPC,
shall state clearly that the Huaxi Electric Power (Group) Shareholding
Company Ltd. shall be responsible for arranging the execution of
on-grid agreement and dispatch agreement entered into by and between
the Company & the Power Bureau.
12.02 Tariff Determination
The tariff of the power generated by the GT Plant shall be determined
by the tariff formula prescribed in the Power Purchase Contract entered
into by and between the Company and the Huaxi Electric Power (Group)
Shareholding Company Ltd., and approved by relevant price
administration departments.
ARTICLE 13. CONSTRUCTION
13.01 Construction Management
The Parties agree that Party B and A shall be responsible for the
construction of the GT Plant. The Company shall enter into an EPC
Contract with Party B. The EPC Contract shall be comparable with
internationally accepted parties in similar projects in the areas of
construction schedules, quality and cost. The detailed clauses shall be
specified in the EPC Contract. The Company shall employ an Owner's
Independent Engineer to supervise and manage the construction of the GT
Plant.
ARTICLE 14. FUEL SUPPLY
14.01 Fuel Supply
The Company will sign a long-term natural gas supply contract with
Chengdu Huachuan Oil and Natural Gas Exploration and Development
Corporation.
ARTICLE 15. LABOR MANAGEMENT
15.01 Governing Principles
The Company shall be responsible for its own labor management,
recruitment, employment , dismissal, resignation, wages and welfare of
working personnel in accordance with the "Labor Management Regulations
of the PRC for Foreign Investment Enterprises" (the "Labor
Regulations") and other relevant regulations. The organization chart,
qualifications and number of employees shall be determined by the Board
of Directors in accordance with the operating needs of the Company.
15.02 Operation and Management Personnel
The Company shall enter into a Contract with Party B, specifying the
terms and conditions under which the Company shall engage qualified and
professional operation and management personnel from an entity
designated by Party B & A. When necessary, the Company shall also enter
into an agreement with Party C specifying the terms and conditions
under which the Company shall engage the required personnel from Party
C (the "AES Personnel Contract").
ARTICLE 16. FINANCIAL AFFAIRS AND ACCOUNTING
16.01 Accounting System
(a) The DGM of Finance, under the leadership of the General
Manager, shall be responsible for the financial management of
the Company.
(b) The DGM of Finance shall prepare the Company's accounting
system and procedures in accordance with the "Accounting
System of the People's Republic of China for Foreign
Investment Enterprises" and the "Financial Management System
of the People's Republic of China for Foreign Investment
Enterprises". The Company shall also conduct its accounting in
accordance with such internationally recognized accounting
principles as any foreign lender to the Company may require.
The Company's accounting system and procedures shall be
submitted to the Board for approval. Once approved by the
Board, the accounting system and procedures shall be filed for
the record with the government department in charge of the
Company and with the relevant local department of finance and
tax authorities.
(c) The Company shall adopt RMB as its bookkeeping base currency.
(d) The distribution of available cash shall be carried out in
accordance with the following priority of payments:
(i) Operation and maintenance costs (including VAT) of
the GT Plant and management costs of the Company;
(ii) Principal and interest payments due pursuant to the
Loan Contracts;
(iii) Income and any other taxes;
(iv) Contributions to statutory funds; and
(v) Profits for distribution.
(e) All accounting records, vouchers and books of the Company
shall be made and kept in Chinese. At the request of Party C,
some part of the records and books will be provided to Party C
in English. All Company accounting statements shall be made
and kept in English and Chinese.
16.02 Auditing
(a) The Company will engage an independent accounting firm
registered in China as its auditor to examine and verify the
annual financial report. The Parties agree that such
accounting firm shall be of international standard and shall
be appointed by the Board. The Company shall submit to the
Parties an annual statement of final accounts (including the
audited profit and loss statement and the balance sheet for
the fiscal year) within two (2) months after the end of the
fiscal year. Such documentation will be submitted together
with an audit report prepared by the accounting firm
registered in China.
(b) Each Party may, at its own expense, appoint an accountant who
is either an accountant registered abroad or registered in
China. On behalf of the Party, the independent accountant may
audit the Company's accounts. Such accountants will be given
reasonable access to the Company's financial records and will
keep confidential all documents under their auditing.
(c) The Company shall present to the Parties balance sheets,
profit and loss statements and other supplementary information
requested by the Board on a monthly basis. Such information
will be provided to the Parties in both English and Chinese.
16.03 Bank Accounts and Foreign Exchange Control
The Company will open a foreign exchange account and a Renminbi account
at banks within or outside China; such banks will be approved by the
State Administration of Exchange Control of China. The Company's
foreign exchange transactions shall be handled in accordance with the
regulations of China relating to foreign exchange control.
16.04 Foreign Exchange Balance
(a) In the event the Company borrows foreign currency from lenders
not located in China, the Company shall, in accordance with
applicable foreign exchange regulations of the People's
Republic of China, open USD cash accounts at a bank approved
by the relevant authorities for the repayment of principal of
and the payment of interest on, foreign currency loans.
(b) Funds in the Company's foreign exchange account shall be used
as determined by the Board of Directors to satisfy foreign
exchange debt, expenses, remittances of profit and other
remittances in accordance with relevant foreign exchange
regulations of the People's Republic of China.
(c) All remittances to Party C due in accordance with the
provisions of this Contract shall be made to a foreign bank
account designated by Party C in United States Dollars or in
any other freely convertible foreign currencies in accordance
with the foreign exchange regulations of China and the
commitment of local foreign exchange administration
departments. The Company shall pay for the fee occurred in the
conversion. The Company may also remit all or a portion of
remittances due to Party C in RMB if Party C elects to do so.
(d) From the time the profit distribution plan is approved by the
Board of Directors until the actual time of exchange, the risk
of foreign exchange rate fluctuating shall be borne by the
Company.
16.05 Fiscal Year
The Company shall adopt the calendar year as its fiscal year, which
shall begin on January 1 and end on December 31 of the same year. The
first fiscal year of the Company shall commence on the date that the
Company is established and granted a Business License, and shall end on
the immediately succeeding December 31.
16.06 Distribution of Profits
(a) After the payment of any applicable related taxes and fees by
the Company, the Board will determine the annual allocations
to the required funds as required by Chinese accounting laws
and regulations. The sum of the annual allocations to the
required funds shall be 10% of the after-tax profit of the
year under consideration (unless otherwise required by law).
Any increase or decrease in the percentage to the required
funds must be unanimously approved by the Board of Directors.
(b) All distributable profits shall be distributed to the Parties
in proportion to their respective share of the Registered
Capital.
(c) If the Company carries losses from the prior year, the profit
of the current year shall be used first to cover losses. No
profit shall be distributed unless the deficit from previous
years is made up. The profit retained by the Company and
carried over from the prior year may be distributed together
with the distributable profit of the current year.
ARTICLE 17. TAXATION AND INSURANCE
17.01 Taxes
(a) The Company and its Chinese and expatriate employees shall pay
tax under the relevant tax laws of China.
(b) Following approval of this Contract by the Examination and
Approval Authority, the Company will submit an application for
confirmation of the Company as a technically advanced
enterprise in accordance with the "Implementing Measures of
the Ministry of Foreign and Economic Relations and Trade on
the Conformation and Examination of Export Oriented and
Technologically Advanced Enterprises and Foreign Investment"
in order to obtain the most favorable tax rats.
17.02 Insurance
The insurance for the Company for various kinds of risks shall be
purchased from insurance companies registered within PRC. The Company
shall undertake to procure the following types of insurance:
(a) Property All Risks Insurance , Contractor's All Risk and
Erection All Risks Insurance (including domestic
transportation insurance for equipment) before and after the
construction completion of the GT Plant and thereafter in
respect of any upgrading or maintenance works to the GT Plant;
(b) Property All Risks Insurance, Machinery Breakdown Insurance,
Business Interruption Insurance, Machinery Breakdown Business
Interruption Insurance, Bodily Injury Insurance, Personal
Accident Insurance and Additional Cover for Medical Expenses
for the period after the construction completion of the GT
Plant; and
(c) other insurance coverage which the Board of Directors decides
is necessary.
ARTICLE 18. THE JOINT VENTURE TERM
18.01 Joint Venture Term
The term of the Joint Venture established under this Contract shall
commence on the date the Company is granted a Business License and
shall terminate sixteen (16) years thereafter ( including one year of
construction) .
18.02 Extensions to the Joint Venture Term
The term of the Joint Venture Contract may be extended upon unanimous
approval of the Parties. An application for such extension should be
filed with the original Examination and Approval Authority at least six
months prior to the expiration of the term of this Contract.
ARTICLE 19. BREACH OF CONTRACT
19.01 Breach of Contract
In the event the Company is unable to continue its operation or achieve
the business purposes stipulated in this Contract due to failure of a
Party to fulfill its obligations under this Contract and its
Appendices, the non-defaulting Parties will have the right to terminate
this Contract in accordance with Article 20 herein and the liabilities
arising from breach of contract shall be borne by the Party in breach
as provided for in this Contract and its Appendices. The defaulting
Party shall make the consequent payment arisen from such a breach to
the non-defaulting parties.
ARTICLE 20. TERMINATION AND LIQUIDATION
20.01 Termination
(a) TERMINATION OF THIS CONTRACT: No Party shall have the right,
in its sole discretion and without cause, to terminate this
Contract. This Contract may only be terminated under the
following circumstances:
(i) The Contract expires at the end of the Term as
described in Article 18 hereof;
(ii) The Parties unanimously agree in writing to terminate
this Contract at any time;
(iii) Subject to the notification requirements of Section
20.02 herein, a Party may submit written notice to
the other Parties of its desire to terminate this
Contract upon the occurrence of an event of default
as further described in Section (b) below.
(b) CAUSES FOR TERMINATION: Any of the following occurrences shall
be considered causes for termination:
(i) A Party materially breaches this Contract or violates
the Articles of Association, and such breach or
violation is not cured within thirty (30) days of
written notice to the defaulting Party by a
non-defaulting Party;
(ii) The Company, or any, or all of the Parties become
bankrupt, or is the subject of liquidation or
dissolution proceedings or ceases to carry on
business or becomes unable to pay its debts as they
come due and as a result there are significant
adverse consequences to the Company;
(iii) Any superior authority having authority over a Party
requires any provision of this Contract to be revised
in such a way as to cause significant adverse
consequences to the Company or to the other Parties;
(iv) The conditions or consequences of Force Majeure as
hereinafter defined in Article 21 significantly
interfere with the normal functioning of the company
for a period in excess of eighteen (18) months and
the Parties are unable to find an equitable solution
pursuant to Article 22 hereof ;
(v) Any Party fails to make its contribution to the
registered capital in accordance with Article 6.05;
(vi) Any Party fails to make its contribution to the loans
in accordance with Article 6.06;
(vii) The Power Purchase Contract is terminated.
20.02 Notification Procedure
Mere submission by any Party of a notice indicating a desire to
terminate this Contract shall not by itself constitute a termination of
this Contract. In the event that any Party gives notice pursuant to
Article 20.01 hereof of a desire to terminate this Contract, the
Parties shall within a two (2) month period after such notice is given
conduct negotiations and endeavor to resolve the situation which
resulted in the giving of such notice. In the event that the situation
which resulted in the giving of such notice is not cured and that
matters are not resolved to the satisfaction of the Parties within two
(2) months of such notice, the notifying Party may follow the relevant
procedures and laws and apply to the Examination and Approval
Authorities for the termination of the Contract. In the event a breach
is committed by a Party to this Contract which results in the
termination of this Contract, the Party in breach will bear full
liability and costs associated with such breach of Contract.
20.03 Normal Termination of the Contract
The Contract shall be terminated upon expiration of the term of this
Contract as per specified in Article 18.01, unless it is extended
pursuant to Article 18.02 hereof.
20.04 Liquidation
(a) DISSOLUTION OF THE COMPANY: The Company shall be dissolved
upon expiration of the term of this Contract pursuant to
Article 18 hereof, or upon earlier termination of this
Contract pursuant to Article 20.01 hereof. The Company shall
carry out the procedures for liquidation of the Company in
accordance with the law of the People's Republic of China.
(b) LIQUIDATION COMMITTEE: The Board of Directors shall form a
Liquidation Committee, comprised of three (3) members
appointed by Party A, three (3) members appointed by Party B
and three (3) members appointed by Party C (the "Liquidation
Committee"). The Liquidation Committee shall conduct a
thorough examination of the assets and liabilities of the
Company and develop a liquidation plan in compliance with this
Contract and with relevant laws and regulations of the
People's Republic of China for the liquidation of the Company.
No member of the Liquidation Committee shall have the power to
take any action binding on the Liquidation Committee or on the
Board of Directors or the Company without the express
authorization and the unanimous consent of the entire
Liquidation Committee. All actions of the Liquidation
Committee shall require the unanimous approval of the entire
Liquidation Committee. The Liquidation Committee will value
and liquidate the Company's assets based on the actual
circumstances of the Company valued as a going concern, so as
to cause the Parties to receive the then market value for the
assets. The final liquidation plan shall be unanimously
approved by the entire Liquidation Committee.
(c) LIQUIDATION PLAN:
Upon expiration of the Joint Venture Term as described in
Article 18 hereof, or upon earlier termination of this
Contract pursuant to Article 20.01 hereof, the liquidation
plan shall provide first for payment of the Company's debts
and expenses. Following such payments, the Company's assets
shall be distributed to Party A, Party B and Party C
proportionally in accordance with each Party's registered
capital share of the Company.
ARTICLE 21. FORCE MAJEURE
21.01 Force Majeure
(a) "Force Majeure" shall mean all events which are beyond the
control of the Parties to this Contract, and which are
reasonably unforeseen, unavoidable or insurmountable, and
which arise after the signing of this Contract and which
prevent total or partial performance by any Party of its
obligations under this Contract. Such events shall include
earthquakes, typhoons, flood, fire, strikes, political
disturbances, war, or any other instances which can not be
foreseen, prevented or controlled.
(b) If occurrence of an event of Force Majeure prevents a party
from fulfilling its obligations under this Contract, the Party
will be suspended from performing such obligations provided;
(i) Suspension of performance is of no greater scope and
no longer duration than is reasonably required to
correct consequences caused by the event of Force
Majeure; and
(ii) Suspension of performance will not apply to any
obligation to make payments under this Contract.
(c) In the event any Party is unable to fulfill its obligation
under this Contract as a result of Force Majeure, the Party
claiming Force Majeure shall promptly inform the other Parties
in writing within 15 days of such occurrence. Such
notification will state the nature of the event, the
anticipated duration and any action taken by the affected
party to mitigate the effect. In the event of Force Majeure,
the Parties shall immediately consult with each other in order
to find an equitable solution and shall use all reasonable
endeavors to minimize the consequences of such Force Majeure.
ARTICLE 22. SETTLEMENT OF DISPUTES
22.01 Conciliation and Mediation
Any dispute in connection with this Contract will be settled through
friendly consultation or conciliation among the Parties. Consultations
will occur immediately upon the request of one Party to the other
Parties regarding disputes. Disputes may also be mediated by a third
party appointed by the Parties to this Contract. If mediation is not
successful within 30 days, disputes may also be submitted to binding,
non -appealable arbitration for settlement.
22.02 Arbitration
The following rules and procedures will apply to an arbitration of
disputes between the Parties under this Contract.
(a) Arbitration under this Contract will be conducted by an
arbitral tribunal in accordance with UNCITRAL arbitration
rules contained in Resolution 31/98 adopted by the United
Nations General Assembly on December 15, 1976 and entitled
"Arbitration Rules of the United Nations Commission on
International Trade Law" or its amendments as in force at the
time such arbitration is commenced. Should there be a conflict
between the rules and provisions of this Contract and the
arbitration rules, the provisions of this Contract will
govern.
(b) The arbitral tribunal will have three (3) members. Each Party
will appoint one arbitrator within 30 days after giving or
receiving demand for arbitration. The third arbitrator shall
be appointed by the other two arbitrators within 10 days of
the appoint of the second arbitrator. If any of the
arbitrators are not appointed within the time limits set forth
in this section, arbitrators will be appointed by the
Secretary General of the International Center for Settlement
Disputes.
(c) All arbitrators must be fluent in Mandarin and English. The
arbitration will be conducted in Mandarin and English. Any
subsequent arbitration award will also be written in Mandarin
and English.
(d) The site and the organization for arbitration can be Singapore
International Arbitration Centre or other international
locations and arbitration organizations acceptable to the
Parties.
(e) The final arbitration award will specify with reasonable
detail the facts of the dispute and the reasons justifying the
tribunal's decision. The Parties agree to accept the
arbitration award as final and binding. The Parties renounce
their right to appeal the arbitration award.
(f) The Parties agree to bear all costs as determined and
allocated in the arbitration award.
22.03 Continuing Rights and Obligations
The Parties shall continue to exercise their remaining respective
rights, and fulfill their remaining respective obligations, under this
Contract, except in respect of those matters under dispute.
22.04 Waiver of Immunity
To the extent the Parties may claim for themselves or their assets and
revenues, immunity from suit, execution, attachment or other legal
process, the Parties agree not to claim such immunity and agree to
irrevocably waive such immunity to the full extent permitted by
applicable law.
ARTICLE 23. APPLICABLE LAW
23.01 Applicable Law
The validity, interpretation and implementation of this Contract shall
be governed by the laws of the People's Republic of China which are
published and publicly available. In the event that there is no
published and publicly available law in China governing a particular
matter relating to this Contract, reference shall be made to general
international commercial practices.
23.02 Economic Adjustment for Change of Law
As used herein "Change of Law" means the promulgation of any new laws,
rules or regulations in China or the amendment or interpretation of any
existing laws, rules or regulations in China relating to taxes, custom
duties, environmental issues or other matters concerning this Contract.
In the event that a Change of Law adversely and materially affects a
Party's economic benefit under this Contract, the Parties shall
promptly consult with each other and use their best endeavors to
implement adjustments necessary to maintain each Party's economic
benefits derived from this Contract. The basis of this adjustment will
be no less favorable than the economic benefits it would have derived
if such laws, rules or regulations had not been promulgated or amended
or so interpreted.
23.03 Preferential Treatment
The Company and the Parties shall be entitled to any tax, investment or
other benefits or preferences that become available or publicly known
after the signing of this Contract and which are more favorable than
those set forth in this Contract.
ARTICLE 24. MISCELLANEOUS PROVISIONS
24.01 Environmental
The Company shall undertake environmental protection measures in
accordance with the "Law of the People's Republic of China on
Environmental Protection" and other relevant laws and regulations.
24.02 Waiver
To the extent permitted by Chinese law, failure or delay on the part of
any Party hereto to exercise a right, power or privilege under this
Contract and the Appendices hereto shall not operate as a waiver
thereof or other rights, powers or privileges; nor shall any single or
partial exercise of a right, power or privilege preclude any other
future exercise thereof.
24.03 Binding Effect
This Contract is made for the benefit of the Parties and their
respective lawful successors and assignees and is legally binding on
them. This Contract may not be changed orally, but only by a written
instrument signed by all Parties and approved by the appropriate
Examination and Approval Authority.
24.04 Language
This Contract is executed in the Chinese language in eight (8)
originals and in the English language in eight (8) originals. Both
language versions shall be equally effective.
24.05 Entire Agreement
This Contract and the Appendices attached to this Contract constitute
the entire agreement between the Parties with respect to the subject
matter of this Contract and supersede all prior discussions,
negotiations and agreements between them. In the event of any conflict
between the terms and provisions of this Contract and the Articles of
Association the terms and provisions of this Contract shall prevail.
24.06 Notices
Any notice or written communication provided for in this Contract by
any Party to the others, including but not limited to any and all
offers, writings, or notices to be given thereunder, shall be in
writing made in English and Chinese , and shall be sufficiently given
if addressed as set forth below and sent by registered mail or an
internationally recognized overnight courier services, hand delivered
or transmitted clearly by facsimile, however all facsimile shall be
confirmed by courier service delivered letter, promptly transmitted or
addressed to the appropriate Party. The date of actual receipt of a
notice or communication thereunder shall be deemed to be the effective
date. All notices and communications shall be sent to the appropriate
address set forth below, until the same is changed by notice given in
writing to the other Parties.
PARTY A: Chengdu Hua Xi Electric Power (Group) Share
holding Company Ltd.
Address:
Telephone No.:
Facsimile No.:
Attention: Qu Delin
Zip Code:
PARTY B: China National Aero-engine Corporation
Address: No. 16 Donghuangchenggen, Dongcheng
District, Beijing, China
Telephone No.: 8610 4054595
Facsimile No.: 8610 4036107
Attention: Zhou Xiaoqing
Zip Code: 100717
PARTY C: AES China Generating Company Limited
Address: 9/F, Allied Capital Resources Bldg.,
32-38 Ice House Street, Central, HK
Telephone No.: (852) 28425111
Facsimile No.: (852) 25301673
Attention: Edward C. Hall III
24.08 Appendices
The Appendices listed below are made an integral part of this Contract
and are equally binding with Articles 1 through 24 herein.
Appendix 1. Red Line Site Map
Appendix 2. Annual Capital Returns
Appendix 3. Articles of Association
Appendix 4. List of Imported Equipment
APPendix 5. List of Companies Represented by Each Party
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, each of the Parties hereto have caused this
Contract to be executed by their duly authorized representatives on the
date first set forth above.
PARTY A : Chengdu Hua Xi Electric Power (Group) Share holding
Company Ltd.
[Signature Illegible]
------------------------
Name: Cheng Zhigang
Title: General Manager Assistant
Nationality: Chinese
PARTY B : China National Aero-engine Corporation
[Signature Illegible]
------------------------
Name: Li Yue Ting
Title: Deputy General Manager
Nationality: Chinese
PARTY C : AES China Generating Company Limited
[Signature Illegible]
------------------------
Name: Thomas T.M. Wu
Title: Vice President
Nationality: U.S.A.
Exhibit 10.46
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
SUPPORT CONTRACT
BETWEEN
AES TIAN FU POWER COMPANY (L) LTD.
AND
CHENGDU AES KAIHUA GAS TURBINE POWER CO., LTD.
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions and Principles of Construction.................................1
2. Amount and Terms Of Loans..................................................1
2.1. Loans ..........................................................1
2.2. Notes ..........................................................1
2.3. Interest Payments ..............................................2
2.4. Mandatory Repayments of Principal ..............................2
2.5. Optional Term Loan Prepayments .................................3
2.6. Other Amounts ..................................................3
2.7. Payments to the Arranger; Application of Proceeds ..............3
3. Loans .....................................................................3
3.1. Method of Borrowing; Transfer of Funds .........................3
3.2. Conditions to all Loans ........................................4
3.3. Conditions to First Construction Loan ..........................4
3.4. Conditions to Additional Construction Loans ....................5
3.5. Conditions to the Term Loan ....................................5
4. Representations and Warranties of the Company .............................6
4.1. Corporate Existence and Power ..................................6
4.2. Authorization; Contravention ...................................6
4.3. Binding Effect .................................................6
4.4. Financial Information ..........................................6
4.5. Litigation .....................................................7
5. Covenants of the Company ..................................................7
5.1. Existence ......................................................7
5.2. Notice of Certain Events .......................................7
5.3. Delivery of Financial Statements and Other Reports .............7
5.4. Insurance ......................................................8
5.5. Government Rules and Governmental Approvals ....................8
5.6. Performance of Project Documents ...............................8
5.7. Construction and Operation of the Power Station ................8
5.8. Environmental Compliance .......................................8
5.9. Use of Proceeds ................................................9
5.10. Payment of Taxes and Claims ....................................9
5.11. Event of Loss ..................................................9
5.12. Maintenance of Books and Records; Inspection by the Arranger ...9
5.13. Recording of Financing Documents ...............................9
5.14. Instruments of Further Assurance ...............................9
5.15. Issuance of Additional Debt ....................................9
<PAGE>
5.16. Liens .........................................................10
5.17. Nature of Business ............................................10
5.18. Modification of Agreements ....................................10
5.19. Guarantees ....................................................10
5.20. Prohibition on Fundamental Changes ............................10
5.21. Prohibition on Disposition of Assets ..........................11
5.22. Transactions With Affiliates ..................................11
5.23. Power Purchaser's Assignment ..................................11
5.24. Notice to the Arranger ........................................11
6. Events of Default: Remedies .............................................11
6.1. "Event of Default" Defined ....................................11
6.2. Exercise of Remedies ..........................................14
6.3. Collection of Indebtedness by the Arranger;
Deficiency Judgment .........................................14
6.4. Application of Proceeds of Collateral .........................14
7. Intercreditor Arrangements................................................15
7.1. Borrowings and Repayments......................................15
7.2. Pari Passu.....................................................15
7.3. Amendment or Assignment........................................15
8. Miscellaneous ............................................................15
8.1. Benefit of Agreement; Partial Invalidity ......................15
8.2. Governing Law .................................................16
8.3. Friendly Consultations ........................................16
8.4. Arbitration ...................................................16
8.5. Continuing Rights and Obligations .............................16
8.6. Enforcement of Award ..........................................17
8.7. Waiver of Sovereign Immunity Defense ..........................17
8.8. Remedies Cumulative; Delay or Omission Not to Impair Remedies .17
8.9. Amendment or Waiver ...........................................17
8.10. Notices .......................................................17
8.11. No Oral Agreement .............................................18
8.12. Counterparts ..................................................18
8.13. Verification and Approval by the Chengdu SAEC .................18
Annex A DEFINITIONS
Annex B COMMITMENTS
Exhibit 1 Form of Construction Note
Schedule A
Exhibit 2 Form of Term Loan Note
Schedule A
Exhibit 3 Request for Borrowing
<PAGE>
This SUPPORT CONTRACT, dated as of August 12, 1996 (the "Contract"),
is between AES Tian Fu Power Company (L) Ltd., a company organized under the
laws of Labuan (the "Arranger"), and Chengdu AES KAIHUA Gas Turbine Power Co.,
Ltd., a Sino-foreign joint venture company established under the laws of the PRC
(the "Company").
RECITALS
WHEREAS, the Company desires to borrow funds to pay for the
construction and operation of the Power Station; and
WHEREAS, the Arranger pursuant to the Joint Venture Contract is
willing, subject to the terms and conditions contained herein, to make loans to
the Company;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
herein, the receipt and sufficiency of which is hereby acknowledged, the
Arranger and the Company hereby agree as follows:
1. Definitions and Principles of Construction. For all purposes of
this Contract, (i) capitalized terms used but not otherwise defined herein shall
have the meanings set forth in Annex A hereto, and (ii) the principles of
construction set forth in Annex A shall apply for purposes of this Contract.
2. Amount and Terms Of Loans.
2.1. Loans.
(a) Construction Loans. The Arranger agrees, subject to and
upon the terms and conditions set forth herein, to make loans to the Company
from time to time on any Business Day during the Construction Period in an
aggregate amount not to exceed at any time outstanding the Arranger's Commitment
(each such loan, a "CONSTRUCTION LOAN"). Each borrowing of Construction Loans
hereunder shall be in an aggregate amount of US$500,000 or an integral multiple
of US$100,000 in excess thereof. Once repaid, Construction Loans may not be
reborrowed.
(b) Term Loan. The Arranger agrees, subject to and upon the
terms and conditions set forth herein, to make a loan to the Company on the
Mandatory Repayment Date in an aggregate amount not to exceed the Arranger's
Commitment (the "Term Loan"). The Term Loan borrowing shall be in an amount
equal to the aggregate outstanding principal amount of Construction Loans plus
accrued and unpaid interest thereon, subject to the limitation in the preceding
sentence. Once prepaid or repaid, Term Loans may not be reborrowed.
2.2. Notes.
(a) The Company's obligation to pay the principal of and
interest on the Construction Loans shall be evidenced by a promissory note
substantially in the form of Exhibit 1 hereto in an amount equal to the
Commitment, completed in accordance with the terms of this Contract and duly
executed, issued and delivered by the Company (the "Construction Loan Note").
(b) The Company's obligation to pay the principal of and
interest on the Term Loan shall be evidenced by a promissory note substantially
in the form of Exhibit 2 hereto, completed in accordance with the terms of this
Contract and duly executed, issued and delivered by the Company (the "Term Loan
Note").
2.3. Interest Payments.
(a) Interest shall accrue on the aggregate unpaid principal
amount of each Construction Loan during each calendar month at a rate per month
equal to [***] (or a pro-rata portion thereof for amounts outstanding during a
portion of the month). Interest on the Construction Loans shall be compounded
monthly, and accrued interest on the outstanding principal amount of the
Construction Loans shall be payable by the Company on the Mandatory Repayment
Date.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(b) Interest shall accrue on the aggregate unpaid principal
amount of the Term Loan during each quarter at a rate per quarter equal to [***]
(or a pro-rata portion thereof for amounts outstanding during a portion of the
quarter). Interest on the Term Loan shall be compounded quarterly, and accrued
interest on the outstanding principal amount of the Term Loan shall be payable
by the Company on each Term Loan Repayment Date.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(c) Interest on each Loan shall be computed on the basis of a
360-day year consisting of twelve 30-day months. Interest shall accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the date requested by the Arranger to its bank to transfer the
proceeds of the respective Loan to the Company.
(d) If the Company shall fail to make any payment hereunder or
on the Notes when due, it shall pay on demand interest on such amounts (to the
extent permitted by law) to the date of actual payment (after as well as before
judgment) at a rate per annum equal to the rate provided in Section 2.3 (a) or
(b), as the case may be, plus 2%.
2.4. Mandatory Repayments of Principal.
(a) Principal of the Construction Loans shall be repaid in full
by the Company, together with any outstanding accrued interest thereon, on the
Mandatory Repayment Date.
(b) Principal of the Term Loan shall be repaid by the Company
in 20 consecutive semi-annual installments of equal amounts beginning on the
date occurring six months after the Mandatory Repayment Date and on each date
occurring six calendar months thereafter (each such date, a "Term Loan Repayment
Date"), provided that if any such date is not a Business Day, the relevant Term
Loan Repayment Date shall be the next following Business Day. On the final Term
Loan Repayment Date, all outstanding principal amounts of the Term Loan,
together with any outstanding accrued interest thereon, shall be paid in full to
the Arranger. The Parties shall complete Schedule A to the Term Loan Note to
reflect actual Term Loan Repayment Dates prior to the issuance of the Term Loan
Note.
2.5. Optional Term Loan Prepayments. The Company may, upon at least
five (5) Business Days prior written notice to the Arranger, prepay the Term
Loans, in whole or in part, in an aggregate principal amount of US$250,000 or
integral multiples of US$50,000 in excess thereof, together with all accrued
interest thereon to the date of prepayment. Upon receipt by the Arranger of such
a notice of prepayment in accordance with this section, such notice shall
thereafter not be revocable by the Company. Any such prepayments shall reduce
pro-rata amounts owing on any remaining Term Loan Repayment Dates.
2.6. Other Amounts. All payments of principal, premium, if any, and
interest in respect of the Notes will be made free and clear of, and without
withholding or deduction for, any Withholding Taxes. If any Withholding Taxes
are so imposed, the Company will pay such additional amount ("Additional Company
Amounts") as will result in receipt by the Arranger of such amounts as would
have been received by it had no such Withholding Taxes been imposed.
2.7. Payments to the Arranger; Application of Proceeds. (a) All
payments to the Arranger of interest, principal, Additional Company Amounts and
any other amounts owing hereunder shall be made in Dollars in immediately
available funds and shall be made to a bank account designated by the Arranger
in a written notice to the Company.
(b) Except as provided in Section 6.4, all payments received by
the Arranger hereunder shall be applied, as promptly as possible, in the
following order: (i) first, to the payment of costs and expenses hereunder,
including those from the enforcement of the Contract and the other Financing
Documents, (ii) second, to the payment of Additional Company Amounts, if any,
and accrued but unpaid interest, including default interest, and (iii) third, to
the payment of principal, premium and all other obligations owing under this
Contract and the other Financing Documents.
3. Loans.
3.1. Method of Borrowing; Transfer of Funds.
(a) The Company may request a Loan by making a written request
to the Arranger no less than seven (7) days prior to the date of the proposed
Loan. Each such request shall be in the form of Exhibit 3 hereto, with such
blanks appropriately completed. All such written requests for a Loan by the
Company shall be irrevocable unless the Company provides the Arranger with
written notice of its cancellation of a request no later than two (2) Business
Days prior to the date specified for the making of the Loan.
(b) Subject to the terms and conditions contained in this
Contract, the Arranger shall make Loan amounts available to the Company in
Dollars in immediately available funds in accordance with the Company's
instructions set forth in the relevant request for a Loan.
3.2. Conditions to all Loans. The Arranger's obligation to make any
Loan is subject to performance by the Company of all of its obligations under
this Contract and the fulfillment (or waiver in writing by the Arranger in its
sole discretion) of the following conditions precedent:
(a) receipt by the Arranger of the written request for a Loan
as required by Section 3.1 (a) hereof;
(b) no Default shall have occurred and be continuing hereunder
and no Default under any agreement to which the Company is a party would result
from the making of the Loan or the application of the proceeds therefrom;
(c) the representations and warranties of the Company contained
in this Contract, the Financing Documents and each of the Project Documents
shall be true and correct on as of the date of such Loan;
(d) such Loan will not contravene any provision of law or
regulation of any Governmental Authority;
(e) (i) all Clearances for the Power Station, for the Financing
Documents, and for each of the Project Documents, and (ii) the Liens created by
the Security Documents in the Collateral, on and as of the date of such Loan,
shall be in full force and effect;
(f) receipt by the Arranger of a certificate dated the date of
the Loan, duly executed by an Authorized Officer of the Company, certifying as
to the effect set forth in Section 3.2(b), (c), (d), and (e) hereof; and
(g) the Company shall have duly authorized, executed and
delivered to the Arranger the Security Documents in form and substance
satisfactory to the Arranger;
(h) the shareholders of the Company shall have made their
initial contributions to the registered capital of the Company pursuant to the
terms of the Joint Venture Contract; and
(i) receipt by the Arranger of all such other documents,
instruments, or opinions of counsel it deems necessary or advisable in order to
make the Loans.
3.3. Conditions to First Construction Loan. The Arranger's
obligation to make the first Construction Loan shall, in addition to
satisfaction of the requirements of Section 3.2 hereof, be subject to the
fulfillment (or waiver in writing by the Arranger in its sole discretion) of the
following conditions precedent:
(a) receipt by the Arranger of a duly executed Construction
Loan Note of the Company, dated the date of the making of the first Construction
Loan;
(b) receipt by the Arranger of an opinion of the Company's
counsel, in form and substance satisfactory to the Arranger, with respect to
certain matters relating to the Construction Loan to be indicated by the
Arranger;
(c) receipt by the Arranger of all documents it may request
with respect to (i) the existence of the Company, (ii) the corporate authority
of the Company and the validity of each of the Financing Documents and (iii) any
other matters related thereto, all in form and substance satisfactory to the
Arranger;
(d) receipt by the Arranger of executed copies of all Project
Documents entered into by the Company;
(e) receipt by the Arranger of copies of all required
Clearances for the Power Station, for the Financing Documents and for each of
the Project Documents;
(f) receipt by the Arranger of evidence, in form and substance
satisfactory to the Arranger, that the Company is required to make payment of
Project Costs and that it does not possess the funds, either by way of equity or
debt, to make such payment of Project Costs; and
(g) evidence, in form and substance satisfactory to the
Arranger, that all filings and registrations of each of the Security Documents
have been made and that, as a consequence, the Security Documents create a
legally valid perfected first priority security interest in the Collateral in
favor of the Arranger and the Other Arrangers, securing the Arranger's and the
Other Arrangers' rights under this Contract and the Other Contracts.
3.4. Conditions to Additional Construction Loans. The Arranger's
obligations to make additional Construction Loans shall, in addition to the
satisfaction of the requirements of Section 3.2 hereof, be subject to the
fulfillment (or waiver in writing by the Arranger in its sole discretion) of the
following conditions precedent:
(a) receipt by the Arranger of evidence, in form and substance
satisfactory to the Arranger, that the Company is required to make payment of
Project Costs and that it does not possess the funds, either by way of equity or
debt, to make such payment of Project Costs.
3.5. Conditions to the Term Loan. The Arranger's obligation to make
the Term Loan shall, in addition to satisfaction of the requirements of Section
3.2 hereof, be subject to the fulfillment (or waiver in writing by the Arranger
in its sole discretion) of the following conditions precedent:
(a) receipt by the Arranger of a copy of the Certificate of
Performance Acceptance of the Power Station;
(b) receipt by the Arranger of a duly executed Term Loan Note
of the Company dated the date of the making of the Term Loan;
(c) receipt by the Arranger of an opinion of the Company's
counsel, in form and substance satisfactory to the Arranger, with respect to
certain matters relating to the Term Loan to be indicated by the Arranger; and
(d) receipt by the Arranger of evidence, in form and substance
satisfactory to the Arranger, reconfirming that the Security Documents continue
to create a legally valid perfected first priority security interest and Lien in
the Collateral in favor of the Arranger and the Other Arrangers, securing the
Arranger's and the Other Arrangers' rights under this Contract and the Other
Contracts.
4. Representations and Warranties of the Company.
The Company represents and warrants as follows:
4.1. Corporate Existence and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the PRC,
and has all corporate powers and all Clearances required to carry on its
business as presently conducted.
4.2. Authorization; Contravention. The execution, delivery and
performance by the Company of each of the Financing Documents and the
consummation of the transactions contemplated thereby are within the Company's
corporate powers, have been duly authorized by all necessary corporate and joint
venture action, require no further action by or in respect of any Governmental
Authority and do not contravene, or constitute a Default under, any provision of
applicable law or regulation or of any agreement, judgment, order, decree or
other instrument binding upon the Company and will not result in the creation or
imposition of any Lien on any asset of the Company (other than a Lien created by
the Security Documents).
4.3. Binding Effect. This Contract has been, and each of the other
Financing Documents when delivered will have been, duly executed and delivered
by the Company. Upon filing with the Chengdu SAEC, this Contract will be, and
each of the other Financing Documents when delivered will be, the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
4.4. Financial Information. All financial information heretofor
provided by the Company to the Arranger fairly present in conformity with
People's Republic of China Accounting Rules the financial condition of the
Company as of its date.
4.5. Litigation. There is no action, suit, or proceeding pending, or
threatened, against or affecting the Company before any court or arbitrator or
any Governmental Authority.
5. Covenants of the Company.
So long as any Loan shall remain unpaid or the Arranger shall have
any Commitment hereunder, the Company covenants as follows:
5.1. Existence. The Company shall maintain its legal existence as a
Sino-foreign joint venture established under the laws of the PRC.
5.2. Notice of Certain Events. The Company shall give notice to the
Arranger, promptly following an Authorized Officer's learning of the occurrence
thereof, of (a) any Default (other than an immaterial Default that such Person
reasonably anticipates will be cured on or before the seventh Business Day after
an Authorized Officer becomes aware thereof) or any Event of Default,
specifically stating that such event or condition has occurred and describing it
and any action being or proposed to be taken with respect thereto, (b) the
occurrence of an Event of Loss (or threat of an Event of Eminent Domain),
together with the details thereof and the action which the Company is taking or
proposes to take with respect thereto, (c) any action, suit or proceeding by or
before any Governmental Authority, arbitral tribunal or other body which has had
or could reasonably be expected to have a Material Adverse Effect, together with
the details thereof, (d) receipt of any notice from the Power Purchaser of any
circumstance, act or condition which has had or would reasonably be expected to
have a Material Adverse Effect, together with the details thereof and the action
which the Company is taking or proposes to take with respect thereto, (e)
written notice of any material Default by it under, or material breach by it of,
the Security Documents or relating to the Collateral, and (f) any other
circumstance, act or condition which has had or would reasonably be expected to
have a Material Adverse Effect, together with the details thereof and the action
which the Company is taking or proposes to take with respect thereto.
5.3. Delivery of Financial Statements and Other Reports. The Company
shall furnish to the Arranger:
(a) as soon as available and in any event within 120 days after
the end of each of its fiscal years (commencing with the fiscal year ending
December 31, 1996), copies of its audited balance sheet as of the end of such
fiscal year and copies of its audited statements of income and cash flows for
such fiscal year (in each case, in accordance with People's Republic of China
Accounting Rules) setting forth in each case corresponding figures from the
preceding fiscal year, and accompanied by an opinion thereon of a firm of
independent public accountants of recognized international standing;
(b) as soon as available and in any event within 60 days after
the end of each of its first three fiscal quarters, copies of the unaudited
balance sheet of the Company as of the end of such quarter and copies of its
unaudited statements of income and cash flow for such quarter and fiscal year
through such quarter (in each case, in accordance with People's Republic of
China Accounting Rules) setting forth in each case, in comparative form,
corresponding unaudited figures from the preceding fiscal year, prepared
consistently with the annual statements described in Section 5.3(a) (but subject
to year end adjustments and such other adjustments as are applicable and, in
each case, consistent with People's Republic of China Accounting Rules and
necessary for meaningful comparison), and accompanied by a certificate of an
Authorized Officer of the Company to the effect that such financial statements
fairly represent its financial condition and results of operations at and as of
their respective dates, subject to such adjustments; and
(c) a copy of each annual operating budget and fuel management
plan, if any, as soon as available, but in any event not later than 30 days
prior to the beginning of the period covered by such annual operating budget and
fuel management plan, respectively.
Notwithstanding the foregoing, the Arranger shall be under no
obligation to review or to take any action with respect to the information or
documents provided to it pursuant to this Section 5.3.
5.4. Insurance. The Company shall procure at its own expense and
maintain in full force and effect at all times insurance in form and substance
acceptable to the Arranger.
5.5. Government Rules and Governmental Approvals. The Company shall
comply with all Government Rules applicable to it and the Power Station, except
where the failure to do so could not have a Material Adverse Effect.
5.6. Performance of Project Documents. The Company shall perform all
of its covenants, agreements and obligations under each of the Project Documents
to which it is a party, except where the failure to do so could not have a
Material Adverse Effect. The Company shall take such reasonable steps as may be
necessary to enforce the material obligations of the other parties to the
Project Documents.
5.7. Construction and Operation of the Power Station. The Company
shall (a) construct, operate, and maintain the Power Station, or cause the Power
Station to be constructed, operated, and maintained, in accordance with the
terms of the Project Documents and prudent operating practices and (b) promptly
invoice, and use commercially reasonable efforts to collect, all payments owed
by the Power Purchaser.
5.8. Environmental Compliance. The Company shall comply with all
Environmental Laws applicable to it and to the Power Station, except where
failure to do so could not have a Material Adverse Effect. The Company shall use
reasonable efforts to prevent any physical condition from existing on any
property owned or operated by the Company or on any property that may be
impacted by the Company's operations which could give rise to any remedial
obligation under any Environmental Laws or which could result in any liability
to any third party claiming damage to person or property as a result or
consequence of said physical condition, in each case which could have a Material
Adverse Effect.
5.9. Use of Proceeds. The Company shall use the proceeds from the
Construction Loans solely to pay for Project Costs. The Company shall use the
proceeds from the Term Loan solely to repay the Construction Loans, including
accrued interest thereon.
5.10. Payment of Taxes and Claims. The Company shall duly pay and
discharge or cause to be paid or discharged prior to delinquency all taxes,
assessments and governmental and other charges lawfully levied and assessed upon
it, the Power Station and the Collateral, or upon the franchises, earnings and
business of it, the Power Station and the Collateral, including all penalties
and interest thereon, other than any such taxes, assessments, or charges that
are the subject of a Good Faith Contest. The Company shall promptly pay or cause
to be paid any valid, final judgment enforcing any such tax, assessment, charge,
levy or claim and cause the same to be satisfied of record unless such judgment
is the subject of a Good Faith Contest.
5.11. Event of Loss. If an Event of Loss shall occur with respect to
any portion of the Collateral, the Company shall, to the extent commercially
reasonable, diligently pursue all of its rights to compensation against the
applicable Governmental Authority or any other Person with respect to such Event
of Loss, and deposit in a trust account subject to the control of the Arranger
and the Other Arrangers all Loss Proceeds received in respect of such Event of
Loss (after deducting all reasonable costs and expenses incurred by it in
pursuing such compensation against such Governmental Authority or other Person).
5.12. Maintenance of Books and Records; Inspection by the Arranger.
The Company shall keep proper books and records of all its business and
financial affairs in accordance with People's Republic of China Accounting Rules
and shall, upon the reasonable written request of the Arranger, permit
representatives of the Arranger to inspect its properties (including the Power
Station), books, records, reports and other papers and to take copies and
extracts therefrom.
5.13. Recording of Financing Documents. The Company will cause the
Financing Documents at all times to be duly registered, recorded or filed in
such manner and in such places as may in the reasonable opinion of counsel to
the Arranger be required by applicable law in order to preserve fully and
maintain the Liens intended to be created under the Financing Documents to the
extent attainable under applicable law. The Company shall from time to time
execute or cause to be executed any and all further instruments reasonably
required to maintain and preserve the Liens intended to be created under the
Financing Documents.
5.14. Instruments of Further Assurance. The Company will, upon the
Arranger's reasonable request, execute and deliver such further instruments and
do such further acts as may be necessary or proper to carry out more effectually
the purposes of this Contract.
5.15. Issuance of Additional Debt. The Company shall not incur or
suffer to exist any Indebtedness, except for Permitted Indebtedness.
5.16. Liens. The Company shall not create or suffer to exist or
permit any Lien upon or with respect to any of its properties except for (a)
Liens securing Indebtedness arising under this Contract, the other Financing
Documents or any Project Document, (b) mechanics' or materialmen's Liens that
are subject to a Good Faith Contest, (c) Liens for taxes not yet due and payable
or taxes that are the subject of a Good Faith Contest, (d) Permitted Liens, and
(e) Liens relating to Permitted Indebtedness. Prior to granting any Lien on any
Collateral in connection with the incurrence of Permitted Indebtedness permitted
pursuant to clause (e) above, the Company shall furnish to the Arranger an
opinion of counsel reasonably satisfactory to the Arranger stating that, in the
opinion of such counsel, such action has been taken as is necessary under
applicable law to maintain the Lien intended to be created under the Financing
Documents or stating that no such action is necessary to maintain such Lien. All
references herein to maintaining a Lien include, but are not limited to,
maintaining the intended priority of such Lien to the extent attainable under
applicable law.
5.17. Nature of Business. The Company shall not engage in any
business other than the ownership and operation of the Power Station as
contemplated or allowed by the Project Documents and the Financing Documents.
5.18. Modification of Agreements. (a) The Company shall not
terminate or amend, modify or waive any provision under any of the Project
Documents to which it is a party or assignee unless the Arranger shall have
received a certificate of an Authorized Officer of the Company certifying that
(i) such termination, amendment, modification or waiver could not reasonably be
expected to have a Material Adverse Effect taken as a whole either currently or
in the future, and (ii) such termination, amendment, modification or waiver
could not reasonably be expected to materially increase the likelihood of an
occurrence of a future Material Adverse Effect.
(b) The Company shall not terminate, amend, modify or waive any
rights under the Letter(s) of Undertaking; provided, however, that the Company
may confirm the continued validity of such Letters of Undertaking, obtain new
letters with provisions no less favorable to the Company than the existing
letters or extend the effectiveness of such letters.
5.19. Guarantees. Except as contemplated by the Project Documents,
the Company shall not contingently or otherwise be or become liable, directly or
indirectly, in connection with any Guarantee except (a) indemnities with respect
to unfilled materialmen's, mechanics', workmen's, repairmen's, employees' or
other similar Liens arising in the course of construction or in the ordinary
course of operations or maintenance of the Power Station, (b) indemnities to
Governmental Authorities relating to any expenses incurred that are incidental
to obtaining easements for the benefit of the Power Station and (c) Guarantees
of Permitted Indebtedness the proceeds of which result in a direct benefit to
Company.
5.20. Prohibition on Fundamental Changes. The Company shall not
enter into any transaction of merger or consolidation, change it's form of
organization, liquidate or dissolve itself (or suffer any liquidation or
dissolution). Except as contemplated in the Project Documents, the Company shall
not purchase or otherwise acquire all or substantially all of the assets of any
Person.
5.21. Prohibition on Disposition of Assets. Except as contemplated
by the Project Documents or permitted pursuant to the Financing Documents, the
Company shall not lease (as lessor) or dispose of, sell or transfer (as
transferor) any property or assets material to the operation of the Power
Station, except (a) in the ordinary course of business to the extent that such
property is worn out or no longer useful or usable in connection with the
operation of the Power Station or (b) to the extent such property is replaced by
property having a similar purpose and having a fair market value equal to or
greater than the fair market value of the property being leased or transferred
and upon which the Arranger has an equivalent Lien.
5.22. Transactions With Affiliates. Other than the Project Documents
and the Financing Documents, the Company shall not enter into any transactions
with Affiliates, unless the terms of such transactions are no less favorable to
the Company than terms which the Company could obtain in comparable transactions
entered into on an arm's-length basis with a Person which is not an Affiliate of
the Company.
5.23. Power Purchaser's Assignment. The Company shall not, without
the prior written consent of the Arranger, approve any assignment of the Power
Purchaser's obligations under the Power Purchase Contract.
5.24. Notice to the Arranger. The Company shall notify the Arranger
in writing of any discrepancies between the Services (as defined in the
Construction Contract) and all requirements of the Power Purchaser of which the
Company is aware.
6. Events of Default: Remedies.
6.1. "Event of Default" Defined. The term "Event of Default" means
any of the following events (whatever the reason for such event and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to or in compliance with any applicable Government Rule) and any such event
shall continue to be an Event of Default if and for so long as it shall not have
been remedied;
(a) failure by the Company to pay principal of or premium, if
any, or interest on a Loan for a period of five days after any such amount shall
have become due and payable, whether by scheduled maturity, required repayment
or redemption, acceleration or otherwise;
(b) failure by the Company to perform in any material respect
any covenant of the Company in this Contract (other than the default referred to
in Section 6.1(a)) or in any other Financing Document following notice from the
Arranger, and such failure remains unremedied for 30 days;
(c) any representation, warranty or certification made or
deemed made in this Contract or any other Financing Document by the Company
shall prove to have been incorrect in any material respect as of the time made,
confirmed or furnished and remains incorrect in any material respect 30 days
after the Company becomes aware that it is incorrect;
(d) the Company shall:
(i) apply for or consent to the appointment of a
receiver, custodian, trustee, liquidator or equivalent thereof
in the applicable jurisdiction of it or of all or a
substantial part of its assets (other than in connection with
a restructuring for tax purposes) which (i) has no Material
Adverse Effect and (ii) does not effect the validity or
enforceability of this Contract, any other Financing Document
or any Project Document),
(ii) file a voluntary petition in bankruptcy, or admit in
writing its inability to pay it debts as they come due (other
than in connection with a restructuring for tax purposes)
which (i) has no Material Adverse Effect and (ii) does not
effect the validity or enforceability of this Contract, any
other Financing Document or any Project Document,
(iii) make a general assignment for the benefit of
creditors,
(iv) file a petition or an answer seeking reorganization
or arrangement with creditors or to take advantage of any
insolvency law,
(v) file an answer admitting the material allegations of,
or consent to, or default in answering, a petition filed
against it in any bankruptcy, reorganization or insolvency
proceeding, or
(vi) be adjudicated bankrupt or insolvent, or be the
subject of an order, judgment or decree entered by any court
of competent jurisdiction approving a petition seeking
reorganization of such Person or appointing a receiver,
trustee, liquidator or equivalent thereof in the applicable
jurisdiction of such Person or of all or a substantial part of
its assets, and such order, judgment or decree shall continue
unstayed and in effect for a period of 60 days;
(e) failure by the Company to pay, discharge, or provide full
reserves against any final and nonappealable judgment by a court of competent
jurisdiction against it for the payment of money in excess of US$1,000,000 (or
the equivalent thereof in any other currency) within 60 days from the date of
entry thereof;
(f) the failure of the Company to make any payment when due
(subject to any applicable grace period) in respect of any of its Indebtedness
in an aggregate amount exceeding US$1,000,000 (or the equivalent thereof in any
other currency), which has been incurred and which remains outstanding (other
than any amount due under or pursuant to the Financing Documents);
(g) the Power Purchase Contract or any Financing Document
ceases for any reason to be valid and binding and in full force and effect prior
to its termination in accordance with its terms;
(h) any Project Document (other than the Power Purchase
Contract) ceases for any reason to be valid and binding and in full force and
effect prior to its termination in accordance with its terms unless the Arranger
shall have received a certificate of an Authorized Officer of the Company to the
effect that such event will not have a Material Adverse Effect;
(i) at least 90 days shall have elapsed since any Clearance
necessary to construct or operate the Power Station shall have been revoked or
withdrawn, if such revocation or withdrawal could have a Material Adverse
Effect;
(j) any grant of a Lien contained in the Financing Documents
ceases to be effective to grant a perfected Lien on any of the Collateral or
ceases to be effective to grant a perfected Lien with the priority purported to
be created thereby, to the extent attainable under the law governing such
documents, in favor of the Arranger in the Collateral;
(k) the Company abandons the Project;
(l) any party to a Project Document fails to perform any of its
material obligations thereunder or makes any material misrepresentations
thereunder, which failure or misrepresentation (i) is not cured within the later
of (A) the cure period set forth in the relevant Project Document or (B) 30 days
after the Company's or the Arranger's actual knowledge of such failure or
misrepresentation and (ii) could have a Material Adverse Effect on the Company;
(m) the Power Purchaser is liquidated, except for liquidation
at the end of the term of the Power Purchase Contract;
(n) Project Completion (as defined in the Construction
Contract) shall not have occurred by January 1, 1998;
(o) a Financing Event of Default shall have occurred and be
continuing;
(p) borrowings and repayments under the Other Contracts are not
made in accordance with Section 7.1; or
(q) a sale of the Collateral or any part thereof occurs without
the consent of the Arranger.
6.2. Exercise of Remedies.
(a) If an Event of Default shall occur and be continuing, then,
(i) the Arranger, by notice to the Borrower and the Other Arrangers, may declare
its obligation to make Loans to be terminated, whereupon the same shall
forthwith terminate, and (ii) the Arranger, by notice to the Borrower and the
Other Arrangers, may declare all of the Notes, all interest thereon and all
other amounts payable under this Contract to be forthwith due and payable,
whereupon all of the Notes, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company; provided, however, that if an Event of Default of the kind described in
Section 6.1 (d) shall occur, (i) the obligation of the Arranger to make Loans
shall automatically be terminated and (ii) all of the Notes, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Company.
(b) In case one or more of the Events of Default shall have
occurred and shall be continuing, then the Arranger may also exercise all rights
and remedies which it may have under any of the Financing Documents as provided
therein, in addition to all other rights and remedies available to the Arranger
at law or in equity. The Arranger shall be also entitled to proceed forthwith to
protect and enforce its rights under this Contract by a suit or suits in equity
or at law, either for the specific performance of any covenant or agreement
contained herein, or in aid of the execution of any power herein granted, either
for interest or for principal, or for both, or for the enforcement of any other
appropriate legal or equitable remedy, as the Arranger, being advised by
counsel, shall deem most effectual in support of any of its rights or duties
hereunder.
6.3. Collection of Indebtedness by the Arranger; Deficiency
Judgment. The Arranger shall be entitled to recover judgment against the Company
and any other obligor on the Notes and the Loans for the whole amount so due and
unpaid either before, after or during the pendency of any proceedings for the
enforcement of any Lien or other provisions of the Financing Documents, and in
the case of a sale of the Collateral and the application of the proceeds of such
sale, the Arranger, in its own name, shall be entitled to enforce payment of,
and to receive, all amounts then remaining due and unpaid upon the Notes, for
the benefit of the holders thereof, and shall be entitled to recover judgment
for any portion of the same remaining unpaid, with interest as aforesaid. No
recovery of any such judgment by the Arranger, and no levy of any execution
under any such judgment upon any property of the Company, shall affect or impair
the Lien of the Financing Documents, or any rights, powers or remedies of the
Arranger hereunder or under any other Financing Document.
6.4. Application of Proceeds of Collateral. The proceeds of any sale
of the Collateral, or any part thereof, together with any other sums then held
by the Arranger as part of the Collateral, shall be applied as promptly as
possible as follows: (i) first, to the payment of the costs and expenses of such
sale, including the compensation of the Arranger and its agents and counsel, and
of all charges, expenses, liabilities and advances incurred or made by the
Arranger without gross negligence or bad faith; (ii) second, to the payment of
Additional Company Amounts hereunder and additional company amounts under the
Other Contracts, if any, and of the interest due and unpaid hereunder and under
the Other Contracts, including default interest; (iii) third, to the payment of
principal, premium, if any, and all other obligations owing hereunder and under
the Financing Documents; and (iv) fourth, the surplus, if any, shall be paid to
the Company, its successors or assigns.
7. Intercreditor Arrangements.
7.1. Borrowings and Repayments. All borrowings hereunder shall be
made simultaneously with borrowings made under the Other Contracts, and each
borrowing hereunder shall be in a percentage of the Commitment equal to the
percentage each simultaneous borrowing of loans under each Other Contract bears
to the commitment under each such Other Contract; provided that the foregoing
shall only apply to borrowings under the Huaxi Support Contract to the extent
that the aggregate principal amount of Loans made under this Contract and loans
made under the CNAC Support Contract exceeds U.S.$17,880,000. All repayments or
prepayments of Loans (including principal, interest and other amounts) hereunder
shall be made simultaneously with prepayments or repayments under the Other
Contracts, and any such repayment or prepayment under this Contract shall be in
a percentage of Loans outstanding equal to the percentage each simultaneous
repayment or prepayment of loans under each Other Contract bears to the loans
outstanding under each such Other Contract, in each case using the Dollar/RMB
exchange rate, if applicable, provided herein and in the Other Contracts.
7.2. Pari Passu. All rights of the Arranger hereunder with respect
to the Loans and the Collateral shall be on a pari passu basis with the rights
of the Other Arrangers under the Other Contracts with respect to the Other
Arrangers' loans and the Collateral.
7.3. Amendment or Assignment. This Contract may not be amended,
changed, terminated or discharged without the prior written consent of the Other
Arrangers. Neither this Contract nor the rights or obligations hereunder may be
assigned or transferred by either Party without the prior written consent of the
Other Arrangers.
8. Miscellaneous.
8.1. Benefit of Agreement; Partial Invalidity. This Contract shall
be binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the Parties hereto. The Company may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Arranger. If any provision of this Contract, or the application
of any provision to any Person or circumstance, shall be held invalid or
unenforceable, the remainder of this Contract, or the application of such
provision to Persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby.
8.2. Governing Law. The rights of the Parties hereto and the
validity, interpretation and implementation of this Contract and the Notes shall
be governed by and construed and interpreted in accordance with the laws of the
People's Republic of China.
8.3. Friendly Consultations. In the event of any dispute,
controversy, or claim arising out of or relating to this Contract or other
Financing Documents, or the breach, termination or invalidity hereof or thereof,
the disputing Party shall provide written notice thereof to the other Party. The
Parties shall attempt in the first instance to resolve such dispute through
friendly consultations.
8.4. Arbitration. (a) If the dispute is not resolved by friendly
consultation within 60 days after notice of a dispute is given by a Party, then
any Party may submit the dispute for final binding arbitration by the China
International Economic and Trade Arbitration Commission in accordance with its
rules then in force. The arbitration proceedings shall be held in Mandarin
Chinese and English. The site of the arbitration shall be Beijing. Should there
exist a conflict between the rules of the China International Economic and Trade
Arbitration Commission and the provisions of this Contract, the provisions of
this Contract will prevail.
(b) There shall be three (3) arbitrators. All three arbitrators
shall speak both Mandarin Chinese and English. The Company and the Arranger
shall each appoint (1) arbitrator within thirty (30) days of the date of the
request to initiate arbitration. Within thirty (30) days from the appointment of
the second of the Parties' arbitrators, the Parties' arbitrators shall appoint a
third arbitrator who shall, in addition to his duties as arbitrator, act as
chairman of the arbitration tribunal. Arbitrators not appointed within the time
limits set forth in this paragraph (b) shall be appointed by the Secretary
General of the International Center for Settlement of Investment Disputes. The
Parties hereby waive and renounce any right to appeal the award of the
arbitration panel or to have any question of law or fact referred to a court or
other forum in the People's Republic of China except in furtherance of enforcing
the award of the arbitration panel.
(c) The award of the arbitration panel shall be issued not
later than sixty days following the close of hearings by the panel. The
arbitration award shall be final and binding on the Parties and shall not be
subject to appeal to any court. The Parties agree to be bound thereby and to act
accordingly.
(d) The costs of arbitration shall be borne by each Party as
designated in the arbitration award.
8.5. Continuing Rights and Obligations. When any dispute occurs and
is the subject of friendly consultations or arbitration, the Parties shall
continue to exercise their remaining respective rights, and fulfill their
remaining respective obligations, under this Contract and the other Financing
Documents.
8.6. Enforcement of Award. The Parties acknowledge that any award
rendered pursuant to Section 8.4 hereof shall be governed by the 1958 Convention
on the Recognition and Enforcement of Foreign Arbitration Awards of the United
Nations. The award shall be enforceable in any court that has jurisdiction over
the losing Party or over the property of the losing Party.
8.7. Waiver of Sovereign Immunity Defense. In any arbitration
proceeding, any legal proceeding to enforce any arbitration award and in any
legal action between the Parties pursuant to or relating to this Contract or the
other Financing Documents, each Party expressly waives the defense of sovereign
immunity and any other defense based on the fact or allegation that it is an
agency or instrumentality of a sovereign state.
8.8. Remedies Cumulative; Delay or Omission Not to Impair Remedies.
No delay or omission of the Arranger in exercising any right or remedy arising
upon the happening of any Event of Default, and no course of dealing between the
Company, on the one hand, and the Arranger on the other hand, shall impair any
right or remedy for, or shall be construed to be a waiver of, any such Event of
Default or an acquiescence therein; nor shall any single or partial exercise of
any right or remedy, under this Contract or under any other Financing Document,
preclude any other exercise thereof or the exercise of any other right or remedy
hereunder or thereunder. To the fullest extent permitted by Government Rule, the
rights and remedies herein and in the Financing Documents are cumulative and not
exclusive of any rights or remedies which the Arranger would otherwise have.
Remedies may be exercised in whatever order the Arranger or its designee may
elect. Any rights and remedies granted to or otherwise available to the Arranger
may be exercised by the Arranger or any Person or Persons designated in writing
by the Arranger. No notice to or demand on the Company shall entitle such Person
to any further notice or demand in similar circumstances or constitute a waiver
of the rights of the Arranger to any other action in any circumstances without
notice or demand.
8.9. Amendment or Waiver. This Contract and the terms hereof may not
be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing signed by each of the
Parties hereto.
8.10. Notices. Any notices to the Arranger by the Company under any
provision of this Contract shall be sufficiently given if in writing and served
personally upon an Authorized Officer of the Arranger or delivered via facsimile
transmission to facsimile number: (86) (10) 508-9628 with electronic and
telephonic confirmation to the Arranger, Attention: Jeff Safford, facsimile
number: (85) (2) 530-1673 or at such other address as may be designated for that
purpose in a notice delivered to the Company by the Arranger. Any notice to the
Company by the Arranger under any provision of this Contract shall be
sufficiently given if served personally upon an Authorized Officer of the
Company or delivered via facsimile transmission to facsimile number: (86) (10)
6508-9628 with electronic or telephonic confirmation to Attention: Paul T.
Hanrahan, or at such other address as may be designated for that purpose in a
notice delivered to the Arranger by the Company.
8.11. No Oral Agreement. This Contract represents the entire
understanding of the parties and supersedes all prior undertakings and
agreements with respect thereto, whether written or oral.
8.12. Counterparts. This Contract may be executed in one or more
counterparts each of which shall be deemed an original and all of which shall be
deemed one and the same Contract.
8.13. Verification and Approval by the Chengdu SAEC. The repayment
of the principal and payment of interest pursuant to this Contract shall be
verified and approved by the Chengdu SAEC.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the parties
hereto have caused their duly authorized officers to execute and deliver this
Contract as of the date first above written.
CHENGDU AES KAIHUA GAS
TURBINE POWER CO., LTD.
By:[Signature Illegible]
---------------------
Name:
Title:
AES TIAN FU POWER
COMPANY (L) LTD.
By:[Signature Illegible]
---------------------
Name:
Title:
Agreed as to Section 6.4 and Section 7:
CHINA NATIONAL AERO-ENGINE
CORPORATION
By:[Signature Illegible]
--------------------------------
Name:
Title:
CHENGDU HUAXI ELECTRIC POWER
SHAREHOLDING (GROUP) COMPANY LTD.
By:[Signature Illegible]
--------------------------------
Name:
Title:
<PAGE>
Annex A
to the Contract
DEFINITIONS
"ADDITIONAL COMPANY AMOUNTS" has the meaning set forth in Section
2.6 of the Contract.
"AFFILIATE" of any designated Person means any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such designated Person.
"ARRANGER" has the meaning provided in the preamble to this
Contract.
"AUTHORIZED OFFICER" means, with respect to any Person, the
president, any vice president, the treasurer, or any assistant treasurer of such
Person, or any other Person granted the relevant authority in writing by the
board of directors or management committee, as applicable, of such Person.
"BUSINESS DAY" means any day on which commercial banks are not
authorized or required to close in the City of New York, New York and Beijing,
PRC.
"CERTIFICATE OF PERFORMANCE ACCEPTANCE" has the meaning given such
term in the Construction Contract.
"CLEARANCE" means any authorization, consent, clearance, approval,
license, ruling, permit, exemption, filing or registration by or with (except
any filing relating to the perfection of security interests), or variance of or
from any Governmental Authority.
"CNAC SUPPORT CONTRACT" means the Support Contract, dated the date
hereof, between the Company China National Aero-Engine Corporation as arranger
thereunder.
"COLLATERAL" means, collectively, all property and assets with
respect to which a Lien is granted under the Security Documents.
"COMMENCEMENT DATE" has the meaning given such term in the
Construction Contract.
"COMMITMENT" of the Arranger means, for each type of Loan, the
amount set forth opposite the Arranger's name on Annex B.
"COMPANY" has the meaning provided in the preamble to this Contract.
"CONSTRUCTION CONTRACT" means the Contract for Construction Services
between the Company and China National Aero-Engine Corporation dated as of
- ---------, 1996.
"CONSTRUCTION LOAN" has the meaning provided in Section 2.1(a).
"CONSTRUCTION LOAN NOTE" has the meaning provided in Section 2.2(a).
"CONSTRUCTION PERIOD" means the period of time commencing on the
Commencement Date and ending on the Mandatory Repayment Date.
"DEFAULT" means, with respect to any document, any event which, with
the giving of notice or the passing of time, or both, or the fulfillment of any
other applicable condition, would become an event of default under such
document.
"DOLLARS", "$" or US$" means any coin or currency of the United
States of America which is legal tender for the payment of public and private
debts.
"ENVIRONMENTAL LAWS" means any laws, rules, regulations, and other
legal requirements of any Governmental Authority, foreign or domestic,
pertaining to the release of materials into or protection of the environment,
including all such legal requirements pertaining to human health and safety.
"EVENT OF DEFAULT" has the meaning provided in Section 6.1.
"EVENT OF EMINENT DOMAIN" means any compulsory transfer or taking
(including by condemnation, confiscation, seizure or requisition of title or use
or transfer under threat of compulsory transfer or taking) of all or any
material part of the Power Station or the Collateral by any Governmental
Authority.
"EVENT OF LOSS" means (i) an event that causes all or a portion of
the Power Station or the Collateral to be damaged, destroyed or rendered unfit
for normal use for any reason or (ii) the occurrence of an Event of Eminent
Domain.
"FINANCING DOCUMENTS" means the Contract, the Notes, the Security
Documents and the Other Contracts.
"FINANCING EVENT OF DEFAULT" means an "Event of Default" under any
Financing Document.
"FUEL SUPPLY CONTRACT" means the Gas Purchase and Supply Contract,
dated -----------, 1996 between the Company and Chengdu Huachuan Petroleum &
Natural Gas Exploration and Development Company for the long term supply of
natural gas to the Power Station.
"GOOD FAITH CONTEST" means the contest of an item if: (i) the item
is diligently contested in good faith by appropriate proceedings timely
instituted and (ii) the failure to pay or comply with the contested item during
the period of such contest could not reasonably be expected to have a Material
Adverse Effect.
"GOVERNMENT RULE" means any constitution, law, regulation,
ordinance, rule, directive, judgment, administrative practice, order, writ,
injunction or decree of or by any Governmental Authority.
"GOVERNMENTAL AUTHORITY" means any governmental authority or
judicial, regulatory or administrative body, agency or instrumentality of any
country or political subdivision thereof exercising jurisdiction over the Power
Station, the Company, the Arranger or any party to a Project Document or
Financing Document.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing in any manner the
payment or performance of any Indebtedness or other obligation of any other
Person.
"GUARANTEED COMPLETION DATE" has the meaning given such term in the
Construction Contract.
"HUAXI SUPPORT CONTRACT" means the Support Contract, dated the date
hereof, between the Company and Chengdu Huaxi Electric Power Shareholder (Group)
Company Ltd. as arranger thereunder.
"INDEBTEDNESS" means, for any Person, at any date, without
duplication (i) obligations created, issued or incurred by such Person for
borrowed money; (ii) obligations of such Person to pay the deferred purchase or
acquisition price of property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (iii) Indebtedness of others secured by a Lien
(other than a Permitted Encumbrance) on the property of such Person; (iv)
obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for the
account of such Person (except to the extent such letters of credit or similar
instruments are described in any of the Financing Documents or the Project
Documents (including performance bonds)); (v) capital lease obligations of such
Person; and (vi) Indebtedness of others Guaranteed by such Person.
"INDEMNIFICATION CONTRACT" means the Indemnification Contract dated
- ---------, 1996 between the Company and Chengdu Huaxi Electric Power
Shareholdering (Group) Company Ltd.
"INTERCONNECTION CONTRACT" means the Interconnection and Dispatch
Contract, dated as of --------, 1996, between Sichuan Power Dispatch Bureau and
the Company.
"JOINT VENTURE CONTRACT" means the Cooperative Joint Venture
Contract, dated November 28, 1995, among Chengdu Huaxi Electric Power
Shareholding (Group) Company Ltd., China National Aero-Engine Corporation, and
AES China Generating Company Limited.
"LAND CONTRACT" means the State-Owned Land Use Rights Contract to be
entered into between the Company and ----------------- State Land Bureau with
respect to the use of land located at the Site.
"LETTER(S) OF UNDERTAKING" means the letter(s) of undertaking from
government entities stating that they will render all necessary support to the
Power Purchaser so that the Power Purchaser can perform its obligations under
the Power Purchase Contract, including without limitation (i) the Undertaking
Letter of the Chengdu City Economic Commission dated ----------, 1996; (ii) the
Undertaking Letter of the Chengdu City Commodity Price Control Bureau dated
- ----------, 1996 and (iii) the Undertaking Letter of the Chengdu Foreign
Economic and Trade Commission dated ----------, 1996.
"LIEN" means, with respect to any property, any mortgage, lien,
pledge, charge, lease, easement, servitude, security interest, assignment or
encumbrance of any kind on or with respect to such property.
"LOAN" means either a Construction Loan or the Term Loan and "Loans"
means collectively the Construction Loans and the Term Loan.
"LOSS PROCEEDS" means all net proceeds or compensation received in
respect of any Event of Loss.
"MANDATORY REPAYMENT DATE" means the earlier of (i) date the Company
delivers the Certificate of Performance Acceptance to the contractor under the
Construction Contract and (ii) the Guaranteed Completion Date; provided,
however, that if such date is not a Business Day, the Mandatory Repayment Date
shall occur on the next following Business Day.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial position, results of operations or business prospects, taken as a
whole, of the Company, including, without limitation, a material adverse effect
on (i) the commercial operation of the Power Station, (ii) the ability of the
Company to perform any of its material obligations under the Contract, the
Project Documents or the Financing Documents, (iii) the validity or priority of
the Liens on any of the Collateral, (iv) the repayment of either the
Construction Loans or the Term Loan, as the case may be, or (v) the validity and
enforceability of any of the Financing Documents or the Project Documents.
"NOTE" means either the Construction Loan Note or the Term Loan
Note, and "Notes" means collectively the Construction Loan Note and the Term
Loan Note.
"OTHER CONTRACTS" means the CNAC Support Contract and the Huaxi
Support Contract.
"OTHER ARRANGERS" means China National Aero-Engine Corporation and
Chengdu Huaxi Electric Power Shareholding (Group) Company Ltd., acting as
arrangers under the Other Contracts.
"PARTY" means each of the Arranger and the Company.
PEOPLE'S REPUBLIC OF CHINA ACCOUNTING RULES" means the Rules of the
People's Republic of China on accounting for Chinese Foreign Joint Venture
Enterprises and other relevant rules and regulations of the People's Republic of
China.
"PERMITTED INDEBTEDNESS" means, for any Person: (i) Indebtedness
incurred under the Financing Documents; (ii) Indebtedness arising under the
Project Documents; (iii) trade accounts payable (other than for (a) borrowed
money and operating lease obligations or (b) the purchase of equipment with a
value, individually or in the aggregate, in excess of US$1,000,000) arising, and
accrued expenses incurred, in the ordinary course of business, and (iv) other
Indebtedness of such Person not to exceed in the aggregate US$500,000 or the
equivalent thereof.
"PERMITTED LIENS" means (i) Liens specifically permitted or required
by or created by any of the Financing Documents or the Project Documents; (ii)
Liens expressly subordinated to the Liens created by the Financing Documents and
subordinated in right of payment to the Loans; (iii) Liens for taxes,
assessments or governmental charges not due and delinquent or due, but subject
to a Good Faith Contest; (iv) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business or that are the subject of a Good Faith Contest; (v) easements,
rights-of-way, reservations, restrictions, covenants, and other similar
encumbrances affecting any property subject to the Liens of any of the Security
Documents, granted in the ordinary course of business, which do not individually
or in the aggregate have a Material Adverse Effect; and (vi) attachment,
judgment and other similar Liens arising in connection with court proceedings
that are the subject of a Good Faith Contest.
"PERSON" or "PERSON" means any individual, sole proprietorship,
corporation, partnership, joint venture, limited liability company, trust,
unincorporated association, institution, government authority or any other
entity.
"POWER PURCHASER" means the Chengdu Huaxi Power Company (Group)
Limited, a company organized under the laws of the PRC.
"POWER PURCHASE CONTRACT" means the Power Purchase Contract, dated
- --------, 1996, between the Company and Power Purchaser.
"POWER STATION" means the 1x50 MW natural gas fired power plant, to
be constructed in Jintang County, Sichuan Province, the PRC, as more fully
described in Appendix A to the Construction Contract.
"PRC" or "CHINA" means the People's Republic of China.
"PRICE ADJUSTMENT CONTRACT" means the Electric Tariff Adjustment
Method for Chengdu AES Kaihua Gas Turbine Power Company Limited dated as of
- ---------, 1996 between the Power Purchaser and the Company.
"PROJECT DOCUMENTS" means the Joint Venture Contract, the Power
Purchase Contract, the Construction Contract, Fuel Supply Contract, the
Indemnification Contract, the Land Contract, the Letter(s) of Undertaking, the
Interconnection Contract, the Supplemental Interconnection Contract, the Price
Adjustment Contract, any contract or agreement entered into in substitution for
the foregoing and any other contract or letter or instrument entered into by the
Company with respect to the Power Station.
"PROJECT COSTS" means all costs and expenses paid, incurred or to be
incurred by the Company in connection with the development, design,
construction, financing, start-up, ownership and operation of the Power Station,
including, without limitation, (i) all construction costs of the Power Station,
including all amounts payable under the Construction Contract, (ii) initial
spare parts, start-up, and operator mobilization costs, and working capital
requirements, (iii) development fees and development costs recoveries, (iv)
costs related to any of the Loans or the loans under the Other Contracts, (v)
related legal and other transaction and financing costs, (vi) insurance
premiums, (vii) costs of Site, (viii) operating and maintenance expenses, (ix)
fees and expenses payable to the Arranger and the Other Arrangers, (x) initial
working capital and (xi) all other Power Station related costs and expenses for
the construction and financing of the Power Station.
"RMB" or "RENMINBI" means Renminbi yuan, the lawful currency of the
PRC.
"SECURITY DOCUMENTS" means the Assignment Contract to be entered
into among the Arranger, the Other Arrangers and the Company.
"SITE" means, in the aggregate, the land subject to the Land
Contract.
"SUPPLEMENTAL INTERCONNECTION CONTRACT" means the Supplemental
Interconnection and Dispatch Contract dated ---------, 1996 between the Company
and the Sichwan Power Dispatch Bureau.
"TERM LOAN" has the meaning provided in Section 2.1(b).
"TERM LOAN NOTE" has the meaning provided in Section 2.2(b).
"TERM LOAN REPAYMENT DATES" has the meaning provided in Section
2.4(b).
"UNITED STATES" or "U.S." means all states, commonwealths,
territories and possessions of the United States of America.
"WITHHOLDING TAXES" means any present or future withholding or
deduction for, any present or future withholding taxes imposed by the PRC or
Labuan or any Governmental Authority within the PRC or Labuan.
(a) Principles of Construction. Unless the context otherwise requires:
(i) reference to any statute or statutory provision shall include
any amendment, modification or reenactment of, any legislative
provisions substituted for and all legislation and statutory
instruments issued under, such statute or statutory provisions;
(ii) words defined as denoting the singular shall include the
plural and vice versa;
(iii) references denoting individuals shall include corporations,
associations, trustees, instrumentalities and partnerships, and vice
versa;
(iv) words denoting any gender shall include all genders;
(v) references to a Section, Schedule, Exhibit or party shall be
construed as references to a Section, Schedule, Exhibit or party to
the document in which such reference is made;
(vi) references to any document, lease, contract or other
agreement of any nature shall, as appropriate, include or be construed
as references to such document, lease, contract or other agreement as
amended, modified, extended, renewed, restated, supplemented or
replaced from time to time;
(vii) references to any party in any document, deed or agreement
shall include its successors and permitted assignees;
(viii) headings used in any document are for convenience only and
shall be disregarded in construing such document; and
(ix) the words "include", "includes" or "including" are not
limiting.
<PAGE>
Annex B
to the Contract
COMMITMENTS
COMMITMENT
----------
Construction Loans US$------
Term Loan US$------
<PAGE>
Exhibit 1
to the Contract
Form of Construction Note
[Date]
[Location]
US$-------------
FOR VALUE RECEIVED, Chengdu AES KAIHUA Gas Turbine Power Co.,
Ltd. (the "Company") hereby promises to pay to the order of AES Tian Fu Power
Company (L) Ltd., a company organized under the laws of Labuan (the "Arranger"),
the aggregate unpaid principal amount of all Construction Loans (as defined in
the Contract referred to below) not exceeding in the aggregate the principal sum
of -------------------- (U.S.$------).
All Construction Loans made by the Arranger to the Company and
all repayments of the principal thereof shall be recorded by the Arranger on the
Schedule attached hereto.
This Note shall be repaid in full on the Mandatory Repayment
Date (as such term is defined in the Contract).
This Note evidences the obligations of the Company under, and
is referred to in, the Support Contract, dated as of -------------, between the
Company and the Arranger (as from time to time in effect, the "Contract"), and
is entitled to the benefits thereof.
The Company also promises to pay interest on the unpaid
principal amount hereof from the date hereof until paid at the rates and at the
times provided in the Contract.
Principal of, and premium, if any, and interest on, this Note
shall be payable in immediately available funds in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the
payment of public and private debts, in the manner provided in the Contract.
This Note is secured by the Security Documents referred to in
the Contract and is entitled to the benefits thereof.
In case an Event of Default (as defined in the Contract) shall
occur and be continuing, the principal of and accrued interest on this Note may
be declared to be due and payable in the manner and with the effect provided in
the Contract.
The Company hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.
CHENGDU AES KAIHUA GAS TURBINE POWER CO., LTD.
By:-------------------------------
Name:
Title:
<PAGE>
Schedule A
to Construction
Loan Note
AMOUNT PRINCIPAL UNPAID
DATE BORROWED REPAID BALANCE
---- -------- ------ -------
<PAGE>
Exhibit 2
to the Contract
Form of Term Loan Note
[Date]
[Location]
US$----------------
FOR VALUE RECEIVED, Chengdu AES KAIHUA Gas Turbine Power Co., Ltd. (the
"Company") hereby promises to pay to the order of AES Tian Fu Power Company (L)
Ltd., a company organized under the laws of Labuan (the "Arranger"), the
aggregate the principal sum of ------------------- (U.S.$------).
The amounts and dates of the repayment of this Note are as indicated on
the attached Schedule A.
This Note evidences the obligations of the Company under, and is
referred to in, the Support Contract, dated as of --, 1996, between the Company
and the Arranger (as from time to time in effect, the "Contract"), and is
entitled to the benefits thereof.
The Company also promises to pay interest on the unpaid principal
amount hereof from the date hereof until paid at the rates and at the times
provided in the Contract.
Principal of, and premium, if any, and interest on, this Note shall be
payable in immediately available funds in such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts, in the manner provided in the Contract.
This Note is secured by the Security Documents referred to in the
Contract and is entitled to the benefits thereof.
In case an Event of Default (as defined in the Contract) shall occur
and be continuing, the principal of and accrued interest on this Note may be
declared to be due and payable in the manner and with the effect provided in the
Contract.
The Company hereby waives presentment, demand, protest or notice of any
kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.
CHENGDU AES KAIHUA GAS TURBINE POWER CO., LTD.
By:-----------------------------
Name:
Title:
<PAGE>
Schedule A
to Term Loan Note
Amortization Schedule for Term Loan Note
YEAR MONTH PRINCIPAL REPAYMENT SCHEDULE
U.S.$
[ to be completed upon issuance of the Note ]
<PAGE>
Exhibit 3
to the Contract
Request for Borrowing
[Date]
AES Tian Fu Power Company (L) Ltd.
Gentlemen:
The undersigned, Chengdu AES KAIHUA Gas Turbine Power Co.,
Ltd., refers to the Support Contract, dated as of ------------, 1996 (as amended
from time to time, the "Contract" the terms defined therein being used herein as
therein defined), among the undersigned and you, and hereby requests, pursuant
to Section 3.1 of the Contract, that a borrowing be made under the Contract, and
in that connection sets forth below the information relating to such borrowing
(the "Proposed Borrowing") as required by Section 3.1 of the Contract:
(i) The Business Day of the Proposed Borrowing is --, 19--.
(ii) The Proposed Borrowing is to consist of [a Construction
Loan in an aggregate principal amount equal to $---] [a Term Loan in an
aggregate principal amount equal to $---].
(iii) The name and account number of the bank to which funds
are to be transferred is ----.
Very truly yours,
CHENGDU AES KAIHUA GAS TURBINE
POWER CO., LTD.
By:--------------------------
Name:
Title:
Exhibit 10.47
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
POWER PURCHASE CONTRACT
BETWEEN
CHENGDU HUAXI ELECTRIC POWER SHAREHOLDING (GROUP) COMPANY LTD.
AND
CHENGDU AES KAIHUA GAS TURBINE
POWER CO., LTD.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. GENERAL PRINCIPLES...........................................
ARTICLE 2. DEFINITIONS..................................................
2.01 Definitions..................................................
ARTICLE 3. PARTIES TO THE CONTRACT......................................
3.01 The Parties..................................................
3.02 Mutual Representations and Warranties........................
ARTICLE 4. RIGHTS AND OBLIGATIONS OF THE PARTIES........................
4.01 Rights and Obligations of the Seller.........................
4.02 Rights and Obligations of the Purchaser......................
ARTICLE 5. POWER STATION OPERATION AND DISPATCH.........................
5.01 Power Station Operation and Maintenance......................
ARTICLE 6. MEASUREMENT OF ELECTRICAL ENERGY.............................
6.01 Installation and Maintenance of Meters.......................
6.02 Measurement of Electrical Energy.............................
ARTICLE 7. PRICING......................................................
ARTICLE 8. PAYMENT CALCULATIONS.........................................
8.01 Payment for Annual Minimum Quantity Energy...................
8.02 Payment for Failure to take the Annual Minimum Quantity......
8.03 Payment for Additional Sales.................................
8.04 Failure to Accept Electrical Energy..........................
8.05 Electricity Fee Payments.....................................
ARTICLE 9. TERM AND TERMINATION.........................................
9.01 Term.........................................................
9.02 Defaults and Termination.....................................
ARTICLE 10. INDEMNIFICATION..............................................
10.01 Indemnification..............................................
ARTICLE 11. GOVERNING LAW AND DISPUTE RESOLUTION.........................
11.01 Governing Law................................................
11.02 Change of Law................................................
11.03 Friendly Consultations.......................................
11.04 Arbitration..................................................
11.05 Continuing Rights and Obligations............................
11.06 Enforcement of Award.........................................
11.07 Waiver of Sovereign Immunity Defense.........................
<PAGE>
ARTICLE 12. FORCE MAJEURE................................................
12.01 Definition of Force Majeure..................................
12.02 Parties' Obligations Upon Occurrence of Force Majeure........
12.03 Notification Requirement ....................................
12.04 Change of Circumstances......................................
ARTICLE 13. ASSIGNMENT...................................................
13.01 Assignment...................................................
ARTICLE 14. MISCELLANEOUS PROVISIONS.....................................
14.01 Notices......................................................
14.02 Binding Effect...............................................
14.03 Language.....................................................
14.04 Confidentiality..............................................
14.05 Severability.................................................
14.06 Entire Contract..............................................
14.07 Effectiveness................................................
14.08 Insurance....................................................
APPENDIX A.
INTERCONNECTION AND DISPATCH CONTRACT
APPENDIX B.
METERING POINT AND POINT OF DELIVERY
APPENDIX C.
TERMINATION CHARGE
APPENDIX D.
THE ELECTRIC TARIFF ADJUSTMENT METHOD FOR CHENGDU AES KAIHUA GAS
TURBINE POWER CO., LTD.
<PAGE>
ARTICLE 1. GENERAL PRINCIPLES
This Power Purchase Contract (including all Appendices attached hereto, ("the
Contract") is made in Chengdu, Sichuan Province, the People's Republic of China
on this ____th day of July, 1996 by and between Chengdu Huaxi Electric Power
Shareholding (Group) Company Ltd. [Chinese Characters] (hereinafter referred to
as the "Purchaser") and Chengdu AES KAIHUA Gas Turbine Power Co., Ltd. [Chinese
Characters] (hereinafter referred to as the "Seller"). Each of Purchaser and
Seller may hereinafter individually be referred to as a "Party" and collectively
as the "Parties."
After friendly consultations conducted in accordance with the laws and
regulations of the People's Republic of China and on the basis of the principles
of equality and mutual benefit, the Parties agree as follows:
ARTICLE 2. DEFINITIONS
2.01 Definitions
For purposes of this Contract, the capitalized items set forth below
will have the following corresponding meanings:
(a) "Acceptable Power Factor" means that for any month, the
average power factor for the Power Station shall be between
0.8 and 0.85;
(b) "Annual Energy Payment" has the meaning set forth in Article
8.02 hereof;
(c) "Annual Minimum Quantity" or "AMQ" has the meaning given it in
the Electric Tariff Adjustment Method;
(d) "Capital Return" has the meaning given to it in Schedule 1
which is attached to the Electric Tariff Adjustment Method;
(e) "Change of Law" means any change in any national, provincial,
prefectural, municipal or other local law, rule, regulation or
policy in the People's Republic of China, relating to taxes,
environmental issues or other matters concerning the
production, delivery, or sale of electrical energy, or any
change in any interpretation thereof that was relied upon by
the Seller in entering into this Contract;
(f) "Commencement of Operations Date" means the date on which the
Power Station goes into commercial operation as more fully
described in Article 4.01(h) hereof;
(g) "Current Tariff" shall have the meaning given it in the
Electric Tariff Adjustment Method;
(h) "Declared Capacity" means the Net Station Capacity which is
declared by the Seller in a written notice to the Purchaser on
the Commencement of Operations Date and on or before the first
day of each calendar year thereafter, as being the applicable
Net Station Capacity in effect until the next such notice is
given;
(i) "Dispatch Provisions" means the procedures to be followed by
the Grid, the Purchaser and the Seller, for the scheduling and
control of the delivery of electrical energy as more fully
detailed in the Interconnection and Dispatch Contract;
(j) "Dispatch Center" means the Sichuan Power Dispatch Bureau
located in Chengdu City, Sichuan Province, People's Republic
of China, and any successor thereof;
(k) "Electric Tariff Adjustment Method" means the Electric Tariff
Adjustment Method entered into between the Purchaser and the
Seller which is attached as Appendix D hereto, and approved by
the Price Bureau, that defines the Current Tariff to be paid
by the Purchaser to the Seller, and subsequent adjustments to
the Current Tariff;
(l) "Electricity Fee" means the amount to be paid by the Purchaser
to the Seller pursuant to Article 8.05(b) hereof;
(m) "EPC Contractor" means the company or group of companies that
is responsible for the design, engineering, procurement,
construction, startup and testing of the Power Station;
(n) "EPC Contract" means the Construction Services Contract
between the Seller and the EPC Contractor for the design,
engineering, procurement, construction, start-up and testing
of the Power Station;
(o) "Force Majeure" has the meaning given to it in Article 12.01
hereof;
(p) "Fuel Contract" means the Gas Purchase and Supply Contract for
the purchase and transportation of fuel to the Power Station
between the Seller and the Fuel Supplier, as such contract may
be amended from time to time;
(q) "Fuel Supplier" means the Chengdu Huachuan Petroleum & Natural
Gas Exploration and Development Company;
(r) "Gas Interconnection Facility" has the meaning given to it in
the Fuel Contract;
(s) "Grid" means Sichuan Provincial Power Bureau, the owner and
operator of the electric transmission system to which the
Power Station will be connected;
(t) "Interconnection Approval" means the approval received by the
Seller from the Grid establishing the right of the Seller to
connect to the electric transmission system of the Grid;
(u) "Interconnection Fee" means the fee, associated with the
Transmission Facilities, paid to the Chengdu City Power Supply
Bureau for the Seller's right to connect the Power Station to
the Grid;
(v) "Interconnection and Dispatch Contract" means the contracts
for the interconnection and dispatch of the Power Station
attached as Appendix A hereto, as amended or supplemented;
(w) "Joint Venture Contract" means the cooperative joint venture
contract dated as of November 28, 1995, entered into among
Chengdu Huaxi Electric Power Shareholding (Group) Company
Ltd., China National Aero-Engine Corporation and AES China
Generating Company Limited for the establishment of the
Seller, as such cooperative joint venture contract may be
amended or supplemented from time to time;
(x) "KW" means kilowatt;
(y) "KWH" means kilowatt hours;
(z) "MW" means megawatt;
(aa) "MWH" means megawatt hours;
(ab) "Metering Point" means the location of the Purchaser's meters
and the Seller's meters as described in Appendix B attached
hereto;
(ac) "Net Station Capacity" means the total generation capacity in
MW of the Power Station as measured at the Point of Delivery
after deduction for parasitic load;
(ad) "Point of Delivery" means the physical point of
interconnection between the Power Station and the Transmission
Facilities at which the Purchaser takes delivery of the
electrical energy from the Seller and where the Seller's
equipment maintenance responsibility ends and the Grid's
responsibility starts as more fully described in the diagram
set forth in Appendix B attached hereto. Risk of loss of
electrical energy shall pass from the Seller to the Purchaser
at the Point of Delivery;
(ae) "Power Factor Penalty" means the penalty imposed on the
Seller, per KWH, for failure to achieve the Acceptable Power
Factor in any given month as calculated in accordance with the
Document of the Ministry of Hydro Power and Electricity - 1982
No. 21;
(af) "Power Station" shall mean the simple cycle, approximately 50
MW (at Site conditions and net of parasitic load) electric
generating power plant, consisting of a gas turbine generator
set, to be constructed on and operated at the Site and owned
by the Seller, including, without limitation, the Site, all
machinery, equipment, installations, warehouses, fuel pumps,
pipes and pipelines, control facilities, shops, buildings,
meters and interconnection equipment and substation at the
Site, required to construct and/or operate the Power Station
in a manner which allows Seller to comply fully with its
obligations under this Contract;
(ag) "PRC Government Authority" means any ministry, agency, bureau,
department, political subdivision, corporation, commission,
instrumentality or other government authority under the direct
or indirect control of any central, provincial or local
government of the People's Republic of China;
(ah) "Price Bureau" means the Chengdu City and/or the Sichuan
Provincial price control bureaus and any other PRC Government
Authority required to provide an approval for the Current
Tariff or Electric Tariff Adjustment Method;
(ai) "Prudent Electrical Practices" means those generally accepted
standards, as may be changed from time to time, that are
commonly adhered to by owners and operators of electric
generating power stations to design, engineer, construct,
operate, maintain and test electric equipment within the
constraints of safety, efficiency, economy, reliability, and
equipment manufacturer's recommendations;
(aj) "Transmission Facilities" means the Interconnection Fee and
the transmission facilities to be designed, purchased,
constructed and erected by the Grid required to connect the
Power Station from the Point of Delivery to the Grid's
existing electrical system in order to permit the flow of
electrical energy between them;
(ak) "RMB" or "Renminbi" means the lawful currency of the People's
Republic of China;
(al) "Site" means the real property located at Chengdu City,
Sichuan Province, People's Republic of China as described in
Appendix 1 of the Joint Venture Contract upon which the Power
Station is located;
(am) "Term" means the term of this Contract as defined in Article 9
hereof;
(an) "USD" or "US$" means the lawful currency of the United States
of America.
ARTICLE 3. PARTIES TO THE CONTRACT
3.01 The Parties
The Parties to this Contract are:
(a) Purchaser, Chengdu Huaxi Electric Power Shareholding (Group)
Company Ltd., registered in Chengdu City, Sichuan Province,
the People's Republic of China with its legal address at No.
24 Nan San Duan Y. Huan Road, Chengdu, Sichuan Province,
People's Republic of China.
Legal Representative of Purchaser:
Name: Qu Delin
Position: General Manager
Nationality: Chinese
(b) Seller, Chengdu AES KAIHUA Gas Turbine Power Co., Ltd.,
registered in Chengdu City, Sichuan Province, the People's
Republic of China with its legal address in the Enterprise
Development Zone, Jintang County, Sichuan Province, People's
Republic of China.
Legal Representative of Seller:
Name: Qu Delin
Position: Chairman of the Board
Nationality: People's Republic of China
3.02 Mutual Representations and Warranties
Purchaser and Seller each represent and warrant the following:
(a) Each Party possesses full power and authority and the legal
right to enter this Contract and to perform its obligations
herein; and
(b) The representative of each Party whose signature is affixed
hereto has been fully authorized to sign this Contract and to
bind its respective Party thereby.
ARTICLE 4. RIGHTS AND OBLIGATIONS OF THE PARTIES
4.01 Rights and Obligations of the Seller
(a) Sale and Delivery of electrical energy during start up and
testing: Prior to the Commencement of Operations Date of the
Power Station, the Seller agrees to deliver electrical energy
generated during the start up and testing of the Power Station
to the Purchaser.
(b) Sale and Delivery of electrical energy: Beginning from the
Commencement of Operations Date of the Power Station, Seller
agrees to deliver and sell at the Point of Delivery to
Purchaser all electrical energy generated by the Power
Station, in accordance with the terms of this Contract and its
Appendices attached hereto. Seller agrees to deliver such
electrical energy in accordance with the Dispatch Provisions
attached hereto as Appendix A. Delivery of such electrical
energy will be subject to planned outages and unplanned
outages as further described in Article 5 and the
Interconnection and Dispatch Contract, and subject to events
of Force Majeure as more fully described in Article 12.01 of
this Contract.
(c) Exclusivity: Seller may not sell any electrical energy from
the Power Station to anyone other than the Purchaser.
(d) Design and Construction of the Power Station: Seller is
responsible for the development, design, and construction of
the Power Station. Seller will keep Purchaser reasonably
informed while performing its obligations as described herein.
Upon the commencement of construction of the Power Station,
Seller shall deliver to the Purchaser, a construction schedule
detailing the planned construction progress and specifying the
expected date of the start of testing of the Power Station.
(e) Installation of Seller's Meters: Seller is responsible for
installing and maintaining all Seller's meters as required by
this Contract and as more fully described in Article 6.
(f) Fuel: Seller is responsible for the fuel supply to the Power
Station.
(g) Operation and Maintenance of the Power Station: Seller is
responsible for the management, operation, maintenance and
repair of the Power Station.
(h) Commencement of Operations Date: Seller is responsible for
start-up and testing of the Power Station. Seller will notify
Purchaser in writing upon completion of testing of the Power
Station in accordance with the EPC Contract between the Seller
and the EPC Contractor. The date set forth in the Seller's
notification to the Purchaser shall be the Commencement of
Operations Date of the Power Station.
(i) Power Factor: Seller shall operate the Power Station so that
the Acceptable Power Factor is achieved. Seller shall be
liable for the Power Factor Penalty for a failure to achieve
the Acceptable Power Factor.
4.02 Rights and Obligations of the Purchaser
(a) Purchase and Acceptance of electrical energy: Beginning on the
Commencement of Operations Date for the Power Station,
Purchaser will purchase and accept from Seller, at the Point
of Delivery, all electrical energy generated by the Power
Station and delivered to Purchaser in accordance with the
Dispatch Provisions, this Contract, and the Appendices
attached hereto. Such purchase and acceptance of electrical
energy will also be subject to planned outages and unplanned
outages as more fully described in Article 5 of this Contract
and the Interconnection and Dispatch Contract, and will be
subject to events of Force Majeure as more fully described
Article 12.01 of this Contract. To the extent electrical
energy is generated for start-up and testing purposes prior to
the Commencement of Operations Date for the Power Station,
Purchaser agrees, at all times, except during a Grid
emergency, to accept all such electrical energy at the Point
of Delivery and to pay the Seller seventy percent (70%) of the
Current Tariff per KWH for such electrical energy. During
start-up and testing Purchaser shall allow Seller to operate
the Power Station as necessary to complete plant testing in
accordance with the EPC Contract.
(b) Pricing Approval: Purchaser is responsible for causing all
approvals necessary in connection with the pricing of
electrical energy made available to the Purchaser hereunder to
be received by the Seller from the appropriate level Price
Bureau, and from any other relevant PRC Government Authority.
Such approvals will include the approval of the Electric
Tariff Adjustment Method, the initial Current Tariff and the
principles which will define all future price increases in the
Current Tariff due to higher fuel costs, increased operating
and maintenance costs, changes in the RMB to USD exchange
rates which may affect payments of debt service or profit
repatriation or due to any Change of Law which might adversely
effect the financial return to the Seller. The obligations in
this Article 4.02(b) must be satisfied as a condition to the
obligations of the Seller continuing under this Contract.
(c) Installation of Purchaser's Meters: Purchaser is responsible
for installing and maintaining all Purchaser's meters as
required by this Contract and as more fully described in
Article 6.
(d) Other Government Approvals: Purchaser is responsible for
obtaining the appropriate approvals from all PRC Government
Authority concerning the Purchaser's obligations under this
Contract. Purchaser will assist Seller in obtaining all
permits and licenses as are necessary to proceed with
construction and operation of the Power Station. Purchaser
will cause the Interconnection Approval and all approvals
required by Seller for the Fuel Contract to be received by the
Seller. The obligations in this Article 4.02(d) must be
satisfied as a condition to the obligations of the Seller
continuing under this Contract.
(e) Provision of Construction Electricity: Purchaser is
responsible for supplying, or causing others to provide, the
Seller and the Seller's EPC Contractor a continuous and
uninterrupted supply of electrical energy to the construction
site during construction of the Power Station. For this
service, Seller and EPC Contractor shall not be obligated to
pay more than the tariff paid for such service by other
similarly situated general industrial users of such services.
All rights, title and interest in any equipment put into
service by the Purchaser to meet the obligations of this
Article 4.02(e) shall be transferred to the Seller upon the
Purchaser's receipt of the payment made in accordance with
Article 4.02(i) hereof.
(f) Provision of Standby Electrical Energy and Utilities:
Purchaser is responsible for supplying, or causing others to
provide, a continuous and uninterrupted supply of standby
electrical energy to the Power Station for the Term of this
Contract. Such standby electrical energy shall be sufficient
for testing and start up of the Power Station and for
providing basic station service for the Power Station during
times when the Power Station cannot supply its own energy. For
this service, Seller and EPC Contractor shall not be obligated
to pay more than the tariff paid for such service by other
similarly situated general industrial users of such services.
(g) Provision of Other Utilities: Purchaser shall cause to be
provided to Seller, at Seller's expense, all utilities,
(including, without limitation, telecommunication, fresh
water, waste disposal) and access to the Site which the Seller
requires in order to construct the Power Station in accordance
with the EPC Contract and to operate the Power Station in the
manner contemplated by this Contract, as fired by the fuel
supplied under the Fuel Contract, subject only to the Seller
paying the established, applicable customary rate or charge
for the utilities provided to Seller pursuant to this Article
4.02(g) as paid for by other similarly situated users of such
utilities.
(h) Interconnection: Purchaser is responsible for providing, or if
it is unable to provide, causing others to provide, (i) the
Transmission Facilities necessary to connect the Power Station
to the Grid and (ii) the Gas Interconnection Facility
necessary to provide natural gas to the Power Station.
Purchaser guarantees that (i) the Transmission Facilities will
be ready and available and capable of supplying electrical
energy to the Power Station and accepting the electrical
energy generated by the Power Station and (ii) the Gas
Interconnection Facility will be ready and available to
deliver natural gas to the Power Station prior to the
scheduled start of testing of the Power Station under the EPC
Contract. In the event the Purchaser fails to fulfill its
obligations as provided for in this Article 4.02(h), the
Commencement of Operations Date for the Power Station shall,
notwithstanding such failure, be deemed to have occurred upon
notice by the Seller to the Purchaser that the Power Station
is ready to commence sales of electrical energy hereunder, and
thereafter the Purchaser shall pay to the Seller, commencing
on the date of such notice, the Annual Energy Payment.
(i) In consideration of the Purchaser arranging for the provision
of electricity in accordance with Article 4.02(e) and Article
4.02(f) hereof, utilities in accordance with Article 4.02 (g),
and the Transmission Facilities in accordance with Article
4.02 (h), Seller shall make a one time payment to Purchaser of
fourteen million Renminbi (RMB 14 million) no later than
thirty (30) days following the initial contribution to the
registered capital of the Seller and Seller shall also pay
such reasonable costs, as shall be agreed to by Seller, of the
electric transformer and associated facilities as agreed by
the Seller, required for the supply of electricity to the
Power Station.
ARTICLE 5. POWER STATION OPERATION AND DISPATCH
5.01 Power Station Operation and Maintenance
(a) Planned Outages: The Parties agree and understand that in
order to undertake necessary overhaul, maintenance, inspection
and repair of the Power Station, the Seller is entitled to
completely shutdown or partially reduce the output of the
Power Station for periods of time. The Seller shall coordinate
the schedule of planned outages with Purchaser and the
Dispatch Center in accordance with the Interconnection and
Dispatch Contract. Seller shall provide, in November of each
year, to the Purchaser, a copy of the planned outage schedule
for the following year.
(b) Unplanned Outages: The Parties agree and understand that in
the course of operating the Power Station unscheduled outages
and emergencies may occur and that the Seller shall be
entitled to completely shutdown or partially reduce the output
of the Power Station for periods of time during such events.
Seller will use reasonable efforts to notify Purchaser of any
unscheduled outages, emergencies or other reductions in output
of the Power Station in accordance with the Interconnection
and Dispatch Contract.
ARTICLE 6. MEASUREMENT OF ELECTRICAL ENERGY
6.01 Installation and Maintenance of Meters
(a) Installation: Seller and Purchaser will each install one meter
at the Metering Point. Both the Seller's meter and the
Purchaser's meter shall be capable of measuring the Power
Station output in appropriate units at one (1) minute
intervals.
(b) Testing and Calibration: The Parties shall test the metering
equipment as needed, but no less than twice per year. If the
difference between the measurement by the Seller's meter and
the Purchaser's meter is more than plus or minus two-tenths
(0.2) of one (1%) percent, the Parties shall perform
calibration maintenance on the metering equipment. When
calibrating the metering equipment, voltage transformers, and
current transformers, the Parties shall achieve an accuracy
level no lower than specified in the following standards:
(i) Active Power Metering System - IEC 687 -1980 (Class
0.25)
(ii) Voltage Transformer - IEC (Class 0.2)
(iii) Current Transformer -IEC (Class 0.2)
A Party will be notified in advance by the other Party of any
calibration maintenance intended to be undertaken by the other
Party and will be permitted to attend all testing and
calibration.
6.02 Measurement of Electrical Energy
(a) All measurement of electrical energy delivered by Seller to
Purchaser under this Contract will be made at the Metering
Point by suitable kilowatt hour meters.
(b) In any month, if the number of KWHs measured by the
Purchaser's meter is different from the number of KWHs
measured by the Seller's meter by more than plus or minus
two-tenths (.2) of one (1%) percent, the meters shall be
recalibrated as described in Article 6.01 (b) and the
measurement of electrical energy used for the purpose of
submitting an invoice to the Purchaser shall be calculated as
described in Article 6.02(d) below.
(c) Subject to 6.02(b) above, the measurement of electrical energy
used for the purpose of submitting an invoice to the Purchaser
shall be the Purchaser's meter.
(d) In the event of a difference in the measured KWHs as described
in Article 6.01(b) above, the measured KWHs from the more
accurate meter, as determined by the testing described in
Article 6.01 (b) above, shall be used for the purpose of
submitting an invoice to the Purchaser.
ARTICLE 7. PRICING
The Parties agree that the price for electrical energy
delivered in accordance with this Contract shall be based on
and in accordance with Article 8 hereof and the Electric
Tariff Adjustment Method attached as Appendix D hereto.
ARTICLE 8. PAYMENT CALCULATIONS
8.01 Payment for Annual Minimum Quantity Energy
In each calendar year, all electrical energy delivered, in
accordance with instructions from the Dispatch Center, by the
Seller to the Purchaser shall be considered part of the Annual
Minimum Quantity until the sum of the delivered electrical
energy equals the Annual Minimum Quantity. For all electrical
energy delivered by the Seller to the Purchaser under this
Contract, the Purchaser agrees to pay the Seller, a fee
calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8.02 Payment for Failure to take the Annual Minimum Quantity
The Purchaser shall be obligated to purchase the Annual
Minimum Quantity. If (i) the Purchaser or the Grid fails for
any reason to accept the electrical energy made available by
the Seller or (ii) the Dispatch Center fails in any calendar
year to dispatch the Power Station to meet the Purchaser's
obligation to purchase the Annual Minimum Quantity, and as a
consequence, the annual quantity of electrical energy
delivered to the Point of Delivery is less than the Annual
Minimum Quantity, the Purchaser agrees to pay the Seller a fee
which shall be based on the difference between the actual
electrical energy delivered in the calendar year and the
Annual Minimum Quantity. The fee payable by Purchaser under
this Article 8.02 shall be invoiced by Seller to Purchaser in
January of each year. Such fee shall be calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8.03 Payment for Additional Sales
Seller shall make available as much additional electrical
energy, above the Annual Minimum Quantity, to the Purchaser as
is consistent with Prudent Electrical Practices, the technical
limits of the Power Station, the safe and prudent operation of
the Power Station and the Dispatch Provisions. The Purchaser
agrees to purchase, in accordance with the Dispatch
Provisions, all the additional electrical energy, above the
Annual Minimum Quantity, made available by the Seller
calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8.04 Failure to Accept Electrical Energy
Beginning on the Commencement of Operations Date, during any
month in which the Power Station is available to deliver
electrical energy for more than [***] hours, if the Purchaser
fails at any time and for any reason to accept [***] MWH of
electrical energy from the Power Station in such month, the
Purchaser shall pay the Seller in each such month a fee
calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
In the event that the sum of the electrical energy, delivered
by the Seller in a calendar year and paid for by the Purchaser
in accordance with Article 8.01 hereof, is greater than the
Annual Minimum Quantity, the Seller shall repay to the
Purchaser, all payments made to the Seller under this Article
8.04 in the month of January following the end of such
calendar year, plus interest accrued at the rate of [***]
per day on such amount.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8.05 Electricity Fee Payments
(a) On 26th, 27th or 28th day of each calendar month, the Seller
shall read the electric meters in accordance with Article 6
hereof and calculate the amount due from Purchaser for
electric energy made available in accordance with Article 8.01
hereof. The Purchaser shall have the right to witness the
reading of the meters by the Seller.
(b) Invoices: On the fifth day of each calendar month, Seller will
deliver an invoice to the Purchaser detailing the total
payment due from Purchaser pursuant to Article 8.01, Article
8.02, Article 8.03 and Article 8.04 hereof (collectively the
"Electricity Fee").
(c) Disputes: Should there be a dispute concerning invoiced
amounts of the Electricity Fee, Purchaser agrees to remit the
full amount of the invoice. Upon resolution of the dispute,
any sum to be refunded to Purchaser will be paid together with
interest at a rate of [***] percent per day. Interest will
accrue from the date Purchaser paid the invoice until the date
on which the amount is refunded to the Purchaser.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(d) Payment: Subject to the terms of this Contract, Purchaser will
pay to Seller each amount shown on invoices submitted by
Seller. Such payments made by Purchaser will be made before
the twentieth (20th) day of each calendar month without any
withholding or deduction. All payments by the Purchaser to
Seller hereunder, shall be made free and clear of all taxes,
charges, duties, and any other governmental extractions
imposed on the Purchaser.
(e) Delinquent Payments: If any amount payable of the Electricity
Fee is not paid on or before the specified due date, the
delinquent amount shall accrue interest at a rate of [***]
percent per day, until the date on which such delinquent
amount and the accrued interest thereof is received by Seller.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
ARTICLE 9. TERM AND TERMINATION
9.01 Term
This Contract shall have a term (the "Term") commencing on the
date this Contract is executed and delivered by the Parties
hereto and expiring on the fifteenth (15) anniversary of the
Commencement of Operations Date, unless terminated earlier in
accordance with the provisions of this Contract. If the Power
Station is able to generate electrical energy, but through the
fault of the Purchaser or an event of Force Majeure, is unable
to deliver the electrical energy or must reduce the delivery
of the electrical energy, for an aggregate of thirty (30) days
in any one calendar year during the term of the Contract, this
Contract shall be extended for a period equal to the period of
such reduction or suspension of service.
9.02 Defaults and Termination
(a) Seller's Defaults: Any of the following events shall be a
default by Seller under this Contract unless such event
occurred as a result of Purchaser's breach of its obligations
hereunder:
(i) Seller becomes bankrupt or insolvent and such
circumstances continue unremedied for ninety (90)
days;
(ii) Seller abandons the Power Station for a period of six
(6) months;
(iii) Seller inexcusably fails to generate and deliver
electrical energy to Purchaser for a period of one
hundred twenty (120) consecutive days; provided
however, the Seller shall not be in default if such
failure on the part of Seller is due to Purchaser's
or the Grid's failure to accept electrical energy or
is due to the failure of the Dispatch Center to
dispatch the Power Station in accordance with the
Interconnection and Dispatch Contract, or is due to
the failure of the Fuel Supplier to deliver fuel to
the Power Station in accordance with the Fuel
Contract, or is due to an insurable event or an event
of Force Majeure; or
(iv) Seller materially breaches any other material
obligation under this Contract and such circumstances
continue unremedied for a period of one hundred
eighty (180) days.
(b) Purchaser's Defaults: Any of the following events shall be a
default by the Purchaser under this Contract unless such event
occurred as a result of Seller's breach of its obligations
hereunder:
(i) Except in the event that the Seller has failed to pay
any taxes or fees due and payable, any PRC Government
Authority (including, without limitation any Price
Bureau) either (A) revokes or substantially alters
any license, permit, or approval previously issued to
the Seller or (B) fails to approve the Current Tariff
or fails to approve any adjustment in the Current
Tariff required to be made hereunder or in accordance
with the Electric Tariff Adjustment Method;
(ii) an event of default of the Fuel Supplier under
Article 11.2 of the Fuel Contract occurs;
(iii) Purchaser is dissolved or reorganized pursuant to
law; provided however, the Purchaser shall not be in
default if the newly formed organization expressly
assumes Purchaser's obligations described herein, the
provisions of Article 13.01 are satisfied, and the
financial condition of such newly formed organization
is fully acceptable and satisfactory to Seller;
(iv) Purchaser fails to make a payment in accordance with
this Contract and such non-payment continues for a
period of thirty (30) days following its due date;
provided that the Seller shall have the right to
suspend delivery of electrical energy to the
Purchaser after ten (10) days of such non-payment;
(v) Purchaser materially breaches any other material
obligation under this Contract and such circumstances
continue unremedied for one hundred eighty (180)
days; or
(vi) a breach by the Dispatch Center of the
Interconnection and Dispatch Contract.
(c) Procedures for Termination: Following the occurrence of one of
the defaults described in Section 9.02 above, the
non-defaulting Party may elect to terminate this Contract as
follows:
(i) The Party exercising its right to terminate the
Contract will notify the defaulting Party of its
intent to terminate. Such notice will specify the
default or breach in reasonable detail.
(ii) Upon receipt of the termination notice, the Party
charged with defaulting under this Contract shall
have ninety (90) days, or ten (10) days in the event
of failure to make any payment in accordance with
this Contract, to cure, mitigate or resolve the
default. If the Party charged with breaching the
Contract has failed to cure, mitigate or resolve such
default within the prescribed cure period, the Party
exercising its right to terminate this Contract shall
have the right to serve final notice of termination
to the defaulting Party.
(d) Termination Charge: In the event that this Contract is
terminated prior to the end of the Term, the following shall
apply:
(i) If the Seller abandons the Power Station prior to the
Commencement of Operations Date of the Power Station,
then no termination charge shall be paid.
(ii) If Seller terminates this Contract on account of the
default described in Article 9.02(b)(ii) and receives
full payment of the termination charge set forth in
Appendix C of the Fuel Contract from the Fuel
Supplier, then no additional termination charge shall
be payable by the Purchaser. In any such case, all
rights, title and ownership of the Power Station
shall be transferred as provided for under the Fuel
Contract and the Seller shall have no further
obligation to the Purchaser under this Contract.
(iii) In all other cases, (including termination by the
Purchaser pursuant to Article 9.02(a) above) the
Purchaser agrees to pay the Seller a termination
charge as calculated in Appendix C which is attached
hereto within thirty (30) days of receipt of the
final notice of termination described in Article
9.02(c)(ii). Upon full payment of the termination
charge, all rights, title, and ownership of the Power
Station shall be transferred by the Seller to the
Purchaser and the Seller shall have no further
obligation to the Purchaser under this Contract.
(e) Remedies upon Termination: The Party exercising its right to
terminate this Contract may pursue other remedies available to
it at law or equity or otherwise. The provisions contained in
this Article 9.02 (d) and Article 9.02 (e) shall survive the
termination of this Contract.
ARTICLE 10. INDEMNIFICATION
10.01 Indemnification
Seller and Purchaser hereby agree to indemnify and hold each
other, and their respective agents, employees, and
representatives harmless, with respect to loss or damage to
persons or property arising from the gross negligence,
inexcusable failure to act, bad faith, or willful misconduct
in connection with such Party's performance under this
Contract.
ARTICLE 11. GOVERNING LAW AND DISPUTE RESOLUTION
11.01 Governing Law
The validity, interpretation and implementation of this
Contract will be in accordance with the laws of the People's
Republic of China where such laws are published and publicly
available. In the event there is no published and publicly
available law in the People's Republic of China governing a
particular matter under this Contract, reference will be made
to general international commercial practices.
11.02 Change of Law
Purchaser agrees to indemnify and hold Seller harmless for any
financial impact on Seller's rights or obligations under this
Contract attributable to a Change of Law. In the event a
Change of Law adversely affects Seller's expected financial
benefit under this Contract, the Purchaser agrees to
compensate Seller by adjusting the Current Tariff as set forth
in the Electric Tariff Adjustment Method.
11.03 Friendly Consultations
In the event of any dispute, controversy, or claim arising out
of or relating to this Contract, or the breach, termination or
invalidity thereof, the disputing Party shall provide written
notice thereof to the other Party. The Parties shall attempt
in the first instance to resolve such dispute through friendly
consultations.
11.04 Arbitration
(a) If the dispute is not resolved by friendly consultation within
60 days after notice of a dispute is given by a Party, then
any Party may submit the dispute for final binding arbitration
by the Beijing City Arbitration Commission, in accordance with
its rules then in force. The arbitration proceedings shall be
held in Mandarin Chinese and English. The site of the
arbitration shall be Beijing. Should there exist a conflict
between the rules of the Beijing City Arbitration Commission
and the provisions of this Contract, the provisions of this
Contract will prevail.
(b) There shall be three (3) arbitrators. All three arbitrators
shall speak both Mandarin Chinese and English. Purchaser and
Seller shall each appoint (1) arbitrator within thirty (30)
days of the date of the request to initiate arbitration.
Within thirty (30) days from the appointment of the second of
the Parties' arbitrators, the Parties' arbitrators shall
appoint a third arbitrator who shall, in addition to his
duties as arbitrator, act as chairman of the arbitration
tribunal. Arbitrators not appointed within the time limits set
forth in this Article 11.04(b) shall be appointed by the
Secretary General of the International Center for Settlement
of Investment Disputes. The Parties hereby waive and renounce
any right to appeal the award of the arbitration panel or to
have any question of law or fact referred to a court or other
forum in the People's Republic of China except in furtherance
of enforcing the award of the arbitration panel.
(c) The award of the arbitration panel shall be issued not later
than sixty days following the close of hearings by the panel.
The arbitration award shall be final and binding on the
Parties and shall not be subject to appeal to any court. The
Parties agree to be bound thereby and to act accordingly.
(d) The costs of arbitration shall be borne by each Party as
designated in the arbitration award.
11.05 Continuing Rights and Obligations
Whenany dispute occurs and is the subject of friendly
consultations, or arbitration, the Parties shall continue to
exercise their remaining respective rights, and fulfill their
remaining respective obligations under this Contract.
11.06 Enforcement of Award
The Parties acknowledge that any award rendered pursuant to
Article 11.04 hereof shall be governed by the 1958 Convention
on the Recognition and Enforcement of Foreign Arbitration
Awards of the United Nations. The award shall be enforceable
in any court that has jurisdiction over the losing Party or
over the property of the losing Party.
11.07 Waiver of Sovereign Immunity Defense
In any arbitration proceeding, any legal proceeding to enforce
any arbitration award and in any legal action between the
Parties pursuant to or relating to this Contract, each Party
expressly waives the defense of sovereign immunity and any
other defense based on the fact or allegation that it is an
agency or instrumentality of a sovereign state.
ARTICLE 12. FORCE MAJEURE
12.01 Definition of Force Majeure
"Force Majeure" means all events which are beyond the
reasonable control of the Parties to this Contract. For
purposes of this Contract, events of Force Majeure are
reasonably unforeseen, unavoidable or insurmountable events
which arise after execution of this Contract and which prevent
total or partial performance by any Party. Such events will
include but not be limited to the following, earthquakes,
typhoons, flood, fire, any other natural disaster, strikes,
political disturbances, wars, or any other instance which
cannot be reasonably foreseen, prevented or controlled. For
purposes of this Contract, events of Force Majeure shall also
include those events considered Force Majeure in general
international commercial practice and under any agreement or
contract for the supply of fuel to the Power Station
(including, without limitation, any event of force majeure
under the Fuel Contract), and any event which results in an
interruption in the supply of fuel to the Power Station,
whether or not it was foreseeable. The Purchaser shall not be
entitled to claim Force Majeure due to any Change of Law or
due to any act of any PRC Government Authority or due to any
decrease in the demand for electrical energy in the People's
Republic of China or due to any increase in the supply of
electrical energy in the People's Republic of China. The
Seller shall be entitled to claim Force Majeure due to any
Change of Law or due to any act of any PRC Government
Authority which prevents the Seller from performing its
obligations hereunder or prevents the Seller from realizing
the economic benefits accruing to it under this Contract.
12.02 Parties' Obligations Upon Occurrence of Force Majeure
(i) If the occurrence of an event of Force Majeure
prevents a Party from fulfilling its obligations
under this Contract, the Party will be excused from
performing such obligations provided:
(a) Suspension of performance is of no greater
scope and no longer duration than is
reasonably required to correct consequences
caused by the event of Force Majeure; and
(b) The affected Party's remaining obligations
not affected by the event of Force Majeure
will not be excused.
(ii) The Parties agree to take all reasonable precautions,
due care, and reasonable measures to mitigate the
consequences of a Force Majeure event.
12.03 Notification Requirement
In the event either Party is unable to fulfill its obligations
under this Contract as a result of Force Majeure, such Party
will promptly notify the other Party. Such notification will
state the nature of the event, the anticipated duration, and
any action taken by the affected Party to mitigate the effect.
12.04 Change of Circumstances
Notwithstanding anything herein to the contrary, if any event
of Force Majeure affecting the operation of the Power Station
or the performance of the obligations of the Contract by
either or both of the Parties continues for a period longer
than one hundred and eighty consecutive (180) days (any such
event or circumstance in this Article 12.04 hereinafter
referred to as a "Change of Circumstances"), the Seller shall
give notice to the Purchaser thereof and the Parties shall
meet and endeavor to agree to amendments to this Contract
which will permit Seller to realize substantially the same
benefits and Capital Return as it would have received had the
Change of Circumstances not occurred. If after sixty (60) days
following the commencement of a Change of Circumstances, no
such agreement to amend the Contract has been reached, Seller
shall be entitled upon written notice to the Purchaser to
terminate this Contract. In any such case of termination, the
Purchaser shall pay the Seller a termination charge calculated
in accordance with Appendix C which is attached hereto within
thirty (30) days following Purchaser's receipt of such notice
of termination. Upon full payment by the Purchaser of the
termination charge, all rights, title, and ownership of the
Power Station shall be transferred by the Seller to the
Purchaser and the Seller shall have not further obligation to
Purchaser hereunder.
ARTICLE 13. ASSIGNMENT
13.01 Assignment
Neither Party may assign or transfer any of its rights,
benefits or obligations under this Contract without the prior
written consent of the other Party, except as follows:
(a) Purchaser's Rights of Assignment: Purchaser may assign its
rights and obligations under this Contract to a successor
statutory body. The successor statutory body must provide
financial guarantees satisfactory to Seller demonstrating the
successor's ability to continue Purchaser's obligations under
this Contract. In addition, the successor statutory body must,
prior to any such assignment, expressly agree with the Seller
in writing to be fully bound by Purchaser's obligations set
forth in this Contract.
(b) Seller's Rights of Assignment: Seller may assign its rights
and obligations under this Contract to any parent, subsidiary,
shareholder(s) or affiliate. Such assignment would be for the
purpose of constructing, owning and operating the Power
Station. In addition, the assignee must expressly agree in
writing to be fully bound by Seller's obligations set forth in
this Contract. Upon such assignment, Seller will be relieved
of all obligations herein. Seller may also assign its rights
under this Contract, including its right to receive revenues
from the sale of electrical energy under this Contract, as
security to financial institutions or other lenders of debt or
equity to the Power Station. Upon such assignment of this
Contract and through enforcement by such financial
institutions or other lenders of their rights under such
security assignment or upon assumption of the obligations of
the Seller by such financial institutions or other lenders,
such assignees shall have the right to perform all of Seller's
obligations under this Contract.
ARTICLE 14. MISCELLANEOUS PROVISIONS
14.01 Notices
Any notice or written communication provided for in this
Contract by any Party to the other Party will be sent by
facsimile, telegram or telex, and confirmed by delivery of a
letter by courier service, promptly transmitted and addressed
to the appropriate Party. For notices or communications
delivered by courier service, such notice of communication
will be considered received twelve (12) days after such notice
or communication is given to the courier service for delivery.
For notices or communications dispatched by facsimile,
telegram or telex, such notice or communication will be
considered received two (2) days after such notice or
communication was dispatched. All notices and communications
will be sent to the appropriate addresses set forth in Article
3 of this Contract until the same is changed by notice in
writing to and acknowledged by the other Party.
14.02 Binding Effect; Amendment
This Contract is made for the benefit of and is legally
binding on the Parties and their respective lawful successors
and assignees. This Contract may be changed, amended or
modified only by a written instrument signed by both Parties.
14.03 Language
This Contract will be executed and delivered in both Chinese
and English. Both language versions of this Contract will be
equally authentic and effective.
14.04 Confidentiality
Both Parties agree that all information and documents
(financial, technical or otherwise) which are not publicly
available and which are obtained by one Party will be kept
confidential by the other Party. Furthermore, except as
required by law, such information and documents will not be
disclosed to any other person or entity, other than such
Party's advisers, consultants, and lenders and their advisers
and consultants without the prior written approval of the
Party from whom the information or documents originated.
14.05 Severability
If any section, paragraph, clause or provision of this
Contract is finally adjudicated by a court of competent
jurisdiction to be invalid, the remainder of this Contract, to
the extent reasonably possible, will remain in full force and
effect as though such section, paragraph, clause or provision
or any part thereof so adjudicated to be invalid, had not been
included herein.
14.06 Entire Contract
This Contract and the Electric Tariff Adjustment Method
constitute the entire agreement between the Parties with
respect to the subject matter contained herein and therein.
This Contract and the Electric Tariff Adjustment Method
supersede all prior and contemporaneous discussions,
negotiations, agreements and contracts between the Parties
concerning their subject matter. In the event of conflict
between the terms and conditions of the Contract and the
Electric Tariff Adjustment Method on one hand, and the terms
and conditions of the Interconnection and Dispatch Contract on
the other, the terms and conditions of the Contract and the
Electric Tariff Adjustment Method shall prevail.
14.07 Effectiveness
Notwithstanding any provision to the contrary in this
Contract, Seller's obligations under this Contract shall be
subject to the Seller's written confirmation that each party
to the Joint Venture Contract has made its initial
contribution of registered capital to the Seller in accordance
with the terms and conditions of the Joint Venture Contract.
14.08 Insurance
Seller shall maintain insurance coverages equal to or greater
than those defined in Article 17.02 of the Joint Venture
Contract.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, each of the Parties
hereto have caused this Contract to be executed and to become effective by their
duly authorized representatives as of the date first set forth above.
SIGNATURES
For the Purchaser:
[Signature Illegible]
---------------------------------------
By:
Date:
Name:
Title:
For the Seller:
[Signature Illegible]
----------------------------------------
By:
Date:
Name:
Title:
<PAGE>
APPENDIX A.
INTERCONNECTION AND DISPATCH CONTRACTS
<PAGE>
INTERCONNECTION AND DISPATCH CONTRACT
This Interconnection and Dispatch Contract (the "Contract") is entered into as
of ------------- July 1996 between Sichuan Power Dispatch Bureau ([Chinese
text]) ("Dispatcher") and Chengdu AES KAIHUA Gas Turbine Power Co., Ltd.
([Chinese text]) ("Seller"). Terms not otherwise defined herein shall have the
meaning given to them in the Power Purchase Contract between Chengdu Huaxi
Electric Power Shareholding (Group) Company Ltd. and Chengdu AES KAIHUA Gas
Turbine Power Co., Ltd. (the "Power Purchase Contract").
I. Conditions for Interconnection
The Dispatcher agrees to the integration of the Power Station into the
operations of the Dispatcher's transmission system and of the Grid upon
the fulfillment of the following conditions:
A. The Power Station shall possess, but be not limited to,
following technical conditions:
1. All the generating equipment in the Power Station
shall be in good condition, with the ability to
maintain a continuous and steady output,
2. The Power Station shall have a comprehensive and
reliable relay protection apparatus, with adequate
safeguards in operation for circuits of 110 kilovolts
and above,
3. In order to meet the requirements of dispatch
communications and the transmission of information,
there shall be two independent ways of communications
between the Power Station and Dispatch Center,
4. There shall be installed at the Power Station to the
satisfaction of the Dispatcher telemetry data
equipment in accordance with the codes and
specifications issued by the Ministry of Electric
Power of the People's Republic of China, and
5. All electric energy metering equipment installed at
the Power Station shall be capable of measuring the
on-grid output of the Power Station in appropriate
units at one (1) minute intervals.
B. The technology utilized and operational management procedures
employed at the Power Station shall be in compliance with the
regulations and stipulations of electric power industry in the
People's Republic of China, and with the requirements of the
Grid.
C. The operations of the Power Station shall be in accordance
with Prudent Electrical Practices at all times.
II. Dispatch Management
A. Commencing on the Commencement of Operations Date, the Power
Station will be available for dispatch by the Dispatcher.
B. The Seller and Dispatcher agree that the Power Station is
normally to be dispatched as a peaking power plant. The Seller
and Dispatcher further agree that the Power Station will be
dispatched by the Dispatch Center at its maximum capacity
allowed consistent with international operating standards and
within the limits recommended by manufacturers of the Power
Station's equipment (hereinafter referred to as the "Technical
Limits") and Prudent Electrical Practices. The Dispatcher
agrees that notwithstanding the needs of the Grid during an
emergency, the Dispatcher shall request the Power Station to
operate according to Paragraph 2.3 below.
C. Dispatcher agrees that at a minimum, it shall dispatch the
Power Station a sufficient number of hours so that the Power
Station can deliver the Annual Minimum Quantity to the
Purchaser as such term is defined in the Power Purchase
Contract.
D. The Seller shall accept and comply with the unified dispatch
of the Power Station by the Dispatcher in accordance with this
Contract. In case of an emergency that might pose a risk to
life and/or safety of the Power Station's equipment,
preventative measures may be taken by the Seller's personnel
in accordance with acceptable international operating
standards and equipment manufacturers' recommended operating
procedures and without prior instructions from the Dispatcher.
The Dispatcher's personnel on duty shall be informed of the
situation requiring emergency actions as soon as possible.
E. The Seller's duty officer or other employee posted on duty at
the Power Station shall never hide the truth from the
Dispatcher's personnel, and shall report factually and reply
accurately to any inquiries by the Dispatcher's personnel on
duty.
F. The Dispatcher shall inform the Seller of a Grid emergency as
soon as possible after it occurs and when normal operations
may be resumed.
G. Seller shall be responsible for providing to the Dispatcher
any operational planning documentation given to the Purchaser
by the Seller at the time such documentation is given to the
Purchaser by the Seller.
H. The Dispatcher shall issue such dispatch instructions as are
necessary to allow the Seller and the Purchaser to perform
their obligations under the Power Purchase Contract.
III. Dispatch Parameters
A. During each calendar year, the Dispatcher shall issue dispatch
orders so that the number of KWHs delivered by the Seller to
the Purchaser shall be equal to or greater than the Annual
Minimum Quantity as defined in the Power Purchase Contract.
B. When the Power Station is operational, the Dispatcher shall
request the Power Station to deliver one-hundred percent
(100%) of the Net Station Capacity.
C. The Dispatcher shall not request that the Power Station
increase or decrease the capacity of the energy delivered by
the Power Station in a manner that would result in operating
the Power Station's equipment inconsistent with international
operating standards, Prudent Electrical Practices and the
Technical Limits.
D. Except in the case of a Grid emergency, the Dispatcher shall
not cycle the Power Station between full load and no load more
than twice in a 24 hour period.
IV. Dispatch Schedule
A. In order for the Seller to plan its purchase of fuel needed
for the generation of electricity by the Power Station, and to
plan the scheduling of maintenance and overhaul of the Power
Station's equipment, the Seller shall provide the Dispatch
Center sixty (60) days prior to the beginning of each year
with a schedule of the availability of the Power Station
during the following year and its planned outages. Before
December 31st of each year, the Seller and the Dispatcher
shall mutually agree on a schedule of availability for the
Power Station for the following year.
B. Ten (10) days prior to the beginning of each month, and three
(3) days prior to the beginning of each week, the Seller and
the Dispatch Center shall confirm by written notice or
facsimile sent to each other the availability schedule of the
Power Station for the following month or week, as the case may
be. The Seller and the Dispatch Center may propose
modifications to such monthly and weekly availability schedule
provided such modifications are consistent with Prudent
Electrical Practices and the Technical Limits. To the fullest
extent possible, such modifications shall be made so as to
minimize costs to the Seller.
C. Each day, prior to 12:00 noon on such day, the Seller shall
inform by facsimile the Dispatcher of the Net Station Capacity
available for the following day.
D. Each day, prior to 5:00 p.m. on such day, the Dispatch Center
shall confirm by facsimile its request for electricity to be
delivered on the following day.
E. As the need for an unplanned outage arises, the Seller shall
promptly provide notice thereof to the Dispatcher as soon as
such need arises along with an estimate of its cause, scope
and duration. The Seller and the Dispatch Center shall agree
on a modification of the availability schedule of the Power
Station to take into account such unplanned outage. If an
unplanned outage occurs after November 1st of any year in
which the Seller has not delivered the Annual Minimum Quantity
to the Purchaser, the Dispatcher shall use its best efforts to
issue dispatch instructions to the Seller to permit the Power
Station to deliver an amount of energy equal to the shortfall
resulting from such outage to the Purchaser by no later than
April 1st of the following year.
V. Miscellaneous
A. The performance of the obligations of the Dispatch Center and
the Seller hereunder shall be subject to relief on account of
an event of Force Majeure in the same manner and to the same
extent as, in the case of the Dispatch Center, the scope of
the relief available to the Purchaser for Force Majeure under
the Power Purchaser Contract and in the case of the Seller,
the scope of relief available to the Seller for Force Majeure
under the Power Purchaser Contract.
B. The term of this Contract shall be the same as the Term of the
Power Purchaser Contract.
C. The Seller shall have the right to assign this Contract in the
same way and to the same extent as its right to assign the
Power Purchaser Contract.
D. Any dispute arising out of or inconnection with this Contract
shall be resolved in accordance with the procedures for
dispute resolution set forth in Article 11.04 of the Power
Purchase Contract. In the event of a conflict between the
terms and conditions of this Contract and the terms and
conditions of the Power Purchase Contract, the Seller and the
Dispatch Center shall amend this Contract in accordance with
the terms and conditions of the Power Purchase Contract.
E. This Contract is effective as of the date first written above.
<PAGE>
IN WITNESS HEREOF, and intending to be legally bound, the Dispatch Center and
the Seller have affixed below the signatures of their duly authorized
representatives.
For the Dispatch Center: For the Seller:
By: By:
----------------------------- ------------------------------
Name: Name:
Title: Title:
<PAGE>
SUPPLEMENTAL INTERCONNECTION AND DISPATCH CONTRACT
This Supplemental Interconnection and Dispatch Contract (the "Contract") is
entered into as of ------ July 1996 between Sichuan Power Dispatch Bureau
([Chinese text]) ("Dispatcher") and Chengdu AES KAIHUA Gas Turbine Power Co.,
Ltd. ([Chinese text]) ("Seller"). Terms not otherwise defined herein shall have
the meaning given to them in the Power Purchase Contract (the "Power Purchase
Contract") between Chengdu Huaxi Electric Power Shareholding (Group) Company
Ltd. ([Chinese text]) ("Purchaser") and the Seller.
The Dispatcher and the Seller (the "Parties") acknowledge that they have entered
into the Interconnection and Dispatch Contract dated as of ---------- July 1996
(the "Interconnection and Dispatch Contract") and that all terms and conditions
therein (as amended or supplemented by Article 5 below ) are binding on the
Parties.
1. Conditions for Interconnection
The conditions for interconnection shall be the same as those found in
Article 1 of the Interconnection and Dispatch Contract.
2. Dispatch Management
The dispatch management shall be the same as found in Article 2 of the
Interconnection and Dispatch Contract.
3. Dispatch Parameters
The dispatch parameters shall be the same as those found in Article 3
of the Interconnection and Dispatch Contract.
4. Dispatch Schedule
The dispatch schedule shall be the same as found in Article 4 of the
Interconnection and Dispatch Contract.
5. Supplemental Dispatch
5.1 In accordance with the Power Purchase Contract, the Seller
anticipates and desires to have dispatch orders issued by the
Dispatcher allowing the Seller to deliver to the Purchaser
additional energy above the Annual Minimum Quantity as defined
in the Power Purchase Contract.
5.2 In accordance with Article 4 of the Interconnection and
Dispatch Contract, the Seller and the Dispatch Center shall
agree on a number of KWH above the Annual Minimum Quantity
(the "Supplemental Energy") that the Seller shall deliver to
the Purchaser each year.
5.3 The Dispatcher agrees to issue additional dispatch orders in
accordance with Articles 2 and 3 of the Interconnection and
Dispatch Contract so that the Power Station can deliver the
Supplemental Energy to the Purchaser.
5.4 The Seller agrees to pay the Dispatcher a fee of ----% of the
Current Tariff for each KWH of Supplemental Energy that the
Seller delivers to the Purchaser.
6. Miscellaneous
6.1 The performance of the obligations of the Dispatch Center and
the Seller hereunder shall be subject to relief on account of
an event of Force Majeure in the same manner and to the same
extent as, in the case of the Dispatch Center, the scope of
the relief available to the Purchaser for Force Majeure under
the Power Purchase Contract and in the case of the Seller, the
scope of relief available to the Seller for Force Majeure
under the Power Purchase Contract.
6.2 The term of this contract shall be the same as the Term of the
Power Purchase Contract.
6.3 The Seller has the right to assign this Contract in the same
way and to the same extent as its right to assign the Power
Purchase Contract.
6.4 Any dispute arising out of or in connection with this Contract
shall be resolve in accordance with the procedures for dispute
resolution set forth in Article 11.04 of the Power Purchase
Contract. In the event of a conflict between the terms and
conditions of this Contract and the terms and conditions of
the Power Purchase Contract, the Seller and the Dispatch
Center shall amend this Contract in accordance with the terms
and conditions of the Power Purchase Contract.
6.5 This Contract is effective as of the date first written above.
<PAGE>
IN WITNESS HEREOF, and intending to be legally bound, the Dispatch Center and
the Seller have affixed below the signatures of their duly authorized
representatives.
For the Dispatch Center: For the Seller:
By: By:
---------------------------- ------------------------------
Name: Name:
Title: Title:
<PAGE>
APPENDIX B.
METERING POINT AND POINT OF DELIVERY
The Metering Point shall be same as the Point of Delivery. The Metering Point
and the Point of Delivery shall be on the low voltage side bushings of the main
step up transformer after the feed to the station service transformer.
[DIAGRAM]
<PAGE>
APPENDIX C.
TERMINATION CHARGE
The termination charge payable by the Purchaser shall be calculated as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
APPENDIX D.
THE
ELECTRIC TARIFF ADJUSTMENT METHOD
FOR
CHENGDU AES KAIHUA GAS TURBINE
POWER CO., LTD.
<PAGE>
Section 1. Preamble
After friendly consultation conducted in accordance with the principles of
equality and mutual benefit, the following parties (hereinafter individually a
"Party" and collectively the "Parties") agree to this ELECTRIC TARIFF ADJUSTMENT
METHOD (hereinafter referred to as the "Method"). The implementation of the
Method shall be the responsibility of the Chengdu City Price Control Bureau,
registered in Chengdu City, Sichuan Province, People's Republic of China ("Price
Bureau").
The Parties to this Method are:
(a) Chengdu Huaxi Electric Power Shareholding (Group) Company Ltd. ([Chinese
text]), registered in Chengdu City, Sichuan Province, the People's Republic of
China with its legal address at Renmin Nan Lu, Chengdu, Sichuan Province,
People's Republic of China ("Purchaser").
Legal Representative of Purchaser:
Name:
Title:
Nationality: Chinese
(b) Chengdu AES KAIHUA Gas Turbine Power Co., Ltd. ([Chinese text]), registered
in Chengdu City, Sichuan Province, the People's Republic of China with its legal
address in the Economic Development Zone, Chengdu, Sichuan Province, People's
Republic of China ("Seller").
Legal Representative of Seller:
Name: Qu Delin
Title: Chairman of the Board
Nationality: Chinese
Section II. Mutual Representations and Warranties
Each of the Purchaser and the Seller represents and warrants that it possesses
full power and authority and the legal right to enter into and abide by this
Method and to perform its obligations herein.
Section III. Definitions:
Unless otherwise defined herein, any capitalized term used in this Method shall
have the meaning given to such term in the Power Purchase Contract between
Chengdu Huaxi Electric Power Shareholding (Group) Company Ltd. and Chengdu AES
KAIHUA Gas Turbine Power Co., Ltd., dated as of __________ July 1996 (the
"Contract").
Section IV. Purpose:
The purpose of this Method is to set forth the manner in which the tariff for
electrical energy delivered from the Power Station to the Purchaser pursuant to
the Contract is to be determined and adjusted. The unit price in RMB per KWH
which shall be payable by the Purchaser for electrical energy delivered from the
Power Station to the Purchaser pursuant to the Contract shall be, as determined
and adjusted by this Method, referred to in this Method and defined for purposes
of the Contract, as the "Current Tariff".
Section V. Budget:
A. Initial Budget
Prior to the Commencement of Operations Date, Seller's board
of directors shall prepare a budget (the "Initial Budget") for
the costs Seller estimates will be incurred with respect to
the Power Station from the Commencement of Operations Date to
the end of the calendar year in which the Commencement of
Operations Date occurs ("First Tariff Period"). The Initial
Budget shall contain specific line items and cost estimates
for the various components of the Current Tariff which are
defined in Section 6 hereof, and where appropriate,
adjustments to such costs for fluctuations in the exchange
rate. The amounts in the Initial Budget which are adopted by
the Seller's board of directors, as adjusted for fluctuations
in the exchange rate, shall be the basis for determining the
initial Current Tariff which shall be payable by the
Purchaser. Such amounts in the Initial Budget also shall be
the basis for any adjustments to the initial Current Tariff to
be made pursuant to Section 8 hereof during the First Tariff
Period.
B. Subsequent Budgets
Prior to the end of the First Tariff Period, and prior to the
end of each calendar year following the end of the First
Tariff Period, (each calendar year following the end of the
First Tariff Period being hereinafter referred to as a
"Subsequent Tariff Period"), the Seller's board of directors
shall prepare a new budget (a "Subsequent Budget") for the
costs the Seller estimates will be incurred with respect to
the Power Station in the applicable Subsequent Tariff Period.
The Subsequent Budget shall contain specific line items and
cost estimates for the various components of the Current
Tariff defined in Section 6 hereof, and where appropriate,
adjustments to such costs for fluctuations in the exchange
rate. It shall also contain an adjustment for the differences
from year to year between actual costs incurred and the
budgeted costs. The amounts in a Subsequent Budget which are
adopted by the Seller's board of directors, as adjusted for
fluctuations in the exchange rate and for the differences
between actual and budgeted costs, shall be the basis for
determining the Current Tariff which shall be payable by the
Purchaser in applicable Subsequent Tariff Periods. Such
amounts in a Subsequent Budget also shall be the basis for any
adjustments to the Current Tariff to be made pursuant to
Section 8 hereof during such applicable Subsequent Tariff
Period.
Section VI. Current Tariff:
The Current Tariff shall be calculated in accordance with the following
equation:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Section VII. Price Bureau Approval of the Current Tariff:
The Seller shall provide the Price Bureau with a statement detailing the
calculation of the initial Current Tariff ninety (90) days prior to the
Commencement of Operations Date and detailing any subsequent Current Tariff
ninety (90) days prior to the beginning of each calendar year following the year
in which the Commencement Date of Operations occurs. The statement shall be
accompanied by the Initial Budget or the Subsequent Budget, as the case may be,
certified as having been adopted by the Seller's board of directors. The Price
Bureau shall approve the initial Current Tariff as calculated by this Method
prior to the Commencement of Operations Date and it shall approve a subsequent
Current Tariff prior to each calendar year to which such Current Tariff is
intended to apply. The Seller estimates that the initial Current Tariff will be
[***]. The initial Current Tariff shall be determined based on the
Seller's actual investment in the Power Station at the Commencement of
Operations Date in accordance with the Method.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Section VIII. Mid-Year Current Tariff Adjustments:
If during the Term, in any year, there is a Significant Change in Costs (which
for purposes of this Method shall be defined as a five percent (5%) or more
increase in Fuel Costs beyond the amounts budgeted for Fuel Costs in the Initial
Budget or applicable Subsequent Budget, as the case may be), such Significant
Change in Costs shall be reflected in a corresponding adjustment to the Current
Tariff. Such adjustment shall be made such that all of the Significant Change in
Costs is paid for by the Purchaser and the Seller's Capital Return is no less
after such adjustment is made as it was prior to the occurrence of the
Significant Change in Costs. The Price Bureau shall consider the Seller's
application for such an adjustment and shall inform the Seller of the Price
Bureau's decision on the mid-year Current Tariff adjustment within sixty (60)
days of the Seller's submission of the application for such adjustment.
Section IX. Obligations of the Purchaser:
The Purchaser agrees to accept from the Seller all electrical energy made
available by the Power Station in accordance with the terms of the Contract and
to pay for all such electrical energy made available from the Power Station in
accordance with the terms of the Contract and this Method.
Section X. Obligations of the Seller:
Seller agrees to make available to the Purchaser all electrical energy from the
Power Station in accordance with the terms of the Contract.
Section XI. Effectiveness:
Notwithstanding any provision to the contrary in the Contract or this Method,
Seller's obligations under this Method shall be subject to the Seller's written
confirmation that each party to the Joint Venture Contract has made its initial
contribution to the registered capital of the Seller in accordance with the
terms and conditions of the Joint Venture Contract.
Section XII. Disputes:
Any dispute arising out of or in connection with this Method shall be resolved
in accordance with the procedures for dispute resolution set forth in Article
11.04 of the Contract.
<PAGE>
IN WITNESS WHEREOF, and intending to be legally bound, the Parties hereto have
each affixed the signatures of their duly authorized representatives.
SIGNATURES:
Agreed to and Accepted by:
Chengdu Huaxi Electric Power Shareholding (Group) Company Ltd.
---------------------------------------
Name:
Title:
Agreed to and Accepted by:
Chengdu AES KAIHUA Gas Turbine Power Co., Ltd.
---------------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1 - CAPITAL RETURN
- --------------------------------------------------------------------------------
YEAR CAPITAL RETURN
- --------------------------------------------------------------------------------
1 US$[***]
- --------------------------------------------------------------------------------
2 US$[***]
- --------------------------------------------------------------------------------
3 US$[***]
- --------------------------------------------------------------------------------
4 US$[***]
- --------------------------------------------------------------------------------
5 US$[***]
- --------------------------------------------------------------------------------
6 US$[***]
- --------------------------------------------------------------------------------
7 US$[***]
- --------------------------------------------------------------------------------
8 US$[***]
- --------------------------------------------------------------------------------
9 US$[***]
- --------------------------------------------------------------------------------
10 US$[***]
- --------------------------------------------------------------------------------
11 US$[***]
- --------------------------------------------------------------------------------
12 US$[***]
- --------------------------------------------------------------------------------
13 US$[***]
- --------------------------------------------------------------------------------
14 US$[***]
- --------------------------------------------------------------------------------
15 US$[***]
- --------------------------------------------------------------------------------
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
Note: This table has been calculated on the date the Contract is
executed based on the assumption that the total investment in the Power Station
is US$36.904 million. The actual amounts of the Capital Return shall be
recalculated by the Seller prior to the Commencement of Operations Date based on
the Seller's actual investment in the Power Station. To the extent any of the
amounts in this table are denominated in United States Dollars, for purposes of
calculating the Current Tariff, they shall be converted into RMB at the rate of
exchange prevailing on the date of conversion.
Agreement of
Amendment to the
Cooperative Joint Venture Contract and Articles of Association
of Chengdu AES KAIHUA Gas Turbine Power Co., Ltd.
In accordance with the relevant laws and regulations of the People's
Republic of China, this Agreement of Amendment (the "Agreement of Amendment") is
hereby entered into among Chengdu Huaxi Electric Power Shareholding (Group)
Company Ltd.[Chinese text] and Chengdu Huachuan Petroleum & Natural Gas
Exploration and Development Company [Chinese text] (together referred to herein
as "Party A"), China National Aero-Engine Corporation [Chinese text] ("Party B")
and AES China Generating Company Limited [Chinese text] ("Party C"), following
full discussions by Party A, Party B and Party C (Party A, Party B and Party C
hereinafter collectively referred to as the "Parties") with respect to
amendments to the Cooperative Joint Venture Contract ("Cooperative JVC") and the
Articles of Association ("Articles") of Chengdu AES KAIHUA Gas Turbine Power
Co., Ltd.
NOW THEREFORE, the Parties agree to amend the Cooperative JVC and
Articles as follows:
1. Article 1 of the Cooperative JVC is deleted in its entirety and the
following new Article 1 is substituted in its place:
THIS CONTRACT is made in Beijing, the People's Republic of China on
this 28th day of November, 1995 by and among Chengdu Huaxi Electric
Power Shareholding (Group) Company Ltd. and Chengdu Huachuan Petroleum
& Natural Gas Exploration and Development Company (hereinafter
collectively referred to as "Party A"), China National Aero-Engine
Corporation (hereinafter referred to as "Party B") and AES China
Generating Company Limited (hereinafter referred to as "Party C"). Each
of Party A, Party B and Party C shall hereinafter individually be
referred to as a "Party" and collectively as the "Parties".
After friendly consultations conducted in accordance with the
principles of equality and mutual benefit, the Parties have agreed to
organize Sino Foreign Chengdu AES KAIHUA Gas Turbine Power Co., Ltd.
(the "Company") in accordance with the Law of the People's Republic of
China on Sino-Foreign Cooperative Joint Venture Enterprises (the
"Cooperative Joint Venture Law"), other relevant laws and regulations
of the People's Republic of China, and the provisions of this Contract.
2. Article 3.01 of the Cooperative JVC is deleted in its entirety and the
following new Article 3.01 is substituted in its place:
The Parties to this Contract are:
(a) Party A, Chengdu Huaxi Electric Power Shareholding (Group)
Company Ltd., a corporation registered in Chengdu City,
Sichuan Province, the People's Republic of China with its
legal address at: No. 24 Nansanduan Y. Huan Road, Chengdu
City, Sichuan Province, PRC
and
Chengdu Huachuan Petroleum & Natural Gas Exploration and
Development Company, a corporation registered in Chengdu City,
Sichuan Province, the People's Republic of China with its
legal address at:
116 North 4 Section of Yihuan Lu, Chengdu 610081, Sichuan
Province, PRC
(the two foregoing corporations hereinafter collectively
referred to as "Party A")
Legal Representative of Party A:
Name: Qu De Lin
Position: General Manager
Nationality: Chinese
(b) Party B, China National Aero-Engine Corporation, a Chinese
economic legal entity registered in China with its legal
address at: No. 16 Donghuangchenggen, Dongcheng District,
Beijing, PRC
Legal Representative of Party B:
Name: Zhou Xiaoqing
Position: General Manager
Nationality: Chinese
(c) Party C, AES China Generating Company Limited, a company
registered in Bermuda with its legal address at 9/F, Allied
Capital Resources Building, 32-38 Ice House Street, Central,
Hong Kong
Legal Representative of Party C:
Name: Paul T. Hanrahan
Position: President
Nationality: U.S.A.
3. Article 16.01(d) of the Cooperative JVC is deleted in its entirety and the
following new Article 16.01(d) is substituted in its place:
The distribution of available cash of the Company shall be carried out
in accordance with the following priority of payments:
(i) Operation and maintenance costs (including VAT) of the GT
Plant and management costs of the Company;
(ii) Principal and interest payments due pursuant to the Loan
Contracts;
(iii) Income taxes and any other taxes;
(iv) Contributions to statutory funds; and
(v) Distributions of remaining after-tax profits to the Parties
once a year at such time as the Board shall determine, as
follows:
(A) in any year, if the Power Station was available to
generate electricity during [***] hours in such year,
(a) first, to Party C, an amount necessary, after
conversion of Renminbi into U.S. Dollars, to provide
it with a [***] internal rate of return (after
payment of taxes and after funding all required
reserves) on its contributions to the registered
capital of the Company over the term of the Joint
Venture established by this Contract, (b) second,
pari passu to Party A and Party B, an amount
necessary to provide each of Party A and Party B with
a [***] internal rate of return (after payment of
taxes and after funding all required reserves) on its
contributions to the registered capital of the
Company over the term of the Joint Venture
established by this Contract, (c) third, to pay Party
A in reimbursement of any payment Party A previously
has made to Chengdu Huachuan Petroleum & Natural Gas
Exploration and Development Company ("Gas Supplier")
in its capacity as natural gas supplier under a Gas
Purchase and Supply Contract entered into between the
Gas Supplier and the Company for natural gas
purchased by the Company, plus interest on any such
payment as determined to be appropriate by the Board
and (d) fourth, remaining amounts to the Parties in
accordance with the percentage of their respective
Registered Capital contributions to the Company; and
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(B) in any year, if the Power Station was available to
generate electricity for less than [***] hours in
such year, to the Parties in accordance with the
percentage of their respective Registered Capital
contributions to the Company.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
(vi) In accordance with Article 16.01(d)(v) hereof cash shall be
distributed once a year (unless the Board of Directors of the
Company approves more frequent distributions). All payments by
the Company to the Parties under Article 16.01(d)(v) hereof
shall be made by wire transfer to the bank accounts designated
by the Parties from time to time. All distributions to Party C
shall be made in accordance with Article 16.04(c) hereof.
4. Article 16.06(b) of the Cooperative JVC is deleted in its entirety and the
following new Article 16.06(b) is substituted in its place:
Subject to Article 16.01(d)(v) hereof, all distributable
profits shall be distributed to the Parties in proportion to
their respective share of Registered Capital.
5. Section 1.1 of the Articles is deleted in its entirety and the following
substituted in its place:
In accordance with the Law of the People's Republic of China on
"Sino-Foreign Cooperative Joint Venture Enterprises" (the "Cooperative
Joint Venture Law"), and other relevant laws and regulations, Chengdu
Huaxi Electric Power Shareholding (Group) Company Ltd., Chengdu
Huachuan Petroleum & Natural Gas Exploration and Development Company
(collectively referred to hereinafter as "Party A"), China National
Aero-Engine Corporation (referred to hereinafter as "Party B") and AES
China Generating Company Limited (referred to hereinafter as "Party C")
have entered into the Cooperative Joint Venture Contract (referred to
hereinafter as the ("Joint Venture Contract") for the establishment of
the Chengdu AES KAIHUA Gas Turbine Power Co., Ltd. on November 28, 1995
in Beijing, the People's Republic of China. Party A, Party B and Party
C hereby formulate these Articles of Association to govern the
operation of the Chengdu AES KAIHUA Gas Turbine Power Co., Ltd. (Each
of Party A, Party B or Party C shall hereinafter individually be
referred to as a "Party" and collectively as the "Parties".)
6. Section 1.4 of the Articles is deleted in its entirety and the following
substituted in its place:
The Parties to these Articles of Association are:
(1) Party A, Chengdu Huaxi Electric Power Shareholding (Group)
Company Ltd., a Chinese state-owned enterprise registered in
Chengdu City, Sichuan Province, the People's Republic of
China, with its legal address in Chengdu City, Sichuan
Province, PRC; and
Chengdu Huachuan Petroleum & Natural Gas Exploration and
Development Company, a Chinese corporation registered in
Chengdu City, Sichuan Province, the People's Republic of China
with its legal address at:
116 North 4 Section of Yihuan Lu, Chengdu 610081, Sichuan
Province, PRC
(the two foregoing corporations hereinafter collectively
referred to as "Party A")
Legal Representative of Party A:
Name: Qu DeLin
Position: General Manager
Nationality: Chinese
(2) Party B, China National Aero-Engine Corporation, a Chinese
economic legal entity with its legal address at No.16
Donghuangchenggen North Street, Dongcheng District, Beijing,
PRC.
Legal Representative of Party B:
Name: Zhou Xiaoqing
Position: General Manager
Nationality: Chinese
(3) Party C, AES China Generating Company Limited, a company
registered in Bermuda with its legal address at 9/F., Allied
Capital Resources Building, 32-38 Ice House Street, Central,
Hong Kong.
Legal Representative of Party C:
Name: Paul Hanrahan
Position: President
Nationality: U.S.A.
7. Article 8.2 of the Articles is deleted in its entirety and the following new
Article 8.2 is substituted in its place:
Subject to Article 16.01(d)(v) of the Joint Venture Contract,
all distributable profits shall be distributed to the Parties
in proportion to their respective share of Registered Capital.
8. This Agreement of Amendment is an inalienable part of the Cooperative JVC and
Articles, and upon the approval of the original examination and approval
authority of the Cooperative JVC and Articles, shall have the same effect with
the Cooperative JVC and Articles and shall amend the Cooperative JVC and
Articles accordingly as provided herein.
9. This Agreement of Amendment is written in Chinese and English. Both language
versions shall have the same validity and effect. Each version has eight
counterparts. Each of the Parties shall keep one set, the remaining
counterparts, shall be submitted to the original examination and approval
authority of the Cooperative JVC and Articles and to such other relevant
departments as is required.
10. This Agreement of Amendment shall become effective upon its execution by the
Parties and the approval of the original examination and approval authority of
the Cooperative JVC and Articles.
IN WITNESS WHEREOF, the Parties have caused this Agreement of Amendment
to be executed by their duly authorized representatives as of __ day of July,
1996 in the People's Republic of China.
For and on behalf of Party A:
Chengdu Huaxi Electric Power
Shareholding (Group) Company Ltd.
By: [Signature Illegible]
Name:
Chengdu Huachuan Petroleum &
Natural Gas Exploration and Development Company
By: [Signature Illegible]
Name:
For and on behalf of Party B:
China National Aero-Engine Corporation
By: [Signature Illegible]
Name:
For and on behalf of Party C:
AES China Generating Company Limited
By: [Signature Illegible]
Name:
Exhibit 11.1
AES CHINA GENERATING CO. LTD.
STATEMENTS REGARDING COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For Period from
December 7, 1993
For Year Ended (inception) to
November 30, November 30,
1996 1995 1994
------------ ------------ -------------------
PRIMARY
Weighted Average Number of Shares of
Common Stock Outstanding 15,637 17,391 14,817
Net Effect of Dilutive Stock
Options
Based on the Treasury Stock Method Using 27 - -
Average Market Price
Stock Allocated to Pension Plan 6 - -
------------ ------------ -------------------
Weighted Average Shares Outstanding 15,670 17,391 14,817
============ ============ ===================
Net Income / (Loss) US$ 4,140 US$ 2,138 US$ (371)
============ ============ ===================
Per Share Amount US$ 0.26 US$ 0.12 US$ (0.03)
============ ============ ===================
FULLY DILUTED
Weighted Average Number of Shares of
Common Stock Outstanding 15,637 17,391 14,817
Net Effect of Dilutive Stock Options Based
on the Treasury Stock Method Using Ending
Market Price 259 - -
Stock Allocated to Pension Plan 6 - -
------------ ------------ -------------------
Weighted Average Shares Outstanding 15,902 17,391 14,817
============ ============ ===================
Net Income / (Loss) US$ 4,140 US$ 2,138 US$ (371)
============ ============ ===================
Per Share Amount US$ 0.26 US$ 0.12 US$ (0.03)
============ ============ ===================
</TABLE>
Exhibit 21.1
Subsidiaries of Company
The following is a list of all subsidiaries of the Company as
of February 28, 1997 and their respective states or other jurisdictions of
incorporation. Each subsidiary does business under its own name.
<TABLE>
<CAPTION>
<S> <C> <C>
State or Other Jurisdiction of Company's Ownership
Subsidiary Incorporation Percentage
- ------------------------------------------- ------------------------------- --------------------
AES Anhui Power Co. Ltd. British Virgin Islands 100%
AES Chigen Company (L) Ltd. Labuan, Malaysia 100%
AES China Holding Company (L) Ltd. Labuan, Malaysia 100%
AES China Power Holding Company (L) Ltd. Labuan, Malaysia 100%
AES-GITIC Power Development Company Limited Bermuda 60%
AES Tian Fu Power Company Ltd. British Virgin Islands 100%
AES Tian Fu Power Company (L) Ltd. Labuan, Malaysia 100%
AES Yangchun Power Co., Ltd. British Virgin Islands 100%
Anhui Liyuan-AES Power Company Ltd. China# 70%
Hefei Zhongli Energy Company Ltd. China# 70%
Hunan Xiangci-AES Hydro Power Company Ltd. China# 51%
Jiaozuo (G.P.) Corporation Cayman Islands 100%
Jiaozuo Power Partners, L.P. Cayman Islands 50%
Jiaozuo Wan Fang Power Company Ltd. China# 70%
Sichuan Fuling Aixi Power Generating China# 70%
Company Ltd.
Wuxi-AES-CAREC Gas Turbine Power Company China# 55%
Ltd.
Wuxi-AES-Zhonghang Power Company Ltd. China# 55%
</TABLE>
* Certain dormant subsidiaries, considered insignificant, are not listed.
- ------------------------------
# A cooperative joint venture formed under the Law of the People's Republic
of China on Chinese and Foreign Cooperative Joint Venture Enterprises.
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-97030 of AES China Generating Co. Ltd. Incentive Stock Option
Plan on Form S-8 dated September 18, 1995 of our report dated January 31, 1997
appearing in this Annual Report on Form 10-K of AES China Generating Co. Ltd.
for the year ended November 30, 1996.
Deloitte Touche Tohmatsu
Hong Kong
February 28, 1997
Exhibit 25.1
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated opposite
their respective names below, hereby severally constitute and appoint Jeffery A.
Safford, William R. Luraschi and Peter K. Ingerman and each of them with full
power to act alone, our true and lawful attorneys and agents to do any and all
acts and things and to execute any and all instruments which they deem necessary
or advisable to enable AES China Generating Co. Ltd., a Bermuda company, to
comply with the Securities Exchange Act of 1934, as amended, in connection with
Section l3 or l5(d) of the Securities Exchange Act of 1934, as amended, the Form
10K Annual Report and any related registration statements, amendments,
post-effective amendments or supplements thereto, including specifically, but
without limiting the generality of the foregoing, the power and authority to
sign the name of the Company and the names of the undersigned directors and
officers in the capacities indicated below.
This Power of Attorney may be executed in counterparts, which together
shall constitute one and the same instrument.
Signature Title Date
/s/Roger W. Sant Chairman of the Board and February 28, 1997
Roger W. Sant Class B Director
/s/Dennis W. Bakke Vice Chairman and February 27, 1997
Dennis W. Bakke Class B Director
/s/Robert F. Hemphill Vice Chairman and February 27, 1997
Robert F. Hemphill, Jr. Class B Director
/s/Thomas Tribone Class B Director February 28, 1997
Thomas Tribone
/s/Thomas I. Unterberg Class B Director February 28, 1997
Thomas I. Unterberg
/s/William Dykes Class A Director February 26, 1997
William Dykes
/s/Xiliang Feng Class A Director February 26, 1997
Xiliang Feng
/s/William H. Taft Class A Director February 28, 1997
William H. Taft, IV
/s/Victor Hao Li Class A Director February 28, 1997
Victor Hao Li
/s/Jeffery A. Safford Vice President, Chief Financial February 26, 1997
Jeffery A. Safford Officer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1996 AND THE CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 56,200
<SECURITIES> 8,995
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 765
<CURRENT-ASSETS> 73,929
<PP&E> 165,743
<DEPRECIATION> 3,143
<TOTAL-ASSETS> 280,698
<CURRENT-LIABILITIES> 14,487
<BONDS> 34,933
0
0
<COMMON> 156
<OTHER-SE> 190,199
<TOTAL-LIABILITY-AND-EQUITY> 280,698
<SALES> 8,812
<TOTAL-REVENUES> 9,212
<CGS> 5,360
<TOTAL-COSTS> 5,360
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,120
<INCOME-PRETAX> 4,804
<INCOME-TAX> 387
<INCOME-CONTINUING> 4,140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,140
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
Exhibit 99.1
AES CHINA GENERATING CO. LTD.
STATEMENT RE: COMPUTATION OF FIXED CHARGE COVERAGE RATIO
(in thousands except ratio amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal period ended
November 30,
------------------------------------------------
1996 1995 1994
---------- ---------- -------
Adjusted Cash Flow
(A) Cash Inflow:
(i) Dividend, distribution, payment of interest and scheduled
repayment of loan received by the Company and its Wholly
Owned Subsidiaries from the Project Companies $ 2,420 $ - $ -
(ii) 50% of the combined interest income of the Company and its
Wholly Owned Subsidiaries from cash, cash equivalents and
investments in marketable securities 2,751 5,090 3,298
-------- -------- -------
5,171 5,090 3,298
-------- -------- -------
(B) Cash Outflow:
(i) Selling, general and administrative expenses of the Company
and its Wholly Owned Subsidiaries 994 1,779 1,250
(ii) Company Designated Costs 10,312 9,880 6,403
-------- -------- -------
11,306 11,659 7,653
-------- -------- -------
$(6,135) $(6,569) $(4,355)
======== ======== ========
Adjusted Interest Expense - - -
=========== =========== =========
Fixed Charge Coverage Ratio - - -
=========== =========== =========
</TABLE>
