UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-23148
AES CHINA GENERATING CO. LTD.
(Exact name of registrant as specified in its charter)
Bermuda 98-0152612
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3/F(W), Golden Bridge Plaza
No. 1(A) Jianguomenwai Avenue
Beijing 100020, People's Republic of China
(Address of principal executive office)
Telephone Number (86 10) 65089619
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of the registrant's Common Stock,
as of October 15, 1997.
12,000 shares of Common Stock, par value $1.00 per share
<PAGE>
AES CHINA GENERATING CO. LTD.
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations ................. 3
Consolidated Balance Sheets ........................... 5
Consolidated Statements of Cash Flows ................. 7
Notes to Consolidated Financial Statements ............ 8
Item 2. Discussion and Analysis of Financial Condition
and Results of Operations ........................... 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk .............................. Not Applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................ Not Applicable
Item 2. Changes in Securities and Use of Proceeds ........ Not Applicable
Item 3. Defaults Upon Senior Securities .................. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders Not Applicable
Item 5. Other Information ................................. Not Applicable
Item 6. Exhibits and Reports on Form 8-K ...................... 17
Signatures ............................................ 18
2
<PAGE>
PART I
Item 1. Consolidated Financial Statements
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
August 31, 1997 August 31, 1996
--------------------------------------------------
(unaudited)
<S> <C> <C>
REVENUES:
Electricity sales US$ 4,503 US$ 4,106
Construction delay fee -- (3)
---------------------- ---------------------
Total revenues 4,503 4,103
OPERATING COSTS AND EXPENSES:
Costs of sales 3,123 1,870
Development, selling, general and
administrative expenses 406 1,824
---------------------- ---------------------
Total operating costs and expenses 3,529 3,694
---------------------- ---------------------
OPERATING INCOME 974 409
OTHER INCOME/(EXPENSES):
Interest income 3,249 1,286
Interest expense (1,737) (357)
Equity in earnings of an affiliate 162 189
Amalgamation cost (221) --
---------------------- ---------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 2,427 1,527
Income taxes 105 253
Minority interest 22 237
---------------------- ---------------------
NET INCOME US$ 2,300 US$ 1,037
====================== ====================
NET INCOME PER SHARE US$ 191.67 US$ 86.42
====================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
August 31, 1997 August 31, 1996
--------------------------------------------------
(unaudited)
<S> <C> <C>
REVENUES:
Electricity sales US$ 9,576 US$ 6,553
Construction delay fee -- 400
---------------------- ---------------------
Total revenues 9,576 6,953
OPERATING COSTS AND EXPENSES:
Costs of sales 6,413 3,867
Development, selling, general and
administrative expenses 3,741 5,229
---------------------- ---------------------
Total operating costs and expenses 10,154 9,096
---------------------- ---------------------
OPERATING LOSS (578) (2,143)
OTHER INCOME/(EXPENSES):
Interest income 9,827 5,001
Interest expense (3,989) (679)
Equity in earnings of an affiliate 370 441
Amalgamation cost (397) --
---------------------- ---------------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 5,233 2,620
Income taxes 159 455
Minority interest (102) 218
---------------------- ---------------------
NET INCOME US$ 5,176 US$ 1,947
====================== =====================
NET INCOME PER SHARE US$ 431.33 US$ 162.25
====================== =====================
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values and share amounts)
<TABLE>
<CAPTION>
As of As of
August 31, 1997 November 30, 1996
-------------------- ----------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents US$ 89,047 US$ 56,200
Debt service reserves 18,225 --
Investments - held-to-maturity 20,932 8,995
Investments - available-for-sale 6,771 --
Accounts receivable - The AES Corporation 804 --
Accounts receivable from related parties 7,674 6,809
Interest receivable 1,488 286
Inventory 1,854 765
Prepaid expenses and other current assets 5,654 874
-------------------- ----------------------
Total current assets 152,449 73,929
Property, Plant and Equipment:
Electric generating facilities 177,159 64,185
Equipment, furniture and leasehold improvements 3,363 2,646
Accumulated depreciation and amortization (6,140) (3,143)
Construction in progress 78,179 98,912
-------------------- ----------------------
Total property, plant and equipment, net 252,561 162,600
Other Assets:
Deferred costs, net 5,679 407
Project development costs -- 3,352
Investments in and advances to affiliates 67,589 33,202
Note receivable 8,204 6,626
Debt service reserves 9,113 --
Deposits and other assets 722 582
-------------------- ----------------------
Total other assets 91,307 44,169
-------------------- ----------------------
TOTAL US$ 496,317 US$ 280,698
==================== ======================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED BALANCE SHEETS
(In thousands, except par values and share amounts)
<TABLE>
<CAPTION>
As of As of
August 31, 1997 November 30, 1996
--------------------- ---------------------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - The AES Corporation US$ -- US$ 1,185
Accounts payable 4,920 2,199
Accounts payable for construction 12,507 --
Accrued liabilities 5,498 2,618
Accrued liabilities for construction 4,366 4,259
Loans from minority shareholders - current portion 3,995 1,365
Bank loans 2,991 2,861
--------------------- ---------------------
Total current liabilities 34,277 14,487
Long-Term Liabilities:
Notes payable, net 179,839 --
Bank loan 7,000 --
Deferred income taxes 546 387
Loans from minority shareholders 34,837 34,933
--------------------- ---------------------
Total long-term liabilities 222,222 35,320
Minority Interest 43,936 40,536
Shareholders' Equity:
Common Stock - par value $1.00 per share, (Authorized, issued and
outstanding shares:
1997 - 12,000; 1996 - N/A) 12 --
Class A Common Stock - par value $0.01 per share,
(1997 - N/A; 1996 - 50,000,000 shares authorized; issued
and outstanding shares: 8,134,100) -- 81
Class B Common Stock - par value $0.01 per share,
(1997 - N/A; 1996 - 50,000,000 shares authorized; issued
and outstanding shares: 7,500,000) -- 75
Additional paid-in capital 184,348 183,980
Retained earnings 11,083 5,907
Cumulative translation adjustment 439 312
--------------------- ---------------------
Total shareholders' equity 195,882 190,355
--------------------- ---------------------
TOTAL US$ 496,317 US$ 280,698
===================== =====================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
AES CHINA GENERATING CO. LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
August 31, 1997 August 31, 1996
------------------------------------------------
(unaudited)
<S> <C> <C>
Net cash used in operating activities US$ (10,646) US$ (267)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of notes 174,100 --
Contributions and loans from minority shareholders 3,438 1,117
Repayment of loans from minority shareholders (1,361) --
Proceeds from bank loans 8,810 481
Repayment of bank loans (1,680) (1,000)
Sale of Class A common stock 224 --
Repurchase of Class A common stock -- (11,443)
-------------------- --------------------
Net cash provided by/(used in) financing activities 183,531 (10,845)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and construction in progress (61,905) (37,552)
Purchase of investments - held-to-maturity (27,600) (15,534)
Purchase of investments - available-for-sale (17,636) (22,548)
Proceeds from maturity of investments - held-to-maturity 16,982 51,976
Proceeds from sales of investments - available-for-sale 11,037 16,969
Investments in and advances to affiliates (31,128) (8,500)
Recoupment of investment in affiliate 322 79
Project development costs and other assets (1,245) (3,205)
Deposit to debt service reserves (27,287) --
Investment in note receivable (1,578) (4,214)
-------------------- --------------------
Net cash used in investing activities (140,038) (22,529)
-------------------- --------------------
Increase/(decrease) in cash and cash equivalents 32,847 (33,641)
CASH AND CASH EQUIVALENTS,
Beginning of period 56,200 125,684
-------------------- --------------------
End of period US$ 89,047 US$ 92,043
==================== ====================
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
AES CHINA GENERATING CO. LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. General and Basis of Presentation
AES China Generating Co. Ltd. ("AES Chigen" or the "Company"), a Bermuda
company, was incorporated on December 7, 1993, to develop, acquire, finance,
construct, own and manage electric power generation facilities in the People's
Republic of China (the "PRC"). On May 8, 1997, the amalgamation of a
wholly-owned subsidiary of The AES Corporation ("AES") with and into AES Chigen
(the "Amalgamation") was completed. The Company became a wholly-owned subsidiary
of AES. Prior to the Amalgamation, the Company was a controlled affiliate of
AES, which owned approximately 48% of the outstanding common stock of the
Company.
The consolidated financial statements include the accounts of AES Chigen, its
subsidiaries and controlled affiliates. Investments in 50% or less owned
affiliates over which the Company has the ability to exercise significant
influence, but not control, are accounted for using the equity method.
Intercompany transactions and balances have been eliminated.
The number of shares used in computing net income per share for the three months
and nine months ended August 31, 1997 and August 31, 1996 was 12,000.
In the Company's opinion, all adjustments necessary for a fair presentation of
the unaudited results of operations for the three months and the nine months
ended August 31, 1997 and August 31, 1996 are included. All such adjustments are
accruals of a normal and recurring nature. The results of operations for the
periods are not necessarily indicative of the results of operations for the full
year. The financial statements are unaudited.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at August 31, 1997 and November 30, 1996 and
the reported amounts of revenues and expenses during the three months and the
nine months ended August 31, 1997 and August 31, 1996.
Actual results could differ from those estimates.
Information concerning the organization and business of the Company, accounting
policies followed by the Company and other information are contained in the
notes to the Company's financial statements filed as part of the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 1996 (the
"Annual Report"). This Quarterly Report on Form 10-Q should be read in
conjunction with such Annual Report.
8
<PAGE>
2. Notes Payable
As of August 31, 1997, notes payable consisted of $180 million principal amount
Notes due on December 15, 2006 (the "2006 Notes"). The 2006 Notes 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 2006 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 2006 Notes have a claim to
amounts on deposit in debt service and interim reserve accounts that is prior to
the claims of other creditors of the Company. The 2006 Notes are redeemable at
the Company's option, in whole or in part, beginning December 15, 2001 at
redemption prices in excess of par and are redeemable at par beginning December
15, 2003.
The terms of the 2006 Notes contain certain covenants and restrictions. The most
restrictive of these covenants include a requirement to maintain certain
reserves and limitations on the payment of dividends, redemption of equity
interests, redemption of subordinated indebtedness, making of certain
investments, incurrence of certain indebtedness, certain assets sales and the
incurrence of indebtedness to refinance existing indebtedness, among other
things.
3. Bank Loan
As of August 31, 1997, a long-term bank loan of $7.0 million to Anhui Liyuan-AES
Power Company Ltd., a joint venture of the Company, was outstanding. The loan is
unsecured and bears interest at the prevailing lending rates in the PRC. The
interest rate for the nine months ended August 31, 1997 was approximately 7.8%
per annum.
Scheduled maturities of the bank loan as of August 31, 1997 are as follows:
(in thousands)
1998 $ --
1999 1,000
2000 2,000
2001 2,500
2002 1,500
----------------------
$ 7,000
======================
4. Shareholders' Equity
Since May 8, 1997, the effective date of the Amalgamation, the capital of the
Company has consisted of 12,000 authorized, issued and outstanding shares of
Common Stock, par value $1.00 per share.
9
<PAGE>
Upon the effectiveness of the Amalgamation, each issued and outstanding share of
Class A common stock of the Company was canceled in consideration of the right
to receive 0.29 of a share of common stock of AES and cash in lieu of any
fractional shares (the "Consideration"). All such shares of Class A common stock
are no longer outstanding and were automatically canceled and retired and ceased
to exist and each holder of a certificate representing any such shares of Class
A common stock ceased to have any rights with respect thereto, except the right
to receive the Consideration, without interest.
Upon the effectiveness of the Amalgamation, each share of the Class B Common
Stock was automatically canceled and ceased to exist and no consideration was
delivered in exchange therefor.
Upon the effectiveness of the Amalgamation, all outstanding options issued under
the AES Chigen Incentive Stock Option Plan (the "Option Plan") automatically and
without any action on the part of the holders thereof became options for shares
of AES common stock. The Option Plan remains in full force and effect.
5. Commitments and Contingencies
Since the commencement of operations, the Company has entered into commitments
to invest a total of approximately $357.8 million in the form of equity
contributions and loans to its joint ventures. As of August 31, 1997, the total
outstanding commitments to its joint ventures was $142.0 million.
Pursuant to the Payment and Milestone Schedule agreed between Sichuan Fuling
Aixi Power Company Ltd. and Shanghai Electric Corporation ("Shanghai Electric"),
a portion of the price of the Engineering, Procurement and Construction Services
Contract (the "EPC Contract") for the Aixi Heart River project can be deferred.
Interest shall accrue on the amount of the deferred payments as set forth in the
Payment and Milestone Schedule. AES Chigen guaranteed to pay Shanghai Electric
up to $19.2 million, representing 60% of the price of the EPC Contract, plus the
interest accrued thereon. As of August 31, 1997, the amount of the deferred
payment with interest accrued thereon was $12.5 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.
10
<PAGE>
Item 2. Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
The Company, directly and through its wholly-owned offshore subsidiaries,
engages in the development, construction, operation and ownership of electric
power generating facilities in the PRC by means of its participation in joint
ventures. The Company currently owns interests in the nine power plants listed
in the table below (the "Current Projects") with an aggregate nameplate capacity
of approximately 2,918MW.
In June 1997, the Company announced the investment of a total of $98.2 million
in the form of an equity contribution in Yangcheng International Power Company
("Yangcheng Power"). Yangcheng Power, a 20-year cooperative joint venture, was
organized to build, own and operate a 6 x 350MW mine-mouth, coal-fired power
plant in the Shanxi Province. The total investment in Yangcheng Power approved
by the State Planning Commission ("SPC") is approximately $1.6 billion. The
registered capital approved by the SPC is 25% of the total investment, or $392.9
million. The respective ownership interests of the shareholders in Yangcheng
Power are as follows: AES China Corp., a wholly owned subsidiary of the Company
(25%); North China Electric Power (Group) Corporation (25%); Jiangsu Province
Investment Corporation (20%); Shanxi Energy Enterprises (Group) Company (16%);
Shanxi Provincial Power Company (10%); and Jiangsu Provincial Power Company
(4%). The difference of $1.21 billion between the total investment and the total
registered capital of the joint venture is financed by the China Construction
Bank, China State Development Bank, US Export-Import Bank and Kreditanstalt fur
Wiederaufbau (KfW). The project is being constructed over a 60-month period by
the Shanxi Provincial Power Company under a fixed price, fixed-schedule turnkey
contract. The first unit is scheduled to be in operation within 35 months. The
turbines and generators will be provided by Siemens and boilers will be provided
by Foster Wheeler Energy Corporation. 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.
11
<PAGE>
Projects in Operation or Under Construction
<TABLE>
<CAPTION>
Company Company
Location Capacity Interest Ownership
Joint Venture(s) (Province) (MW) (MW) (%) Fuel Status
- ---------------- ---------- ---- ---- --- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Yangcheng Shanxi 2,100 525 25 Coal Under construction
International (first unit scheduled
Power Company to be in operation by
("Yangcheng Sun second quarter of 2000;
City") last unit scheduled to
be
in operation by the
second quarter of 2002)
Jiaozuo Wan Fang Power Henan 250 175 70 Coal First unit commenced
Company Ltd. ("Jiaozuo commercial operation on
Aluminum Power") August 17, 1997; second
unit scheduled to be in
operation by the second
quarter of 1998
Wuhu Shaoda Anhui 250 62.5 25 Coal In operation
Electric Power
Development
Company Ltd.
("Wuhu Grassy Lake")
Anhui Liyuan-AES Power Anhui 115.2 80.6 70 Oil Simple cycle unit
Company Ltd. and Hefei commenced commercial
Zhongli Energy Company operation on August 1,
Ltd. ("Hefei Prosperity 1997; combined cycle
Lake") unit scheduled to be in
operation in the second
quarter of 1998
Wuxi-AES-CAREC Jiangsu 63 34.7 55 Oil In operation
Gas Turbine Power
Company Ltd. and
Wuxi-AES-
Zhonghang Power
Company Ltd.
("Wuxi Tin Hill")
Sichuan Fuling Aixi Sichuan 50 35 70 Coal Under construction
Power Company (scheduled to be in
Ltd. operation in April
("Aixi Heart River") 1998)
Chengdu AES-Kaihua Sichuan 48 16.8 35 Natural Commenced
Gas Turbine Power Gas commercial operation
Company Ltd. on July 5, 1997
("Chengdu Lotus
City")
12
<PAGE>
Hunan Xiangci-AES Hunan 26.2 13.4 51 Hydro In operation
Hydro Power
Company Ltd.
("Cili Misty Mountain")
Yangchun Fuyang Guangdong 15.1 3.8 25 Oil In operation
Diesel Engine Power
Company Ltd.
("Yangchun Sun
Spring")
---------- -------------
Total 2,917.5 946.8
========== =============
</TABLE>
The Company is currently pursuing a number of other projects in the PRC (the
"Potential Projects").
The Company and AES 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, AES Acquisition Co. Ltd. ("AES Sub"), amalgamated (the
"Amalgamation") with and into the Company and each share of the Company's Class
A common stock outstanding prior to the Amalgamation thereafter represented the
right to receive shares of AES common stock. The Company's shareholders approved
the Amalgamation at a Special Class Meeting of holders of the Class A common
stock and a Special General Meeting of the shareholders of the Company, both of
which were held on April 10, 1997. The Amalgamation was completed on May 8, 1997
after certain regulatory filings were made with, and certain approvals were
obtained from, Bermuda authorities.
In March 1997, the Wuxi Tin Hill joint venture reached agreement with the power
purchaser on the amount of payment for required minimum offtake of electricity
for 1996, which was in dispute. The agreement included the deferral of certain
amounts scheduled to be paid in 1996 and a corresponding adjustment upward of
future scheduled payments of capital return.
On March 17, 1997, the second unit of the Wuhu Grassy Lake 250 MW coal-fired
facility passed its output performance test. During the second quarter of 1997,
approvals for electricity tariff to be paid to the joint venture were obtained.
However, the approved tariff is less than expected, and the joint venture is
negotiating with Anhui Provincial Electric Power, the Operation and Offtake
Contractor, about its operation cost and management fee charged to the joint
venture. Due to the uncertainty related to the operation cost and management
fee, no amount for the Company's equity in the earnings of the Wuhu Grassy Lake
project has been recognized in the statement of operations.
13
<PAGE>
In June 1997, construction commenced on a 36-kilometer low voltage transmission
line to connect the Cili Misty Mountain 26.2 MW hydroelectric generating
facility with the Hunan provincial grid. It is expected that construction of the
transmission line will be completed in the fourth quarter of 1997 and that the
facility will serve a larger market as a result.
Results of Operations
Revenues
Total revenues increased from approximately $4.1 million to $4.5 million from
the third quarter of 1996 to the third quarter of 1997. The increase was
attributable to the commencement of operation of Unit 1 of the Jiaozuo Aluminum
Power facility and the simple cycle unit of the Hefei Prosperity Lake facility.
Total revenues increased from approximately $7.0 million to $9.6 million from
the nine months ended August 31, 1996 to the nine months ended August 31, 1997.
The increase was primarily due to the commencement of operation of the Wuxi Tin
Hill facility, Units 2 and 3 of the Cili Misty Mountain facility, Unit 1 of the
Jiaozuo Aluminum Power facility and the simple cycle unit of the Hefei
Prosperity Lake facility.
Costs of Sales
Costs of sales, which include fuel, operations, and maintenance expenses, and
depreciation and amortization, increased $1.2 million to $3.1 million from the
third quarter of 1996 to the third quarter of 1997. The increase in costs of
sales was primarily due to the commencement of operation of Unit 1 of the
Jiaozuo Aluminum Power facility and the simple cycle unit of the Hefei
Prosperity Lake facility.
Costs of sales increased from $3.9 million to $6.4 million from the nine months
ended August 31, 1996 to the nine months ended August 31, 1997. The increase in
costs of sales was primarily due to the commencement of operation of the Wuxi
Tin Hill facility, Units 2 and 3 of the Cili Misty Mountain facility, Unit 1 of
the Jiaozuo Aluminum Power facility and the simple cycle unit of the Hefei
Prosperity Lake facility.
Development, Selling, General and Administrative Expenses
Development, selling, general and administrative expenses decreased from $1.8
million to $0.4 million from the third quarter of 1996 to the third quarter of
1997 and decreased from $5.2 million to $3.7 million from the nine months ended
August 31, 1996 to the nine months ended August 31, 1997. The decreases were
primarily due to a reduction in the costs associated with development activities
and a corresponding increase in costs associated with the operational management
of the Company's existing projects in China.
14
<PAGE>
Interest Income
Interest income increased from $1.3 million to $3.2 million from the third
quarter of 1996 to the third quarter of 1997 and increased from $5.0 million to
$9.8 million from the nine months ended August 31, 1996 to the nine months ended
August 31, 1997. The increases were primarily due to the proceeds received from
the public offering of the Company's 2006 notes in December 1996 being available
for investment in marketable securities for the three months and the nine months
ended August 31, 1997.
Interest Expense
Interest expense increased from $0.4 million to $1.7 million from the third
quarter of 1996 to the third quarter of 1997 and increased from $0.7 million to
$4.0 million from the nine months ended August 31, 1996 to the nine months ended
August 31, 1997. The increases were primarily due to (i) the interest expense
and amortization of costs associated with the issuance of the 2006 Notes in
December of 1996, offset in part by capitalization of interest incurred during
the development and construction of the Company's projects, and (ii) an increase
in interest on two minority shareholder loans to Wuxi Tin Hill, interest on
minority shareholder loan to Jiaozuo Aluminum Power and interest on a bank loan
to Hefei Prosperity Lake. Capitalized interest was approximately $3.7 million
for the third quarter of 1997 and $10.6 million for the nine months ended August
31, 1997.
Amalgamation Cost
Amalgamation costs of approximately $0.4 million for the nine months ended
August 31, 1997 related to expenses incurred in connection with the
Amalgamation.
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
has entered into commitments to invest a total of approximately $357.8 million
in the form of equity contributions and loans to its joint ventures including
approximately $18.0 million of interest during construction and provision for
potential cost overruns, of which $219.3 million has been invested as of
September 30, 1997. As of September 30, 1997, the Company had approximately
$92.7 million available in cash and cash equivalents and marketable securities
and expects to generate cash flow from operations over the course of the
anticipated investment period to fund any such commitments. In the event of a
shortfall between the amount of the Company's commitments and the foregoing
sources of funds, the shortfall may be made up by loans or equity contributions
from AES, but AES is not obligated to provide any such loan or equity
contribution for such purpose and there are no assurances that AES would decide
to provide any such loan or equity contribution.
As a result of the Amalgamation, the Company is subject to covenants contained
in various AES debt agreements (the "AES Debt Covenants"), including those
contained in the documents governing AES's 10 1/4% Subordinated Notes due 2006,
8-3/8% Senior Subordinated Notes due 2007 and $425 million credit facility due
1999. Due to the recent amendments to the terms of the
15
<PAGE>
AES Debt Covenants, certain material restrictions previously applicable to AES
Chigen, including a prohibition on direct investments in future projects, are no
longer applicable. However, no assurance can be given that AES Chigen will
invest in any additional future projects.
Both the AES Debt Covenants and the covenants contained in the Indenture for AES
Chigen's 2006 Notes 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.
The Company is permitted, pursuant to the terms of the Indenture under which its
2006 Notes were issued, to pay dividends to AES, provided that the Company
satisfies certain conditions.
One of the results of the Amalgamation has been the termination of the
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")
between the Company and AES, which, among other things, prohibited the Company
from developing, constructing, owning, managing and operating electric power
generation projects in any part of Asia other than China. The Company may
consider investing through its subsidiaries in power projects outside of China.
Cash from Operations
Net cash used in operating activities for the nine months ended August 31, 1997
totaled $10.6 million as compared to $0.3 million for the same period in 1996.
The increase in 1997 was primarily due to a high proportion of interest income
accrued from affiliates and an increase in the components of working capital.
These factors offset a significant increase in net income before depreciation as
compared with the corresponding period in 1996.
Cash from Investing Activities
Net cash used in investing activities totaled $140.0 million during the nine
months ended August 31, 1997 as compared to $22.5 million during the same period
of 1996. The 1997 amount primarily reflected the purchase of property, plant and
equipment and other project related investments of $95.5 million, the purchase
of short-term investments (net of any proceeds from the maturity or sale of
short-term investments) of $17.2 million and the deposit (net of withdrawal) of
$27.3 million in debt service reserves.
Cash from Financing Activities
Net cash provided by financing activities during the nine months ended August
31, 1997 aggregated $183.5 million as compared to $10.8 million used in
financing activities during the same period of 1996. During the nine months
ended August 31, 1997, the Company received proceeds, net of underwriting
discounts and commissions and offering costs, of $174.1 million from the
issuance of the 2006 Notes, proceeds of $8.8 million from bank loans available
to subsidiaries and $3.4 million of loans and contributions made to subsidiaries
by minority shareholders, which were partially offset by repayment of bank loans
of $1.7 million and repayment of $1.3 million of loans from minority
shareholders.
16
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Document
10.5* Joint Venture Contract, dated August 1996, by and among North
China Electric Power Group Corporation, Jiangsu Province
Investment Corporation, Shanxi Energy Enterprise (Group)
Company, Jiangsu Provincial Power Company ("Jiangsu Power")
and the Company to establish Yangcheng International Power
Generating Company Limited ("Yangcheng Power").
10.49* On-lending Agreement on Using US Export Credit by Yangcheng
International Power Company Ltd. by and between Yangcheng
Power, as the borrower, and Shanxi Branch of China
Construction Bank, as the lender.
10.50* On-lending Agreement on Using German Export Credit by
Yangcheng International Power Company Ltd. (the "German Export
Loan Contract") by and between Yangcheng Power, as the
borrower, and Shanxi Branch of China Construction Bank, as the
lender.
10.51* On-Lending Agreement by and between Shanxi Branch of the
China Construction Bank, as the lender, and Yangcheng Power,
as the borrower
10.52* RMB Fund Loan Contract of State Development Bank by and
between the State Development Bank, as the lender, and
Yangcheng Power, as the borrower.
10.53* Power Purchase Contract between Yangcheng Power and Jiangsu
Power.
27 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
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AES China Generating Co. Ltd.
(Registrant)
Date: October 15, 1997 /s/ Jeffery A. Safford
----------------------
Jeffery A. Safford
Vice President,
Chief Financial Officer and Secretary
18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Document Numbered Page
- ------ -------- -------------
<S> <C> <C>
10.5* Joint Venture Contract, dated August 1996, by and
among North China Electric Power Group
Corporation, Jiangsu Province Investment
Corporation, Shanxi Energy Enterprise (Group)
Company, Jiangsu Provincial Power Company
("Jiangsu Power") and the Company to establish
Yangcheng International Power Generating
Company Limited ("Yangcheng Power").
10.49* On-lending Agreement on Using US Export Credit
by Yangcheng International Power Company Ltd.
by and between Yangcheng Power, as the borrower,
and Shanxi Branch of China Construction Bank, as
the lender.
10.50* On-lending Agreement on Using German Export
Credit by Yangcheng International Power Company
Ltd. (the "German Export Loan Contract") by and
between Yangcheng Power, as the borrower, and
Shanxi Branch of China Construction Bank, as the
lender.
10.51* On-Lending Agreement by and between Shanxi
Branch of the China Construction Bank, as the
lender, and Yangcheng Power, as the borrower.
10.52* RMB Fund Loan Contract of State Development
Bank by and between the State Development Bank,
as the lender, and Yangcheng Power, as the
borrower.
10.53* Power Purchase Contract between Yangcheng
Power and Jiangsu Power.
27 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.
19
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.5
Draft 08/21/1997
JOINT VENTURE CONTRACT
TO ESTABLISH
YANGCHENG INTERNATIONAL POWER GENERATING
COMPANY LIMITED
August 1996 in Beijing, China
-1-
<PAGE>
Chapter 1
General Principles
North China Electric Power Group Corporation, Jiangsu Province
Investment Corporation. Shanxi Energy Enterprise (Group) Company. Shanxi
Provincial Power Company, Jiangsu Provincial Power Company, and AES China
Generating Co. Ltd. in accordance with the Law of the People's Republic of China
On Cooperative Joint Ventures Using Chinese and Foreign Investment and other
relevant Chinese laws and regulations, and the principle of equality and mutual
benefits, through friendly discussions, hereby agree to jointly invest in and
establish a Sino-foreign cooperative joint venture company which shall be named
Yangcheng International Power Generating Company Limited (hereinafter
"Company"), in Shanxi Province, the PRC.
Whereas, the Company shall develop a 6x350 MW power plant, based on
coal deliveries from Shanxi Province, with the electricity produced to be
transmitted to Jiangsu Province.
Now therefore, it is hereby agreed among the Parties hereto as follows:
Chapter 2
Definitions
Article 1. The following definitions of certain terms hereafter used in
this Contract shall apply for the purposes of this Contract:
Power Plant - means the 6X350MW coal-fired power plant invested and constructed
by the Parties in Yangcheng County, Shanxi Province.
Project - means the 6x350 MW coal-fired Power Station invested and constructed
by the Parties in Yangcheng County, Shanxi Province and the land on which the
Company enjoys all rights of use and auxiliary facilities directly related to
the Power Plant.
Articles of Association - means the articles of association of Yangcheng
International Power Generating Company Limited as concluded and amended by the
Company's Board of Directors.
Business License - means the enterprise legal person business license issued by
the State Administration for Industry and Commerce of the PRC or its authorized
organizations to the Yangcheng International Power Generating Company Limited.
Clearances - means all clearances, permits, consents, approvals, authorizations
and licenses required for the construction and operation of the Project as
contemplated by the Contract.
China or PRC - means the People's Republic of China.
MOFTEC - means the Ministry of Foreign Trade and Economic Cooperation.
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<PAGE>
Subsidiary - means wholly-owned subsidiary of the Party to the Company.
Coal Supply Contract - means the long-term contracts to be entered into by the
Company and the coal suppliers in Shanxi Province for the coal supply to the
Power Plant.
Power Purchase Contract - means the Contract to be entered into by the Company
and Jiangsu Provincial Power Company for the sale and purchase of electricity.
EPC - means the Contract to be entered into by the Company and Shanxi Provincial
Power Company for the engineering, procurement and construction of the Project.
Operator - means Shanxi Provincial Power Company, the operating and managing
company determined by the Board of Directors, which shall be responsible for the
management, operation and maintenance of the Power Plant.
Operation Contract - means the Contract to be entered into by the Company and
Shanxi Provincial Power Company for the management, operation and maintenance of
the Power Plant.
Lenders - means domestical and overseas financial institutions that will or may
provide financing to the Company, or the financial institutions that will
on-lend the foreign export credit.
Financial Closing - means the binding commitment from Lenders, as evidenced by
one or more executed definitive credit agreements in an amount sufficient to
complete the development, construction, commissioning and trial operating of the
Project.
Reasonable Profit - means the distributable profit estimated based on the
approved expected financial internal rate of return in the Feasibility Study
Report of the Project.
Right of Ways and Land Lease Contracts - means the contracts for obtaining right
of use of the ways and the land required by the Company during the period of
construction and operation for the Project.
Project Documents - means the Power Purchase Contract, Coal Supply Contract,
Operation Contract, EPC, the credit agreements. Interconnection & Dispatch
including Right of Ways and Land Lease Contract related to the Project.
RMB - means the Renminbi, the official currency of the PRC.
U.S. Dollars - means the official currency of the United States of America.
the Land - means the land in Yangcheng County. Shanxi Province used for
construction of the Project as specified in the Site Description Map attached to
the Feasibility Study Report and Site Lease Agreement.
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<PAGE>
Chapter 3
Parties to the Joint Venture
Article 2. The Parties to this Contract (hereinafter referred to
jointly as the "Parties", and individually as the "Party") are:
North China Electric Power Group Corporation (hereinafter "Party A"),
incorporated with Beijing Administration of Industry and Commerce, with its
legal address at 32 Zaolinqian Street, XuanWu District, Beijing, the PRC, and
with its general manager, Mr. Jiao Yian, a citizen of the PRC, as its legal
representative;
Jiangsu Province Investment Corporation (hereinafter "Party B"),
incorporated with Jiangsu Administration of Industry and Commerce, with its
legal address at No.5 Shanghai Road, Nanjing City, Jiangsu Province, the PRC,
and with its Chairman, Mr. Chao Renxiang, a citizen of the PRC, as its legal
representative;
Shanxi Energy Enterprise (Group) Company (hereinafter "Party C"),
incorporated with the Shanxi Administration of Industry and Commerce, with its
legal address at Building 10, Guoshi Street, Taiyuan City, Shanxi Province, the
PRC, with its Chairman, Mr. Wu Junzhou, a citizen of the PRC, as its legal
representative;
Jiangsu Provincial Power Company (hereinafter "Party E"), incorporated
with Jiangsu Administration of Industry and Commerce, with its legal address at
20 Beijing West Road, Nanjing City, Jiangsu Province, the PRC, and with its
general manager, Mr. Gu Zhipeng, a citizen of the PRC, as its legal
representative;
AES China Generating Co. Ltd. (hereinafter "Party F"), incorporated in
Bermuda, with its legal address at 9/F., Allied Capital Resources Bldg., 32-38
Ice House Street Central, Hong Kong and with its President, Paul Hanrahan, a
citizen of the U.S., as its legal representative.
Chapter 4
Establishment of the Company
Article 3. In accordance with the Law of the People's Republic of China
On Cooperative Joint Ventures Using Chinese and Foreign Investment and other
relevant Chinese laws and regulations, the Parties agree to establish a
Sino-foreign cooperative joint venture company within the territory of China,
which shall be named Yangcheng International Power Generating Company Limited.
Article 4. The name of the Company shall be [Chinese Characters] in
Chinese and "YANGCHENG INTERNATIONAL POWER GENERATING COMPANY LIMITED" in
English. The legal address of the Company shall be No. 151 Shooing Ta Si Street,
Tai Yuan City in Shanxi Province, the PRC.
-4-
<PAGE>
The Company shall be a Chinese legal person and thus be governed and
protected by Chinese laws. All activities of the Company shall comply with
Chinese laws, regulations and other provisions of the PRC.
Article 5. The Company shall be a limited liability company and shall
be liable for its debts with the total assets of the Company. Each Party shall
share risks, losses and liabilities of the Company in proportion to their
respective contribution to the registered capital of the Company and within its
subscribed capital.
The Parties shall share the rights sand interests under this Contract
according to their contribution to the registered capital and cooperation
condition and in accordance with the provisions of this Contract.
Chapter 5
Business Purpose and Scope
Article 6. The purposes of the Company are:
(a) to increase utilization of the coal resources in Shanxi
Province, to improve Jiangsu's supply of electricity, to
purchase and utilize advanced power generation technology, to
finance, construct, operate, maintain and manage the Power
Plant for the generation and sales of electricity, to
implement scientific and highly efficient management
techniques in the operation of the Power Plant, and to promote
economic development in Shanxi and Jiangsu provinces; and
(b) to achieve efficient power production of the Power Plant and
achieve Reasonable Profits for each Party.
Article 7. The business scope of the Company is:
generation and sales of electricity; construction and
management of the Power Plant; and development of
comprehensive utilization related to the production of
electricity.
Chapter 6
Total Investment and Registered Capital
Article 8. The amount of total investment of the Company is 13.2
billion RMB which is equivalent to 1571.53 million U.S. Dollars.
The registered capital of the Company shall be 392.86 million U.S.
Dollars, accounting for 25% of the total investment set forth above. Party A
shall own 25% of the registered capital of the Company, Party B - 20%, Party C
16%, Party D - 10%, Party E - 4% and Party F - 25%. The capital contribution of
each Party are as follows: Party A 98.22 million U.S. Dollars, Party B 78.57
million U.S. Dollars, Party C 62.86 million U.S. Dollars, Party F 98.22 million
U.S. Dollars.
-5-
<PAGE>
Article 9. The Company, with agreement from all Parties, shall only be
responsible for fees, costs and expenses directly related to the Project.
Article 10. Party A, Party B, Party C, Party D and Party E shall make
their capital contribution in RMB cash which shall be denominated in U.S.
Dollars; Party F shall make its capital contribution in U.S. Dollars. Conversion
of RMB to U.S. Dollars shall be calculated based upon the intermediary price of
the buying and selling exchange rate as published by the People's Bank of China
on the date of each contribution.
Article 11. According to relevant Chinese law, regulations and the
requirements of the Lenders, the Parties shall each pay 15% of its registered
capital contribution within three months of the issuance date of the Business
License. The remaining registered capital shall be paid by the Parties in
installments within three years on the basis of registered capital contribution
ratio, on the dates and in the amounts determined by the Board of Directors
after the official execution of EPC Contract and Loan Agreement.
Article 12. The increase, reduction or assignment of the registered
capital of the Company shall be subject to the decision of the Board of
Directors and approval of MOFTEC. The procedures for the registration of such
alteration shall then be handled by the original registration authority.
Article 13. After the Parties have paid each installment of their
respective registered capital contributions and an accounting firm registered in
China has verified the contribution and issued a verification report, the
Company shall issue an investment certificate to each Party. The investment
certificate shall bear the names of the Parties, the date of the contributions,
the type of currency, the amounts of contribution and the date of the issuance
of the certificates.
Chapter 7
Financing and Cooperation Condition
Article 14. The difference between the total Investment and the
registered capital shall be financed as follows:
a) The foreign exchange shortfall, [***] million U.S.
Dollars, shall be met through export credit guaranteed and
on-lent by the Bank authorized by the State. The Company
shall be responsible to borrow and be responsible to repay
the principal and interest on such loan while the five
Chinese investors shall provide counter-guarantee in
proportion to their contributions to the registered
capital, which shall be the cooperation conditions of the
five Chinese parties.
b) The RMB shortfall, [***] million RMB, shall be met in
the form of loan of the Company and repaid by the Company
at the interest rate set forth by the People's Bank of
China and quoted by
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
-6-
<PAGE>
the State Development Bank for loan of similar term. Such
loan shall be arranged by Party A, B, C, D, and E on
behalf of the Company (including their own fund) or
guaranteed by Party A, B, C, D and E in proportion to
their contributions to the registered capital, which shall
be the cooperation condition of the five Chinese parties.
Article 15. As the five Chinese parties have provided guarantee or
counter guarantee for [***] million U.S. Dollars loan and [***] million RMB loan
of the Company as per this Contract, the Company shall use its all efforts to
fulfill all the obligations under the Loan Agreement, including borrowing short
term loan to repay the principal and interest of the above mentioned loans. In
the event that due to the Company's failure to repay the principal and interest
of such loans in time, and the guarantors are required by the Lenders to make
such repayment, then after the five Chinese parties or any one or several of
them have performed the obligations of guarantee, such party or parties that
have performed their obligations shall at once have the right of subrogation
against such guaranteed debts.
Chapter 8
Favorable Treatment to the Company
Article 16. In the event that the issuance, amendment, supplement or
rescission by the Government of China or its agencies of the laws, regulations
or policies in respect of tax, customs, foreign exchange or other issues after
the execution of this Contract or Project Documents enable the Company to enjoy
more favorable conditions than those offered by this Contract, without harming
the interest of any Party, the Company shall apply for such favorable treatments
in accordance with relevant rules.
Article 17. After the execution date of this Contract and the Project
Documents, if a Party's economic benefits under this Contract or Project
Documents, directly or indirectly, are adversely affected because of the
issuance, amendment, supplement or rescission of the laws, regulations or
policies in respect of tax, customs, foreign exchange or other issues by the
Government of China or its subdivision, the Parties shall consult upon notice
from the affected Party requesting consultation and shall make necessary
amendments to the relevant provisions of this Contract so as to maintain each
Party's economic benefits under this Contract. However, such amended provisions
shall take effect only upon approval of the original examination and approval
authority.
Chapter 9
Assignment of Right and Interest in Registered Capital
Article 18. During the term of this Contract, no Party may sell,
assign, pledge, or dispose of its right and interest in the registered capital
of the Company without the consent of the Board of Directors and the approval of
MOFTEC.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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<PAGE>
When a Party wishes to dispose of all or any part of its right and
interest in registered capital in the Company, the other Parties shall have a
preemptive right to purchase in proportion on their share of registered capital.
The Terms for such transfers by a Party to the other Parties shall be no less
favorable than those offered to any third party. Within 45 days after delivery
of the written offer by the transferring party, any interested Parties shall
deliver their response stating whether or not it accepts the offer to purchase
the transferring Party's interest in the Company. If a Party or other Parties
fail(s) to accept such offer within the aforementioned 45-day period or if a
Party or other Parties express(es) no interest, it will be deemded to have given
its consent to such transfer. In such event, the company's Board of Directors
shall vote to approve such transfer.
In the case one Party wishes to assign its rights ad obligations in the
Company to its subsidiary, the subsidiary or the assignee shall be able to
perform the same obligations as the transferring Party under the Contract and
must undertake all the rights and obligations of the transferring Party under
the Contract. Upon satisfaction of the above conditions, the other Parties shall
prompt their appointed directors of the Board to vote for it at the meeting of
the Board of Directors of the Company. However, such assignment shall be subject
to the consent of the Lenders and shall not adversely affect the business of the
Company and the performance of this Contract.
Any above mentioned disposal of the right and interest in the
registered capital shall be made only after their respective subscribed
Registered Capital is completely paid, the construction of the Project is
completed and all units have entered into commercial operation.
Article 19. If there is any change to the major shareholders or
department-in-charge of the Parties, the Party for which a change has occurred
shall so inform the other Parties in writing immediately.
Any change in the organization or structure of any Party to this
Contract shall not affect its rights and obligations as stipulated in this
Contract.
Chapter 10
Responsibilities of the Parties
Article 20. The Parties shall be respectively responsible for the
following matters:
(a) Responsibilities of Party A:
(i) Providing its registered capital contribution in
accordance with this Contract.
(ii) Obtaining from the relevant PRC government departments
the approvals, the registration and Business License of
the Company, and handling other matters relating to the
establishment of the Company;
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<PAGE>
(iii) Handling other matters entrusted to it by the Company;
(iv) Assisting the Company in obtaining the financing
required by the Project from domestic or foreign
financial institution and provide guarantee or
counter-guarantee for the financing required by the
Project.
(v) Assisting the Company in obtaining the rights, permits
and Clearances for the use of access to infrastructure
facilities such as land, water, power, transportation,
etc.;
(vi) Assisting the Company in obtaining preferential
treatments provided under the laws of China;
(vii) Assisting the Company with application for licenses for
importation of equipment and the reduction or exemption
of import customs duties;
(viii) Assisting the Company with application for obtaining
the related approvals ad permits required by the
electric industry; and
(ix) Assisting in handling matters related to the Company.
(b) Responsibilities of Party B:
(i) Providing its registered capital contribution in
accordance with this Contract;
(ii) Obtaining the approvals and cooperation required by the
Project from Jiangsu Province;
(iii) Handling other ratters entrusted to it by the Company;
(iv) Assisting in obtaining the approval, registration,
Business License from relevant government departments,
and handling other matters concerning the establishment
of the Company;
(v) Assisting the Company in obtaining the financing
required by the Project from domestic or foreign
financial institutions and providing guarantee or
counter-guarantee for the financing required by the
Project;
(vi) Assisting the Company in obtaining preferential
treatments provided under the laws of China;
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<PAGE>
(vii) Assisting the Company with application for licenses for
importation of equipment and the reduction or exemption
of import customs duties;
(viii) Assisting the Company in handling matters concerning
the sale of electricity to Jiangsu Province; and
(ix) Assisting in handling matters related to the Company.
(c) Responsibilities of Party C:
(i) Providing its registered capital contribution in
accordance with this Contract;
(ii) Obtaining the approvals and cooperation required by the
Project from Shanxi Province;
(iii) Handling other matters entrusted to it by the Company;
(iv) Assisting in obtaining the approval, registration,
Business License from relevant government departments,
and handling other matters concerning the establishment
of the company;
(v) Assisting the Company in obtaining the financing
required by the Project from domestic or foreign
financial institutions and providing guarantee or
counter-guarantee for the financial required by the
Project;
(vi) Assisting the Company with application for obtaining
the rights, permits and Clearances for the use of
access to infrastructure facilities such as land,
water, power, transportation, etc.;
(vii) Assisting the Company in obtaining preferential
treatments provided under the laws of China;
(viii) Assisting the Company with application for licenses for
importation of equipment and the reduction or exemption
of import customs duties;
(ix) Assisting the Company to buy coal at the price applied
by Shanxi Provincial Power Company to its power plants.
(x) Assisting the Company with application for
preferential treatment of local taxes; and
(xi) Assisting in handling matters related to the Company.
(d) Responsibilities of Party D:
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<PAGE>
(i) Providing its registered capital contribution in
accordance with this Contract.
(ii) Obtaining approvals and cooperation required by the
Project from Shanxi Province;
(iii) Handling other matters entrusted to it by the Company;
(iv) Assisting in obtaining the approval, registration,
Business License from relevant government departments,
and handling other matters concerning the establishment
of the Company;
(v) Assisting the Company in obtaining the financing
required by the Project from domestic or foreign
financial institutions and providing guarantee or
counter-guarantee for the Company on the financing
required by the Project;
(vi) Be responsible for applying and obtaining for the
Company the rights or permits for the use of access to
infrastructure facilities such as land, water, power,
transportation, etc.;
(vii) Assisting the Company in obtaining preferential
treatments provided under the laws of China;
(viii) Be responsible for applying for the license for
importation of equipment, and the reduction or
exemption of import customs duties for the Company;
(ix) Assisting the Company to buy coal at the price applied
by Shanxi provincial Power Company to its power
plants;
(x) Assisting the Company with application for preferential
treatment of local taxes;
(xi) Assisting the Company with application for related
approvals and permits required by the electric
industry;
(xii) Executing EPC Contract with the Company and
implementing the obligations thereunder;
(xiii) Executing O&M Contract with the Joint Venture Company
and implementing the obligations thereunder; and
(xiv) Assisting in handling matters related to the Company.
(e) Responsibilities of Party E:
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<PAGE>
(i) Providing its registered capital contribution in
accordance with this Contract;
(ii) Obtaining approvals and cooperation required by the
Project from Jiangsu Province;
(iii) Handling other matters entrusted to it by the Company;
(iv) Entering the Power Purchase Contract with the Company
and taking the obligations thereunder;
(v) Assisting in obtaining the approval, registration,
Business License from relevant government departments,
and handling other matters concerning the establishment
of the Company;
(vi) Assisting the Company in obtaining the financing
required by the Project from domestic or foreign
financial institutions and providing guarantee or
counter-guarantee fro the financing required by the
Project;
(vii) Assisting the Company in obtaining preferential
treatments provided under the laws of China;
(viii) Assisting the Company with application for importation
of equipment and import licenses, and the reduction or
exemption of import customs duties;
(ix) Assisting the Company with application for related
approvals and permits required by the electric
industry;
(x) Assisting in handling matters related to the Company.
(f) Responsibilities of Party F:
(i) Providing its registered capital contribution in
accordance with this Contract;
(ii) Assisting in obtaining the approval, registration,
Business License from relevant government departments,
and handling other matters concerning the establishment
of the Company;
(iii) Handling other matters entrusted to it by the Company;
(iv) Assisting the Company in obtaining Financing required
by the Project through domestic or foreign financial
institutions;
(v) Assisting the Company in obtaining preferential
treatment provided under Chinese law and policies;
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<PAGE>
(vi) Assisting the Company in obtaining advanced management
techniques and power generating technologies;
(vii) Assisting the Company with application for importation
of equipment and export licenses, and the reduction or
exemption of export customs duties;
(viii) Assisting in handling matters related to the Company.
Chapter 11
Board of Directors
Article 21. The Company shall establish a Board of Directors which
shall be the governing body of the Company.
Article 22. The Board of Directors shall be composed of nine persons of
which two Directors are from Party A; two from Party B; one from Party C; one
from Party D; one from Party E and two from Party F. The Chairman of the Board
of Directors shall be appointed by Party A, and three Vice Chairmen shall be
appointed respectively by Party F, B and C. The term of the Chairman, Vice
Chairman and the directors positions shall be three years and they may serve a
consecutive term if reappointed upon expiration of the term.
Article 23. The Chairman of the Board is the legal representative of
the Company. Should the Chairman be unable to exercise his responsibility for
some reasons, a Vice Chairman shall be authorized to assume the responsibilities
of the Chairman.
Article 24. The Board of Directors shall convene at least two meetings
each year. The meetings shall be called and presided over by the Chairman. Upon
motion by one third or more of the directors, the Chairman shall convene interim
meetings of the Board of Directors. Minutes shall be kept for each meeting of
the Board of Directors, signed by each director in attendance, and placed on
file at the Company.
Article 25. Two-thirds of the Directors present in person or by proxy
shall constitute a quorum for any meeting of the Board of Directors. In
addition, any such meeting shall be effective only when it is attended by at
least one Director or his proxy from each Party. However, if a Director of a
Party does not attend the Board meeting in person or by proxy without any
justifiable reasons, such Director shall be deemed to have attended the meeting
and abstained from voting, and the meeting can be validly convened. Any Director
of the Board who is not able to attend any meeting of the Board shall in proxy
entrust another person to be present at such meeting on his behalf. The proxy
shall be in writing and shall state the scope of the powers entrusted by such
Director.
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<PAGE>
Article 26. When the Board of Directors vote, each director shall have
equal voting rights.
Article 27. The following matters shall be discussed and decided by the
Board of Directors:
(a) Amendments of the Articles of Association of the Company;
(b) Termination, liquidation and dissolution of the Company;
(c) Contribution, increase, reduction of the registered capital of
the Company or assignment of right and interest in registered
capital including assignment and disposal pursuant to and in
accordance with Article 18 hereof;
(d) Merger of the Company with other economic entities;
(e) Adjustment of the amount of total investment of the Project;
(f) Execution, amendment, termination, substitution, assignment or
any other action by the Company of or under any Project
Documents;
(g) The Company's annual financial budget, proposal for covering
the deficit of the Company, power price adjustment application
report, and the ratio of allocations to all kinds of funds as
stipulated by laws as well as approval of employee salary
level, pensions subsidy, benefit and bonus plan, labor and
personnel policies, and any amendments thereto;
(h) Any material economic decisions in addition to the Company's
annual financial budget, including but not limited:
(1) Entering into any contract beyond the amount limit
which shall be determined by the Board of Directors
per year or contract with a term of implementation
more than 1 year; if such contracts are a series of
related contracts, the amount of which shall be in
the aggregate;
(2) Any foreign currency-denominated payment exceeding
US$100,000 per payment or US$500,000 per year;
(3) Making draws under the construction loans borrowed to
finance the Project;
(4) Making of loans, or entering into other financing
arrangements;
(i) Issuing guarantees in the name of the Company, pledge,
assignment or mortgage of assets of the Company;
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(j) Repayment of loans except as set forth in the original
amortization schedule of such loans;
(k) Contracts between the Company and the Parties;
(l) Types, amounts, term, modification or termination, of any
insurance to be carried by the Company, appointment or
dismissal of accounting firm, financial and legal advisors;
(m) Appointment, dismissal or rewards and penalties of the General
manager, deputy general manager, financial controller, or
other higher officials of the Company;
(n) Establishment of subsidiaries or branches of the company;
(o) Establishment and adjustment of the internal structure of the
Company;
(p) Formulation or amendment of accounting system and other
material management systems of the Company; and
(q) Other matters for decision as deemed necessary by the Board of
Directors.
When the Board of Directors decides matters set forth above, unless
otherwise stipulated by it, item (a) to item (n) shall be approved unanimously
by the all the directors or their proxies present at the meeting; item (o) to
item (p) shall be approved by at least two-thirds of the directors or their
proxies present; the unlisted matters shall be decided through majority vote by
all the directors or their proxies present.
Chapter 12
Operation and Management Organization
Article 28. The Company shall establish an operation and management
organization that will be responsible for the day-to-day management of the
Company. The operation ad management organization shall have one general manager
and three deputy general managers. The selection and appointment of the general
manager and deputy general managers and their duties shall be set forth in the
Articles of Association.
Article 29. The general manager shall be responsible to the Board of
Directors. The general manager shall be responsible for the day-to-day
administrative work of the Company, handling matters pertaining to construction,
operation, and business development. When handling key issues the general
managers all consult with the deputy general managers; deputy general managers
shall assist the general manager with his work. The general manager shall make
periodic reports to the Board of Directors.
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Chapter 13
Profits, Distribution, Risks and Losses Sharing
Article 30. In accordance with the stipulations of Chinese law, the
Company shall make allocations from its after-tax profits for reserve fund,
employee bonus and welfare fund as well as enterprise development fund. The
proportion of allocation for each year shall be determined by the Board of
Directors, however, it shall not exceed 12.5% of after-tax profit.
Article 31. The Company shall distribute the profit upon the decision
of the Board of Directors as per Article 32 after the Company has paid taxes
according to the laws and regulations of China, repaid the principal and
interest in the current year as per the executed Loan Agreement and made
allocation to the funds stipulated under Article 30.
Article 32. The Company shall make final profit distribution each year
base don the distributable after-tax profit after financial settlement. The
distributable profit of the Company shall be distributed based on fixed amount,
certain percentage and in the following order:
1. For the first five years after the establishment of the Company, the
Company shall not distribute profit if there is no profit; if the Company has
distributable profit, it shall be distributed among all the Parties in
proportion to their contribution to the registered capital.
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<PAGE>
2. Starting from the 6th year of the establishment of the Company,
Party F shall receive a fixed amount of [***] million each year out
of the distributable profit.
3. Surplus profit after distribution pursuant to the above Article 32
(2) clause shall be distributed among the Parties in proportion to their
contribution to the registered capital.
[***]
Article 33. The profit distribution shall be calculated in U.S.
Dollars. The Company shall pay profits of the Company in RMB to Party A, Party
B, Party C, Party D and Party E. At least [***] of Party F's profit shall be
paid in RMB, whereas the remainder shall be paid to Party F in U.S. Dollars.
Distributions in RMB above [***] to Party F shall be the average price of the
buying and selling price published by the People's Bank of China on the date of
payment.
[***]
Article 34. No profits shall be distributed until the losses of the
previous fiscal year have been made up. Undistributed profits from the previous
fiscal year shall be distributed together with the profits of the current fiscal
year.
Article 35. The company shall be responsible to convert RMB into U.S.
Dollars for the portion of profit that shall be distributed in U.S. Dollars to
Party F according to the relevant foreign exchange administration rules of the
State.
Chapter 14.
Construction of the Project
Article 36. The land issues of the Project of the Company shall be
handled according to the stipulations as follows:
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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(a) the Company will enter into Right of Ways and Land Lease
Contract with relevant land management authorities and the
Company shall have proprietary right of use on the land during
the entire joint venture term (including any advancement or
extension) and all necessary right of enough access to the
Land and public roads nearby.
(b) the Company hereby entrusts Party D to apply, under the
name of the Company, the land use certificate for the use of
Land proprietorial from the relevant land management
authority. Such Land use right shall be free from any
guarantee (including but not limited to mortgage, pledge or
lien) or lease.
(c) the prepaid money, expenses prepaid by the Parties for
getting the land use right prior to capital contribution,
after being audited by relevant authorities and the Company,
shall be reimbursed by the Company to such Party immediately
after the initial injection of the registered capital of the
Parties, plus the interest on such prepaid expenses
calculating form the date of prepayment to the date of
reimbursement. The interest thereon shall be determined
according to the interest rate quoted by the State Development
Bank for the loan of similar term.
Article 37. The Parties agree that, during the construction of the
Power Plant, a portion of the equipment for the Project shall be foreign
manufactured and warranted equipment, specifically, steam turbines, generators,
boilers and power plant control systems. At the same time the Parties agree that
the Company will maximize the use of Chinese labor, raw materials and equipment
in order to lower the costs of the Project and the electricity price.
Article 38. Party D shall undertake the construction of the Project by
entering into an EPC Contract with the Company on fixed schedule, fixed price,
turnkey EPC basis. The EPC Contract shall include articles on liquidated damages
acceptable to the investors and the General Contractor. The Company shall not
take the risk of construction of the Project. Force Majeure events shall be
dealt with in accordance with relevant articles of the EPC Contract.
Article 39. The general contractor shall, in accordance with the terms
and conditions of the EPC Contract, be responsible for the design, procurement,
construction, test run of the Power Plant and take all the liabilities before
the delivery of the completed Power Plant to the Company in accordance with
acceptance standards in EPC Contract. The General Contractor shall sign the
Equipment Procurement Contract (EP Contract) with the foreign equipment
suppliers in the name of the Company which shall constitute a part of the EPC
Contract. The General Contractor shall take all the responsibilities under EP
Contract.
Chapter 15
Operation and Management of the Power Plant
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Article 41. The Company shall be responsible for the management of the
Power Plan and entrust Party D to be the Operation responsible for the operation
of the Plant by way of executing O&M Contract with Part D. The Joint Venture
shall not take any risk related to the operation and maintenance of the Power
Plant. Force Majeure events shall be dealt wit in accordance with the relevant
articles under O&M Contract entered into between the Joint Venture and the
Operator.
The O&M Contract shall include but not limited to the following:
a) power generation according to Power Purchase Contract
b) the calculation formula, quota and payment method related
to the operation cost
c) calculation formula and payment method of management fee
d) assurance to keep the equipment in good form and safe
operation
e) guarantee for liquidated damages and reward of excess
power generation
Article 42. Operation shall take all the liabilities under the
Operation Contract for the operation of the Power Plant during the joint venture
term to ensure the Company can sell the electricity as per the Power Purchase
Contract.
Chapter 16
Fuel
Article 43. The coal required by the Power Plant shall be supplied
pursuant to the Coal Supply Contract which is entered into between the Company
and the coal suppliers in Shanxi. Party C and Party D shall assist the Company
to buy the coal at the price applied by Shanxi Provincial Power Company to its
power plants to secure the long-term, steady and sufficient coal supply for
production of the Power Plant.
Chapter 17
Procurement of equipment
Article 44. The Company can decide on its own to directly procure from
local or foreign suppliers the equipment, material or other items required by
the Joint Venture Company in accordance with relevant Chinese laws, and enter
into equipment procurement contract with relevant suppliers.
Chapter 18
Sale of Electricity
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<PAGE>
Article 45. All the electricity produced by the Power Plant shall be
purchased by Jiangsu Provincial Power Company pursuant to the Power Purchase
Contract.
Article 46. The electricity price shall be determined according to the
principles of recovering all power generating costs, achieving the Reasonable
Profit, timely repayment of principal and interest on loans, paying taxes and
fees and allocating the three funds, based on annual average utilization hours
of the Power Plant no less than [***] hours for the first [***] years and no
less than [***] hours for the last [***] years of the term of the Joint Venture
as well as other factors. The power price shall be adjusted once a year based on
the generation cost, the repayment of principal and interest, exchange rate
fluctuation, inflation and tax change, and timely adjusted upon occurrence of
any special situation. Such electricity price principles shall be subject to the
prior approval by the examination and approval authority for the electricity
price.
Power Purchase Contract shall have clauses on electricity payment and
payment guarantee which shall be in accordance with the requirements of the
Lenders.
Article 47. The Company and the Parties shall utilize the Power Plan to
generate and sell as much electricity as possible on the basis of [***] annual
average utilization hours. Jiangsu Provincial Power Company shall purchase the
electricity with no less than [***] of annual average utilization hours for the
first [***] years of the term of the Joint Venture and no less than [***] annual
utilization hours for the last [***] years of the term of the Joint Venture, and
purchase as much excess electricity produced by the Power Station as possible.
Chapter 19
Project Development Costs
Article 48. The costs that have been paid by the Parties related to
Project development shall be in accordance with relevant provisions of the State
and shall be processed as follows:
(a) Costs incurred and prepaid for prior to the
establishment of the Company by Parties A, B, C, D
and E on behalf of or for the Yangcheng Power Station
Preparatory Office, shall be reimbursed by the
Company to such Parties immediately after the initial
injection of the registered capital, plus the
interest calculated based on the interest rate quoted
by the State Development Bank of China for the loan
of similar term.
(b) Costs incurred by the Preparatory Office in Beijing
prior to the establishment of the Company, except for
the salaries of the Parties' representatives,
business travel expenses and communication expenses,
shall be reimbursed by the Company to such parties
immediately after the initial injection of the
registered capital, plus the interest calculated
based on the
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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interest rate quoted by the State Development Bank
of China for the loan of similar term.
The costs incurred as above-mentioned in (a) and (b)
upon the approval of the Board of Directors after the
establishment of the Joint Venture shall be
reimbursed by the Company.
(c) In the event of early termination of the Company
within 3 months of the establishment of the Company,
the expenses of the Preparatory Office prepaid by one
or several Parties shall be shared by all the Parties
in proportion to their contributions to the
registered capital, subject to the unanimous approval
of the Board of Directors.
Chapter 20
Labor Management
Article 49. All matters concerning labor management of the Company,
including the establishment of a trade union organization, the conclusion of
labor contracts between the Company and the individual workers and staff members
of the Company, and the recruitment, compensation, bonuses, dismissal, welfare
benefits and labor insurance of workers and staff members shall be handled in
accordance with the applicable laws and regulations of the PRC and the decisions
of the Board of Directors.
Article 50. The Company shall allot each month an amount of money equal
to two percent (2%) of the total amount of the actual wages of the staff and
workers of the Company as the funds of the Trade Union, which shall be used by
the trade union of the Company in accordance with the Measures on Management of
Trade Union Funds formulated by the All China Federation of Trade Unions.
Chapter 21
Taxation
Article 51. The Company shall pay taxes in accordance with the
stipulations of the relevant laws and regulations of the PRC.
Article 52. The Company shall do its best to obtain the benefits of all
of the tax exemptions, reductions and preferences as provided under the laws and
regulations of the PRC.
Article 53. Employees and workers of the Company shall pay individual
income tax according to the relevant laws and regulations of the PRC.
Chapter 22
Financing, Accounting and Auditing
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Article 54. The Company shall adopt the RMB as its accounting unit. The
exchange rate of conversion of foreign currency into RMB in the accounts shall
be carried out according to relevant accounting rules.
Article 55. The Company shall adopt accounting principles in accordance
with the provisions of applicable Sino-foreign cooperation joint venture
accounting regulations.
Article 56. The fiscal year of the Company shall be from January 1 to
December 31 of each year. All vouchers, receipts, and account books used in the
keeping of accounts shall be written in Chinese. Upon the reasonable request of
Party F, the Company may provide English translations of such vouchers, receipts
and account books necessary for Party F. All financial statements shall be
written in both the Chinese language and the English language.
Article 57. With respect to the financial auditing of the Company, an
independent auditor registered in China shall be retained to do examination and
verification. The examination and verification report written both in Chinese
and English shall be submitted to the Board of Directors.
Article 58. Within ten days after the end of each month, the Company
shall submit financial statements of the Company for the previous month to the
Parties. Within twenty days after the end of each quarter, the Company shall
submit the financial statements of the Company for the previous quarter to the
Parties. In the first month of each fiscal year the general manager and the
chief accountant of the Company shall work out and submit balance sheet, cash
flow statements, profits and losses statements and profit distribution plan
pursuant to the Contract for the previous year to the Board of Directors for
examination and approval, and at the same time also to the Parties.
Article 59. In the event any Party would like to employ its own
independent auditor at its own cost to undertake checking and examination of the
Company accounts and financial statements, the Company shall provide convenience
as long as the work of the auditor does not affect the normal operation of the
Company.
Chapter 23
Liability for Breach of Contract and Force Majeure
Article 60. If any Party fails to make its capital contributions in the
amounts and at the time as set forth in Article 8 and Article 11 of this
Contract, commencing from the first day of arrears, the breaching Party shall
pay a daily penalty for breach of Contract to the non-breaching Parties which is
equal to [***] of the contribution in arrears and
which shall be shared by the non-breaching Parties in proportion to their
contributions to the registered capital. If a contribution is in arrears for
3 months, the non-breaching Parties shall have the right to terminate this
Contract or supersede the status of the breaching Party, and make such capital
contribution to the Company that should be contributed by the breaching
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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Party, and at the same time enjoy the corresponding rights and interests in the
Company that should be enjoyed by the breaching Party. Such suppression shall be
approved by the original examination and approval authority and registered with
the administration of industry and commerce. The non-breaching parties may claim
the compensation from the breaching Party for the losses resulting from its
failure to make its capital contribution according to the law. However, in the
event that the Project Documents required by the Project can not be implemented
due to heir inexecution, or, the necessary approval required by the Project can
not be obtained within 3 months of the establishment of the Company, the Parties
shall not be liable for any default and damage incurred thereof.
Article 61. When this Contract or its Appendices cannot be performed or
cannot be performed completely because of the fault of one of the Parties, the
Company and the non-breaching Parties shall send a notice to the breaching Party
requiring it to rectify its default within 30 days from receipt of such notice.
If within such period rectification has not been made by the breaching Party, it
shall be considered to constitute a breach of this Contract and the breaching
Party shall be liable for compensating the Company and the non-breaching Party
for the losses suffered. If more than one Party is in default, each breaching
Party shall, in accordance with the actual circumstances, respectively bear its
share of the liability for breaching the Contract.
Article 62. Failure of a Party to execute its rights or take any
actions in connection with a breach of this Contract by any other Party shall
not be deemed to be a waiver of the rights relating to the breaching Party's
liabilities or obligations. Any waiver at any time, by a Party, of any of its
rights with respect to a certain breach of the other Parties or with respect to
the other matters resulting from such breach, shall not be considered a waiver
of any other rights with respect to another subsequent breach or other matters
arising from such breach.
Article 63. When the performance of this Contract is directly affected
or this Contract cannot be performed according to the agreed terms because of
earthquake, typhoon, flood, fire, war and other events of force majeure that are
unforesseable and of which the occurrence and consequences cannot be prevented
or avoided the Party that encounters the above-mentioned events of force majeure
shall immediately inform the other Parties by facsimile, and, within 15 days,
provide details of the event, together with a valid certifying document
evidencing the reasons for which the Contract cannot be performed or cannot be
performed in part or for which performance needs to be delayed. Such certifying
document shall be provided by the local notarial office where the force majeure
occurred. In accordance with the degree of impact of the event on the
performance of the Contract, the Parties shall discuss and decide on the
extension of the term of the Joint Venture, or whether to terminate this
Contract, or whether there is to be full or partial exemption from
responsibility for performing the Contract, or whether the performance of the
Contract is to be delayed, provided that the Party that encounters an
event of force majeure must use its best efforts to perform its obligations
under the Contract and to reduce the loses to the other Parties or to the
Company arising from the event of force majeure, before it can be excused
from liability for a breach of contract. If the event of force majeure shall
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occur and be continuing for a period of more than 120 days, the Board of
Directors at the request of at least tow Directors, shall meet to determine
first whether to extend the term of the Joint Venture, or to terminate this
Contract.
Chapter 24
Term and Termination of the Company
Article 64. The term of the Company shall be 20 years commencing from
the date of the issuance of the Business License.
In the event that the commercial operation of the Project is delayed or
suspended for an accumulated period of 6 months due to any Force Majeure event,
or any events unforeseeable and uncontrollable by the Company, the Parties and
the Board of Directors shall unanimously agree to apply for a corresponding
extension of the term of the Company, and submit application to the original
examination and approval authority for approval at least six months before the
expiration of the Company's term.
Article 65. Before the expiration of the term of the Company, upon the
occurrence of the following events under subsections (a) and (b) below, the
Board of Directors shall meet to discuss remedy for the occurred events, if no
remedy is effective, then with the unanimous approval of the Board of Directors,
this Contract may be terminated and the Company may be dissolved. Upon the
occurrence of the following events under subsections (c), and (d) below, the
Parties agree that the Board of Directors, upon receipt of any Party's notice in
writing, shall meet to discuss a remedy for the occurred events, if no remedy is
effective, then the Board of Directors shall unanimously agree to terminate this
Contract and dissolve the Company. Any of the above early termination case shall
be submitted to the original approval authority for approval.
When any situation described in (e) occurs, the non-breaching Party has
right to apply by itself to the original examination and approval authority to
terminate the Contract and dissolve the Company, and also has the right to
request the breaching Party(s) to indemnify any losses incurred to the
non-breaching Party and the Company. Any Party in violation of any of the
Project Documents shall bear relevant responsibility as per the relevant clauses
of such Project Document.
(a) Any situation described in Article 63 of this Contract occurs;
(b) The Company is unable to continue its business due to serious
economic losses and such situation has lasted for one year;
(c) The Company fails to achieve its business objectives due to
material change of Chinese law and policies pursuant to
Article 17 of this Contract, or due to the revocation,
suspension or termination of the governmental approvals
required by the Project;
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<PAGE>
(d) The EPC Contract, Power Purchase Contract, the Coal Supply
Contract, the Operation Contract, Interconnection and Dispatch
Agreement, RMB Loan Agreement or U.S. Dollar Loan Agreement
are terminated or abandoned; or
(e) One or several Parties fail to perform their major obligations
under the Contract or Project Documents, and such situation is
not effectively cured within 30 days of its occurrence.
Article 66. Except for the occurrence of the situation described in
Article 65, after the contribution of each Party to the registered capital and
financial closing, prior to the repayment of the principal and interest of loan,
the Company shall not be terminated.
Chapter 25
Disposal of Assets in the Dissolution of the Company
Article 67. Upon the expiration of the term of the Company or upon any
termination before such expiration, the Board of Directors shall put forward the
principles and procedures of the liquidation of the Company in accordance with
the Articles of Association, and organize the liquidation committee to conduct
the matters with respect to the liquidation of the Company. The Board of
Directors shall submit its proposal to the relevant governmental competent
authority.
Article 68. The liquidation of the Company shall be conducted under the
supervision of the relevant competent governmental authority and the laws of the
PRC. The assets of the Company shall be disposed and distributed according to
the stipulated procedures and principles of the liquidation.
Article 69. According to relevant laws and regulations of China, in the
event of liquidation upon or prior to the expiration of the Company, the
Company, after having paid the liquidation expenses, shall repay its debt in the
following order:
(a) the salaries of employees and labor insurance cost
(b) the Company's taxes in arrears
(c) the Company's debt
In case the proceeds form the liquidated assets are insufficient to repay in
sequence the debt in the same category, the proceeds shall then be distributed
on pro rata basis within such category.
Article 70. In the event of liquidation upon the expiration of the term
of the Company, after the debt is paid in the stipulated order under Article 69,
Party F shall agree to transfer all of its rights and interests in the Company
to the five Chinese parties for free, withdraw from the Company, refrain from
involving in distribution of assets conducted by the Company thereafter. The
five Chinese parties have the right
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to continue or terminate the business of the Company with the remaining assets
being distributed among the five Chinese parties in proportion to their capital
contributions.
Article 71. In the event of termination prior to the expiration of the
term of the Company due to the occurrence of the situation described in Article
63, liquidation of the Company shall be conducted. After the debt is paid in the
order stipulated in Article 69, the remaining assets shall be distributed among
all the Parties first to ensure each Party has achieved same financial internal
return rate, and then be distributed among all the Parties in proportion to
their contribution of registered capital.
Article 72. Except for any situation described under Article 63, in the
event of liquidation prior to the expiration of the term of the Company, after
the debt is paid according to the stipulated order under Article 69, and the
Company has made up for the full amount of Party F's Reasonable Profit to be
calculated as of the date of early termination with the remaining assets. Party
F shall agree to transfer all its rights and interests in the Company to the
five Chinese parties for free. Thereafter, Party F shall withdraw from the
Company and refrain from involving in the distribution of assets conducted by
the Company. The five Chinese parties have the right to continue or to terminate
the business of the Company with the remaining assets being distributed among
the Chinese parties in proportion to their capital contributions.
In the event of termination prior to the expiration of the term of the
Company due to the breach of Contract by one or several Parties, the
stipulations in Article 60, Article 61, and Article 62 shall be applied.
Thereafter, the Company shall conduct the liquidation according to the laws and
provisions of the Contract.
Article 73. During the period of liquidation, the liquidation committee
shall sue and defend on behalf of the Company. After the liquidation of the
Company is completed, the liquidation report shall be formulated by the
liquidation committee and submitted to the Board of Directors for approval and
reported to the relevant Chinese competent governmental authority.
Chapter 26
Insurance
Article 74. The insurance policies that the Company purchases on
various kinds of risks shall be purchased from Chinese insurance companies or
insurance companies allowed by Chinese law based on commercially reasonable
principles. The types of insurance, amount of insurance, and term shall be
discussed and decided by the Board of Directors.
Chapter 27
Applicable Law and Settlement of Disputes
Article 75. The execution, validity, interpretation, performance and
settlement of disputes under this Contract shall all be governed by the laws of
China.
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<PAGE>
Article 76. With respect to any dispute arising out of the performance
of this Contract, the Parties through the Board of Directors shall use their
good faith best efforts to settle such dispute through friendly consultation.
Article 77. If a dispute cannot be resolved through consultation, upon
agreement of the Parties, the dispute may be submitted to a mixed conciliation
committee for conciliation at a location and in a manner to be agreed by the
Parties. The conciliation committee shall be composed of one member of the
American Arbitration Association and one member of the China International
Economic Trade Arbitration Commission. The responsibility of the conciliation
committee shall be to seek a solution to the dispute. Within one month of the
submission of the dispute to it, the conciliation committee shall put forward a
conciliation plan for the Parties. If any of the Parties does not accept the
conciliation plan, then the dispute shall be submitted to arbitration according
to the provisions of this Chapter.
Article 78. Arbitration shall be conducted at the Singapore
International Arbitration Center according to the UNICITRAL Rule by an
arbitration tribunal composed of three (3) arbitrators. The award of such
arbitration shall be the final and binding to the Parties.
Article 79. In the course of the arbitration, this Contract shall
continue to be executed except for the parts in dispute and being arbitrated.
Chapter 28
Language and Copies
Article 80. The Chinese version and the English version of this
Contract shall be equally authentic.
Article 81. This Contract is executed in ten original copies both
in Chinese and English, and each Party shall retain one copy of each such
version, one copy of such version will be submitted to the authority in charge
of the examination and approval of the contract, one copy of such version will
be submitted to the department responsible for industry and commerce, and two
copies of such version will be submitted to the Company for its records. The
copies may be separately sent to the relevant PRC departments.
Chapter 29
Notices
Article 82. Notices or other communication required to be given
pursuant to this Contract shall be written in Chinese and English, and delivered
personally or sent in letter form, telex or facsimile to the legal address of
such Party as follows:
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Party A:
North China Electric Power Group Corporation
Legal address: 32 Zao Lin Qian Street,
Xuan Wu District,
Beijing, People's Republic of China
Tel: (010) 63543377
Fax: (010) 63543377 - 2296
Party B:
Jiangsu Province Investment Corporation
Legal address: No.5 Shanghai Road
Nanjing, Jiangsu Province
People's Republic of China
Tel: (025) 6651624
Fax: (025) 6611119
Party C:
Shanxi Energy Enterprise (Group) Company
Legal address: Building 10 Guo Shi Street
Taiyuan, Shanxi Province
People's Republic of China
Tel: (0351) 3090208
Fax: (0351) 3090206
Party D:
Shanxi Provincial Power Company
Legal address: 12 Nan Xiao Qiang
Taiyuan, Shanxi Province
People's Republic of China
Tel: (0351) 2023511
Fax: (0351) 4012296
Party E:
Jiangsu Provincial Power Company
Legal address: 20 Beijing West Road
Nanjing, Jiangsu Province
People's Republic of China
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<PAGE>
Tel: (025) 6637312
Fax: (025) 3307576
Party F:
AES China Generating Co. Ltd.
Legal address: 9/F., Allied Capital Resources Bldg.,
32-38 Ice House Street,
Central, Hong Kong
Tel: (852) 28425111
Fax: (852) 25301673
Chapter 30
Effectiveness and Miscellaneous
Article 83. This Contract shall supersede all prior agreements,
understandings, covenants and representations of the Parties with respect to the
subject matter hereof.
Article 84. Nothing in this Contract is intended to confer upon any
Party the rights or authority to individually bind the Company or other Parties,
expressly or implicitly, to any agreement, obligation or commitment.
Article 85. This Contract, after formal execution by duly authorized
representatives of each Party, shall come into effect at the date of the
approval of MOFTEC.
Article 86. Any amendment to this Contract shall be subject to
unanimous agreement of the Parties and shall come into effect upon approval of
MOFTEC.
Article 87. This Contract is executed by duly authorized
representatives of each Party in Beijing, China in August 1996.
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<PAGE>
North China Electric Power Group Corporation as Party A
By:____________________________________________
Title:
Jiangsu Province Investment Corporation as Party B
By:____________________________________________
Title:
Shanxi Energy Enterprises (Group) Company as Party C
By:____________________________________________
Title:
Jiangsu Provincial Power Company as Party E
By:____________________________________________
Title:
AES China Generating Company, Ltd. as Party F
By:____________________________________________
Title:
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TABLE OF CONTENTS
PAGE
CHAPTER 1
GENERAL PRINCIPLES.................................................2
CHAPTER 2
DEFINITIONS........................................................2
CHAPTER 3
PARTIES TO THE JOINT VENTURE.......................................4
CHAPTER 4
ESTABLISHMENT OF THE COMPANY.......................................4
CHAPTER 5
BUSINESS PURPOSE AND SCOPE.........................................5
CHAPTER 6
TOTAL INVESTMENT AND REGISTERED CAPITAL............................5
CHAPTER 7
FINANCING AND COOPERATION CONDITION................................6
CHAPTER 8
FAVORABLE TREATMENT TO THE COMPANY.................................7
CHAPTER 9
ASSIGNMENT OF RIGHT AND INTEREST IN REGISTERED CAPITAL.............7
CHAPTER 10
RESPONSIBILITIES OF THE PARTIES....................................8
CHAPTER 11
BOARD OF DIRECTORS................................................13
CHAPTER 12
OPERATION AND MANAGEMENT ORGANIZATION.............................15
-31-
<PAGE>
CHAPTER 13
PROFITS, DISTRIBUTION, RISKS AND LOSSES SHARING...................16
CHAPTER 14.
CONSTRUCTION OF THE PROJECT.......................................17
CHAPTER 15
OPERATION AND MANAGEMENT OF THE POWER PLANT.......................18
CHAPTER 16
FUEL..............................................................19
CHAPTER 17
PROCUREMENT OF EQUIPMENT..........................................19
CHAPTER 18
SALE OF ELECTRICITY...............................................19
CHAPTER 19
PROJECT DEVELOPMENT COSTS.........................................20
CHAPTER 20
LABOR MANAGEMENT..................................................21
CHAPTER 21
TAXATION..........................................................21
CHAPTER 22
FINANCING, ACCOUNTING AND AUDITING................................21
CHAPTER 23
LIABILITY FOR BREACH OF CONTRACT AND FORCE MAJEURE................22
CHAPTER 24
TERM AND TERMINATION OF THE COMPANY...............................24
CHAPTER 25
DISPOSAL OF ASSETS IN THE DISSOLUTION OF THE COMPANY..............25
-32-
<PAGE>
CHAPTER 26
INSURANCE.........................................................26
CHAPTER 27
APPLICABLE LAW AND SETTLEMENT OF DISPUTES.........................26
CHAPTER 28
LANGUAGE AND COPIES...............................................27
CHAPTER 29
NOTICES...........................................................27
-33-
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.49
Serial Number: CCBSXZD-970001-A
On-Lending Agreement on Using US Export Credit
by Yangcheng International Power Company Ltd.
between
Shanxi Branch of China Construction Bank
(the Lender)
and
Yangcheng International Power Company Ltd.
(the Borrower)
/1997
1
<PAGE>
Contents
Article 1. Definitions
Article 2. Amount and Use of the Loan
Article 3. Preconditions for Using the Loan
Article 4. Withdrawal and Term of Withdrawal
Article 5. Interest on the Loan and Expenses
Article 6. Repayment and Early Repayment
Article 7. Interest in Arrears
Article 8. Force Majeure
Article 9. Insurance
Article 10. Taxation
Article 11.Guarantee
Article 12. Agreed Matters
Article 13. Events of Default
Article 14. Obligation of the Borrower independent of the "Commercial Contract"
Article 15. The Lender's Exercise of Rights
Article 16. The Lender's Commitments
Article 17. Assignment and Change of Rights and Obligations
Article 18. Amendment and Supplement
Article 19. Settlement of Disputes
Article 20. Appendices
2
<PAGE>
Article 21. Miscellaneous
Article 22. Effectiveness
Article 23. Termination
Article 24. Means of Notification
3
<PAGE>
Appendices:
1. Accord on the repayment of Special Fund of Foreign Loan by Yangcheng
International Power Company Ltd. ("Special Fund Accord")
2. "The Plan for the Finalization of Capital of Yangcheng International
Power Company Ltd."
3. "Guarantee for Repayment".
4. "Schedule of Repayment of Principal with Interest".
4
<PAGE>
On-Lending Agreement on Using US Export Credit
by Yangcheng International Power Company Ltd.
The Borrower: Yangcheng International Power Company Ltd.
Address: No.151, Shuangtasi Street, Taiyuan City, Shanxi Province.
The Lender: Shanxi Branch of People's Construction Bank of China
Address: No. 6, Yingzexi Avenue Taiyuan City, Shanxi Province.
In order to construct Phase I Project of the Shanxi Yangcheng Power
Plant, the Borrower has entrusted China Construction Bank to raise fund
overseas. Authorized by the Head Office of China Construction Bank, the Lender
and the Borrower have, through friendly discussions and in accordance with the
Foreign Financing Agreement executed between the Head Office of China
Construction Bank and Export-Import Bank of the United States, reached the
following Agreement concerning the use of the above mentioned loan:
Article 1: Definitions.
Except as provided otherwise, in this On-Lending Agreement:
"Project" shall refer to Phase I Project of Shanxi Yangcheng Power Plant.
"Foreign Lending Bank" shall refer to the Export-Import Bank of the United
States.
"Foreign Financing Agreement" shall refer to the financing Agreement executed
on June 27, 1997 between China Construction Bank and Export-Import Bank of the
United States concerning using the US Export Credit with respect to the
Commercial Contract No.961JBJGB/011022DE US as well as amendments made
thereafter.
"Exporter" shall refer to Siemens Company and Forster Wheeler Inc.
5
<PAGE>
"Import Agent" shall refer to China Power Technology Import and Export Company.
"Guarantor" shall refer to North China Electric Power Group Corporation, Shanxi
Provincial Power Company, Jiangsu Provincial Power Company, Shanxi Province
Economic Construction and Investment Corporation, Jiangsu Province Investment
Corporation.
"Commercial Contracts" shall refer to the No. 961JBJGB/011022DE.US contract
executed on August 22, 1996 between China Electric Power Technology
Import-Export Company and German Siemens and US Forster Wheeler Inc.
"Supplied Items" shall refer to (1) the goods that are purchased in the United
States and exported to China under the Procurement Contract and fixed in the
Procurement List and/or (2) the services from the United States that are
performed under the procurement Contract and fixed in the Procurement List.
Its composition is determined by the Foreign Lending Bank.
"Procurement Contract" shall refer to the Commercial Contract and the
subordinated Supply Contract executed between the Borrower and the Subordinated
Supplier (such contract may or may not include the supply item which
constitutes the local cost)
"Procurement List" shall refer to the List of Supplied Items and Local Cost
Supplied Items in accordance with the requirements of the Foreign Lending Bank,
including a brief description of the Supplied Item and Local Cost Supplied
Items, quantity, estimated invoice price, estimated DOS (Date of Shipment), the
DUNS Number of Supplier and Subordinated Supplier (If any) and the SIC Code of
its products.
"Overseas Cost" shall refer to the fees paid to the Supplier and Subordinated
Supplier for those supplied items which are Non-US equipment produced outside
the United States.
"Local Cost Supplied Items" shall refer to goods of Chinese make or the
services provided for the project development and construction under this the
Procurement Contract, the amount in the invoice as issued by the supplier in
accordance with the Procurement Contract shall prevail. The composition of the
local cost supplied items shall be determined by the Foreign Lending Bank.
"US Components" shall refer to the Contract Price of the Supplied Items minus
the corresponding foreign cost (if any), its composition shall be determined by
the Foreign Lending Bank.
"Contract Price" shall refer to the sum of money issued by Supplier or
Subordinated Supplier in connection with the Supplied Items and/or Local Cost
Supplied Items.
6
<PAGE>
"The date of Issuance of Acceptance Certificate" shall refer to the date set
forth in the Commercial contract for the issuance of Acceptance Certificate.
"Commitment Fees" shall refer to the fees set forth in Article 5.2.1.
"Insurance Premium of Export Credit" shall refer to the fees set forth in
Article 5.2.2.
"Day" shall refer to the actual number of days including festivals and
holidays.
"Business day" shall refer to a day when both China Construction Bank and the
New York Federal Reserve Bank are open for business.
"Period for Using the Fund" shall refer to the period starting from the initial
day to the closing day of using the fund in accordance with the stipulations set
forth in this agreement.
"Interest Payment Day" shall refer to the Interest Payment Day set forth in
the Foreign Financing Agreement.
"Interest Period" shall refer to the period starting from a certain interest
payment day (inclusive) to the following interest payment day (non-inclusive),
but the first interest period shall start at the first day of using the fund.
"Repayment Day" shall refer to the Repayment Day set forth in the Foreign
Financing Agreement.
"Exporter Certificate" shall refer to the certificate that is signed by the
authorized representative in accordance with the stipulations set forth in the
Foreign Financing Agreement.
"Payment Voucher" shall refer to the Voucher which shall be submitted when
making payment for the Commercial Contract.
"Financiable Portion" shall refer to payment for products, services and other
expenses by means of US Export Credit in accordance with the stipulations set
forth in the Foreign Financing Agreement.
"Actual Financing Amount" shall refer to the financing amount which is
confirmed by the Foreign Lending Bank and eventually obtained by the Borrower.
"L/C Bank" shall refer to an US Commercial Bank designated by the Lender and
accepted by the Foreign Lending Bank to serve as negotiating bank and notifying
bank
7
<PAGE>
for letter of credit in accordance with the requirements set forth in the
Foreign Financing Agreement.
"LIBOR" shall refer to the London Interbank offered rate on that very day.
The headings of Articles hereof are inserted for convenience of reference only
and are not intended to affect the interpretation of this Agreement.
Article 2: Amount and Use of the Loan:
2.1. The total amount of on-lending under this On-lending Agreement shall not
exceed [***], among which: (1) [***] of the price of US supply, namely
[***] (2) Local Cost Financing: [***](3) Capitalization of interest in the
construction period: [***]; (4) Insurance Fees of Export Credit: [***].
The actual on-lending amount shall be subject to the actual financing
amount provided to the Lender by the Foreign Lending Bank.
2.2. The amount payable in cash by the Borrower shall not be less than the [***]
of the Contract Price of US Components. The Borrower can give up the unused
on-lending fund totally or partially, but it shall notify the Lender in
written form at least 40 days in advance. Meanwhile the Borrower shall bear
relevant obligations and possibly incurred fees.
2.3. If the goods which may be paid by using the export credit in accordance
with this agreement have to be transported by ships, they shall be
transported by the ships which were registered in the United States, unless
such requirement is exempted by the US Federal Shipping Administration .
The shipping fees can only be paid by using the export credit when
US-registered ships and planes are used for loading and shipping. In the
event that the transportation fees of the non-us registered ships and
planes is included in the Contract Price, such transportation fees shall be
considered as Non-US products or services.
2.4. The Borrower or the Import-Agent shall cover the marine risk insurance for
the goods, the insurance amount shall not be less than the corresponding
amount in using the export credit. The US insurer shall be put on an equal
footing in the selection of insurers. Such insurance fees are payable by
using the export credit only under conditions that it shall be paid in US
Dollars in accordance with the stipulations set
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8
<PAGE>
forth in the insurance policy or it is issued to the US Companies. Under
other conditions, such insurance fees shall be considered as non-us
products and services.
2.5. If the Borrower can not use this export credit not because of the Lender,
the Lender shall not undertake responsibility therefor.
2.6. In the event that the actual on-lending amount is less than the amount as
stipulated in the Foreign Financing Agreement, the rights and obligations
with respect to the actual On-lent amount of the Borrower and the Lender
shall not be affected.
Article 3: Preconditions for Using the Loan.
The loan under this On-lending Agreement can only be used when all the following
conditions are met:
3.1. Precondition for the initial withdrawal.
3.1.1. The Borrower shall submit the following documents at least 30 days prior
to the date of initial withdrawal to the Lender and the Lender shall
confirm the receipt of the following documents:
1) Duplicate of the Borrower's effective business license issued by
Administration Authorities for Industry & Commerce.
2) The JV Contract of the Borrower, the articles of Association of the
enterprises, approval documents of MOFTEC or other documents which have the
same effect.
3) Project establishment documents approved by the State Planning Commission.
4) The Borrower's letter of authorization authorizing the China Construction
Bank to raise fund overseas.
5) The State Planning Commission's approval to the project feasibility study
report and other relevant documents.
6) The Borrower's receipt of foreign exchange on-lending loan, registration
certificate issued by the local Administration of Exchange Control and
notice for establishment of account for repayment of principal with
interest of the foreign exchange on-lending loan.
7) Duplicate of the Commercial Contract.
8) Duplicate of Power Purchase Contract.
9) Duplicate of the Engineering Procurement and Construction Services
Contract.
10) Unconditional and irrevocable letter of guarantee for repayment provided
by the Borrower's guarantor.
11) The report for project commencement concerning Yangcheng Power Plant and
its associated power transmission and substation project approved by
competent state authorities.
9
<PAGE>
12) The procurement list of the Borrower.
13) Other documents deemed necessary by the Lender.
3.1.2. The Foreign Financing Agreement has been signed by the parties and has
become effective.
3.1.3. The Lender has obtained the confirmation letter issued by the Foreign
Lending Bank stating that the export credit meets the requirements of
fund using.
3.1.4. The Borrower has opened a foreign exchange on-lending special account and
a foreign exchange on-lending loan account for the repayment of principal
with interest in China Construction Bank or its designated branches.
3.1.5. The Borrower has committed no event of default or any action that might
lead to events of default.
3.2. Preconditions for each withdrawal (including the initial withdrawal)
3.2.1. The Foreign Financing Agreement remains valid.
3.2.2. The project capital of project as well as auxiliary RMB fund shall be
finalized according to the plan. (Schedule for finalization of capital
is described in Appendix 2)
3.2.3. The Borrower has paid all the expenses due pursuant to the Article of
this Agreement.
3.2.4. The procurement of goods which does not follow the procurement list
approved by the Lender and the Foreign Lending Bank has not occurred.
3.2.5. Effective evidence that the Borrower has obtained the valid
certificate for insurance issued by insurance corporation of China in
accordance with Article 9 of this Agreement.
3.2.6. The Borrower has not committed any events of defaults or any actions
leading to events of defaults.
3.2.7. No amendment in relation to amount, time and altering the purpose of the
equipment of the "Commercial Contract" without the consent of the Lender
has been obtained or other material amendment has been made without the
affirmation of the Lender.
3.2.8. The Borrower has reiterated that the guarantee made in this Agreement is
true, accurate and valid.
3.2.9. Other documents which are required by the Foreign Lending Bank.
3.2.10. In accordance with the stipulations set forth in this Foreign Financing
Agreement: (1) the L/C Bank and the Foreign Lending Bank have reached the
repayment agreement; (2) the L/C Bank has received the approval
certificate by the Foreign Lending Bank with respect to the letter of
credit (3) the L/C Bank has received the irrevocable instruction from
the beneficiary of the letter of credit, demanding that the L/C Bank
deduct the insurance fees for export credit from the fund of the letter
of credit and pay to the Foreign Lending Bank directly.
10
<PAGE>
3.3. The fact that the Lender has not submitted any written or oral requirement
to the Borrower to fulfill the articles and clauses set forth in the
preconditions, or that the Lender has granted the loan to the Borrower
without the Borrower's satisfaction of the conditions set forth in the
above mentioned articles and clauses, or that the Lender has given a grace
period to the Borrower's fulfillment of the preconditions shall not be
taken for granted that the Lender has waived the right of recourse to the
Borrower's nonperformance or be interpreted as the Lender's amendment to
the on-lending Agreement.
Article 4: Withdrawal and Term of Withdrawal
4.1. The Borrower hereby authorizes the Lender to require the Foreign Lending
Bank to pay the amount of the Commercial Contracts to the export traders
through the payment agent bank in accordance with the stipulations set
forth in Foreign Financing Agreement. This authorization is irrevocable and
shall not be amended without the consent of the Lender.
4.2. The Borrower and the Import-Agent shall apply to the Lender for the
opening of a letter of credit, and the Lender shall issue the letter of
credit accordingly. The fund of the Commercial Contract shall be paid in
the mode of letter of credit, and the occurred banking charges shall be
borne by the Borrower.
4.3. When the Borrower and the Import-Agent is applying for the opening of a
letter of credit, the following valid documents shall be submitted to the
Lender in accordance with the stipulations of the State Administration of
Exchange Control:
(1) Application for the opening of the certificate which is executed by the
authorized representative of the Import-Agent.
(2) The approved document of the State Electromechanical Import-Export
Examination Office.
(3) The original copy of the Commercial Contract, and pro forma invoice
(if any).
(4) Certificate of the exporter.
(5) Reference sheet of foreign currency payment in other cities which is
approved by the local Administration of Exchange Control where the
Import-Agent is located.
(6) Other documents which may be required by the Foreign Lending Bank in
accordance with the Export Credit Agreement.
11
<PAGE>
Within 5 days of the Lender's signing of the relevant instruments under
the Commercial Contract, the instruments shall be submitted to the Import Agent
for examination. The Import Agent shall within 15 days after the receipt of the
instruments notify the Lender in written form about its comments on the
instruments after examination. The Lender is responsible to handle it in
accordance with relevant stipulations set forth in the letter of credit.
4.4. After the payment agreement has been executed between the L/C Bank and the
Foreign Lending Bank, the letter of credit which is opened by the Lender
becomes effective after it has been approved by the Foreign Lending Bank.
After having received the payment instruction issued by the Lender and the
instruction for deducting the insurance premium for the export credit
issued by the beneficiary of the letter of credit, the L/C Bank shall
deduct from the payable the insurance premium for the export credit which
is the precondition for using this on-lending loan, such deducted fees
shall be paid directly to the Foreign Lending Bank, while the other payable
shall be paid directly to the beneficiary of the letter of credit. The fact
that the L/C Bank has made the payment by way of the letter of credit shall
mean that the Borrower has made the withdrawal. The amount of money used
shall be the sum of the amount paid to the beneficiary of the letter of
credit and the insurance premium for the export credit paid to the Foreign
Lending Bank.
4.5. The deadline for the withdrawal under this On-lending Agreement shall
subject to the stipulations set forth in the Foreign Financing Agreement.
With the written consent of the Lender and Foreign Lending Bank, the
deadline can be extended.
4.6. If the Borrower applies for an extension of the term of withdrawal, it
shall submit a written application to the Lender at least 45 days in
advance. The Lender shall then communicate with Foreign Lending Bank, and
if the Foreign Lending Bank consents to it, the formalities of deferring
the withdrawal may be processed for the Borrower; if not, the Borrower must
make withdrawal on schedule, otherwise the unused part shall be
automatically canceled.
Article 5. Interest on the Loan and Expenses.
5.1. Interest.
5.1.1. The annual interest rate of the loan under this Agreement shall be [***].
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
12
<PAGE>
5.1.2. The Borrower shall pay interest to the Lender once in accordance with the
balance of the loan on each Interest Payment Day, the interest shall be
calculated by the actual number of days on the basis of 360 days a year
(subject to the Foreign Financing Agreement). Detailed interest payment
plan as well as the method of payment shall be carried out in accordance
with the "Schedule for Repayment of Principal with interest" (Appendix 3),
and "Special Fund Accord" (Appendix 1).
5.1.3. The capitalization of the insurance premium of the export credit and
interest incurred in the construction period shall be carried out in
accordance with the stipulations set forth in the Foreign Financing
Agreement.
5.1.4. In the event that the last day of the interest period is a non-business
day, the interest period shall be deferred to the next business day; in the
event that the next business day falls into the next calendar month, it
shall be advanced to the last business day of the current calendar month.
5.2. Expenses:
5.2.1. Commitment fees of the Foreign Lending Bank.
The annual rate is: [***] staring from January 14, 1997 to the end
period of using fund stipulated by the Foreign Lending Bank, the commitment fees
shall be calculated and collected in accordance with the paid balance of the
loan. On the basis of 365 days a year and in accordance with the actual number
of days (subject to the Foreign Financing Agreement) It shall be paid on May 15
and November 15 of each year and the first payment day shall be May 15, 1997.
5.2.2. Insurance premium of the Export Credit.
5.2.3. On-lending fees of the Lender.
The annual rate is [***] in the grace period and [***] in the repayment
period. It shall be paid by the Borrower to the Lender in accordance with the
balance of the loan. The method of payment shall be identical as that described
in the above mentioned Article 5.1.2.
5.2.4. Other expenses incurred under the Foreign Financing Agreement and this
Agreement, including but not being limited to attorney's fees,
notarization expenses, travel expenses, expenses for presentation of
lawsuit agency, letter expenses and stamp tax incurred in the
preparation of this Agreement and other relevant documents, negotiations,
signing and implementation, shall be paid by the Borrower in accordance
with the request for payment invoice of the other party.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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<PAGE>
5.3. The interest and expenses as stipulated in the above article, the fees
collected by foreign organizations and the on-lending fees shall be paid in
US dollars and in cash, while the remainder shall be paid in RMB. The
detailed method of payment shall be subject to the "Notice of Payment"
submitted by the Lender and it shall be paid within 7 days after such
notice has been received.
Article 6. Repayment and Prepayment.
6.1. Repayment of the loan.
6.1.1. This on-lending loan shall be repaid in US dollars.
6.1.2. The detailed repayment plan of the Borrower shall be subject to the
"Schedule for Repayment of the Principal with Interest" (Appendix 3).
6.1.3. The detailed method of repayment shall be carried out in accordance with
the "Special Fund Accord" (Appendix 1) signed between the Borrower and the
Lender.
6.1.4 In this Agreement, all the payment that the Borrower makes to the Lender
shall be made in the following sequence: payment of interest in arrears,
expenses, interest and principal. If the maturity date of any payable in
this Agreement is not a business day, it shall be deferred to the following
business day, the time deferred shall be included in the calculation of
interest for this period.
6.2. Prepayment
6.2.1. In accordance with this On-lending Agreement, the Borrower can prepay the
loan after seeking the written consent from the Lender in advance, but the
Borrower shall notify the Lender the amount of the prepayment at least 45
days in advance. If it is a partial prepayment, the amount of the
prepayment shall be specified.
6.2.2. The prepayment shall begin with the last installment of repayment set
forth in the "Schedule of Repayment of Principal and Interest" (Appendix 3)
in reversed order.
6.2.3. The prepayment shall be made together with the corresponding interest and
charges thereof.
6.2.4. If the prepayment requires the approval of relevant departments in
accordance with the stipulations, the Borrower shall provide the duplicate
of the relevant approval document to the Lender.
6.2.5. The request of the Borrower for prepayment is irrevocable and the amount
of the prepayment shall not be reapplied for use.
14
<PAGE>
6.2.6. The compensation fees for the Foreign Lending Bank arising from
prepayment shall be borne by the Borrower.
Article 7. Interest in Arrears.
7.1. If the Borrower fails to repay any maturity payment including principal,
interest and expenses in accordance with the stipulations in this
Agreement, the Lender shall calculate and collect interests in arrears with
respect to the part of payment in arrears starting from the date of payment
(inclusive) to the date of actual date of payment (inclusive). The
interest rate shall be the highest of the following:
[***]
7.2. If the overdue exceeds half a year, compound interest shall be accrued.
7.3. The collection of the interest in arrears shall not affect the
implementation of Article 13.
Article 8. Force Majeure.
In the event that one of the following happens:
1) The export credit insurance has not been obtained or the insurance of the
export credit ceases to be effective.
2) Due to economic crisis or the abrupt change in the financial market, the
corresponding loan funds can not be raised or the cost of the Foreign
Lending Bank has increased.
3) Due to the international or domestic political legal and taxation reasons,
the Foreign Lending Bank can not fulfill the responsibilities of lending
set forth in the Foreign Financing Agreement.
4) Due to adjustment and change in state policies, the Lender`s continuance of
granting loans to the Borrower or of refraining from recovering the loans
will be illegal or a breach of state policy.
5) Due to the occurrence of other events of force majeure,
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
15
<PAGE>
the Lender is entitled to the following:
1) In accordance with the requirement of the Borrower, and under the
conditions set forth in the stipulations of the Foreign Financing
Agreement, the Lender will negotiate with the Foreign Lending Bank, and
handle it in accordance with the result of the negotiations.
2) Declaring the termination of the on-lending loan.
3) Require the Borrower to repay the principal with the relevant interest and
fees promptly.
Article 9: Insurance
9.1. Upon the effectiveness of the Commercial Contract, the Borrower shall
directly make or cause the contractor for transportation, installation or
construction to cover insurance for domestic transportation of imported
goods, installation project, construction project and property all risks in
a Chinese insurance institution acknowledged by the Lender with respect to
equipment under such contract on the delivery, construction and repayment
periods. The Lender shall be considered as the first beneficiary, all the
insurance coverage shall be connected to each other and allow of no
suspension in the duration of insurance.
9.2. The Borrower shall transfer all the interests under the insurance policy
to the Lender pursuant to the stipulations of Article 9.1., the insurance
benefits shall first be used to repay the principal with interest and
expenses of the loan. With the written consent of the Lender, such
insurance benefits can be continuously used in the project construction
under this Agreement.
9.3. The Borrower shall be responsible for renewing the insurance on time
before the expiration of the insurance policy and the Borrower shall not
suspend the insurance for whatever reason within the validity of the
Agreement.
9.4. If the Borrower fails to fulfill the above mentioned requirements, the
Borrower shall undertake that in case of less of assets, the Borrower shall
not refrain from undertaking any of its obligations to the Lender for
whatever reason.
16
<PAGE>
9.5. The Borrower shall bear the insurance premium incurred by insurance
coverage.
Article 10. Taxation.
The tax payable by the Lender under the Foreign Financing Agreement shall be
borne by the Borrower. The Lender shall on behalf of the Borrower, submit
application to relevant tax authority for exemption of tax in connection with
the withholding tax on foreign interest income under the Foreign Financing
Agreement. The tax payable under this on-lending Agreement shall be carried out
in accordance with Chinese tax law and relevant stipulations.
Article 11. Guarantee
The Borrower hereby guarantees:
11.1. Upon the effectiveness of this On-lending Agreement, the Borrower shall
timely, unconditionally and consecutively fulfill the responsibility and
obligation of repayment of principal with interest as well as other
obligations set forth in this Agreement without any impact whatever because
of gain or loss or repayment ability.
11.2. The Borrower is a legal person which is established in accordance with
Chinese law, existing, and engaging in legal business activities, and is
entitled to execute and perform this On-lending Agreement. The Borrower has
completed all necessary legal and administrative formalities for the
execution and performance of this On-lending Agreement.
11.3. The documents that the Borrower has provided and will provide are true,
accurate, valid and up-to-date in accordance with the requirements.
11.4. The Borrower's execution and performance of this On-lending Agreement do
not violate any of the current Chinese laws, rules and regulations, nor do
they violate any contract or agreement to which the Borrower is a party and
the use of all supplied items confirms to the stipulations of the law.
11.5. Any contracts or agreements which the Borrower executes with a third party
at present and in the future shall not affect and damage all the interests
of the Lender under this On-lending Agreement.
11.6. The Borrower is not involved in or will not be involved in any significant
arbitration or legal process, nor it is subject to any compulsory
administrative measures taken by any government departments. (These
arbitration or legal process
17
<PAGE>
or administrative measures will have significantly adverse impact on its
finance, operation and management).
11.7. All the assets incurred by the loan under this Agreement shall not be
used as any other form of mortgage or any form of guaranty during the term
of performance of this Agreement without the written consent of the Lender.
11.8. At each withdrawal and repayment, the Borrower reiterates that the above
statement and guarantee remain true, valid and accurate.
Article 12: Agreed Matters
12.1. The distribution principle of repayment of loan first and profit sharing
second shall be carried out in accordance with the plan for repayment of
principal with interest.
12.2. Any material amendment to the procurement list between the Borrower and
the Exporter shall obtain written consent from the Lender in advance.
12.3. Any amendment to the "Commercial Contract" concerning the amount, time,
change of purpose of the equipment or other material amendment confirmed by
the Lender, or any transfer of right and obligation under the Commercial
Contract shall obtain written consent from the Foreign Lending Bank and the
Lender in advance.
12.4. Without the written consent of the Lender, the Borrower shall not sell,
rent or transfer any equipment under the Commercial Contract or use these
equipment aboard.
12.5. In enlarging its scope of business stipulated in the business license
before the execution of this Agreement, or in enlarging the scope of
operation and management approved by relevant government authority, or in
selling, renting and transferring assets under this Agreement or in
charging its business, the Borrower shall solicit written consent from the
Lender before submitting it to the administrative department for industry
and commerce or relevant government authority for approval.
12.6. If the Borrower engages in any forms of mortgage, pledge, or guaranty
for its assets and interests or engages in other actions that may have
significantly adverse impact on its assets and interests, it shall
notify the Lender in time and obtain written consent from the Lender in
advance.
12.7. The Borrower shall, at the request of the Lender, provide the Lender
all relevant information concerning its operation and finance in time,
accept the supervision from the Lender and provide convenient
conditions to the Lender for examining
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the use and repayment of the loan as well as the production and operation
status of the Borrower.
12.8. The Borrower shall promptly notify the Lender of any adverse change in
the repayment of loan and operation and financial conditions of the
Borrower, and put forth its proposal or measure for settlement or
handling.
12.9. If it is necessary for the Borrower to take any significant actions
such as restructuring, reorganization, merger, acquisition, equity
transfer, equity mortgage or contracting, it shall notify the Lender in
advance and seek written consent from the Lender in advance.
12.10. The Borrower shall within 30 days at the end of each quarter provide
the Lender the balance sheet, the profit and loss statement and other
financial statement for the preceding quarter, and shall provide the
Lender within 3 months at the end of each fiscal year the balance
sheet, the profit and loss statement and other financial statement as
well as other relevant information which have been audited by an
accounting firm.
12.11. The project schedule report starts from the date of implementation of
this Agreement till the earlier date of the two dates: the date of
installation of the two generating units by the supplier as finally
accepted and acknowledged by the Borrower or all the payments payable
under this credit and this time bill have been paid in full. During
this period, the Borrower shall within 20 days after the end of each 6
months provide a project schedule report (English and Chinese, each one
copy) in accordance with the requirements of the Foreign Lending Bank
to the Lender. Such report shall include the following:
(1) budget cost of the major part of the project, the expenses of the
project in the last 6 months, the expenses of the project up to now and
the increase or decrease in the expenses of the project in accordance
with the original budget to complete the project. The RMB payment, US
Dollar payment and other foreign currency payment shall be stated
separately in all the expenses.
(2) the initial schedule and actual progress of the project construction,
the proportion that the completed portion makes up and the current
estimated project schedule;
(3) a brief description of (a) the work in the last 6 months, including an
explanation of the changes in the plan, quantity and expenditure as
well as encountered special circumstances (b) The work schedule for the
6 months thereafter.
12.12. Within 45 days from the interim acceptance and acknowledgment of the
Borrower to the two units installed by the supplier as well as in each year
thereafter, the Borrower shall submit a conventional production and
operation report (one Chinese copy and one English copy) to the Lender
until the sum under this Credit Agreement
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<PAGE>
and the time bill has been paid in full. Such report shall include: (a)
information concerning the capacity factors of the units, outage, power
sale ; (b) a description of the plan concerning the improvement and
enlargement of the power plant; besides, if the Foreign Lending Bank
requires other relevant information, corresponding contents shall be added
into the report.
12.13. The Borrower shall run its business steadily and maintain good financial
status.
12.14. The Borrower shall inform the following to the Lender promptly, if:
1) Any arbitration or legal action involving the Borrower and this project;
2) Mandatory measures have been taken by any relevant governmental authority
against any property of the Borrower;
3) Any event that seriously hinders and endangers the normal performance of
the Foreign Financing Agreement and Commercial Contract;
4) Other information with respect to the project which is required by the
Lender.
12.15. Any action taken by the Import-Agent shall be considered as having been
consented and authorized by the Lender in accordance with the Commercial
Contract or this Agreement and relevant amendments and appendices and shall
constitute the responsibilities and obligations of the Borrower. If the
Import-Agent or Exporter fails to perform the Commercial Contract or this
Agreement and its corresponding amendments as well as the stipulations set
forth in the appendices , the Lender shall not undertake the corresponding
consequences.
12.16. The Borrower shall strictly carry out the stipulations set forth in the
"Special Fund Accord" (Appendix 1).
12.17. The Borrower must assign all the RMB settlement of accounts and
import-export settlement of accounts to the Lender or its designated branch
for handling.
12.18. The Lender holds that the financial status of the Guarantor has
deteriorated to such an extent as to suspend operation or to go bankrupt or
to be incapable of performing its obligations under the Guaranty Agreement;
the Guarantor may be confronted with possible events of liquidation or
being merged or dissolved and rescinded which may produce adverse impact on
the interests of the Lender; the Guarantor is involved or will be involved
in significant arbitration or legal proceedings and debt dispute which will
affect the implementation of this On-lending Agreement. Once the Lender has
confirmed the occurrence of the above situation, the Lender is entitled:
12.18.1. To ask the Borrower to find a new guarantor acceptable to the Lender
within the time-limit(no longer than 45 days) set by the Lender with
respect to the guaranty obligations undertaken by the above Guarantor.
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12.18.2. If the Borrower fails to provide the guarantee acceptable to the Lender
within the above time-limit, the Borrower is considered to have committed
events of default as stipulated in Article 13, the Lender may take any
appropriate action which is entitled to take in accordance with the
stipulations set forth in the Articles on Events of Default.
12.19. If the non-financiable situation deemed by the foreign lending bank does
occur thus resulting in the actual on-lending amount being less than the
amount as set forth in the Foreign Financing Agreement, the Lender shall
not bear any responsibility.
12.20. Any matter not determined in this Agreement but included in the
stipulations set forth in the Foreign Financing Agreement shall be included
in the supplementary agreement to this Agreement, the Articles in the
supplementary agreement shall be determined by the Lender in accordance
with the Foreign Financing Agreement, and both the Lender and the Borrower
shall execute and perform.
Article 13. Events of Default
13.1. Any of the following actions or events are considered as the Borrower's
events of default:
1) The Borrower fails to repay and pay the principal, interest and other
expenses in accordance with the stipulations set forth in this Agreement.
2) The Borrower fails to fulfill any obligations stipulated in the documents
and this Agreement which it shall undertake.
3) The Borrower's guarantee in this On-lending Agreement and the
notification or other documents made or submitted accordingly seriously
inconsistent with facts or inaccurate or incapable of being performed.
4) The Lender holds that the financial status of the Borrower has
deteriorated so gravely that it may cause operation or go bankrupt or
incapable of fulfilling this Agreement.
5) Any agreements, contracts or other documents related to this Agreement
were suspended or declared invalid.
6) The Borrower may be confronted with events of liquidation or being merged
or dissolved and rescinded which will produce adverse impact on the
interests of the Lender.
7) The Borrower fails to repay in time any other debt which it owes to the
China Construction Bank and the Lender holds that the Borrower's default
under any other
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<PAGE>
debt agreement will affect the Borrower's repayment of any
debt under this Agreement.
8) The Borrower has been involved or shall be involved in any significant
arbitration or legal proceedings and debt disputes (the Lender holds that
these arbitration or legal proceedings or debt disputes may produce adverse
impact on the Borrower's performance of this Agreement.)
9) The Commercial Contract is totally or partially suspended or canceled, or
any event which seriously affects the proper performance of the contract
has occurred.
10) The Borrower opens an account or handles settlements in a bank which is
not designated by the Lender.
11) The tariff approved by the domestic relevant authority is not enough to
ensure the repayment of principal with interest.
12) The capital which shall be finalized in accordance with the Plan for the
Finalization of Capital has not been finalized on schedule and the
associated RMB fund has not been finalized on schedule.
13.2. In the event that any of the above-mentioned events of default occur, the
Lender is entitled to take one or several of the following measures:
1) To notify the Borrower to correct it within a definite time;
2) To suspend withdrawal promptly;
3) To announce the maturity of all the loan and require immediate repayment of
all the loan and its corresponding interest and fees;
4) The Lender may ask the Borrower to compensate for any loss and the
additional expenses accordingly because of the Borrower's default.
Article 14. Obligation of the Borrower independent of the Commercial Contract
Any disputes or other event occurred between the seller and the purchaser
under the Commercial Contract shall not affect any obligations which shall be
undertaken by the Borrower under this On-lending Agreement. The Borrower shall
not for this reason delay in or refrain from performing the obligation of
repaying principal with interest and other fees on schedule.
Article 15. The Lender's Exercise of Rights
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The fact that the Lender has not exercised or has not exercised in time
any obligations under this On-lending Agreement in the course of the
implementation of the Agreement shall not be regarded as a waive of its rights
and shall not affect any obligation which the Borrower shall undertake under law
and this On-lending Agreement.
Article 16. The Lender's Commitments
16.1. The Lender will provide the Borrower reasonable reserve loan in the
construction period and circulating fund loan in the operation period.
16.2. The Lender shall conform to the international practice and general
practice followed by foreign banks to raise funds overseas and strive for
better condition for loans in accordance with the financing plan agreed by
the both parties through negotiations.
16.3. The Lender shall conform to the change and tendency of the international
financing market, try its best to provide financing services such as
restructuring of debt, and try hard to save interest and expenses and to
reduce the cost of fund for the Borrower.
16.4. If the Borrower applies for an extension of the loan, the Lender will try
its best to negotiate with the Foreign Lending Bank. If the Foreign
Lending Bank agrees to the extension, the Lender will handle the extension
formalities for the Borrower in time.
16.5. If the fund transfer is delayed in withdrawal and repayment on account of
the Lender's responsibility, the Lender shall undertake the corresponding
responsibility.
16.6. The Lender shall keep confidential of all the documents, data and
business information which are provided by the Borrower and marked with
"Confidential".
Article 17. Assignment of Rights and Obligations
17.1. The rights and obligations of the Borrower under this On-lending Agreement
can be assigned only after written consent from the Lender is obtained.
17.2. The Lender may in the light of its business or needs, assign its rights
and obligations under this Agreement totally or partially to a third party
which it thinks appropriate but it must seek written consent from the
Borrower pursuant to the Foreign Financing Agreement in advance.
Article 18. Amendment and Supplement
In case of adjustment in policy or other uncovered matters, this
On-lending Agreement may be amended and supplemented through joint consultations
between both parties pursuant to the Foreign Financing Agreement and on the
precondition that the principal, the interest and relevant expenses of the loan
under this On-lending Agreement
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<PAGE>
will be paid on schedule. Both the amendment and the supplement shall constitute
an inseparable part of this On-lending Agreement and have the same effectiveness
as this On-lending Agreement.
Article 19. Settlement of Disputes
Should there be any disputes between the Lender and the Borrower in the
course of the implementation of this On-lending Agreement, it shall first be
settled through friendly consultation. If no agreement can be reached, any party
may institute legal proceedings at a people's court with jurisdiction in
accordance with the law.
Article 20. Effectiveness of Appendices
The appendices of this On-lending Agreement constitute an inseparable
part of the On-lending Agreement and have the same effectiveness. Appendix 3 can
be adjusted and/or supplemented by the Lender in accordance with the
stipulations of the Foreign Financing Agreement or the corresponding
notification of the Foreign Lending Bank.
Article 21. Miscellaneous
If the reform in the state foreign currency control system and changes
in other policies are related to the use and repayment of the foreign exchange
under this Agreement, the Lender will notify the Borrower on time and amend
relevant articles of this Agreement in accordance with the stipulations of the
state.
Article 22. Effectiveness
22.1. This On-lending Agreement becomes effective on the day when all of the
following conditions are satisfied and in accordance with the notification
of the Lender.
1) The execution of this Loan Agreement.
2) The Foreign Financing Agreement becomes effective.
22.2. This On-lending Agreement is prepared in two original copies, each party
shall keep one while duplicates will be delivered to the relevant parties.
Article 23. Termination
This On-lending Agreement ceases to be effective automatically on the day
when all the principal, interest and other corresponding expenses under this
Agreement have been paid by the Borrower.
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Article 24. Mode of Notification
The correspondence documents in the course of the performance of this
Agreement shall be delivered accurately by the Lender and the Borrower to the
following addresses. (If there is any change, the other Party shall be notified
in time):
The Lender:
Address: No. 9, Taoyuan North Road, Taiyuan City, Shanxi Province
Name: International Business Department of Shanxi
Branch of China Construction Bank
Tel: 0351-4031672/4031685
Fax: 0351-4031683
Zip Code: 030002
The Borrower:
Address:
Name: Yangcheng International Power Company Ltd.
Tel:
Fax:
Zip Code:
If notified by fax, the original must be mailed by registered courier service
immediately after the fax is sent. If it is mailed by registered courier
service, the date of mail shall govern.
Borrower: Lender:
Yangcheng International Power Company Ltd. Shanxi Province Branch of China
Construction Bank
(Seal): (Seal):
Signature of Authorized Representative: Signature of Authorized
Representative:
Place of Execution: Place of the Execution:
Date of the Execution: Date of the Execution:
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Appendix I.
Accord on the Repayment of Special Fund of Foreign Loan by Yangcheng
International Power Company Ltd.
In order to construct Phase I Project of the Shanxi Yangcheng Power Plant,
the Shanxi Branch of China Construction Bank ("the Lender") and Yangcheng
International Power Company Ltd. ("the Borrower") have executed this On-lending
Agreement at a total amount not exceeding [***]. To ensure the use,
the repayment of the principal with interest and the payment of relevant
expenses of the Foreign Exchange Loan under the above mentioned On-lending
Agreement, the Lender and the Borrower have reached the following agreement
through friendly discussions:
Article One. Establishment of the Relevant Account of Special Fund and Its
Purpose
The Borrower applies for establishment of the following accounts within 10
days upon the effectiveness of this On-lending Agreement:
1. The Borrower applies to the Administration of Exchange Control for opening
the "Special Account for the Foreign Exchange On-lending Loan" and the
"Account for Repayment of Principal with Interest of Foreign Exchange
On-lending Loan" in the Lender's International Business Department .
2. The Borrower shall open a RMB fund special account in an institution
designated by the Lender which will be used to deposit RMB funds with
respect to foreign exchange settlement and relevant expenses incurred under
the On-lending Agreement.
Article Two. Sources of the Fund of the Special Account
In order to ensure the timely performance of the foreign payment, the
Borrower shall reserve the following funds in accordance with the following
sequences as the sources for repayment. (If there is any change in the
accounting system of the State, both parties may make corresponding adjustment
pursuant to a new accounting system):
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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1. The depreciation fund of fixed assets which will be withdrawn by Phase I
Project of the Yangcheng Power Company Ltd. in accordance with the relevant
stipulations.
2. The profit which may be used for repayment by Phase I Project of the
Yangcheng Power Plant in accordance with the relevant stipulations.
3. Foreign exchange income of the Phase I Project of the Yangcheng Power
Plant.
4. Overall benefits of the Borrower and other income and ownership interests
which can be used for repayment.
5. The exempted or refunded taxes which may be used for repayment after it
has been submitted to the relevant authorities for approval.
6. Other legal fund sources.
Article 3. Use of the Account
1. The Borrower shall, in accordance with the "Schedule for Repayment of
Principal with Interest" or the notification of the lender, deposit the
required funds from the date that the first unit is put into operation till
the date of 30 days before the date of payment every month in proportion
(the detailed proportion shall be determined through consultations by both
parties) and successively into the "Special Account for the Foreign
Exchange On-lending" and "Account for the Repayment of Principal with
Interest of Foreign Exchange On-lending" which are opened at the Lender's
Bank by the Borrower.
2. The depreciation funds of fixed assets which are withdrawn in accordance
with the stipulations for imported equipment of the Phase I Project of
Yangcheng Power Plant must be deposited into the Borrower's RMB Special
Account which is opened at the Lender's designated institution.
3. The RMB settlement must be handled in the designated institution of the
Lender after the Phase I Project of Yangcheng Power Plant is put into
operation.
4. After the Phase I. Project of Yangcheng Power Plant is put into operation,
the settlement of the Foreign Exchange shall be handled in the
International Business Department of the Lender, the foreign exchange
earnings for ensuring the repayment shall promptly be deposited into the
"Account for the Repayment of Principal with Interest of Foreign Exchange
On-lending".
5. The Borrower shall repay the principal with interest of the matured
foreign exchange loan with the kind of currency stipulated in the loan
agreement. If the Borrower
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<PAGE>
makes repayment with the kind of currency agreed to by the Lender, the
Lender shall act as an intermediary in foreign exchange trading in
accordance with the current exchange rate, the risk of the foreign
exchange rate shall be undertaken by the Borrower.
6. The Lender shall, on the basis of the balance of the funds in the Special
Account of the Borrower, pay interest in accordance with the stipulations.
Article 4. Management of the Special Funds
1. The Borrower shall, in accordance with the stipulations of this Accord,
deposit the foreign exchange used for foreign payments and the RMB funds
into the above mentioned account in time. In the event that the Borrower
has not deposited the above mentioned funds into the designated account
within 7 business days of the bank before making foreign payment, the
Lender is entitled to handle the formalities for direct transfer.
2. Without prior written consent from the Lender, within the term of
repayment, the Borrower shall not handle the settlement of RMB set forth in
Article 3.3. and the settlement of import-export set forth in Article 3.4
in any bank which is not the Lender's Bank.
3. The Borrower shall deposit in time a full amount in the "Account for the
Repayment of Principal with Interest of Foreign Exchange On-lending" and be
ready for payment in foreign exchange. The payable funds that are not paid
because of the Borrower's insufficient funds shall without exception be
considered as overdue. The Lender will collect the interest in arrears with
respect to the funds in arrears and in accordance with the stipulations set
forth in this On-lending Agreement.
4. While making foreign payment, with respect to the balance due of the
arrears of the aggregate payment resulting from exchange rate changes
because of engaging in foreign exchange trading, the Lender may temporarily
make the advance first and then deduct the advance in the next foreign
payment together with the accrued interest in accordance with the
stipulated corresponding loan interest rate. With respect to the balance of
the fund in the "Special Account of Payment of Foreign Exchange",
interests will be paid in accordance with the stipulations by the Lender.
5. The bank charges incurred in settlement and sales of foreign exchange and
in foreign exchange trading and international settlement as well as other
relevant expenses under this On-lending Agreement shall all be borne by the
Borrower.
6. Should there be any adjustment in the state policy, this Accord shall be
amended through consultation between the Borrower and the Lender under the
precondition
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<PAGE>
that the principal and interest of the loan under the above mentioned
On-lending Agreement as well as other relevant expenses are paid on
schedule.
7. This Accord shall constitute Appendix I. to the above-mentioned On-lending
Agreement.
Yangcheng International Power Company Ltd.
(Seal):
Authorized Representative:
Shanxi Branch of China Construction Bank
(Seal):
Authorized Representative:
Date of Signature:
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<PAGE>
Appendix II.
"The Plan for the Finalization of Capital of Yangcheng International Power
Company Ltd."
30
<PAGE>
Appendix III.
"Schedule of Repayment of Principal with Interest"
(Executed in accordance with the schedule of Repayment of Principal with
Interest provided by the foreign banks)
31
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.50
Serial Number: CCBSXZD-970001-B
On-Lending Agreement on Using German Export Credit
by Yangcheng International Power Company Ltd.
between
Shanxi Branch of China Construction Bank
(the Lender)
and
Yangcheng International Power Company Ltd.
(the Borrower)
/ /1997
1
<PAGE>
Contents
Article 1. Definitions
Article 2. Amount and Use of the Loan
Article 3. Preconditions for Using the Loan
Article 4. Withdrawal and Term of Withdrawal
Article 5. Interest on the Loan and Expenses
Article 6. Repayment and Early Prepayment
Article 7. Interest in Arrears
Article 8. Force Majeure
Article 9. Insurance
Article 10. Taxation
Article 11. Guarantee
Article 12. Agreed Matters
Article 13. Events of Default
Article 14. Obligation of the Borrower independent of the "Commercial Contract"
Article 15. The Lender's Exercise of Rights
Article 16. The Lender's Commitments
Article 17. Assignment and Change of Rights and Obligations
Article 18. Amendment and Supplement
Article 19. Settlement of Disputes
Article 20. Appendices
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<PAGE>
Article 21. Miscellaneous
Article 22. Effectiveness
Article 23. Termination
Article 24. Mode of Notification
3
<PAGE>
Appendices:
1. Accord on the Repayment of Special Fund of Foreign Loan by Yangcheng
International Power Company
Ltd. ("Special Fund Accord")
2. "The Plan for the Finalization of Capital of Yangcheng International
Power Company Ltd."
3. "Guarantee for Repayment"
4. "Schedule for Repayment of Principal with Interest".
4
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On-Lending Agreement on Using German Export Credit
by Yangcheng International Power Company Ltd.
The Borrower: Yangcheng International Power Company Ltd.
Address: No.151, Shuangtasi Street, Taiyuan City, Shanxi Province.
The Lender: Shanxi Branch of China Construciton Bank
Address: No. 6, Yingzexi Avenue Taiyuan City, Shanxi Province.
In order to construct Phase I Project of the Shanxi Yangcheng Power
Plant, the Borrower has entrusted China Construction Bank to raise fund
overseas. Authorized by the Head Office of China Construction Bank, the Lender
and the Borrower have, through friendly discussions and in accordance with the
Foreign Financing Agreement executed between the Head Office of China
Construction Bank and the Foreign Lending Bank, reached the following Agreement
concerning the use of the above- mentioned loan:
Article 1: Definitions.
Except as provided otherwise, in this On-Lending Agreement:
"Project" shall refer to Phase I Project of Shanxi Yangcheng Power Plant.
"Foreign Lending Bank" shall refer to the German KFW Bank.
"Foreign Financing Agreement" shall refer to the Financing Agreement executed
on August 29,1996 between China Construction Bank and German KFW Bank concerning
using the German Export Credit with respect to the Commercial Contract
No.961JBJGB/011022DE US as well as amendments made thereafter.
"Import Agent" shall refer to China Power Technology Import - Export Company.
"Exporter" shall refer to Siemens Company and Foster Wheeler Inc.
5
<PAGE>
"Guarantor" shall refer to North China Electric Power Group Corporation, Shanxi
Provincial Power Company, Jiangsu Provincial Power Company, Shanxi Province
Economic Construction and Investment Corporation, Jiangsu Province Investment
Corporation.
"Commercial Contract" shall refer to the No. 961JBJGB/011022DE.US contract
executed on August 22,1996 between China Electric Power Technology Import-Export
Company and German Siemens and US Foster Wheeler Inc.
"The Day for Issuing and Accepting the Certificate" shall refer to the date for
issuing and accepting the Certificate set forth in the Commercial Contract.
"Insurance Institution for Export Credit" shall refer to the Holmes Export
Credit Security Bureau.
"Insurance Premium for Export Credit" shall refer to the Export Credit Insurance
Premium collected by Holmes Export Credit Security Bureau.
"Day" shall refer to the actual number of days including festivals and
holidays.
"Business day" shall refer to a day when both China Construction Bank and the
New York Federal Reserve Bank are open for business.
"Interest Payment Day" shall refer to the Interest Payment Day set forth in
the Foreign Financing Agreement.
"Repayment Day" shall refer to the Repayment Day set forth in the Foreign
Financing Agreement.
"Withdrawal Term" shall refer to the period from the effective date of this
Agreement to the deadline of withdrawal set forth in the Foreign Financing
Agreement.
"Payment of Instruments" shall refer to the Instruments which shall be
submitted when making payment for the Commercial Contract.
"LIBOR" shall refer to the Libor set forth in the Foreign Financing Agreement.
The headings of Articles hereof are inserted for convenience of reference only
and are not intended to affect the interpretation of this Agreement.
6
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Article 2: Amount and Use of the Loan:
2.1. The total amount of on-lending under this On-lending Agreement shall not
exceed [***], among which: [***] is for the payment of part of the payable
under the Commercial Contract; [***] is for the payment of construction
interest; [***] is for the payment of [***] of the export credit insurance
premium (the actual incurred fees shall govern.)
2.2. In the event that the actual on-lending amount is less than the on-lending
amount under this On-lending Agreement, the rights and obligations of the
Borrower and Lender to the actual on-lending amount shall not be affected.
Article 3: Preconditions for Using the Loan.
The loan under this On-lending Agreement can only be used when all the following
conditions are met:
3.1. Precondition for the initial withdrawal.
3.1.1. The Borrower shall submit the following documents at least 30 days prior
to the date of initial withdrawal to the Lender and the Lender shall
confirm the receipt of the following documents:
1) Duplicate of the Borrower's effective business license issued by
administration authorities for industry & commerce.
2) The JV Contract of the Borrower, the Articles of Association of the
enterprise, approval documents of MOFTEC or other documents having the same
effect.
3) The project establishment document approved by the State Planning
Commission.
4) The Borrower's letter of authorization authorizing the China Construction
Bank to raise fund overseas.
5) The State Planning Commission's approval to the project feasibility study
report and other relevant documents.
6) The Borrower's receipt of foreign exchange on-lending loan, registration
certificate issued by the local Administration of Exchange Control and
notice for establishment of account for repayment of principal with
interest of the foreign exchange on-lending loan.
7) Duplicate of the Commercial Contract.
8) Duplicate of the Power Purchase Contract.
9) Duplicate of the Engineering Procurement and Construction Services
Contract.
10) Unconditional and irrevocable letter of guarantee for repayment provided by
the Borrower's guarantor.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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11) The report for project commencement concerning Yangcheng Power Plant and
its associated power transmission and substation project approved by
competent State authorities.
12) Effective evidence that the Borrower has obtained the valid certificate for
insurance issued by insurance corporation of China in accordance with
Article 9 of this Agreement.
13) The procurement list of the Borrower and other documents deemed necessary
by the Lender.
3.1.2. The Foreign Financing Agreement has been signed by the parties and has
become effective.
3.1.3. The Foreign Lending Bank has notified the Lender that the export credit
insurance has become effective.
3.1.4. The Borrower has opened a foreign exchange on-lending special account and
a foreign exchange on-lending loan account for the repayment of principal
with interest in China Construction Bank or its designated branches.
3.1.5. The Borrower has committed no event of default or any action that might
lead to events of default.
3.2. Preconditions for each withdrawal (including the initial withdrawal)
3.2.1. The Foreign Financing Agreement remains valid.
3.2.2. The capital of the project as well as auxiliary RMB fund shall be
finalized according to the plan. (Schedule for finalization of capital is
described in Appendix 2)
3.2.3. The Borrower has paid all the expenses due pursuant to Article 5.2. of
this Agreement.
3.2.4. Effective evidence that the Borrower has obtained the valid certificate
for insurance issued by insurance corporation of China in accordance with
Article 9 of this Agreement.
3.2.5. The procurement of goods which does not follow the procurement list
approved by the Lender and the Foreign Lending Bank has not occurred.
3.2.6. The Borrower has not committed any event of default or any action leading
to event of default.
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3.2.7. No amendment in relation to amount, time and altering the purpose of the
equipment of the "Commercial Contract" without the consent of the Lender
has occurred or no other material amendment has been made without the
affirmation of the Lender.
3.2.8. The Borrower has reiterated that the guarantee made in this Agreement is
true, accurate and valid.
3.3. The fact that the Lender has not submitted any written or oral requirement
to the Borrower to fulfill the articles and clauses set forth in the
preconditions, or that the Lender has granted the loan to the Borrower
without the Borrower's satisfaction of the conditions set forth in the
above mentioned articles and clauses, or that the Lender has given a grace
period to the Borrower's fulfillment of the preconditions shall not be
taken for granted that the Lender has waived the right of recourse to the
Borrower's nonperformance or be interpreted as the Lender's amendment to
the On-lending Agreement.
Article 4: Withdrawal and Term of Withdrawal
4.1. The Borrower hereby authorizes the Lender to require the Foreign Lending
Bank to pay the amount of the Commercial Contract to the export traders
through the payment agent bank in accordance with the stipulations set
forth in Foreign Financing Agreement. This authorization is irrevocable and
shall not be amended without the consent of the Lender.
4.2. Within 5 days after the Lender has signed and accepted relevant instruments
under the Commercial Contract, the instruments shall be submitted to the
Import Agent for examination. The Import Agent shall, within 15 days after
the receipt of the instruments, notify the Lender in written form of its
comments. The Lender shall take the responsibility to instruct the Foreign
Lending Bank whether to make such payment.
4.3. The deadline of the withdrawal under this On-lending Agreement shall be
subject to the date set forth in the Foreign Financing Agreement.
4.4. If the Borrower applies for an extension of the withdrawal term, it shall
submit a written application to the Lender at least 45 days in advance. The
Lender shall then communicate with the Foreign Lending Bank, and if the
Foreign Lending Bank consents to it, the formalities for extending the
withdrawal for the Borrower may be
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<PAGE>
processed. If not, the Borrower must make withdrawal on schedule, otherwise
the unused part shall be automatically canceled.
Article 5. Interest on the Loan and Expenses.
5.1. Interest.
5.1.1. The annual interest rate of the loan under this Agreement shall be [***].
5.1.2. The Borrower shall pay interest to the Lender once in accordance with the
balance of the loan on each Interest Payment Day, the interest shall be
calculated by the actual number of days on the basis of 360 days a year
(subject to the Foreign Financing Agreement). Detailed interest payment
plan as well as the method of payment shall be carried out in accordance
with the "Schedule for Repayment of Principal with interest" (Appendix 3),
and "Special Fund Accord" (Appendix 1).
5.1.3. The capitalization of the insurance premium of the export credit and
interest incurred in the construction period shall be carried out in
accordance with the stipulations set forth in the Foreign Financing
Agreement.
5.1.4. In the event that the last day of the interest period falls on a
non-business day, the interest period shall be deferred to the next
business day; in the event that the next business day falls on the next
calendar month, it shall be advanced to the last business day of the
current calendar month.
5.2. Expenses:
5.2.1. Commitment fees of the Foreign Lending Bank.
The annual rate is: [***] starting from August 29,1996 to the deadline
of withdrawal stipulated by the Foreign Lending Bank, the commitment fees shall
be calculated and collected quarterly in US Dollars in accordance with the
actual number of days and the unpaid balance of the loan on the basis of 360
days a year and 30 days a month. It shall be paid by the Borrower to the Foreign
Lending Bank through the Lender in accordance with the Foreign Financing
Agreement.
5.2.2. On-lending fees of the Lender.
The annual rate is [***] in the grace period and [***] in the repayment
period. It shall be paid by the Borrower to the Lender in accordance with the
balance of the loan. The method of payment shall be identical as that described
in the above mentioned Article 5.1.2.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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5.2.3. Other expenses incurred under the Foreign Financing Agreement and this
Agreement, including but not being limited to attorney's fees,
notarization expenses, travel expenses, expenses for presentation of
lawsuit agency letter expenses and stamp tax incurred in the preparation of
this Agreement and other relevant documents, negotiations, signing and
implementation shall be paid by the Borrower in accordance with the request
for payment invoice of the other party.
5.3. The interest and expenses as stipulated in the above article, the fees
collected by foreign organizations and the on-lending fees shall be paid in
US Dollars cash, while the remainder shall be paid in RMB. The detailed
method of payment shall be subject to the "Notice of Payment" submitted by
the Lender and it shall be paid within 7 days after such notice has been
received.
Article 6. Repayment and Prepayment.
6.1. Repayment of the loan.
6.1.1. This on-lending loan shall be repaid in US dollars.
6.1.2. The detailed repayment plan of the Borrower shall be subject to the
"Schedule for Repayment of the Principal with Interest" (Appendix 3).
6.1.3. The detailed method of repayment shall be carried out in accordance with
the "Special Fund Accord" (Appendix 1) signed between the Borrower and the
Lender.
6.1.4. In this Agreement, all the Borrower's payment to the Lender shall be made
in the following sequence: payment of interest in arrears, expenses,
interest and principal. If the maturity date of any payable in this
Agreement is not a business day, it shall be deferred to the following
business day, the time deferred shall be included in the calculation of
interest for this period.
6.2. Prepayment
6.2.1. In accordance with this On-lending Agreement, the Borrower can prepay the
loan after seeking written consent from the Lender in advance, but the
Borrower shall notify the Lender the amount of prepayment at least 45 days
in advance. If it is a partial prepayment, the amount of prepayment shall
be specified.
6.2.2. The prepayment shall begin with the last installment of repayment set
forth in the "Schedule of Repayment of Principal with Interest" (Appendix
3) in reverse order.
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6.2.3. The prepayment shall be made together with the corresponding interest and
charges thereof.
6.2.4. If the prepayment requires the approval of relevant departments in
accordance with the stipulations, the Borrower shall provide the duplicate
of the relevant approval document to the Lender.
6.2.5. The request of the Borrower for prepayment is irrevocable and the amount
of the prepayment shall not be reapplied for use.
6.2.6. The compensation fees for the Foreign Lending Bank arising from
prepayment shall be borne by the Borrower.
Article 7. Interest in Arrears
7.1. If the Borrower fails to repay any maturity payment including principal,
interest and expenses in accordance with the stipulations in this
Agreement, the Lender shall calculate and collect interests in arrears with
respect to the part of payment in arrears starting from the date of payment
(inclusive) to the date of actual date of payment (inclusive). The interest
rate shall be the highest of the following:
[***]
7.2. If the overdue exceeds half a year, compound interest shall be accrued.
7.3. The collection of the interest in arrears shall not affect the
implementation of Article 13 of this Agreement.
Article 8. Force Majeure.
In the event that one of the following happens:
1) The export credit insurance has not been obtained or the insurance of the
export credit ceases to be effective.
2) Due to economic crisis or the abrupt change in the financial market, the
corresponding loan funds can not be raised or the cost of the Foreign
Lending Bank has increased.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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3) Due to international or domestic political legal and taxation reasons, the
Foreign Lending Bank can not fulfill the obligations of lending set forth
in the Foreign Financing Agreement.
4) Due to adjustment and change in state policies, the Lender`s continuance of
granting loans to the Borrower or of refraining from recovering the loans
will be illegal or a breach of state policy.
5) Due to the occurrence of other events of force majeure,
the Lender is entitled to the following:
1) In accordance with the requirement of the Borrower, and under the
conditions set forth in the stipulations of the Foreign Financing
Agreement, the Lender will negotiate with the Foreign Lending Bank and
handle it in accordance with the result of the negotiations.
2) Declaring the termination of the on-lending loan.
3) Require the Borrower to repay promptly the principal with the relevant
interest and fees.
Article 9: Insurance
9.1. Upon the effectiveness of the Commercial Contract, the Borrower shall
directly make or cause the contractor for transportation, installation or
construction to cover insurance for domestic transportation of imported
goods, installation project, construction project and property all risks in
a Chinese insurance institution acknowledged by the Lender with respect to
equipment under such contract in the delivery, construction and repayment
periods. The Lender shall be considered as the first beneficiary, all the
insurance coverage shall be linked with each other and allow of no
suspension in the duration of insurance.
9.2. The Borrower shall transfer all the interests under the insurance policy to
the Lender pursuant to the stipulation of Article 9.1., the insurance
benefits shall first be used to repay the principal with interest and
expenses of the loan . With the written consent of the Lender, such
insurance benefits can be continuously used in the project construction
under this Agreement.
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<PAGE>
9.3. The Borrower shall be responsible for renewing the insurance on time before
the expiration of the insurance policy and the Borrower shall not suspend
the insurance for whatever reason within the validity of this Agreement.
9.4. If the Borrower fails to fulfill the above mentioned requirements, the
Borrower shall undertake that in case of any loss to the assets, the
Borrower shall not refrain from undertaking any of its obligations to the
Lender for whatever reason.
9.5. The Borrower shall bear the insurance premium incurred by insurance
coverage.
Article 10. Taxation.
The tax payable by the Lender under the Foreign Financing Agreement shall
be borne by the Borrower. The Lender shall on behalf of the Borrower, submit
application to relevant tax authority for exemption of tax in connection with
the withholding tax on foreign interest income under the Foreign Financing
Agreement. The tax payable under this On-lending Agreement shall be carried out
in accordance with Chinese tax law and relevant stipulations.
Article 11. Guarantee
The Borrower hereby guarantees:
11.1. Upon the effectiveness of this On-lending Agreement, the Borrower shall
timely, unconditionally and consecutively fulfill the responsibility and
obligation of repayment of principal with interest as well as other
obligations set forth in this Agreement without any impact whatever because
of gain or loss or repayment ability.
11.2. The Borrower is a legal person which is established in accordance with
Chinese law, existing, and engaging in legal business activities, and is
entitled to execute and perform this On-lending Agreement. The Borrower has
completed all necessary legal and administrative formalities for the
execution and performance of this On-lending Agreement.
11.3. The documents that the Borrower has provided and will provide are true,
accurate, valid and up-to-date in accordance with the requirements.
11.4. The Borrower's execution and performance of this On-lending Agreement do
not violate any of the current Chinese laws, rules and regulations, nor do
they violate any contract or agreement to which the Borrower is a party.
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<PAGE>
11.5. Any contract or agreement which the Borrower executes with a third party
at present and in the future shall not affect and damage all the interests
of the Lender under this On-lending Agreement.
11.6. The Borrower is not involved in or will not be involved in any significant
arbitration or legal process, nor is it subject to any compulsory
administrative measures taken by any government department. (These
arbitration or legal process or administrative measures will have
significantly adverse impact on its finance, operation and management).
11.7. All the assets incurred by the loan under this Agreement shall not be used
as any other form of mortgage or any form of guaranty during the term of
performance of this Agreement without the written consent of the Lender.
11.8. At each withdrawal and repayment, the Borrower reiterates that the above
statement and guarantee remain true, valid and accurate.
Article 12: Agreed Matters
12.1. The distribution principle of repaying loan first and sharing profit
second shall be carried out in accordance with the plan for repayment of
principal with interest.
12.2. Any material amendment to the procurement list between the Borrower and
the Exporter shall obtain written consent from the Lender in advance.
12.3. Any amendment to the Commercial Contract concerning the amount, time,
change of purpose of the equipment or other material amendment confirmed by
the Lender, or any transfer of right and obligation under the Commercial
Contract shall obtain written consent from the Foreign Lending Bank and the
Lender in advance.
12.4. Without the written consent of the Lender, the Borrower shall not sell,
rent or transfer any equipment under the Commercial Contract or use these
equipment aboard.
12.5. In enlarging its scope of business stipulated in the business license
before the execution of this Agreement, or in enlarging the scope of
operation and management approved by relevant government authority, or in
selling, renting and assigning assets under this Agreement or in changing
its business, the Borrower shall solicit written consent from the Lender
before submitting it to the administrative department for industry and
commerce or relevant government authority for approval.
12.6. If the Borrower engages in any form of mortgage, pledge, or guaranty for
its assets and interests or engages in other actions that may have
significantly adverse
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<PAGE>
impact on its assets and interests, it shall notify the Lender in time and
obtain written consent from the Lender in advance.
12.7. The Borrower shall, at the request of the Lender, provide the Lender all
relevant information concerning its operation and finance in time, accept
the supervision from the Lender and provide convenient conditions to the
Lender for examining the use and repayment of the loan as well as the
production and operation status of the Borrower.
12.8. The Borrower shall promptly notify the Lender of any adverse change in the
repayment of loan and operation and financial conditions of the Borrower,
and put forth its proposal or measure for settlement or handling.
12.9. If it is necessary for the Borrower to take any significant actions such
as restructuring, reorganization, merger, acquisition, equity transfer,
equity mortgage or contracting, it shall notify the Lender in advance and
seek written consent from the Lender in advance.
12.10. The Borrower shall within 30 days at the end of each quarter provide the
Lender the balance sheet, the profit and loss statement and other financial
statement for the preceding quarter , and shall provide the Lender within 3
months at the end of each fiscal year the balance sheet, the profit and
loss statement and other financial statement as well as other relevant
information of the preceding fiscal year which have been audited by an
accounting firm.
12.11. The Borrower shall provide the project schedule report and operation
status report to the Lender in time at request.
12.12. The Borrower shall run its business steadily and maintain good financial
status.
12.13. The Borrower shall promptly inform the following to the Lender, if:
1) Any arbitration or legal action involving the Borrower and this project;
2) Mandatory measures have been taken by any relevant governmental authority
against any property of the Borrower;
3) Any event that seriously hinders and endangers the normal performance of
the Foreign Financing Agreement and the Commercial Contract;
4) Other information with respect to the project which is required by the
Lender.
12.14. Any action taken by the Import Agent shall be considered as having been
consented and authorized by the Lender in accordance with the Commercial
Contract or this Agreement and relevant amendments and appendices and shall
constitute the responsibilities and obligations of the Borrower. If the
Import Agent or Exporter fails to perform the Commercial Contract or this
Agreement and its corresponding amendments
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as well as the stipulations set forth in the appendices, the Lender shall
not undertake the corresponding consequences.
12.15. The Borrower shall strictly carry out the stipulations set forth in the
"Special Fund Accord" (Appendix 1).
12.16. The Borrower must assign all the RMB settlement of accounts and
import-export settlement of accounts to the Lender or its designated branch
for handling.
12.17. The Lender holds that the financial status of the Guarantor has
deteriorated to such an extent as to suspend operation or to go bankrupt or
to be incapable of performing its obligations under the Guaranty Agreement;
the Guarantor may be confronted with possible events of liquidation or
being merged or dissolved and rescinded which may produce adverse impact on
the interests of the Lender; the Guarantor is involved or will be involved
in significant arbitration or legal proceedings and debt dispute which will
affect the implementation of this On-lending Agreement. Once the Lender has
confirmed the occurrence of the above situation, the Lender is entitled:
12.17.1. To ask the Borrower to find a new guarantor acceptable to the Lender
within the time-limit (no longer than 45 days) set by the Lender with
respect to the guaranty obligations undertaken by the above Guarantor.
12.17.2. If the Borrower fails to provide the guarantee acceptable to the Lender
within the above time-limit, the Borrower is considered to have committed
events of default as stipulated in Article 13, the Lender may take any
appropriate action which it is entitled to take in accordance with the
stipulations set forth in the Articles on Events of Default.
12.18. Any matter not determined in this Agreement but included in the
stipulations set forth in the Foreign Financing Agreement shall be included
in the supplementary agreement to this Agreement, the Articles in the
supplementary agreement shall be determined by the Lender in accordance
with the Foreign Financing Agreement, and both the Lender and the Borrower
shall execute and perform.
Article 13. Events of Default
13.1. Any of the following actions or events are considered as the Borrower's
events of default:
1) The Borrower fails to repay the principal and pay interest and other
expenses in accordance with the stipulations set forth in this Agreement.
2) The Borrower fails to fulfill any obligations under this Agreement and
other relevant documents.
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3) The Borrower's guarantee in this On-lending Agreement and the notification
or other document made or submitted accordingly is proved to be seriously
inconsistent with facts or inaccurate or incapable of being performed.
4) The Lender holds that the financial status of the Borrower has deteriorated
so gravely that it may cease operation or go bankrupt or be incapable of
fulfilling this Agreement.
5) Any agreement, contract or other document related to this Agreement is
suspended or declared invalid.
6) The Borrower may be confronted with events of liquidation or being merged
or dissolved and rescinded which will produce adverse impact on the
interests of the Lender.
7) The Borrower fails to repay in time any other debt which it owes to the
China Construction Bank and the Lender holds that the Borrower's default
under any other debt agreement will affect the Borrower's repayment of any
debt under this Agreement.
8) The Borrower has been involved or shall be involved in any significant
arbitration or legal proceedings and debt disputes (the Lender holds that
these arbitration or legal proceedings or debt disputes may produce adverse
impact on the Borrower's performance of this Agreement.)
9) The Commercial Contract is totally or partially suspended or canceled, or
any event which seriously affects the proper performance of the contract
has occurred.
10) The Borrower opens an account or handles settlements in a bank which is not
designated by the Lender.
11) The tariff approved by the domestic relevant authority is not enough to
ensure the repayment of principal with interest.
12) The capital which shall be finalized in accordance with the Plan for the
Finalization of Capital has not been finalized on schedule and the
associated RMB fund has not been finalized on schedule.
13.2. In the event that any of the above-mentioned events of default occur, the
Lender is entitled to take one or several of the following measures:
1) To notify the Borrower to correct it within a definite time;
2) To suspend withdrawal promptly;
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3) To announce the maturity of all the loan and require immediate repayment of
all the loan and its corresponding interest and fees;
4) The Lender may ask the Borrower to compensate for any loss and the
additional expenses accordingly because of the Borrower's default.
Article 14. Obligation of the Borrower Independent of the Commercial Contract
Any disputes or other event occurred between the seller and the
purchaser under the Commercial Contract shall not affect any obligation which
shall be undertaken by the Borrower under this On-lending Agreement. The
Borrower shall not for this reason delay in or refrain from performing the
obligation of repaying principal with interest and other fees on schedule.
Article 15. The Lender's Exercise of Rights
The fact that the Lender has not exercised or has not exercised in time
any obligations under this On-lending Agreement in the course of the
implementation of the Agreement shall not be regarded as a waive of its rights
and shall not affect any obligation which the Borrower shall undertake under law
and this On-lending Agreement.
Article 16. The Lender's Commitments
16.1. The Lender will provide the Borrower reasonable reserve loan in the
construction period and circulating fund loan in the operation period.
16.2. The Lender shall conform to the international practice and general
practice followed by foreign banks to raise funds overseas and strive for
better condition for loans in accordance with the financing plan accepted
by the both parties through negotiations.
16.3. The Lender shall conform to the change and trend of the international
financing market, try its best to provide financing services such as
restructuring of debt, and try hard to save interest and expenses and to
reduce the cost of fund for the Borrower.
16.4. If the Borrower applies for an extension of the loan, the Lender will try
its best to negotiate with the Foreign Lending Bank. If the Foreign Lending
Bank agrees to the extension, the Lender will handle the extension
formalities for the Borrower in time.
16.5. If the fund transfer is delayed in withdrawal and repayment on account of
the Lender's responsibility, the Lender shall undertake the corresponding
responsibility.
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16.6. The Lender shall keep confidential of all the documents, data and business
information which are provided by the Borrower and marked with the word
"Confidential".
Article 17. Assignment of Rights and Obligations
17.1. The rights and obligations of the Borrower under this On-lending Agreement
can be assigned only if written consent from the Lender is obtained in
advance.
17.2. The Lender may in the light of its business or needs, assign its rights
and obligations under this Agreement totally or partially to a third party
which it thinks appropriate but it must seek written consent from the
Borrower in advance pursuant to the Foreign Financing Agreement.
Article 18. Amendment and Supplement
In case of adjustment in policy or other uncovered matters, this
On-lending Agreement may be amended and supplemented through joint consultations
between both parties pursuant to the Foreign Financing Agreement and on the
precondition on ensuring that the principal, the interest and relevant expenses
of the loan under this On-lending Agreement are paid on schedule. Both the
amendment and the supplement shall constitute an inseparable part of this
On-lending Agreement and have the same effectiveness as this On-lending
Agreement.
Article 19. Settlement of Disputes
Should there be any dispute between the Lender and the Borrower in the
course of the implementation of this On-lending Agreement, it shall first be
settled through friendly consultation. If no agreement can be reached, any party
may institute legal proceedings at a people's court with jurisdiction in
accordance with the law.
Article 20. Effectiveness of Appendices
The appendices of this On-lending Agreement constitute an inseparable
part of the On-lending Agreement and have the same effectiveness as this
On-lending Agreement. Appendix 3 may be adjusted and/or supplemented by the
Lender in accordance with the stipulations of the Foreign Financing Agreement or
the corresponding notification of the Foreign Lending Bank.
Article 21. Miscellaneous
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If the reform in the state foreign currency control system and changes
in other policies are related to the use and repayment of the foreign exchange
under this Agreement, the Lender shall notify the Borrower on time and amend
relevant articles of this Agreement in accordance with the stipulations of the
state.
Article 22. Effectiveness
22.1. This On-lending Agreement becomes effective on the day when all of the
following conditions are satisfied and in accordance with the notification
of the Lender.
1) The execution of this Loan Agreement.
2) The execution of the Foreign Financing Agreement.
22.2. This On-lending Agreement is prepared in two original copies, each party
shall keep one while duplicates will be delivered to the relevant parties.
Article 23. Termination
This On-lending Agreement ceases to be effective automatically on the
day when all the principal, interest and other corresponding expenses under this
Agreement have been paid by the Borrower.
Article 24. Mode of Notification
The correspondence documents in the course of the performance of this
Agreement shall be delivered accurately by the Lender and the Borrower to the
following addresses.(If there is any change, the other Party shall be notified
in time):
The Lender:
Address: No. 9, Taoyuan North Road, Taiyuan City, Shanxi Province
Name: International Business Department of Shanxi Branch
of China Construction Bank
Tel: 0351-4031672/4031685
Fax: 0351-4031683
Zip Code: 030002
The Borrower:
Address:
Name: Yangcheng International Power Company Ltd.
Tel:
Fax:
Zip Code:
If notified by fax, the original must be mailed by registered courier service
immediately after the fax is sent. If it is mailed by registered courier
service, the date of mail shall govern.
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Borrower: Lender:
Yangcheng International Power Shanxi Branch of China
Company Ltd. Construction Bank
(Seal): (Seal):
Signature of Authorized Signature of Authorized
Representative: Representative:
Place of Execution: Place of Execution:
Date of Execution: Date of Execution:
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Appendix I.
Accord on the Repayment of Special Fund of Foreign Loan by Yangcheng
International Power Company Ltd.
In order to construct Phase I Project of the Shanxi Yangcheng Power
Plant, the Shanxi Branch of China Construction Bank ("the Lender") and
Yangcheng International Power Company Ltd. ("the Borrower") have executed this
On-lending Agreement at a total amount not exceeding [***]. To ensure the
use, the repayment of the principal with interest and the payment of relevant
expenses of the Foreign Exchange Loan under the above-mentioned On-lending
Agreement, the Lender and the Borrower have reached the following agreement
through friendly consultations:
Article One. Establishment of the Relevant Account of Special Fund and Its
Purpose
The Borrower applies for establishment of the following accounts within
10 days upon the effectiveness of this On-lending Agreement:
1. The Borrower applies to the Administration of Exchange Control for opening
the "Special Account for the Foreign Exchange On-lending Loan" and the
"Account for Repayment of Principal with Interest of Foreign Exchange
On-lending Loan" in the Lender's International Business Department .
2. The Borrower shall open a RMB fund special account in an institution
designated by the Lender which shall be used to deposit RMB funds with
respect to foreign exchange settlement and relevant expenses incurred under
the On-lending Agreement.
Article Two. Sources of the Fund of the Special Account
In order to ensure the timely performance of the foreign payment, the
Borrower shall reserve the following funds in accordance with the following
sequence as the sources for repayment. (If there is any change in the
accounting system of the State, both parties may make corresponding adjustment
pursuant to a new accounting system):
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
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1. The depreciation fund of fixed assets which will be withdrawn by Phase I
Project of the Yangcheng Power Company Ltd. in accordance with relevant
stipulations.
2. The profit which may be used for repayment by Phase I Project of the
Yangcheng Power Plant in accordance with the relevant stipulations.
3. Foreign exchange income of Phase I Project of the Yangcheng Power Plant.
4. Overall benefits of the Borrower and other income and ownership interests
which can be used for repayment.
5. The exempted or refunded taxes which may be used for repayment after it has
been submitted to relevant authorities for approval.
6. Other legal fund sources.
Article 3. Use of the Account
1. The Borrower shall, in accordance with the "Schedule for Repayment of
Principal with Interest" or the notification of the Lender and from the day
the first unit is put into operation to within 30 days of the Payment Day,
deposit the required funds pro rata (the specific proportion shall be
determined through consultations between both parties on a monthly basis in
the Special Account for the Foreign Exchange On-lending and Account for the
Repayment of Principal with Interest of Foreign Exchange On-lending which
are opened at the Lender's Bank by the Borrower.
2. The depreciation funds of fixed assets which are withdrawn in accordance
with the stipulations for imported equipment of Phase I Project of
Yangcheng Power Plant must be deposited in the Borrower's RMB Special
Account which is opened at the Lender's designated institution.
3. The RMB settlement must be handled in the designated institution of the
Lender after Phase I Project of Yangcheng Power Plant is put into
operation.
4. After Phase I Project of Yangcheng Power Plant is put into operation, the
settlement of the foreign exchange shall be handled in the International
Business Department of the Lender, the foreign exchange earnings for
ensuring the repayment shall promptly be deposited in the Account for the
Repayment of Principal with Interest of Foreign Exchange On-lending.
5. The Borrower shall repay the principal with interest of the matured foreign
exchange loan with the kind of currency stipulated in the loan agreement.
If the Borrower makes repayment with the kind of currency agreed to by the
Lender, the Lender shall act as an intermediary in foreign exchange trading
in accordance with the current
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exchange rate, the risk of the foreign exchange rate shall be undertaken by
the Borrower.
6. The Lender shall, on the basis of the balance of the funds in the Special
Account of the Borrower, pay interest in accordance with the stipulations.
Article 4. Management of the Special Funds
1. The Borrower shall, in accordance with the stipulations of this Accord,
deposit the foreign exchange and RMB funds used for foreign payments in the
above mentioned account in time. In the event that the Borrower has not
deposited the above mentioned funds in the designated account within 7
business days of the bank before making foreign payment, the Lender is
entitled to handle the formalities for direct transfer.
2. Without prior written consent from the Lender, the Borrower shall not
within the term of repayment handle the settlement of RMB set forth in
Article 3.3. and the settlement of import-export set forth in Article 3.4
in any bank which is not the Lender's Bank.
3. The Borrower shall deposit in time a full amount in the "Account for the
Repayment of Principal with Interest of Foreign Exchange On-lending" and be
ready for payment in foreign exchange. The payable funds that are not paid
because of the Borrower's insufficient funds shall without exception be
considered as overdue. The Lender will collect the interest in arrears with
respect to the funds in arrears and in accordance with the stipulations set
forth in this On-lending Agreement.
4. While making foreign payment, with respect to the balance due of the
arrears of the aggregate payment resulting from exchange rate changes
because of engaging in foreign exchange trading, the Lender may temporarily
make the advance first and then deduct the advance in the next foreign
payment together with the accrued interest in accordance with the
stipulated corresponding loan interest rate. With respect to the balance of
the fund in the "Special Account of Payment of Foreign Exchange", interests
will be paid by the Lender in accordance with the stipulations of the China
Construction Bank.
5. The bank charges incurred in settlement and sales of foreign exchange and
in foreign exchange trading and international settlement as well as other
relevant expenses under this On-lending Agreement shall all be borne by the
Borrower.
6. Should there be any adjustment in the state policy, this Accord shall be
amended through consultation between the Borrower and the Lender under the
precondition that the principal and interest of the loan under the
above-mentioned On-lending Agreement as well as other relevant expenses are
paid on schedule.
25
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7. This Accord shall constitute Appendix I to the above-mentioned On-lending
Agreement.
Yangcheng International Power Company Ltd.
(Official Seal):
Authorized Representative:
Shanxi Branch of China Construction Bank
(Official Seal):
Authorized Representative:
Date of Signature:
26
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Appendix II.
"The Plan for the Finalization of Capital of Yangcheng International
Power Company Ltd."
27
<PAGE>
Appendix III.
"Schedule for Repayment of Principal with Interest"
(Executed in accordance with the Schedule for Repayment of Principal with
Interest provided by the foreign banks)
28
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.51
ON-LENDING AGREEMENT
by and between
Shanxi Branch of the China Construction Bank
(the Lender)
and
Yangcheng International Power Company Ltd.
(the Borrower)
, 1997
<PAGE>
Table of Contents
Article 1 Definition
Article 2 Amount and Purpose of the Loan
Article 3 Preconditions for Using the Loan
Article 4 Use of the Loan
Article 5 Interest and Fees of the Loan
Article 6 Repayment
Article 7 Overdue Interest
Article 8 Change in Situation
Article 9 Insurance
Article 10 Tax
Article 11 Guarantee
Article 12 Promises
Article 13 Events of Default
Article 14 The Lender's Exercise of Rights
Article 15 Assignment of the Rights and Obligations of the
Lender and the Borrower
Article 16 Amendment and Supplement
Article 17 Dispute Resolution
Article 18 Effectiveness of the Annexes
Article 19 Miscellaneous
Article 20 Effectiveness
Article 21 Modes of Notification
2
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Annexes:
1. "Regarding the Accord on the Repayment of Special-purpose Funds of the
On-lending Loan for Issuance of Bonds Overseas" by the Yangcheng
International Power Company Ltd. (hereinafter referred to as "the Accord
on Special-purpose Funds")
2. Letter of Guaranty for Repayment
3. "Schedule on the Repayment of Special-purpose Funds of the On-lending
Loan for Issuance of Bonds Overseas" by the Yangcheng International
Power Company Ltd. (hereinafter referred to as "the Schedule for
Repayment of Principal with Interest")
3
<PAGE>
ON-LENDING AGREEMENT
Borrower: Yangcheng International Power Company Ltd.
Address: No. 15, Shuangtashi Street, Taiyuan City, Shanxi Province
Lender: Shanxi Branch of China Construction Bank
Address: No. 6, Yingze Street (west), Taiyuan City, Shanxi Province
In order to construct the Shanxi Yangcheng Power Plant project, the
Borrower entrusts the China Construction Bank to raise funds overseas. In
accordance with the entrustment of the Borrower and with the approval of the
State Planning Commission, the State Administration of Exchange Control and the
State Administration of Taxation, the China Construction Bank signed in Hong
Kong on April 4, 1997 a relevant agreement with overseas financial institutions
on the issuance of [***] bonds.
With the authorization of the Head Office of the China Construction
Bank, the Lender and the Borrower have, through friendly consultations, reached
the following agreement in connection with the [***] of the funds raised through
the issuance of the above-mentioned bonds:
Article 1 Definition
Unless otherwise specifically stipulated, in this On-lending Agreement:
"Offering Circular" shall mean the circular issued on April 4, 1997.
"Terms of Bonds" shall mean the terms as recorded in the bonds.
"Lender" shall mean the Shanxi Branch of the China Construction Bank.
"Borrower" shall mean the Yangcheng International Power Company Ltd.
"Guarantor" shall mean the legal entity which issues guaranty for the
repayment of principal, interest and relevant fees under this On-lending
Agreement, namely the North China Electric Power Group Corporation, Jiangsu
Provincial International Trust and Investment Company, Shanxi Energy Enterprise
(Group) Company, Shanxi Provincial Power Company and Jiangsu Provincial Power
Company.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
4
<PAGE>
"Issuer" shall mean the China Construction Bank.
"Fiscal Agent" shall mean the Chase Manhattan Bank, London Branch or
its successor the Chase Manhattan Bank, Hong Kong Branch.
"Managing Agents" shall mean
1) Bayerische Landesbank Girozentral, Hong Kong Branch;
2) Daiwa Securities (H.K.) Ltd.
3) The Development Bank of Singapore Ltd.
4) Merrill Lynch Far East Limited
5) Sakura Finance Asia Limited
"Fiscal Agency Agreement" shall mean the Fiscal Agency Agreement
executed on April 4, 1997 by and between the Issuer and the Fiscal Agents.
"Subscription Agreement" shall mean the Bonds Subscription Agreement
executed on April 4, 1997 by and between the Issuer and the Managing Agents.
"Bonds" shall mean, pursuant to the Fiscal Agency Agreement, the
issuance of a total amount of [***] bonds at US$ floating interest rate with a
term of five years.
"Net Proceeds from Bonds" shall mean an amount of [***] million
which is the balance from the total proceeds from the issuance of bonds minus
the total commission for the issuance of bonds and other expenses.
"External Agreements" shall mean in general the Fiscal Agency
Agreement, the Subscription Agreement, the Offering Circular and the Terms of
Bonds.
"Business Day" shall mean a day when the China Construction Bank and
the commercial banks of Hong Kong, New York and London are open for business.
"Maturity Date of Bonds" shall mean the interest payment day of April
11, 2002 on which the Issuer shall accept the request for honor on the part of
bondholders.
"Interest Payment Day" shall mean April 11 and October 11 of each year
from the issuance of bonds on April 11, 1997 to the Maturity Date of Bonds
(inclusive), if such day falls on a non-business day, it shall be adjusted
pursuant to Article 5.1.3 of this Agreement, but the date as notified by the
Lender shall prevail in the end.
"Interest Period" shall mean the period beginning from an Interest
Payment Day (inclusive) to the next Interest Payment Day (non-inclusive), but
the first Interest Period shall begin in 1997.
"Interest Rate of Overseas Fund-raising" shall mean the six-month [***]
as stipulated in the External Agreements.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
5
<PAGE>
"On-lending Fee Rate" shall mean the rate of on-lending fees under this
Agreement whose annual rate is %.
"Issuance Underwriting Fee" shall mean the commission charges collected
by the underwriting banking syndicate from the Issuer for underwriting bonds.
"Determination Date for Interest Rate" shall mean the date for
determining the US$ floating interest rate as stipulated in the External
Agreements.
"LIBOR" shall mean the LIBOR US$ floating interest rate as referred to
in the External Agreements.
Clause headings in this Agreement are inserted for convenience only and
shall be ignored in construing this Agreement.
Article 2 Amount and Purpose of the Loan
2.1 The on-lending loan under this On-lending Agreement is a part of
the total [***] which are issued by the Issuer
pursuant to the trust of the Borrower, the amount of the Loan
being [***].
Article 3 Preconditions for Using the Loan
The loan under this On-lending Agreement can only be used when all the
following conditions are met:
3.1 To provide at least 30 days prior to drawing money and subject to
the confirmation of the Lender the receipt of the following
documents:
(1) A photo copy of the Borrower's effective business license
issued by the authority for industry and commerce;
(2) A copy of the latest articles of association of the
Borrower's enterprise or other document with equal
effectiveness;
(3) A copy of the SPC's approval document to the proposal for the
construction project of the Borrower;
(4) The Borrower's letter of authorization authorizing the China
Construction Bank to raise funds overseas;
(5) A copy of the approval document of relevant governmental
authority which has listed the project in the State or
provincial plan;
(6) The foreign exchange (on-lending) loan registration and the
notice for the opening of the account for repayment of
investment with
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
6
<PAGE>
interest of foreign exchange (on-lending) loan which are
issued by the local administration of exchange control have
been obtained by the Borrower;
(7) The unconditional, irrevocable and payment-upon-demand letter
of guaranty for repayment provided by the Borrower's
Guarantor pursuant to the form and content in Annex 2;
(8) Effective evidence that the Borrower has covered insurance
with a Chinese insurance company in accordance with the
stipulations of this Agreement;
(9) The report for project commencement approved by a competent
authority of the State;
(10) The Borrower has obtained the foreign debt registration
issued by the local administration of foreign exchange;
(11) The signature book and specimen official seal (signature) of
the authorized signatory of the Borrower;
(12) Other documents deemed necessary by the Lender.
3.2 The letter of guaranty for repayment issued by the Guarantor
pursuant to the form and content in Annex 2 has become effective.
3.3 The Borrower has paid all the fees due pursuant to Article 5.2.1
and Article 5.2.2 of this Agreement at the request of the Lender.
3.4 The Borrower has committed no act of default as described in
Article 13 or any act that might lead to default.
3.5 The Guarantor has not violated any obligation stipulated in the
letter of guaranty for repayment.
3.6 The Borrower reaffirms that the guaranty which it makes in this
Agreement is true, accurate and effective.
Article 4 Use of the Loan
The Lender will credit the loan under this Agreement to the account
which the Borrower has opened in the Lender's bank on April 11, 1997, namely the
date when the funds collected from the issuance of bonds have been credited to
the Lender's account. Regardless of when the Borrower will use the loan, the
interest on the loan under this On-lending Agreement shall be accrued from April
11, 1997.
Article 5 Interest and Fees of the Loan
7
<PAGE>
5.1 Interest
5.1.1 The Borrower shall pay interest on time pursuant to the
interest rate of the loan which under this Agreement is the sum
of the interest rate for overseas fund-raising and the rate of
on-lending fee, namely the sum of the six months [***]
after the Determination Date of Interest Rate and the rate
of on-lending fee [***]. The specific interest rate as notified
to the Borrower by the Lender shall govern.
5.1.2 The Borrower shall pay interest to the Lender at each
corresponding Interest Payment Day on the basis of the balance
on the loan. The interest shall be calculated by the actual
number of days on the basis of 360 days a year. The specific
interest payment schedule and method of payment shall be
carried out in accordance with the "Schedule on Repayment of
Investment with Interest" (Annex 3) and the "Accord on
Special-purpose Funds" (Annex 1) respectively.
5.1.3 If the Interest Payment Day falls on a non-business day, the
next business day shall be taken as the Interest Payment Day
pursuant to the stipulation on Business Day in the External
Agreements; if the next business day falls on another calendar
month, it shall be advanced to the last business day of the
current calendar month, but the date as notified by the Lender
shall govern in the end.
5.2 Fees
5.2.1 The fees (including issuance underwriting fee, issuance
miscellaneous expenses and financial agency fee) totaling
[***] (the Issuer's overseas attorney fees which are
not included hereto shall be decided by the Lender in a
specific notice) under the Fiscal Agency Agreement and the
Subscription Agreement which are collected from the Issuer by
the Fiscal Agent and the Managing Agents shall be deducted
directly from the loan by the Lender.
5.2.2 The corresponding fees (including but not being limited to
attorney fees, travel expenses and contractual fees) incurred
by the Lenders in arranging the on-lending loan shall all be
borne by the Borrower.
5.3 The interest and fees as stipulated in the above articles with
the exception of Article 5.2.2 shall all be paid in US Dollar
cash while the fees as described in Article 5.2.2 shall be paid
in US Dollar cash or RMB at the request of the Lender and the
specific method of payment shall be carried out in accordance
with the "Payment Notice" delivered by the Lender.
5.4 All the payments made by the Borrower to the Lender under this
Agreement shall be executed in the precedence of payments of
expenses, overdue payment, interest and principal.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
8
<PAGE>
5.5 If the maturity date of any payable under this Agreement falls
on a non-business day, it shall be postponed to the next
business day; if the next business day falls on another
calendar month, it shall be advanced to the last business day
of the current calendar month, but the date as notified by the
Lender shall govern in the end.
Article 6 Repayment
6.1 The date of repayment for the Loan under this Agreement is the
Maturity Date of Bonds, namely the Interest Payment Date on
April 11, 2002, but the occurrence of an event of default as
stipulated in Article 13 of this On-lending Agreement is an
exception.
6.2 The loan principal totaling [***] under this
Agreement shall be repaid in lump-sum US Dollar cash.
6.3 The "Schedule on the Repayment of Investment with Interest"
(Annex 3) provided by the Lenders shall govern the specific
repayment schedule.
6.4 The specific method of repayment shall be carried out in
accordance with the "Accord on Special-purpose Funds" (Annex 1)
executed by and between the Borrower and the Lender.
Article 7 Overdue Interest
7.1 If the Borrower fails to repay any sum (including principal,
interest and fees) due pursuant to the stipulations of this
Agreement, the Lender will accrue overdue interest from the
Borrower in relation to the overdue amount from the accrual
date (including such date) to the actual payment day (including
such day), the overdue interest will be the higher of the
following:
(1) 1.3 times as much as the Lender's cash loan interest rate
in the same period;
(2) The loan interest rate (the sum of the overseas
fund-raising interest rate and the rate of on-lending fee)
under this Agreement [***].
7.2 If the overdue exceeds one interest period, a compound interest
shall be accrued on the overdue sum.
7.3 The collection of overdue interest shall not affect the
implementation of Article 13 of this Agreement.
Article 8 Change in Situation
If due to changes in factors such as domestic and foreign laws and
decrees and market conditions which hinder the performance of the External
Agreements or lead
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
9
<PAGE>
to bondholder's demand for redeeming its bonds in advance, the Lender may take
corresponding measures pursuant to the External Agreements, including the demand
for the Borrower's prepayment.
Article 9 Insurance
9.1 The Borrower shall cover full insurance for the assets incurred
by this Loan or the assets incurred by the original external
debt funds which are replaced by utilizing this Loan, and
shall, in respect of imported equipment, cover imported
commodity domestic transportation insurance, installment
insurance, construction project insurance, property insurance
and other necessary insurance with a Chinese insurance
institution in connection with the equipment under such
Agreement in the delivery, construction and repayment periods.
All the insurance coverages shall dovetail and allow of no
suspension in the duration of insurance and the insurance
amount shall not be lower than the sum of principal and
interest of the loan under this Agreement.
9.2 The insurance proceeds shall first be used to repay the
investment and interest of the Loan and its fees, but such
insurance proceeds may continue to be used for purposes
stipulated in this Agreement with the written consent of the
Lender.
9.3 The Borrower shall renew in time the insurance policy prior to
its expiration. During the effective period of this Agreement,
the Borrower shall not suspend the insurance for whatever
reason. If the Borrower suspends the insurance, the Lender has
the right to cover the insurance on its behalf and the
insurance premium shall be paid by the Borrower within ten days
after having received the Lender's notice with the overdue
interest to be accrued for the overdue in accordance with
Article 7 of this Agreement.
9.4 The insurance premium incurred for insurance under this Article
shall be borne by the Borrower.
Article 10 Tax
10.1 The tax which the Issuer pays and/or will pay under the
External Agreements shall all be borne by the Borrower in
accordance with the proportion of its on-lending loan in the
funds collected through issuance of bonds.
10.2 The tax payable under this Agreement shall be carried out in
accordance with Chinese tax laws and relevant regulations, and
the Borrower shall submit relevant tax payment receipt to the
Lender at the Lender's request.
Article 11 Guarantee
10
<PAGE>
The Borrower hereby guarantees that:
11.1 since the effectiveness of this On-lending Agreement it will,
pursuant to the stipulations of this Agreement, perform
unconditionally and consecutively all its responsibilities and
obligations of repaying the principal with interest under this
Agreement and other obligations as stipulated in this Agreement
without being affected in any way because of its loss incurred
or its ability or inability of repayment;
11.2 the Borrower is a legal entity or institution which is
established, exists and engages in legal business activities in
accordance with the laws of China, is entitled to execute and
perform this Agreement, and has completed all necessary legal
and administrative procedures in executing and performing this
On-lending Agreement;
11.3 all the documents which the Borrower has provided and will
provide to the Lender are true, accurate, effective and latest
as required;
11.4 the Borrower's execution and performance of this Agreement does
not violate any of the current Chinese laws, regulations and
rules nor does it violate any contract or agreement to which
the Borrower is a party;
11.5 the Borrower has covered full insurance in connection with the
assets incurred by external debt funds which are obtained
through utilizing this Loan and that it has, in respect of
imported equipment, covered imported commodity domestic
transportation insurance, installment insurance, construction
project insurance, property insurance and other necessary
insurance with a Chinese insurance institution in connection
with the equipment under such contract in the delivery,
construction and repayment periods;
11.6 any agreement which the Borrower enters into or shall enter
into with a third party shall not affect or harm all the
interests which the Lender enjoys under this Agreement;
11.7 the Borrower, the Borrower's assets and the Borrower's officers
are not involved or will not be involved in any significant
arbitration or legal proceedings, nor are they subject to
mandatory administrative measure of any governmental authority
(these arbitration, or legal proceedings, or administrative
measures will produce significant adverse impact on its
finance, operation and management);
11.8 all the assets incurred by external debt funds under this
Agreement shall not be used as any other form of mortgage or
any form of guaranty during the term of execution of this
Agreement without the written consent of the Lender;
11
<PAGE>
11.9 the Borrower reaffirms at each withdrawal and repayment that
the above-mentioned representation and guaranty remain true,
effective and accurate.
Article 12 Promises
12.1 The distribution principle of repaying loan first and sharing
profit second shall be carried out in connection with the plan
of repayment of principal with interest for this project;
12.2 If the Borrower extends the business scope as stipulated in its
business license or the scope of business and management as
approved by relevant governmental authority, or assigns any of
its assets or changes its business, it must seek written
consent from the Lender before submitting it to the
administrative authority for industry and commerce or relevant
governmental authority for approval;
12.3 If the Borrower engages in any form of mortgage, pledge or
guaranty for its assets and interests, it must inform the
Lender and seek written consent from the Lender in advance;
12.4 The Borrower must, at the request of the Lender, provide all
the information materials in time in connection with its
business and finance to the Lender, accept the Lender's
supervision and provide convenient conditions to the Lender in
inspecting the use and repayment of the loan and the production
and operation status of the Borrower;
12.5 If any adverse change on the part of the Borrower has occurred
or will occur which will affect its repayment capability or its
operation and financial status, the Board of Directors must
make a decision thereto or the Borrower must inform the Lender
within ten days of the occurrence of the above instance and put
forth its proposal or measure for settlement or handling;
12.6 If the Borrower requires to take any significant action such as
restructuring, reorganization, merger, acquisition, equity
transfer or equity mortgage, it shall inform the Lender in
advance and seek written consent from the Lender in advance;
12.7 The Borrower must within thirty days at the end of each quarter
provide the financial statement, profit and loss statement and
other financial reports for the preceding quarter to the
Lender, and must within three months at the end of each
financial year provide the financial statement, profit and loss
statement, other financial reports and relevant information for
the preceding year which are audited by an accounting firm to
the Lender;
12.8 The Borrower must run its business steadily and maintain good
financial status;
12
<PAGE>
12.9 The Borrower shall inform immediately the following matters to
the Lender:
(1) Any arbitration or legal action in relation to the
Borrower or this project;
(2) Mandatory measure has been taken by any relevant
governmental authority against any property of the
Borrower;
(3) Other information in connection with the project which is
required by the Lender.
12.10 The Borrower hereby acknowledges as follows:
1. The funds which are collected through this issuance of the
bonds are partly aimed at raising funds for the Borrower, and
the China Construction Bank, for the sole benefit of the
Borrower, has as far as possible obtained the most favorable
conditions and terms in signing the External Agreements with
relevant parties at the request of the Borrower;
2. The Borrower commits that regardless of whether the Borrower
uses the loan pursuant to this Agreement, the Borrower will:
(1) bear the expenses and risks which shall be borne by the
Borrower and which are incurred in the course of execution
and performance of the External Agreements in connection
with this loan and pursuant to the stipulation of this
Agreement, and will, pursuant to the notification of
the Lender, compensate in full the Issuer and the Lender
for any expense and loss sustained because of the External
Agreements and related to this loan;
(2) the calculation of the loan interest under this Agreement
shall start from April 11, 1997 in accordance with
relevant stipulation on interest calculation in the
External Agreements;
3. The Borrower commits that in compensating the Lender's loss or
in notifying the Lender to make prepayment pursuant to relevant
terms of this Agreement, the Borrower, after having received
the above notification, must immediately repay the loan
pursuant to the requirement of the notification, meanwhile, the
Borrower irrevocably authorizes the Lender to make direct
deduction, transfer and use in case of compensating for the
loss of the Lender or notifying the Borrower to make prepayment
pursuant to relevant terms of this Agreement;
4. Unless the records are wrong, otherwise the records of the
Lender shall govern in respect of the debt records of the loan
under this Agreement.
12.11 The Borrower must strictly carry out the stipulations of the
"Accord on Special-purpose Funds" (Annex 1);
13
<PAGE>
12.12 The Borrower guarantees that the repayment of the loan under
this Agreement is not subordinate to any other debt of the
Borrower;
12.13 The Lender is entitled to exercise supervision and examination
over the Borrower pursuant to the stipulation of this
Agreement;
12.14 The Borrower must deliver all the RMB settlement of accounts
and the import-export settlement of accounts to the Lender or
their designated branch for handling;
12.15 The Lender holds that the financial status of the Guarantor has
deteriorated to such an extent as to suspend operation or to go
bankrupt or to be incapable of performing its obligations under
the guaranty agreement; that the Guarantor may be confronted
with events of liquidation or being merged or dissolved and
rescinded which will produce adverse impact on the interests of
the Lender; and that the Guarantor is involved or will be
involved in significant arbitration or legal proceedings and
debt dispute which will affect the implementation of this
On-lending Agreement. Once the Lender confirms the occurrence
of the above situation, the Lender is entitled:
(1) to demand that the Borrower shall, in connection with the
above-mentioned guaranty obligations undertaken by the
Guarantor, find a new guarantor acceptable to the Lender
within the time-limit (no longer than 45 days) set by the
Lender;
(2) if the Borrower fails to provide the guaranty acceptable
to the Lender within the above time-limit, the Borrower
is regarded as having committed an event of default as
stipulated in Article 13, the Lender may take any
appropriate action which it is entitled to take pursuant
to the terms of the event of default;
12.16 Any undetermined matters in this Agreement, if being stipulated
in the External Agreements, will be included in the
supplementary agreement to this Agreement, the terms in the
supplementary agreement will be determined by the Lender
pursuant to the External Agreements and both the Lender and the
Borrower shall execute and perform.
12.17 In order to meet the need of the Borrower for paying the
principal and interest for the issuance of bonds, the Lender
will, on the basis of the foreign debt quotas acquired by the
Borrower, raise funds for the Borrower pursuant to relevant
stipulations for such foreign debt quotas, so as to enable the
Borrower to repay the principal and pay the interest and
relevant fees of the on-lending loan under this On-lending
Agreement.
Article 13 Events of Default
14
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13.1 Any of the following acts or events shall constitute the
Borrower's event of default:
(1) The Borrower fails to repay principal and pay interest
and other fees pursuant to the stipulations of this
On-lending Agreement;
(2) The Borrower fails to perform any obligation which it
shall undertake pursuant to the stipulations of this
On-lending Agreement and relevant documents;
(3) The Borrower's guaranty in this On-lending Agreement and
the notification or other document made or delivered
therefrom are proved to be significantly inconsistent with
facts or inaccurate or incapable of performance;
(4) The Lender holds that the fact that the Borrower has made
guaranty, mortgage and pledge in connection with its
assets and interests has gravely affected its performance
of all the obligations under this Agreement;
(5) The Lender holds that the financial status of the
Borrower and the Guarantor has deteriorated so gravely
that they may suspend operation or go bankrupt or not be
able to perform their obligations under this Agreement;
(6) Any agreement, contract or document related to this
On-lending Agreement is suspended for implementation or
declared invalid;
(7) The Borrower has been or will be confronted with events
of liquidation or being merged or dissolved and rescinded
which will produce adverse impact on the interests of the
Lender;
(8) The Borrower fails to repay in time any other debt which
it owes the China Construction Bank and the Lender holds
that the Borrower's default in any other debt agreement
will affect the Borrower's repayment of any debt under
this Agreement;
(9) The Borrower, the Borrower's assets or the Borrower's
officers have been involved or shall be involved in any
significant arbitration or legal proceedings and debt
dispute (the Lender holds that these arbitration or legal
proceedings or debt dispute may produce adverse impact on
the Borrower's performance of this Agreement), however, if
the Borrower's officers are involved or shall be involved
in any significant arbitration or legal proceedings and
debt dispute which are merely individual actions unrelated
to their titles, then such actions shall not constitute
the Borrower's default;
(10) The Borrower arbitrarily embezzles any portion of the
loan under this Agreement;
(11) The Borrower opens an account or handles settlement in a
bank which is not designated by the Lender;
(12) The Guarantor violates any obligation stipulated in the
letter of guaranty;
13.2 In case any of the above-mentioned events of default occurs,
the Lender is entitled to take one or several of the following
measures:
15
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(1) to correct within a definite time in accordance with
the notification of the Lender;
(2) to suspend withdrawal immediately;
(3) to declare the maturity of all the loan and require
immediate repayment of all the loan and its corresponding
interest and fees;
(4) the Lender may ask the Borrower to compensate for any
loss and the additional expenses therefrom because of the
Borrower's default.
Article 14 The Lender's Exercise of Rights
The fact that the Lender has not exercised or has not exercised in time
any obligations under this On-lending Agreement in the course of the
implementation of this Agreement shall not be regarded as its waiver of rights
and shall not affect any obligation which the Borrower shall undertake under law
and this On-lending Agreement.
Article 15 Assignment of the Rights and Obligations of the Lender and
the Borrower
15.1 The rights and obligations of the Lender under this On-lending
Agreement may be legally assigned.
15.2 The assignment of the rights and obligations of the Borrower
under this On-lending Agreement can be executed only after
seeking written consent from the Lender in advance.
Article 16 Amendment and Supplement
If there is adjustment in relevant policy of the State or other
uncovered matters in this On-lending Agreement, it may be jointly consulted,
amended and supplemented by both parties in accordance with the stipulations of
the External Agreements on the prerequisite of ensuring non-violation of the
External Agreements and timely repayment of investment and payment of interest
and relevant fees and of not harming the interests of the Lender. The amendment
and supplement shall constitute an inseparable part of this On-lending Agreement
and shall be as equally authentic as this Agreement.
Article 17 Dispute Resolution
17.1 The signed text of the "External Agreements" shall govern in
connection with the final interpretation of the written
language and terms which have occurred and are used in this
Agreement in relation to the External Agreements.
17.2 Should there be any dispute between the Borrower and the Lender
in the course of entrustment and on-lending, it shall first be
settled through friendly consultation. If no agreement can be
reached, any party may institute legal proceedings at a
people's court with jurisdiction according to law.
16
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Article 18 Effectiveness of the Annexes
The annexes to this On-lending Agreement are the inseparable parts of
this On-lending Agreement and shall be as equally authentic as this Agreement.
Annex 3 may be adjusted and/or supplemented by the Lender in accordance with
corresponding stipulations of the External Agreements.
Article 19 Miscellaneous
If the reform in the foreign currency system of the State and other
changes in policy are related to the use and repayment of foreign currency, the
Lender shall notify the Borrower on time and redefine relevant terms of this
Agreement pursuant to relevant stipulations of the State. Should there be any
change, the terms after the change shall govern.
Article 20 Effectiveness
20.1 This On-lending Agreement will come into force upon the
Lender's notification after all the following conditions are
satisfied:
(1) Execution of this Loan Agreement;
(2) Effectiveness of the External Agreements.
This Agreement will automatically cease to be effective upon the date
when the Borrower has paid all the loan principal, interest and any other fees
stipulated in this Agreement.
20.2 This On-lending Agreement is prepared in five original copies
with the Lender retaining three and the Borrower retaining two
and with duplicates delivered to relevant parties.
Article 21 Mode of Notification
The correspondence in the course of the implementation of this
Agreement shall be delivered correctly by the Lender and the Borrower to the
following addresses (If there is any change, it shall be notified in time to the
other Party):
Lender: Address:
Name:
Tel.:
Fax:
17
<PAGE>
Postcode:
Borrower: Address:
Name:
Tel.:
Fax:
Postcode:
If it is notified by fax, the original must be mailed by registered
courier service immediately after the fax is sent. If it is mailed by registered
courier service, the date of mail shall govern.
Borrower: Lender:
(seal) (seal)
Signature of Legal Representative Signature of Legal Representative
(or his or her authorized (or his or her authorized
representative): representative):
Place of Signature: Date of Signature:
18
<PAGE>
Annex 1
Accord on Special-purpose Funds in Connection
with the Repayment of On-lending Loan
for Issuance of Bonds Overseas
In order to meet the need for construction and development of the
Yangcheng Power Plant Project, the Shanxi Branch of the China Construction Bank
(hereinafter referred to as the Lender) and the Yangcheng International Power
Company Ltd. (hereinafter referred to as the Borrower) have signed the
On-lending Agreement totaling [***]. For the sake of ensuring the timely use
and repayment of the principal and payment of interest and relevant fees of the
foreign debt under the above-mentioned Agreement, both the Borrower and the
Lender have reached the following accord through friendly consultations:
Article 1 Opening and Purposes of Relevant Account of Special-purpose
Funds
The Borrower applies for opening the following accounts within
10 days upon the effectiveness of this Accord:
1. The Borrower applies to the Administration of Exchange Control
for opening an account in the Lender's International Business
Department which will be used for repaying the special-purpose
funds of the foreign debt.
2. The Borrower shall open a special-purpose RMB fund account (its
name will be determined separately) in an institution designated
by the Lender. The RMB funds in the account will be used to make
payment in regulated and rationed foreign exchange as well as
relevant fees incurred under this Accord.
Article 2 Sources of the Funds of the Special-purpose Account
In order to ensure the timely performance of external payment, the
Borrower shall reserve the following funds as the sources for repayment (if
there is any change in the accounting system of the State, both Parties may make
corresponding adjustment pursuant to the new accounting system):
1. The depreciation fund of fixed assets which shall be withdrawn
for imported equipment of the project and which shall be used for
repayment;
2. The additional profits which may be used for repayment pursuant
to relevant stipulations after the completion of the project;
3. Foreign currency earnings after the completion of the project;
4. Development fund for the enterprise;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
19
<PAGE>
5. Overall benefits of the Borrower and other income and funds under
enterprise control which may be used for repayment;
6. The exempted or refunded taxes which may be used for repayment
after submission to relevant authorities for approval.
Article 3 Use of the Account
1. The Borrower shall, pursuant to the "Schedule for Repayment of
Principal with Interest" or the notification of the Lender,
deposit the required funds not later than six months before the
Date of Payment in the "Special-purpose Fund Account for the
Repayment of Foreign Debt" or the RMB special-purpose fund account
which is opened at the Lender's Bank.
2. The depreciation funds of fixed assets that are withdrawn from
imported equipment of the project must be deposited in the
Borrower's RMB special-purpose account which is opened at an
institution designated by the Lender.
3. After the project has gone into operation, the RMB settlement in
the credit period must be handled in the Lender or its branch .
4. After the project has gone into operation, the settlement for the
import and export of products in the credit period must be handled
in the International Business Department of the Lender, and the
foreign currency earnings designated for repayment shall
immediately be deposited in the Borrower's "Special-purpose Fund
Account for the Repayment of Foreign Debt"
5. The Borrower shall repay the principal with interest on the
matured foreign currency loan with the kind of currency stipulated
in the loan agreement. If the Borrower makes repayment with other
kind of currency agreed to by the Lender, the Lender will act as
an intermediary in foreign exchange trading in accordance with the
exchange rate announced by the Administration of Exchange Control
at that time with the exchange rate risk borne by the Borrower.
6. The Lender will, on the basis of current deposit, accrue and pay
interest on the Borrower's balance of the funds in the
special-purpose fund account.
Article 4 Management of Special-purpose Funds
1. The Borrower shall, pursuant to the stipulations of this Accord,
deposit in time the foreign currency and RMB funds used for
external payment in the above account. The Lender is entitled to
handle directly the procedures of transfer for any delayed
payment.
2. Without prior written consent of the Lender, the Borrower shall
not handle RMB settlement stipulated in Article 3.3 and import and
export settlement stipulated in Article 3.4 in any bank other than
the Lender's during the repayment period.
If it is discovered that the Borrower handles the
above-mentioned settlement in any bank other than the Lender's, the
Lender is entitled to withhold from the Borrower's deposit account a
sum which is [***] of the total
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
20
<PAGE>
amount of each default in settlement. The default fine withheld
pursuant to the above-mentioned stipulation shall not affect the
performance of the terms of "Events of Default" under the On-lending
Agreement.
3. The Borrower shall deposit in time a full amount of rationed or
regulated foreign exchange in the "Special-purpose Fund Account
for Repayment of Foreign Debt" so as to make it available for
payment in foreign currency. The Lender shall handle any of the
Borrower's unpaid payable account because of delayed or
insufficient amount of rationed or regulated foreign exchange as
an overdue, and overdue interest shall be accrued on the overdue
sum in accordance with the stipulations of the On-lending
Agreement.
4. Owing to foreign exchange trading during the period of external
payment, the Lender may temporarily advance the balance of the
arrears of the payment resulting from change in exchange rate and
then withhold it in the next external payment with the accrued
interest pursuant to the stipulated corresponding loan interest
rate. The Lender shall, on the basis of the current deposit for
foreign currency, accrue and pay interest on the balance of the
foreign currency special-purpose fund account for external
payment.
5. The banking charges incurred in foreign exchange rationing,
regulation and trading as well as other relevant fees under this
On-lending Agreement shall all be borne by the Borrower.
6. Should there be any major policy adjustment by the State, this
Accord may be amended through joint consultations between the
Borrower and the Lender on the premise of ensuring to repay on
schedule the principal with interest and relevant fees to relevant
foreign parties under the above-mentioned On-lending Agreement.
Yangcheng International Power Company Ltd.
(official seal)
Signature of Authorized Representative:
Shanxi Branch of China Construction Bank
(official seal)
Signature of Authorized Representative:
Date of Signature:
21
<PAGE>
Annex 2
Letter of Guaranty for Repayment
China Construction Bank:
Whereas the Yangcheng International Power Company Ltd. (the Borrower)
has entrusted the China Construction Bank to raise funds through issuing bonds
overseas, the Borrower and the Shanxi Branch of the China Construction Bank (the
Lender) has for this purpose executed the On-lending Agreement totaling
[***]. This Guarantor sincerely guarantees that the Borrower will repay on
time the principal, interest and fees in foreign currency under the
above-mentioned Agreement, and has hereby established this letter of guaranty
which specifies the liabilities for guaranty as follows:
1. This letter of guaranty is an unconditional and irrevocable one
whose amount guaranteed is the sum of all the principal, interest
and fees under the above-mentioned Agreement.
2. In the event that the Borrower fails to deliver on schedule all
or part of the principal, interest and fees of the matured loan
under the above-mentioned Agreement because of difficulties in
making repayment or any other causes, the Guarantor will undertake
collateral liability and shall, within 15 working days after
having received a written notice from the Lender, guarantee to pay
in full to the Lender the foreign currency amount payable by the
Borrower as mentioned in the notice. If this Guarantor is unable
to perform the above-mentioned liability for guaranty, this
Guarantor hereby accepts that the Lender may directly deduct or
entrust the bank of deposit to deduct the corresponding amount
from any account of this Guarantor.
3. All the assets of this Guarantor, including but not being limited
to all the fixed assets, real estate, stock ownership and working
asset owned by this Guarantor, are the material guaranty for
issuing this letter of guaranty by this Guarantor. If this
Guarantor fails to perform its liability for guaranty pursuant to
the stipulation of this letter of guaranty, the Lender is entitled
to acquire through legal procedures the corresponding assets which
this Guarantor offers as a guarantee.
The Lender is also entitled to ask this Guarantor which, on
the basis of all its assets as the material guaranty for this
letter of guaranty, will set up a mortgage to which the Lender is
the beneficiary.
4. This letter of guaranty takes effect as of today and will remain
effective when the Lender agrees to the Borrower's postponement of
payment, while the amount guaranteed will be decreasing with the
Borrower's repayment of the loan until the guaranteed amount has
been repaid in full by the Borrower or the Guarantor.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
22
<PAGE>
This Guarantor hereby confirms that the extension of the
above-mentioned loan may be regarded as having obtained prior consent
from this Guarantor and that this Guarantor agrees to undertake
collateral liability. This Guarantor waives its right of raising a plea
against any demand for repayment of loan or for performance of guaranty
obligations on the part of the Lender.
5. This Guarantor hereby confirms that it agrees to undertake
collateral liability.
6. This letter of guaranty is of the nature of a continuing
liability for guaranty which is affected neither by any
instruction of the higher unit of the Guarantor nor by any
agreement and document which the Borrower has concluded with any
unit; nor is it affected in any way by any change in the
Borrower's position or financial status, such as whether it goes
bankrupt, is closed, suspended, merged and transferred, turns to
be a joint stock company, or is purchased; nor is it affected by
any change in the nature of its enterprise, scope of business,
articles of association, and organization and institution.
7. This Guarantor is a legal entity which is lawfully established,
is issued with a business license by the administration for
industry and commerce, is possessed of property as guaranty which
is sufficient to repay the above-mentioned amount of guaranty, and
can guarantee to perform the obligations under this letter of
guaranty during the term of guaranty.
8. In the event of any situation which may affect its ability for
guaranty during the effective term of this letter of guaranty,
this Guarantor shall notify both the Borrower and the Lender and
shall guarantee the continued effectiveness of the guaranty. This
Guarantor shall not assign its obligation for guaranty without the
prior written consent of the Lender.
9. This Guarantor hereby confirms that the content and form of the
above-mentioned Agreement and its annexes have been accepted by
this Guarantor.
10. This letter of guaranty remains effective when both the Borrower
and the Lender agree to make amendments to the above-mentioned
Agreement.
11. This Guarantor hereby agrees that any accommodation and grace
granted to the Borrower by the Lender will not affect the
obligations of the Guarantor under this letter of guaranty.
Guarantor: ____________________
(official seal)
Legal Representative: ___________________
(signature)
23
<PAGE>
Address of the Guarantor: _________________
The Guarantor's bank of deposit and account number:_____________
day month year
24
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.52
Serial Number: 1400104061997020078
RMB Fund Loan Contract
Of
State Development Bank
Type of Loan: Basic Construction
Name of Project: The First Power Plant of Yangcheng, Shanxi
Borrower: Yangcheng International Power Generating Co.,
Ltd.
Lender: State Development Bank
0
<PAGE>
Borrower (hereinafter referred to as Party A):
Address:
Legal Representative:
Post Code:
Person to contact:
Tel.:
Cable Address:
Fax:
Lender (hereinafter referred to as Party B): State Development Bank
Address: Yulong Grand Restaurant
No. 42, Fucheng Road, Haidian District, Beijing
Legal Representative: Yao Zhenyan
Post Code: 100036
Person to contact:
Tel.:
Cable Address: 81308
Fax:
Party A applies to Party B for a loan of basic construction which is
approved to be granted by Party B after examination. For the sake of specifying
the rights and obligations of the two Parties, this Contract is hereby executed.
Article 1 Amount of Loan
Party A borrows from Party B [***].
Article 2 Purposes of Loan
The Loan will be used for the construction, installation and other
relevant costs of the coal-fired units of 6X350MW of the Yangcheng First Power
Plant.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
1
<PAGE>
Article 3 Term of Loan
The term of the loan is 13 years 1 months, namely from ____day
____ month of the year 1997 until the 30th day of June of the year 2010.
Article 4 Loan Interest Rate and Loan Interest
The loan interest rate will be calculated on the basis of [***] per
year and the interest will be calculated on the basis of quarters. For the
interest unpaid when due, compounded interest shall be collected.
If there is any adjustment in the interest rate during the term of
validity of this Contract, it shall be carried out in accordance with the
stipulation of the People's Bank.
Article 5 Party A's Installment Use of the Loan is as follows:
1997 year__ month [***] 1998year ___ month ___ [***]
1999year ____ month [***] 2000 year ____ month [***]
2001 year ____ month [***] ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
____ year ____ month ________ yuan ____ year ____ month ________ yuan
Article 6 Party B guarantees to repay the above loan within the term
of the loan in accordance with the following plan for installment repayment of
the loan:
prior to2,000year11month30day [***]
prior to2001year6month30day [***]
prior to2001year11month30day [***]
prior to2002year6month30day [***]
prior to2002year11month30day [***]
prior to2003year6month30day [***]
prior to2003year11month30day [***]
prior to2004year6month30day [***]
prior to2004year11month30day [***]
prior to2005year6month30day [***]
prior to2005year11month30day [***]
prior to2006year6month30day [***]
prior to2006year11month30day [***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
2
<PAGE>
prior to2007year6month30day [***]
prior to2007year11month30day [***]
prior to2008year6month30day [***]
prior to2008year11month30day [***]
prior to2009year6month30day [***]
prior to2009year11month30day [***]
prior to2010year___month___day [***]
If Party A wants to make prepayment, it shall notify Party B 20
business days before the date of repayment and shall seek consent from Party B.
Article 7 Rights and Obligations of Both Parties
1. Party B shall grant a loan to Party B in accordance with
contractual terms;
2. Party A shall guarantee that other construction funds of the loan
project be finalized synchronously and pro rata with the loan
funds provided by Party B;
3. Party B shall repay in full the investment and interest of the
loan during the term of the loan in accordance with Article 4 and
Article 6 of this Contract;
4. Party A must use the loan in accordance with the stipulations of
this Contract and the loan shall not be diverted to any other
purpose without the written consent of Party B;
5. Party B is entitled to understand, inspect and supervise Party
A's use of the loan, engineering construction, purchase of
equipment and materials, stockpile of materials and completion
acceptance as well as implementation of the plan and the
financial revenue and expenditure in production, operation and
management. Party A shall cooperate with Party B's inspection of
the loan;
6. Party A shall, pursuant to the requirement of Party B, provide
such information materials as relevant plan, statistics,
financial and accounting statements;
7. Party A shall call for bid in respect of the loan project in
accordance with relevant stipulations of the State and Party B.
The bidding documents such as the design of the main part of a
project, construction, and purchase of major equipment and
relevant contracts shall be examined, verified and confirmed by
Party B;
8. Party A shall submit to Party B the report on the implementation
of the loan project within 12 months of the completion acceptance
of the loan project;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
3
<PAGE>
9. If during the term of validity of this Contract Party A makes
changes in its mode of business operation and property right in
connection with contracting, merger, separation, joint venture,
joint operation and shareholding system reform, it shall notify
Party B 60 days in advance and shall seek written consent from
Party B or both Parties shall reach a new agreement;
10. Without Party B's examination and consent, Party A shall not,
within the term of validity of this Contract, assign, sell,
become a shareholder by fixing a price for or set guaranty for
others with the assets resulting from the loan project under this
Contract.
Article 8 Entrustment of An Agent
Party B entrusts International Department of Shanxi Province
Construction Bank as the agency bank to handle the transfer of payment
of the loan funds, to supervise Party A's performance of this Contract
and the use of the loan, to assist Party B in recovering the principal
and interest of the loan and to handle other matters entrusted by Party
B. Party A is obliged to accept the supervision and management of the
agency bank on the basis of the stipulations of the agency agreement
executed between Party B and the agency bank.
Article 9 Guaranty
The repayment of the principal and interest of the loan under
this Contract shall be guaranteed by a guarantor acceptable to Party B
in the form of guaranty and a "guaranty contract" shall be executed
between the guarantor and Party B as a subordinate contract to this
Contract.
Article 10 Change in and Termination of the Contract
1. Upon the effectiveness of this Contract, neither Party A
nor Party B can arbitrarily change and terminate this Contract;
2. Party A shall repay the loan pursuant to the plan for
installment repayment as stipulated in this Contract. When the loan is
due and Party A is not capable of making full repayment in spite of all
efforts, it may apply to Party B for extension and the accumulated
extension time shall not exceed 3 years. The borrower shall submit
written application for extension of the loan 60 business days prior to
the maturity of the loan, and shall submit to Party B a written
certificate which is agreed to by the guarantor for the extension of
the repayment, then after having been examined and consented by Party
B, an agreement for extension of repayment shall be executed as an
annex to this Contract;
3. If during the term of validity of this Contract, the
changes in laws, policies and plans or the presentation of either of
the two Parties makes it
4
<PAGE>
necessary to change or terminate this Contract, an agreement may be
executed between the two Parties on the basis of reaching unanimity
through consultation and this agreement will be a constituent part of
this Contract. Having reached agreement on terminating this Contract,
Party A shall repay Party B the loan it has used and the accrued
interest therefrom;
4. If Party A or Party B cannot perform or cannot fully
perform this Contract because of reasons of Force Majeure, the affected
Party shall promptly notify the other Party, shall adopt effective
measures to prevent the extension of losses and shall provide relevant
detailed information and documentary evidence within 20 business days.
Party A and Party B shall consult in adopting make-up measures to
relieve in part or in full the responsibilities for performance of the
contract on the basis of the extent of impact on the performance of the
contract.
Article 11 Liabilities for Default
1. If Party A diverts the loan for other purposes, Party B is entitled
to accrue additional interest pursuant to the stipulation of the
People's Bank of China on the basis of the loan interest rate of
this Contract in connection with the misused loan;
2. If Party A fails to repay the loan pursuant to the plan for
installment repayment as provided for in this Contract, it is
deemed as an overdue loan. Party B is entitled to accrue additional
interest pursuant to the stipulation of the People's Bank of China
on the basis of the loan interest of this Contract;
3. Any of the following occurrences on the part of Party A during the
term of validity of this Contract shall be regarded as Party's A's
default, and Party B is entitled to suspend granting the loan,
recover the principal and interest of the loan that has been
granted and is entitled to withhold it from Party A's bank account;
(1) Party A does not perform the obligations as stipulated in
Sections 5, 6, 7, 9 and 10 of Article 7 under this Contract;
(2) Party A diverts the loan for other purposes;
(3) Party A does not repay the overdue loan after demand for
repayment;
(4) Party A does not provide or has provided false plan, statistics
and financial and accounting statements to Party B;
(5) The guarantor violates the guaranty contract or loses the
capability of undertaking collateral liability, the mortgager
(pledger) violates the mortgage (pledge) agreement or the value
of the object of mortgage (pledge) diminishes to such an extent
because of unexpected loss and damage and because of the
mortgager's error or other reasons that it is not sufficient to
liquidate the principal and interest of the loan under this
Contract, moreover, Party A is unable to establish new guaranty
as required by Party B;
5
<PAGE>
(6) Party A is involved or will be involved in major legal or
arbitration proceedings or other legal disputes;
(7) Other occurrence on the part of Party A which is sufficient to
affect its repayment capability;
(8) Party A deliberately diverts its funds for other purposes,
averts repayment of the loan or refuses obstinately to repay
and lacks the sincerity to repay the loan.
4. Party A violates Section 2 of Article 7 of this Contract, so Party
B is entitled to collect default fine from Party A which is [***]
of the amount of the loan;
5. Party A violates Sections 5, 6, 7, 9 and 10 of Article 7, so Party
B is entitled to collect a default fine from Party A which is [***]
of the amount of the loan in addition to the disciplinary measure
taken in accordance with Section 3 of this Article.
Article 12 The application for the loan, the guaranty contract, the
mortgage agreement, the pledge agreement and other documents relevant to this
Contract are the constituent parts of this Contract.
Article 13 Any dispute between Party A and Party B arising in the
performance of this Contract shall be settled by the both Parties through
consultation; if it can not be settled through negotiation, it may be settled
through legal proceedings at the people's court where Party B is located.
Article 14 Other matters agreed to by Party A and Party B are as
follows:
[***]
Article 15 Those which are not covered in this Agreement shall be
dealt with in accordance with relevant laws and regulations of the State as well
as the stipulations of the financial regulations.
Article 16 This Contract shall come into force upon its official
execution by Party A and Party B and shall cease to be effective upon Party A's
repayment in full of the principal and interest of the loan.
Article 17 This Contract is prepared in 3 original copies with Party
A, Party B and the guarantor retaining one original copy each; the duplicates
are prepared in
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
6
<PAGE>
7 copies with Party A retaining 1 copies, Party B 4 copies, and the guarantor,
Head Office of the Agency Bank and the handling branch of the Bank retaining one
copy each.
Party A :
Legal Representative: (official seal)
(or authorized agent) (signature)
Year Month Day
Party A's Bank of Deposit and Account Number: International Department
of Shanxi Branch of Construction Bank.
Party B:
Legal Representative: (official seal)
(or authorized agent) (signature)
1997Year 7 Month 29 Day
Place of Execution: Haidian District, Beijing
7
Information contained herein, marked with [***], is being filed pursuant to a
request for confidential treatment.
Exhibit 10.53
POWER PURCHASE CONTRACT
RELATED TO THE 6 X 350 MW POWER STATION
IN YANGCHENG, SHANXI PROVINCE
BY AND BETWEEN
YANGCHENG INTERNATIONAL POWER GENERATING COMPANY LIMITED
AND
JIANGSU PROVINCIAL POWER COMPANY
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS................................................3
ARTICLE 2 OBLIGATIONS PRIOR TO THE COMMERCIAL OPERATION..............6
ARTICLE 3 COMMENCEMENT OF COMMERCIAL OPERATION.......................7
ARTICLE 4 OPERATION, DESPATCH AND EXAMINATION........................8
ARTICLE 5 ON-GRID TARIFF............................................11
ARTICLE 6 METERING OF ELECTRICITY...................................15
ARTICLE 7 PAYMENT OF ELECTRICITY FEE................................16
ARTICLE 8 BREACH OF CONTRACT AND COMPENSATION.......................17
ARTICLE 9 INSURANCE.................................................19
ARTICLE 10 FORCE MAJEURE.............................................19
ARTICLE 11 ASSIGNMENT................................................20
ARTICLE 12 CONTRACT TERM & TERMINATION...............................21
ARTICLE 13 GOVERNING LAWS AND SETTLEMENT OF DISPUTES.................21
ARTICLE 14 EFFECTIVENESS OF THE CONTRACT AND AMENDMENTS..............22
ANNEX 1..............................................................24
POWER STATION OR PROJECT.............................................24
ANNEX 2..............................................................25
DEDICATED TRANSMISSION FACILITIES....................................25
ANNEX 3..............................................................27
PERFORMANCE INDICES AND TESTING RESULTS FOR THE UNITS................27
ANNEX 4..............................................................28
RETURNS ON REGISTERED CAPITAL (ANTICIPATED REVENUE) OVER THE YEARS---26
ANNEX 5..............................................................29
METHOD OF ACCOUNT SETTLEMENT FOR THE AMOUNT OF POWER GENERATED
BY THE POWER STATION............................................29
ANNEX 6..............................................................33
INSURANCE............................................................33
<PAGE>
Parties to the Contract:
Yangcheng International Power Generating Company Limited ("Party A"), a
Sino-foreign cooperative joint venture enterprise of limited liability which is
registered with the State Administration for Industry and Commerce of the
People's Republic of China and which possesses the legal status of a legal
person with its legal address at No.151 Shuangtashi Street in Tai Yuan City,
Shanxi Province, the People's Republic of China and its legal representative is
Bian Xuehai [Chinese characters].
Jiangsu Provincial Power Company ("Party B"), a national enterprise of
the People's Republic of China owned by the entire people, which is registered
with Jiangsu Provincial Administration for Industry and Commerce and possesses
the legal status of a legal person with its registered address at #20 Beijing
Xilu, Nanjing, Jiangsu Province and its legal representative is Gu Zhipeng
[Chinese characters].
WHEREAS, Party A is planning to build, own and operate a power station
of 6 X 350MW capacity in Yangcheng County of Shanxi Province, and in
association with that Party B is planning to build, own and manage a 500KV
Dedicated Transmission Facilities for the delivery of electricity. Party A shall
sell to Party B the On-Grid Electricity of the Power Station and Party B shall
agree to purchase the aforementioned electricity.
Party A and Party B, on the basis of equality and mutual benefit, have
undertaken negotiations on the sale and purchase of electricity that is
available from the 6 X 350MW Power Station, and have concluded this Power
Purchase Contract (this "Contract").
Upon its effectiveness, this Contract shall be binding on both Parties,
and the Parties shall strictly adhere to this Contract.
Article 1 Definitions
1.1 "Yangcheng International Power Generating Company Limited" shall be a
limited liability company established by North China Electric Power
Group Corporation, Jiangsu Province Investment Corporation, Shanxi
Energy Enterprise (Group) Company, Shanxi Provincial Power Company,
Jiangsu Provincial Power Company and AES China Generating Co. Ltd. in
accordance with the "Company Law of the People's Republic of China" and
"Law of the People's Republic of China on Sino-Foreign Co-operative
Joint Venture Enterprises" and other relevant Chinese laws,
regulations, rules and the Joint Venture Contract of the Company.
1.2 "Property Right Boundary Point" shall refer to the area within 2 meters
from the Connecting Point A located at the terminal tower of the
electricity transmission line of the Dedicated Transmission Facilities
outside to the enclosing wall of and next to the Power Station as
illustrated in Drawing No. 0-3 in Annex 2.
1.3 "Power Station" or "Project" shall refer to the 6 X 350MW
coal-fired generating units and related ancillary facilities including
the step-up substation and all the electrical equipment, water supply,
<PAGE>
coal supply and ash disposal systems within the Property Right Boundary
Point which shall be invested and constructed by Party A in Yangcheng
County of Shanxi Province. For details, refer to Annex 1.
1.4 "Dedicated Transmission Facilities" shall refer to the 500KV power
transmission and transformation facility extended from the Property
Right Boundary Point to the Huaiyin substation in Jiangsu Province. For
details, refer to Annex 2.
1.5 "Units" shall refer to any of the six 350MW generating units designated
as Unit 1 to Unit 6 with each of the Units numbered in accordance with
the design drawings.
1.6 "Connecting Point" shall be the Property Right Boundary Point which is
designated as Point A in Drawing No. 0-3 of Annex 2.
1.7 "Unit Supply Capacity" with reference to any Unit of the Power Station
shall be the maximum continuous output capacity in kilowatts (that is
the gross generating capacity less consumption for the auxiliaries and
station use, and transmission losses in the main transformer and
busbar) of such Unit of the Power Station available at the Connecting
Point as determined by tests carried out pursuant to Annex 3 before
going into Commercial Operation of such Unit. Refer to Annex 3 for
specific indices.
1.8 "On-Grid Electricity" shall mean for any period, the electricity
generated and delivered by the Power Station to the Connecting Point
that is qualified in accordance with the electricity quality standards
of the state and is measured, in kilowatt hour ("KWH"), by the electric
energy metering equipment provided for under Article 6.1 at the 500KV
side near the Connecting Point.
1.9 "Effective On-Grid Electricity" shall refer to the on-grid electricity
in KWHs which is derived from deducting the electricity counted as "no
metering of electricity and no payment" stipulated in Article 3.4 of
Annex 5 from the On-Grid Electricity stipulated in Article 1.8.
1.10 "Normal Take" shall refer to the minimum amount of Effective On-Grid
Electricity in KWHs in each year during the effective term of this
Contract that Party B agrees to purchase from Party A after the Units
have gone into Commercial Operation and shall equal to:
6
SIGMA Supply Capacity of Unit i x Annual Utilization Hours of
i=1 Unit i in the Year
Where:
i =1 to 6, referring respectively to Unit 1 through Unit 6
Annual Utilization Hours for the Unit shall be:
(1) For the calendar Year in which the Unit goes into Commercial
Operation,
<PAGE>
[***] hours x (A/365)
in which:
A is the number of the days counting from the day on which the Unit is
put into Commercial Operation to 31st December of that Year.
(2) For each calendar Year before 31st December 2010, [***] hours;
(3) For the Year 2011, [***] hours;
(4) For each calendar Year from 2012 to 2015, [***] hours;
(5) For the Year 2016, [***] hours x (B/365)
in which:
B is the number of the days counting from 1st January of that year to
the day on which the Joint Venture Term expires.
1.11 "On-Grid Tariff" shall mean the various On-Grid Tariff expressed in RMB
Yuan per KWH corresponding to the On-Grid Electricity as defined in
Article 1.8, calculated in accordance with the principles, methods and
procedures set forth in Article 5, and approved by relevant competent
pricing authorities of the State.
1.12 "Sales Tariff" shall mean the sales tariff expressed in RMB Yuan per
KWH and approved by relevant competent pricing authorities of the
State, corresponding to the On-Grid Electricity which Party B shall
purchase from Yangcheng Power Station pursuant to the On-Grid Tariff
stipulated in Article 1.11 and shall be delivered to the consumers in
the Province through electricity supply networks.
1.13 "Electricity Fee" shall mean the payments expressed in RMB Yuan to be
made by Party B to Party A pursuant to Article 7 in respect of the
On-Grid Electricity purchased at the Connecting Point by Party B
pursuant to Article 6, and to be calculated pursuant to the On-grid
Tariff as stipulated in Article 5 of this Contract.
1.14 "Interconnection and Despatch Agreement" shall mean the Interconnection
and Despatch Agreement executed between Party A and the State
Electricity Despatch and Communication Centre for the Yangcheng Power
Station.
1.15 "Despatch Agreement" shall mean the Despatch Agreement executed between
Party B and the State Electricity Despatch and Communication Centre for
the delivery of electricity through the Dedicated Transmission
Facilities of Yangcheng Power Station.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
1.16 "Commercial Operation" shall mean, for each Unit, the formal
commencement of electricity generation acknowledged by Party A after
the satisfactory completion of performance tests for the Unit executed
in accordance with Article 3.
1.17 "Registered Capital" shall mean the total equity capital contributions
actually made by the joint venture partners of Party A in accordance
with the Joint Venture Contract.
1.18 "Joint Venture Contract" shall mean the Joint Venture Contract executed
on 22nd August 1996 under which Party A was established and any of its
subsequent amendments.
1.19 "Joint Venture Term" shall mean the period of time from the date (10th
October 1996) on which Party A has obtained its business license from
the State Administration for Industry and Commerce until the expiration
of the Joint Venture Contract.
1.20 "Completion Exchange Rate" shall mean the exchange rate (expressed in
RMB per USD) used in converting the US Dollars expenditure in the total
investment of the Power Station into RMB value for final account
settlement in order to determine the original value of the assets of
the Power Station at the completion of the construction of the Power
Station, but before Unit 6 is put into Commercial Operation, it shall
be equal to the Budgeted Exchange Rate.
1.21 "EPC Contract" shall mean the Engineering, Procurement and Construction
Services Contract entered into by and between Party A (as the Owner)
and Shanxi Provincial Power Company (as the EPC Contractor).
1.22 "Excess On-Grid Electricity" shall have the definition as stipulated in
Article 7.5 herein.
1.23 "Party A's Liability for Short Generation" shall have the definition as
stipulated in Article 4.6 herein.
1.24 "Party B's Liability for Short Purchase" shall have the definition as
stipulated in Article 4.6 herein.
1.25 "State Despatch Center's Liability for Short Despatch of Electricity"
shall have the definition as stipulated in Article 4.6 herein.
1.26 "Budgeted Exchange Rate" shall have the definition as stipulated in
Article 5.2 herein.
1.27 "Income Tax Rate" shall refer to the tax rates applicable to the
enterprise income tax and the local income tax that Party A is liable
to pay in accordance with the Income Tax Law for Foreign Invested
Enterprises.
Article 2 Obligations Prior to the Commercial Operation
2.1 Prior to Party A's issuance of the Notice to Proceed under the EPC
Contract to the EPC Contractor:
<PAGE>
(1) Party A shall execute the EPC Contract.
(2) Party A shall execute the Coal Supply Contract for coal needed by the
Power Station.
(3) Party B shall co-operate fully with Party A in providing required
information and convenience during Party A's negotiations with third
party lenders.
(4) Party B shall provide Party A with acceptable comfort letters issued by
Jiangsu Provincial Government or provincial organs for Party B's
performance of all the provisions of this Contract.
2.2 Party A shall cause Unit 1 to go into Commercial Operation within
thirty five (35) months after the Ministry of Electric Power grants approval to
Party A for the issuance of the Notice to Proceed under the EPC Contract to the
EPC Contractor, and thereafter Unit 2, Unit 3, Unit 4, Unit 5 and Unit 6 to go
into Commercial Operation respectively at an interval of every five months.
2.3 Party A shall cooperate fully with Party B in providing required
information and convenience during Party B's negotiations with third party
lenders.
2.4 When the conditions are mature for the construction commencement of
Dedicated Transmission Facilities, Party B shall submit the commencement of
construction of the Project to the Ministry of Electric Power for approval, but
Party B shall guarantee to complete the Dedicated Transmission Facilities 3
months ahead of the date as stipulated in Article 2.2 on which the first Unit of
the Power Station goes into Commercial Operation in order to satisfy the testing
and interconnection requirements of the Power Station.
2.5 The Parties shall strive to ensure the concurrent construction of the
Power Station, Dedicated Transmission Facilities and provincial transmission
facilities.
Article 3 Commencement of Commercial Operation
3.1 Party A shall conduct performance tests (See Annex 3 for major
performance indices and test results) on each Unit in accordance with the EPC
Contract. The date on which Party A issues the Commercial Operation Acceptance
Certificate for any Unit to the EPC Contractor in accordance with the EPC
Contract shall be the Date of Commencement of Commercial Operation of such Unit.
3.2 Party B shall agree to accept and purchase all the electricity
generated by each Unit during the testing period and prior to the Commercial
Operation.
3.3 Upon the Commencement of Commercial Operation of the Units, the
Effective On-Grid Electricity which Party B shall agree to purchase from Party A
in each Year shall not be less than the Normal Take.
<PAGE>
Article 4 Operation, Despatch and Examination
4.1 The Power Station and the Dedicated Transmission Facilities shall obey
the unified despatch of the State Power Despatch and Communication Centre
("State Despatch Centre"). The Interconnection and Despatch Agreement and the
Despatch Agreement shall be concluded separately.
4.2 Refer to Annex 3 for the range of electricity output of the Units that
is despatchable. (The design value of the range of electricity output of the
Units that is despatchable is 50-100% of the rated capacity). With reference to
generating units of similar type in the East China and Jiangsu Power Grids, and
taking into account the economic factors and special characteristics of a
mine-mouth unit using anthracite as fuel, the Power Station shall reasonably
undertake the tasks of base load, peaking, frequency modulation and voltage
regulation of the power grid and shall be operated in accordance with the
generation despatch plans and despatch orders issued by the State Despatch
Centre.
The annual, monthly and daily generation despatch plans of the Power
Station shall, pursuant to Party B's power purchase plan and the operating
status of the equipment of the Power Station, ensure that Party A and Party B
are able to satisfy the Normal Take and to leave an appropriate margin for
unseen circumstances within the annual planned despatchable hours of the Units.
The equipment maintenance plans of the Power Station which shall take
into consideration the status of the equipment of the power grid and the Power
Station and the requirement to satisfy the Normal Take, and, in accordance with
the maintenance cycle and time stipulated under "The Maintenance Regulations of
the Power Station" promulgated by the Ministry of Electric Power, shall be
arranged by the State Despatch Centre after overall co-ordination together with
Party A, Party B and relevant authorities.
4.3 In mid-July each Year, Party A shall submit to the State Despatch
Centre the proposed operation plans and equipment maintenance plans of the Power
Station for the following Year. At the end of August each Year, Party B shall
submit to the State Despatch Centre the proposed power purchase plan for the
following Year. The State Despatch Centre shall issue to Party A with a copy to
Party B, a prearranged plan for the following Year in December of each Year
after co-ordinating and reaching a balance with Party A and Party B.
Before the 15th of each month, Party A shall submit to the State Despatch Centre
the proposed operation plan and equipment maintenance plan of the Power Station
for the following month; before the 20th of each month, Party B shall submit to
the State Despatch Centre the power purchase plan for the following month; the
State Despatch Centre shall issue to Party A with a copy to Party B, a
generation despatch plan and equipment maintenance plan for the following month
before the 25th of each month after co-ordinating and reaching a balance with
Party A and Party B.
4.4 Together with Party A and Party B, the State Despatch Centre shall
formulate a typical daily load curve of the Power Station for the current month
in accordance with the monthly generation despatch plan.
4.5 Party A shall ensure that the Annual Planned Despatchable Hours of the
Power
<PAGE>
Station is equal to:
N
[(SIGMA) (Annual Planned Despatchable Hours of the Unit x Di/8760)]/N
i=1
In the above formula, the Annual Planned Despatchable Hours of the
Unit shall be 7,350 hours for the Year(s) of and before the Commencement of
Commercial Operation of Unit 6 (assuming that during such Year the Commercial
Operation hours of the Units that have gone into operation are 8760 for each
Unit) and 7,400 hours for each Year subsequent to the Year of Commencement of
Commercial Operation of Unit 6.
N
(SIGMA) Di
i=1
Annual Actual Despatchable Hours of the Power Station = ----------- -
N
Reduction in Despatchable Capacity of the Power Station in Equivalent
Annual Hours
Where:
Di shall mean the total number of hours of Commercial Operation of
Unit i during such Year;
N shall mean the number of Units which have already been put into
Commercial Operation in such Year.
Reduction in Despatchable Capacity of the Power Station in Equivalent
Annual Hours shall mean the annual cumulative and equivalent hours of
outages owing to the reduction in Supply Capacity Available for
Despatch during the despatch and operation of the Power Station,
namely:
Reduction in Despatchable Capacity of the Power Station in Equivalent
Annual Hours =
(SIGMA) {[(Supply Capacity Available for Despatch of the Power Station
- Actual Supply Capacity Available for Despatch of the Power Station) /
Supply Capacity Available for Despatch of the Power Station] x Number
of Continuing Hours in Such Period}
Where:
Supply Capacity Available for Despatch of the Power Station is the sum
of the Supply Capacity Available for Despatch of the various Units of
the Power Station which have already been put into Commercial
Operation (see Annex 3).
<PAGE>
Actual Supply Capacity Available for Despatch of the Power Station is
the sum of the Supply Capacity Available for Despatch actually
provided by the various Units of the Power Station which have already
been put into Commercial Operation when the reduction in Supply
Capacity Available for Dispatch occurs in such Units.
Number of Continuing Hours in Such Period shall mean the Number of
Continuing Hours during which the reduction in Supply Capacity
Available for Dispatch occurs in the various Units of the Power
Station which have already been put into operation.
4.6 If in any Year within the term of the Contract the annual cumulative
total quantity of On-Grid Electricity fails to reach the Normal Take, when the
difference is caused by the failure of the Actual Annual Despatchable Hours of
the Power Station to meet the Annual Planned Despatchable Hours of the Power
Station, the electricity not generated shall be recorded as a short generation
for which Party A shall be liable and which shall be handled in accordance with
Article 8.2.
Party A's Liability for Short Generation = Annual Normal Take x
[(Annual Planned Despatchable Hours of the Power Station - Annual
Actual Despatchable Hours of the Power Station) / Annual Planned
Despatchable Hours of the Power Station]
If, pursuant to stipulations in the "Interconnection and Despatch
Agreement", the reduction in electricity generation and purchase is determined
as being attributable to despatch reasons of the State Despatch Centre, it shall
be recorded as the State Despatch Center's liability for a short despatch of
electricity.
The reduction in electricity generation by the Power Station due to
reasons caused by Party B's power purchase plan and the downward adjustment of
the output of the Units as required by the power grid, and the failure of the
Units to generate the expected output because of the breakdown of the Dedicated
Transmission Facilities shall be adjusted and compensated as far as possible in
the plans of the current Year. After the above adjustment is made, the portion
of electricity generation falling short of the Normal Take shall be recorded as
Party B's Liability for Short Purchase and shall be handled in accordance with
Article 8.1.
4.7 Before 0930 hours each day, the Power Station shall submit to the
State Despatch Center a forecast of the Supply Capacity Available for Despatch
of each Unit for the following day. Pursuant to the monthly generation despatch
plan and upon liaison with Party B, the State Despatch Centre shall issue before
1700 hours of each day the daily generation despatch plan of the Power Station
for the following day with a copy to Party B.
4.8 The Power Station shall be operated in compliance with the daily
generation despatch curves (including such curves as revised in accordance with
Article 2 of Annex 5) issued by the State Despatch Centre with the active power
fluctuations within the permissible variation range of +/-3%.
<PAGE>
Examinations shall be executed in accordance with the daily generation
despatch curves (including such curves as revised in accordance with Article 2
of Annex 5) on the basis of the real time data which Party A transmits to the
State Despatch Centre. Refer to Annex 5 for the actual method adopted in the
settlement of accounts on the amount of power generated by the Power Station,
and the State Despatch Centre shall record such data at intervals on a daily
basis.
In the event that any Party discovers at any time the transmitted real
time data inaccurate, such Party may request for examination and calibration and
the real time data shall be corrected in accordance with the results of the
examination and calibration.
4.9 The State Despatch Centre shall inform Party A and Party B in writing
of the examination results regarding the status of the Power Station's execution
of the generation despatch curves in the preceding month on the fifth working
day of each month. Any disagreement relating to the examination results raised
by Party A and Party B shall be submitted to the State Despatch Centre before
the 12th of the month. When the said deadline expires and no query is raised,
the original notice of the examination results shall be deemed to be correct.
The State Despatch Centre shall send the finalised and audited
generation examination notice of the preceding month to Party A and Party B
before the 20th of each month as the basis for settlement of accounts between
both Parties.
Article 5 On-Grid Tariff
5.1 The On-Grid Tariff shall be estimated by Party A in accordance with
the formulae stipulated in Article 5.4 and Article 5.5 on the basis of the
principles of the Power Supply Costs of the Power Station, timely repayment of
principal and interest on loans, payment of taxes, collection of funds and
guaranteeing of Party A's reasonable profits, on the basis of the FIRR of [***]
on Party A's anticipated Registered Capital during the
Joint Venture Term and on the basis of the Normal Take. The average On-Grid
Tariff during the Joint Venture Term as specified in the Feasibility Study
Report approved by the State Planning Commission is [***] on the
basis of [***] utilisation hours while the actual tariff in
each Year shall be submitted for examination and approval year by year pursuant
to Article 5.6.
5.2 Party A and Party B shall jointly fix the Budgeted Exchange Rate
(the US Dollar Selling Price set by the People's Bank of China) on the basis of
the trend of the USD/RMB exchange rate fluctuations of the preceding Year and
use such Budgeted Exchange Rate for the conversion of the USD component of the
On-Grid Tariff into RMB in the estimation of the On-Grid Tariff fully
denominated in RMB. The USD component of the On-Grid Tariff shall constitute the
principal and interest on the foreign currency loans paid by Party A for the
Year and the return on Party A's Registered Capital during the Year. Any
exchange loss or gain due to the difference between the actual exchange rates
during the Year and the Budgeted Exchange Rate shall be adjusted in the next
estimation of the On-Grid Tariff.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
5.3 The On-Grid Tariff for the electricity generated and delivered to the
Connecting Point prior to the Commercial Operation of any Unit, including the
period of testing and commissioning of the Unit, shall be settled on the basis
of [***].
5.4 After the commencement of Commercial Operation of any Unit, the
On-Grid Tariff for the On-Grid Electricity generated each Year within the Normal
Take shall be expressed in RMB per KWH, estimated in accordance with the
following formula:
On-Grid Tariff
during Commercial = [***]
Operation
Where:
(A) A is the Power Supply Cost of the Power Station (not including
purchase value added tax), including:
A1, fuel cost: refers to all the annual budgeted expenses related to
the purchase of fuels (including coal and oil) for the Power Station,
including among others management fee, transportation expenses,
insurance costs, handling charges, transhipment costs and other costs,
and the gain or loss due to the difference between the budgeted price
and the actual price for the fuels for the previous year. The coal
price shall follow the price for coal used in electricity generation in
Shanxi Province.
A2, water rate: refers to the annual budgeted expenses for water
consumed in power generation by the Power Station.
A3, electricity purchase cost: refers to the cost for the electricity
that the Power Station is required to purchase from outside each year
on the basis of its rated design capacity.
A4, material costs: refers to the costs of operation and maintenance
materials consumed each Year for maintaining the operation of the Power
Station.
A5, wages and welfare expenses: refers to the wages and welfare
expenses paid by Party A each Year to its employees.
A6, depreciation and amortization costs: refers to the depreciation
cost of the fixed assets and amortization cost of intangible assets and
other assets, allocated each Year according to relevant stipulations
after any Unit of the Power Station goes into Commercial Operation.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
A7, major repair cost: refers to the annual budgeted cost for major and
minor repairs of the Units of the Power Station.
A8, other business management costs: refers to other expenses and costs
related to the operation, maintenance and management of the Power
Station each Year, including but not being limited to insurance costs,
staff education and training costs, business management costs of Party
A, the adjustment amount for exchange loss or gain for the previous
Year, costs resulting from changes in law, etc.
(B) B is the Financial Expenses, referring to: the sum of interest
charges, on-lending fees, handling fees, other financial management
costs according to relevant financial regulations and foreign currency
exchange loss or gain, incurred each Year on the construction loans and
the working capital loans of the Power Station.
The exchange loss or gain shall be: USD Loan Principal repayable by
Party A for the Year x (Budgeted Exchange Rate - Completion Exchange
Rate)
(C) C is all relevant taxes, other than the income tax and the value
added tax, which are payable during the business operation of the Power
Station according to relevant regulations (State-stipulated taxes or
local taxes). These taxes shall be incorporated into the Power Supply
Costs of A1 to A8.
(D) D is the Return on Registered Capital and shall be equal to the
product of (i) during the Joint Venture Term, the anticipated US
Dollars amount of return over the years calculated on the basis of the
Normal Take and [***] on Party A's Registered Capital,
and (ii) the Budgeted Exchange Rate. Such anticipated returns on Party
A's Registered Capital for each Year are listed in Annex 4.
(E) E is the Loan Repayment Profit and shall mean that during the
repayment of loans by Party A, the portion of the after-tax profit used
to pay the shortfall in the repayment of the principal of loans payable
for the Year which the above A6, to be used for loan repayment, is not
sufficient to cover.
Loan Repayment Profit = [US Dollar Loan Principal Repayment Payable by
Party A for the Year x Completion Exchange Rate + RMB Loan Principal
Repayment Payable by Party A for the Year] - [Depreciation and
Amortization set forth in Item A6 above]
The Loan Repayment Profit shall be no less than zero.
(F) F is the Fund Allocation and shall mean the accumulation fund,
the public welfare fund, and other funds for the Power Station
allocated by Party A in accordance with relevant regulations of the
People's Republic of China.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
5.5 The On-Grid Tariff for Excess On-Grid Electricity: In the event that
during the term of this Contract, the total actual purchase and sales of
electricity for any one Year exceeds the Normal Take, that portion of the
On-Grid Electricity exceeding the Normal Take shall be paid for on the basis of
the On-Grid Tariff for Excess On-Grid Electricity.
The formula for the On-Grid Tariff for Excess On-Grid Electricity shall
be as follows:
On-Grid Tariff
for Excess = [***]
On-Grid
Electricity
The definitions of the terms A, A6, A7, D and F shall be the same as
those provided in Article 5.4.
5.6 The On-Grid Tariff shall be fully denominated in RMB and shall be set
once a year. Party A shall calculate the On-Grid Tariff for the following Year
in October of each Year; Party A and Party B shall raise through consultation a
proposal on the subject and submit the proposal in mid-November in accordance
with relevant state stipulations to Chief Commodity Prices Administrative
Authorities of the State Council for examination and approval. Party B shall put
forward a proposal on the corresponding Sales Tariff based on the On-Grid Tariff
which Parties A and B have agreed on for submission and submit the proposal in
mid-November in accordance with the same application procedures to Chief
Commodity Prices Administrative Authorities of the State Council for examination
and approval.
5.7 In order to forecast the On-Grid Tariff during the Joint Venture Term,
Party A and Party B shall, promptly following the execution of this Contract and
pursuant to the principles and contents set forth in the above articles, agree
on a financial model and a mechanism to obtain and adjust quantified figures on
factors affecting the calculation of the tariff which shall serve as the basis
for calculating the On-Grid Tariff. Six months prior to the expected Commercial
Operation of the first Unit, Party A shall estimate the On-Grid Tariff for
Commercial Operation of such Unit which, upon approval through the approving
procedures under Article 5.6, shall be the On-grid Tariff for settlement of the
Electricity Fee between Party A and Party B.
5.8 If the On-Grid Tariff calculated on the basis of current external
factors such as the price level, exchange rate and tax rates during any Year
exceeds the approved On-Grid Tariff for that Year by more than 2%, which results
in that the approved On-Grid Tariff cannot meet the repayment of either
(i) principal and interest (including both RMB and US Dollars loans) or (ii)
anticipated Return on Party A's Registered Capital, Party A and Party B shall
promptly submit an application for adjustments to the On-Grid Tariff and Sales
Tariff for the Year and submit it to the state pricing authorities for approval.
Upon approval, such adjustments shall be implemented.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
Article 6 Metering of Electricity
6.1 Party A shall install dedicated energy metering equipment, including
main meters and check meters on each 500KV outgoing line at the inner side near
the Connecting Point for the measurement of the On-Grid Electricity that Party B
purchases from Party A. The energy metering equipment installed by Party B at
the incoming side of each 500KV line at San Bao Switchgear Station in Jiangsu
Province shall be used as reference for checking the dedicated energy
measurement.
6.2 The accuracy of the dedicated energy metering equipment shall be no
lower than the accuracy standards related to electric energy meters promulgated
by the State Technology Inspection Bureau as follows:
Active energy meter : Grade 0.2
Reactive energy meter: Grade 0.5
Associated current transformer and potential transformer: Grade 0.2
6.3 The Dedicated energy metering equipment shall be inspected and
calibrated by an inspection and calibration team established jointly by Shanxi
Provincial Electrical Testing Centre and Jiangsu Provincial Electrical Testing
Centre on a regular basis and within a time period as required by the codes of
electrical metering. The inspection and calibration results shall be sent to
Party A and Party B respectively. The costs incurred shall be borne by the two
Parties in relation to the ownership of assets.
6.4 The readings of the aforesaid meters shall be taken and recorded
jointly by Party A and Party B on the first day of each month. The On-Grid
Electricity that Party A transmits to Party B during the preceding month shall
be the sum of the new increments in the readings of the applicable main energy
meters during that month. Such metered number shall be final if no fault or
omission exists. In case that the main energy meters fail to measure the On-Grid
Electricity accurately, the main energy meters and the check energy meters shall
be inspected separately. If the check energy meters prove to be accurate, the
readings of the check energy meters shall be the data used for calculating the
On-Grid Electricity.
6.5 Party A shall notify Party B promptly of the failure of the Dedicated
energy metering equipment. If both main meters and check meters fail at the same
time, the measurement of On-Grid Electricity during the failure period can be
resolved through consultation between both Parties by referring to other energy
meters or be resolved through consultation with State Power Despatch and
Communication Centre in accordance with despatch records.
6.6 If any Party finds out at any time that the readings of a Dedicated
energy metering equipment are not accurate, such Party may propose an interim
inspection and calibration.
<PAGE>
6.7 Party A shall install telemetry equipment in the Power Station and
make them having the function of transmitting real time information about the
on-grid capacity and On-Grid Electricity of the Power Station to Party B and
State Power Despatch and Communication Centre.
Article 7 Electricity Fee
7.1 Within the first five (5) working days of each month, Party A shall
deliver to Party B the first invoice, which shall specify the following items:
(1) 40% of the On-Grid Electricity, read according to Article 6.4,
which Party A has transmitted to Party B in the preceding month.
(2) the applicable On-Grid Tariff.
(3) Electricity Fee payable by Party B to Party A = (1) x (2).
Prior to the twentieth (20th) day of each month, Party A shall deliver
to Party B the second invoice which shall specify the following items:
(1) 30% of the On-Grid Electricity, read according to Article 6.4,
which Party A has transmitted to Party B in the preceding month.
(2) the applicable On-Grid Tariff.
(3) Electricity Fee payable by Party B to Party A = (1) x (2).
Before the end of each month Party A shall deliver to Party B the
month-end invoice in accordance with the notice of verification of power
generation in the proceeding month examined and verified by the State Despatch
and Communication Centre and, the account settlement notice of the Power Station
in the preceding month issued by Party B. The amount payable in such invoice
shall be:
(The Effective On-Grid Electricity which Party A transmitted to Party B
in the preceding month - the electricity already paid for in the first and
second invoices) x the applicable On-Grid Tariff pursuant to Article 5 +/-
the amount stipulated in Article 7.6.
7.2 The Electricity Fee shall be paid in three instalments in each month:
(1) on the 5th working day of each month, Party B shall remit the
Electricity Fee payable by Party B that is specified in the first
invoice provided by Party A for the preceding month to the China
Construction Bank account designated by Party A.
(2) on the 20th day of that month, Party B shall remit the Electricity
Fee payable by Party B that is specified in the second invoice provided
by Party A to the China Construction Bank account designated by Party
A.
<PAGE>
(3) before the end of the month, Party B shall remit the Electricity
Fee payable by Party B that is specified in the month-end settlement
invoice provided by Party A to the China Construction Bank account
designated by Party A .
7.3 Party B shall pay Party A the Electricity Fee in accordance with
Article 7.2. In the event that Party B disputes the Electricity Fee in the
month-end settlement invoice provided by Party A, Party B shall nevertheless pay
the non-disputed amount; upon resolution of the dispute, Party B shall pay the
disputed amount immediately. Party B shall pay Party A late payment fee in
accordance with Article 8.4 for the delayed amount payable because of the
dispute.
7.4 Party A shall issue to Party B the value added tax invoice following
the payment schedule and in accordance with tax laws.
7.5 When the actual cumulative Effective On-Grid Electricity that
Party A transmits to the Connecting Point during the current year exceeds the
Normal Take for such Year ("Excess On-Grid Electricity"), Party B shall pay the
Electricity Fee to Party A calculated on the basis of the On-Grid Tariff for
Excess Electricity as stipulated in Article 5.5, but after deduction of the
amount payable to Party B calculated according to the following formula:
The Amount
Payable to = [***]
Party B
Where:
D and F shall have the same definitions as in Article 5.5.
7.6 After the Units of the Power Station enter into Commercial Operation,
the results of verification of generation for account settlement of the Power
Station as stipulated in Annex 5 shall be settled together with the Electricity
Fee by Parties A and B on a monthly basis. Refer to Annex 5 for specific methods
of account settlement.
Article 8 Breach of Contract and Compensation
8.1 During the term of this Contract, Party B shall guarantee that the
Effective On-Grid Electricity procured by Party B at the Connecting Point in
every Year shall be no less than the Normal Take. In the event that at the last
day of any Year within the Contract term, the actual cumulative Effective
On-Grid Electricity procured by Party B for the whole Year is less than the
Normal Take, Party B shall pay Party A within forty five (45) days after the end
of such Year an amount as follows:
[***]
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
[***]
8.2 During the term of this Contract, Party A shall guarantee that the
Effective On-Grid Electricity delivered by Party A to Party B each Year shall be
no less than the Normal Take. In the event that at the last day of any Year
within the Contract term, the total cumulative Effective On-Grid Electricity for
the whole Year is less than the Normal Take, and Party A's Liability for Short
Generation is finalized pursuant to Article 4.6, Party A shall pay Party B
within forty five (45) days after the end of the Year a compensation equal to
the portion of the shared costs for principal and interest repayment on the
Dedicated Transmission Facilities and for the Power Supply Costs,
(after deduction of the transmission line loss and relevant taxes),
corresponding to Party A's Liability for Short Generation; the compensation to
be allocated to the provincial transmission facilities shall be exercised in
accordance with the replies from relevant government authorities.
8.3 In case of any of the following events, Party A or Party B shall pay
each other the liquidated damages for late completion. Both Parties have
covenanted that the liquidated damages shall be on a reciprocal basis and shall
be equal in amount. If the insurance is covered, the insurance indemnity shall
be deducted.
(1) In the event that Party B fails to complete the construction of
Dedicated Transmission Facilities before the date provided for in
Article 2.4, which causes the failure of the Units to carry forth the
interconnected commissioning as scheduled, Party B shall, for each day
of delay, indemnify Party A the "Loan Interest Payment Amount" as
stipulated in Article 8.3 (3) (a), and pay in advance for Party A the
"Loan Principal Repayment Amount" as stipulated in Article 8.3 (3) (b)
together with interest thereof;
(2) In the event that Party A fails to complete the construction of a Unit
in accordance with the schedule provided for in Article 2.2, which
causes a delay in the delivery of electricity to Party B (but not due
to the delay in the completion of Dedicated Transmission Facilities and
Provincial Transmission Facilities), Party A shall, for each day of
delay of Commercial Operation of such Unit, be liable to indemnify
Party B the "Loan Interest Payment Amount" as stipulated in Article 8.3
(3) (a), and pay in advance for Party A the "Loan Principal Repayment
Amount" as stipulated in Article 8.3 (3) (b) together with interest
thereof.
(3) Methods of calculation and payment of the liquidated damages:
a, The "Loan Interest Payment Amount" shall mean the total amount of
interest payable for each day of delay on all the loans to such delayed
Unit;
b, The "Loan Principal Repayment Amount" shall mean the total amount of
principal due and payable for each day of delay on all the loans to
such delayed Unit;
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
c, The Loan Interest Payment Amount and the Loan Principal Repayment
Amount shall be established pursuant to the loan principal repayment
and interest payment component included in the On-Grid Tariff
corresponding to the Year of Commencement of Commercial Operation of
the Unit as estimated and submitted by Party A;
d, The indemnified Party shall repay in full the Loan Principal
Repayment Amount paid in advance to the defaulting Party at the latest
within one (1) year after the Date of Commencement of Commercial
Operation of Unit Six;
e, The liquidated damages provided for in this Article shall be paid on
a weekly basis on the first business day of the bank of each week
following the guaranteed completion dates as stipulated in Article 2.2
and Article 2.4, with the last such payment to occur on the actual
completion date.
8.4 In the event that Party B fails to pay Party A the Electricity Fee in
accordance with the schedule provided for in Article 7.3, Party B shall pay
Party A the late payment fee calculated from the next day following the due day
to the day on which the bank remits the fund. The late payment fee shall be
calculated at a rate of [***] per day on the delayed amount.
Article 9 Insurance
9.1 Party A shall purchase and maintain all types of insurance related
with the operation, maintenance and management of the Power Station. Annex 6
details the types of insurance required.
Article 10 Force Majeure
10.1 Definition of Force Majeure:
In this Contract an Force Majeure Event refers to any event which can
not be controlled, predicted, and the occurrence and consequences of which can
not be overcome by the affected Party to the Contract. Such events prevent the
affected Party from performing its obligations under the Contract, or makes the
performance of such obligations impossible, such events including war, strike,
flood, windstorm, fire, earthquake, thunderbolt, epidemic diseases, etc.
10.2 The failure of a Party to fulfill any of its obligations hereunder
shall not be considered to be a breach of, or default under this Contract and
the Party concerned shall not be liable to any liquidated damage insofar as such
inability arises from an event of Force Majeure, provided that the Party
affected by such an event has taken reasonable measures to mitigate effects of
such event of Force Majeure, all with the objective of carrying out the terms
and conditions of this Contract.
10.3 Notification obligation
(1) The Party claiming Force Majeure shall give notice to the other Party
of any event of Force Majeure as soon as practical, but no later than
seven (7) days after the date on which such Party gets aware or should
have reasonably got aware of the commencement of such event, and shall
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
provide the other Party with valid evidences of the Force Majeure event
within a reasonable period of time after cessation of such Force
Majeure event. Such evidences shall be issued by a notary organization
or relevant authority at the location of the Force Majeure event.
Notwithstanding the above, if the event of Force Majeure results in a
breakdown of communication rendering it not reasonably practicable to
give notice within the applicable time limit specified herein, then the
Party claiming Force Majeure shall give such notice as soon as
reasonably practicable after the reinstatement of the communications,
but no later than one day after such reinstatement .
(2) The Party claiming Force Majeure shall give notice to the other Party
of
1. event of Force Majeure;
2. the commencement and cessation time of the event of
Force Majeure; and
3. the scope, content and duration of the effects of such
event of Force Majeure on the enjoyment by such affected
Party of its rights or performance of its obligations
hereunder.
10.4 Obligations to Mitigate the Damages
The Parties shall use all their reasonable efforts to mitigate the
effects of any event of Force Majeure and to jointly develop and implement a
plan of reasonable measures (in accordance with ownership of property) to remove
the effects of such event of Force Majeure. The Parties shall continue to
perform other obligations as provided for in this Contract that are not affected
by the event of Force Majeure.
Article 11 Assignment
11.1 Party B shall be entitled to transfer this Contract to a third Party,
subject to such third Party providing a financial guarantee stating that its
financial status is at least as good as that of Party B and, subject also to the
approval of Party A and its lenders. That third Party shall be the successor to
all of Party B's rights and obligations under this contract.
11.2 Party A shall obtain Party B's agreement to the assignment of its
rights and obligations under this Contract to a third party other than the
Project lenders.
11.3 When Party A proposes to transfer the ownership of all the assets of
the Power Station at any time after the Unit 6 has been completed, Party B shall
have the first right of refusal as equally as the Project lenders do.
11.4 Upon the assignment by any one Party of its rights and obligations
under this Contract, the transferor shall guarantee that the transferee shall
continuously perform this Contract, and shall not impose
<PAGE>
on the other Party any additional legal obligations or obligations beyond this
Contract. Such assignment shall be subject to the approval of the original
examination and approval authority.
Article 12 Contract Term & Termination
12.1 The term of this Contract shall be twenty (20) years starting from the
date of issuance of business license to Party A. Should the Joint Venture Term
of Party A be extended, both Party A and Party B may choose to:
(1) agree to extend the term of this Contract;
(2) negotiate new terms and conditions for this Contract.
12.2 Should the purchase and sale of electricity be interrupted due to an
event of Force Majeure during the term of this Contract, either Party shall have
the right to extend the term of this Contract and the corresponding period for
the calculation of Normal Take pursuant to Article 1.9, with the terms and
conditions of this Contract unchanged. The extension of the term of this
Contract shall be equal to the period that the purchase and sale of electricity
was interrupted due to the event of Force Majeure.
12.3 In case of extension of this Contract pursuant to Article 12.1 and
Article 12.2, it shall be submitted to the original examination authority or
competent examination authority for approval. No Party shall declare to
terminate this Contract unilaterally.
Article 13 Governing Laws and Settlement of Disputes
13.1 This Contract shall be governed and interpreted by the laws of
People's Republic of China.
13.2 Settlement of Dispute: Party A and Party B shall pursue the following
procedures in the event of any dispute between the Parties concerning the
performance of this Contract:
(1) Disputes shall be resolved through a conciliation and mediation
committee. Party A and Party B shall each recommend two mediators to
form a joint conciliation and mediation committee with the aim of
seeking resolution through friendly consultation. Within one month
after the dispute is submitted to the conciliation and mediation
committee, the conciliation and mediation committee shall provide a
resolution opinion to the Parties. Should either of the Parties not
accept the resolution proposal provided, the dispute shall be submitted
for arbitration in accordance with provisions of this Article.
(2) In the event that the dispute is not resolved in accordance with
Article 13.2 (1) above within sixty (60) days after any Party notifies
the other Party of the dispute in writing, either party may submit the
dispute in question to the China International Economic Trade
Arbitration Committee for arbitration in Beijing pursuant to the
arbitration rules prevailing at the time the application for
arbitration being filed. In the event that China International Economic
Trade arbitration Committee has no power of jurisdiction over such
dispute, the dispute shall be submitted to Beijing Municipal
<PAGE>
Arbitration Committee for arbitration in Beijing pursuant to the
prevailing arbitration rules. The arbitration award from either of the
two said arbitration committees shall be final and binding upon the two
Parties.
Article 14 Effectiveness of the Contract and Amendments
14.1 This Contract shall become effective upon approval by relevant state
examination and approval authorities to which Party B shall submit this Contract
upon execution and seal by the validly authorised representative of the two
Parties.
14.2 Changes in national and local laws and regulations shall not be
regarded as a Force Majeure event. In the event of any change in national or
local laws or regulations, this Contract shall be amended accordingly. Any
amendment of this Contract shall first have the unanimous agreement of Party A
and Party B through consultation and be executed and sealed by the validly
authorised representatives of the two Parties and come into effect upon the
approval of the original examination and approval authority.
14.3 This Contract shall be written in Chinese and English, with both
language texts being equally authentic. In case of any conflict between the
Chinese and English versions, the Chinese version shall govern. This Contract
shall have ten originals with Party A and Party B each keeping five. There shall
be twenty duplicates.
<PAGE>
Party A: Yangcheng International Power Generating Co. Ltd.
Representative: [Signature Illegible]
Position:
Party B: Jiangsu Provincial Power Company.
Representative: [Signature Illegible]
Position:
Venue of Signing: Beijing, the People's Republic of China
Date: January _____, 1997
<PAGE>
Annex 1
Power Station or Project
Yangcheng Power Station is located in Beiliu Township of Yangcheng
County, Shanxi Province, 25 kilometres to the east of Jincheng City and 10
kilometres to the west of Yangcheng city and just 0.4 kilometres to the south of
Beiliu Township.
The natural elevation of the ground of the Power Station is 648-693 m.
The first phase of the Power Station is to build a 6x350MW anthracite
fired Units with a total installed capacity of 2100 MW and, with room for
further expansion. The turbine island and the boiler island of the main plant
house of the Power Station are respectively imported from Siemens Company of
Germany and the Foster Wheeler company of United States. The BOP portion of the
Power Station is locally designed and uses local equipment (except for
pneumatic ash handling equipment and water supply pump station equipment),
including mainly coal conveying, oil supply, ash disposal, water supply,
recycling water, chemical water, electrical step-up substation, start-up power
source, parasitic load, communication, repair, monitoring and other auxiliary
production facilities.
Offsite project mainly includes the following: water source, make-up
water pump and pipelines, ash handling and ash water recovery pipelines, ash
yard, Dedicated railway, coal transporting and access road to the Power Station,
start-up power source transmission and transformation facilities, residential
quarters (external to the Power Station) in Jincheng city, administrative area
in the front part of the Power Station and offsite communication and remote
control system, etc.
For the Property Right Boundary Line of the Power Station and the 500KV
transmission facilities, see Annex 2.
<PAGE>
Annex 2
Dedicated Transmission Facilities
The electricity produced by the Power Station shall be totally
transmitted to Jiangsu Province in the form of Dedicated station, Dedicated
lines and Dedicated supply. The Dedicated Transmission Facilities in association
with the Power Station shall start from the Property Right Boundary Point and
pass through the provinces of Shanxi, Henan, Shandong and Anhui to Huaiyin of
Jiangsu Province (a distance of about 755 kilometers). Details of the whole
transmission line project of the Power Station are as follows:
1. Two switching stations to be newly constructed: the mid-way switching
station (for three incoming lines and two outgoing lines, total five circuits)
at the crossing point of the Yellow River and the Sanbao Switching Station, at
Xuzhou city of Jiangsu province (with two incoming lines and three outgoing
lines, total five circuits);
2. A substation to be expanded in Huaiyin, Jiangsu Province with one 750
MVA main transformer;
3. The extension for one 500 kV panel at the Runzhuang Substation in
Jiangsu Province.
4. Three circuits from the Power Station to the mid-way switching
station to be constructed, approximately 3 x 262 km long on one double circuit
tower and one single circuit tower;
Two circuits from the newly constructed mid-way switching station to
Sanbao Switching Station to be constructed, 2 x 268 km long on a double circuit
tower, with serial compensation equipment of 2 x 500 MVAR;
One single circuit from the newly constructed Sanbao Switching Station
to Runzhang Substation, 50 km long single circuit;
Two circuits on a double circuit tower from the newly constructed
Sanbao Switching Station to Huanyin Substation, 2 x 230 km long on a double
circuit tower;
One crossing over the Yellow River with a circuit length of 2 x 4 km;
5. Associated parallel resistors, reactive power compensation equipment
and corresponding remote control, communication and protective relay equipment
to be built;
Drawing No. 0-1 shows the one-line diagram of the Transmission
Facilities.
Drawing No. 0-2 shows the one-line diagram of the stations and
substations.
Drawing No 0-3 shows the Property Right Boundary Point between the
Power Station and Transmission Facilities.
<PAGE>
[GRAPHIC OMITTED]
Point A to the direction of the transmission line falls within the scope of
construction of the dedicated transmission facilities including the terminal
tower, while the others fall within the scope of the Power Station.
<PAGE>
Annex 3
Performance Indices and Testing Results for the Units
Relevant performance test items, indices and test results of the Units are shown
as follows:
<TABLE>
<CAPTION>
- ------ ------------------------------------------------------- ------------------- -----------------------
Performance Test items Design Value Actual Test Value
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
<S> <C> <C> <C>
1 maximum continuous output of the Unit (MW) 369.6
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
2 rated capacity (MW) of the Unit 350
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
3 minimum non-oil stable burning load (MCR) of the Unit 50%
non-oil stable burning Load (ECR) of the Unit --
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
4 load adjustment rate of the Unit 5% /MIN
50%~100%MCR
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
below 50% MCR 3% /MIN
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
5 Parasitic loan of the Unit under ECR working condition less than or equal
to 6%
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
6 rated power factor of the Unit under ECR working 0.85
condition
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
7 coal consumption (kilogram / KWH) of the Unit in 330
power generation
- ------ ------------------------------------------------------- ------------------- -----------------------
- ------ ------------------------------------------------------- ------------------- -----------------------
8 Unit supply capacity (MW):
Rated power factor of the Unit x (1 - parasitic load
of the Unit under ECR working conditions) - main
transformer and busbar power loss
- ------ ------------------------------------------------------- ------------------- -----------------------
</TABLE>
<PAGE>
Annex 4
Returns on Registered Capital (Anticipated Revenue) Over the Years
Unit: ten thousand US Dollars
Year Registered Capital Contributions Returns on Registered Capital
1 [***] [***]
2 [***] [***]
3 [***] [***]
4 [***] [***]
5 [***] [***]
6 [***] [***]
7 [***] [***]
8 [***] [***]
9 [***] [***]
10 [***] [***]
11 [***] [***]
12 [***] [***]
13 [***] [***]
14 [***] [***]
15 [***] [***]
16 [***] [***]
17 [***] [***]
17 [***] [***]
18 [***] [***]
19 [***] [***]
20 [***] [***]
Note:
(1) The financial internal rate of return (FIRR) on the above Registered Capital
contribution and Returns on Registered Capital shall be [***] on the
basis of the Normal Take. If the amount and timing of Registered Capital
actually contributed are different from the figures listed in the above table,
the returns on Registered Capital shall be adjusted, while the financial
internal rate of return remains at [***].
(2) The Returns on Registered Capital (Anticipated Revenue) in the table are
applicable to the formula in the calculation of On-Grid Tariff set forth in
Article 5.4.
[***] Filed separately with the Commission pursuant to a request for
confidential treatment.
<PAGE>
Annex 5
Method of Account Settlement for the Amount of Power
Generated by the Power Station
Article 1. Account settlement for monthly generated amount of power which
deviates from the plan.
a. the monthly generation plan (including amendments) as issued by the
State Despatch Centre shall prevail.
b. Factors leading to the revision of the monthly generation plan are as
follows:
1. Factors regarding the variation of the planned maintenance schedule of
the generating units shall be based on the monthly planned maintenance
schedule as issued by the State Despatch Centre, any change in the
maintenance schedule shall be submitted to the State Despatch Centre
for approval and the monthly generation plan shall be adjusted as
determined by the State Despatch Center.
2. The amount of power generated which is affected by the outage of
generating units as required by the grid shall be adjusted.
3. Other adjustment factors: reduced power generation resulting from
the disconnection of the Power Station or failure to generate the
expected amount of electricity which is caused by transmission line
breakdown not attributable to the Power Station.
c. In the event of any accident in any month in the generating units of the
Power Station or any maintenance of electrical equipment (including emergency
maintenance and maintenance extension without the approval of the State Despatch
Centre) which is not included in the monthly generation plan and which affects
power generation, it shall be recorded as monthly unplanned outage hours of the
Power station.
Monthly Unplanned outage Hours = (SIGMA) (Unit accident outage hours +
Unit interim maintenance outage hours + Unit planned maintenance
extended outage hours).
The Monthly Unplanned Outage Hours shall be added up cumulatively month
by month, if the Annual Actual Equivalent Despatchable Hours of the Power
Station fail to reach the requirement as stipulated in Article 4.5 herein, so
that the annual cumulative Effective On-Grid Electricity in such Year fails to
reach the annual Normal Take, then Party A shall compensate Party B pursuant to
Article 8.2 herein.
d. If the Power Station finds it difficult to execute the verified peaking
quota, it shall submit a written application to the State Despatch Centre and
shall solicit consent from Party B so that the State Despatch Centre can make
necessary arrangement in the monthly and daily generation plans, but the Power
Station
<PAGE>
shall pay to the Jiangsu Power Grid a peaking compensation fee of RMB
5,000 Yuan for less generation of 10 MW each day during the valley period.
Article 2. The daily generation despatch curve (including amendment) issued by
the State Despatch Centre is the basis for the amount of electricity generated
by the Power Station and accounts settlement for the amount of electricity
generated. The State Despatch Centre may revise, after having consulted with
Party B, the daily generation despatch curve of Yangcheng Power Station in the
light of the following different conditions:
1. the requirement for frequency modulation, peaking and planned power
allocation on the part of the Jiangsu Power Grid.
2. the communication line between the Jiangsu Power Grid and other
provincial grids is not capable of taking the expected power load, nor is the
out-going line of Yangcheng Power Station.
3. temporary maintenance of approved equipment during valley load and
mid-range load periods.
4. temporary maintenance of approved generation units (including
auxiliaries).
5. accident outage of the Power Station
6. extension of the approved planned maintenance of the generating units.
7. in the event of force majeure.
8. other causes acknowledged by the State Despatch Centre.
Article 3. Economic settlement of daily output rate and amount of electricity
which deviates from the plan.
a. the planned daily generation despatch curve (including amendments)
issued by the State Despatch Centre shall govern the planned daily generation
of the Power Station.
b. The active power output rate of the Power Station shall be sampled at
an interval of every 15 minutes, totaling 96 sampling points per day, an error
exceeding +/- 3% shall be recorded as an unqualified point if compared with the
corresponding planned value (when the values recorded during the two hours
prior to and after the planned value are different, then the quartering of the
differential value shall be taken and be progressively increased to or decreased
from the hour values).
c. The unqualified points for the active power output of the Power Station
shall be settled economically in accordance with the following standards:
1. if the number of unqualified points is less than the number of monthly
examination points by 5%, the Jiangsu Power Grid shall pay the Power
Station a bonus at the rate of RMB 600 per bonus point.
<PAGE>
Bonus points = monthly examination points x 5% - unqualified points.
2. if the unqualified points exceed the examination points by 5-10%
inclusive, the Power Station shall compensate the Jiangsu Power Grid
at the rate of RMB 100 per unqualified point.
3. if the unqualified points exceed the examination points by 10-20%
inclusive, the Power Station shall compensate Jiangsu Power Grid at the
rate of RMB 200 per unqualified point.
4. if the unqualified points exceed the examination points by over 20%,
the Power Station shall compensate the Jiangsu Power Grid at the rate
of RMB 400 per unqualified point.
d. The actual generation of the Power Station shall be sampled at an
interval of five minutes, totaling 288 sampling points per day, the error
exceeding +/- 3% shall be regarded as a deviation from the daily generation plan
which shall be settled economically in accordance with the following standards:
1. If the error is within +/-3%, the excess and deficit generation may be
offset in the corresponding periods that day; if there is still excess
generation after offsetting excess and deficit generation in the valley
and mid-range periods, the electric energy is not counted and the
Electricity Fees are not paid; if there is still deficit generation
after offsetting in the peak period, the Power Station shall compensate
Jiangsu Power Grid in accordance with the mutually allocating tariff
for the peak period between provincial grids of the East China Power
Grid.
2. If the excess generation deviates from the plan by more than +3% in the
valley period, in addition to not counting the electric energy and not
paying the Electricity Fees, the Power Station shall compensate the
Jiangsu Power Grid in accordance with the tariff which is 150% as much
as the mutually allocating tariff for the valley period between
provincial grids of the East China Power Grid.
3. if the excess generation deviates from the plan by more than +3% in the
mid-range period, in addition to not counting the electric energy and
not paying the Electricity Fees, the Power Station shall compensate the
Jiangsu Power Grid 100% as much in accordance with the mutually
allocating tariff for the mid-range period between provincial grids of
the East China Electric Power Grid.
4. If the short generation deviates from the plan by more than -3% in the
peak period, the Power Station shall compensate the Jiangsu Power Grid
in accordance with the tariff which is 200% as much as the
mutually-allocating tariff for the peak period between provincial grids
of the East China Power Grid.
Article 4. The division of generation periods
a. It is only divided into the peak period and the valley period from 1st
July to 30th September each year.
<PAGE>
where,
the peak period : 0800 - 2200 hours
the valley period : 2200 - 0800 of the following day
b. It is divided into the peak period, the mid-range period and the valley
period from 1st January to 30th June and from 1st October to 31st December.
where,
the peak period : 0800 - 1100 hour and 1700 - 2200 hour
the mid-range period : 1100 - 1700 hour
the valley period : 2200 - 0800 of the following day
Article 5. The document published by the East China Power Administration shall
be taken as the standard for the inter-provincial mutually-allocating power
price of East China Power Grid for the peak load, the mid-range load and the
valley load periods.
Article 6. Prior to 25th of each month, Jiangsu Provincial Power Company shall
deliver to the Power Station the Bill of Account Settlement on Power Generation
of the Power Station in the preceding month and shall settle the accounts when
it pays the On-Grid Electricity Fees to the Power Station before the end of the
month in accordance with this Method and the Power Purchase Contract entered
into by and between the Yangcheng International Power Generating Company and the
Jiangsu Provincial Power Company.
Article 7. If the change in the method of check out in the East China Power Grid
leads to modifying the method for economic settlement of dispatching power
generation of the Power Station by the Jiangsu Provincial Power Company, this
method shall be correspondingly revised.
<PAGE>
Annex 6
Insurance
Party A shall purchase or cause to be purchased the following insurance
for each Unit and shall maintain the insurance at full effectiveness from the
commencement of Commercial Operation of Unit 1 until the expiration of the Joint
Venture Term:
1. Property All risks insurance:
Scope of Coverage: tangible losses or damages to buildings,
machinery, inventories, fixed installation, spare parts and all other
personal properties which are structured together to form the Power
Station, including but not being limited to the losses or damages
resulting from the risks listed below: fire, lightning, explosion,
self-ignition, thunderstorm, snow-storm, flooding, typhoon, damage by
water, riot, strikes, willful damage, earthquakes, tsunamis, collapse
and/or the loss of stored goods in storage tanks.
Insured Amount: the full value for a repurchase of the
insured items.
2. Insurance for outage due to breakdown of machinery
Scope of Coverage: sudden and unforeseen tangible losses or
damages to all machinery, plant house,
boilers, ancillary equipment which are
structured to form the Power Station due to
the following causes, including but not
being limited to breakdown of machinery and
electrical equipment, collapse and explosion
of boiler and pressurized vessel, electrical
short-circuit, improper vibration and
calibration, overloading and over-voltage,
abnormal tension, centrifugal force,
breakdown in protection and regulation
equipment, overheating or collision or other
similar causes.
Insured Amount: The value for the repurchase of the insured
machines, station houses, boilers and
others.
3. Third Party Liability Insurance
Scope of Coverage: property losses or personnel casualties
to third parties that Party A is required to
be liable legally in the business operation
and maintenance of the Power Station by the
JV Company.
Insured amount: The maximum insurance amount for each
accident is RMB 200,000 Yuan. The number of
accidents insured is not limited.
Insured Person: The Joint Venture Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
AUGUST 31, 1997 AND THE CONSOLIDATED BALANCE SHEET AS OF AUGUST 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> AUG-31-1997
<CASH> 107,272
<SECURITIES> 27,703
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,854
<CURRENT-ASSETS> 152,449
<PP&E> 258,701
<DEPRECIATION> 6,140
<TOTAL-ASSETS> 496,317
<CURRENT-LIABILITIES> 34,277
<BONDS> 221,676
0
0
<COMMON> 12
<OTHER-SE> 195,870
<TOTAL-LIABILITY-AND-EQUITY> 496,317
<SALES> 0
<TOTAL-REVENUES> 9,576
<CGS> 0
<TOTAL-COSTS> 6,413
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,989
<INCOME-PRETAX> 5,233
<INCOME-TAX> 159
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,176
<EPS-PRIMARY> 431.33
<EPS-DILUTED> 431.33
</TABLE>
Exhibit 99.1
AES CHINA GENERATING CO. LTD.
STATEMENT RE: COMPUTATION OF FIXED CHARGE COVERAGE RATIO
(in thousands, except ratio amounts)
<TABLE>
<CAPTION>
Twelve months ended August 31,
1997 1996
--------------------- ---- ----------------------
<S> <C> <C>
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 $ 3,470 $ 2,047
(ii) 50% of the combined interest income of the Company,
and its Wholly Owned Subsidiaries from cash, cash
equivalents and investments in marketable securities 3,534 3,522
--------------------- ----------------------
7,004 5,569
--------------------- ----------------------
(B) Cash Outflow:
(i) Selling, general and administrative expenses of the
Company and its Wholly Owned Subsidiaries 246 1,457
(ii) Company Designated Costs 8,133 10,928
--------------------- ----------------------
8,379 12,385
--------------------- ----------------------
$ (1,375) $ (6,816)
===================== ======================
Adjusted Interest Expenses $ 13,134 $ --
===================== ======================
Fixed Charge Coverage Ratio -- --
===================== ======================
</TABLE>
