Model Project Development Agreement Final

ModelProjectDevelopmentAgreement
GovernmentofNepal
MinistryofEnergy
DepartmentofElectricityDevelopment
Kathmandu,Nepal April,2010
Note:ThisModelAgreementisendorsedandauthorizedbytheMinistryofEnergy,Government
ofNepal.Thismodelagreementisdeemedtobegenerallysufficient.Itmay,however,bevaried tomeetthefactsofaparticularcaseaslongasthevariancecomplieswiththisModelAgreement. The Department of Electricity Development may require the Developer to justify any proposed variationfromthisModelAgreement
PROJECT DEVELOPMENT AGREEMENT

THIS PROJECT DEVELOPMENT AGREEMENT (hereinafter referred to as the Agreement")isenteredintoon [insertdate]between: TheDepartmentofElectricityDevelopment,MinistryofEnergy,onbehalfofandwith therequisiteauthorityofthe GovernmentofNepal, havingits administrative officeat [SPECIFY],Kathmandu,Nepal(hereinafterreferredtoasGON),and [SPECIFY],alimitedliabilityCompanyincorporatedandregisteredundertheCompany Act, 2063 of Nepal, having its registered office at [SPECIFY], Nepal (hereinafter referredtoas,theCompany). (Each of them being singularly referred to as a Party and collectively referred to as the Parties).
PREAMBLE HAVINGTAKENINTOCONSIDERATIONTHEFOLLOWING:
A. The Government of Nepal (GON) desires to promote the development of sustainable hydropower projects on a BuildOwnOperate and Transfer (BOOT) basis under the HydropowerDevelopmentPolicy,2058.
B. Inthiseffort,GONhasselectedtheCompanyinordertoexecutethe[Specify Project].A Memorandum of Understanding (MOU) tothat effect was concluded on [Specify date] betweenthePartiesinrespectto thedevelopmentoftheProject.(ifapplicable)
C. GONhas(pursuanttothesaidMOU)grantedaSurveyLicensefortheGenerationand Transmission Line of [SPECIFY] Hydroelectric Project, located at [SPECIFY] to M/s [SPECIFY] upon receiving applications as per Electricity Act, 2049 and Electricity Regulation,2050.
D. The Company has agreed to develop the Project on the terms and conditions set forth herein and GON has agreed to support and facilitate the Company to plan, design, construct and commission the [SPECIFY], [Location] to generate electricity and shall own and operate the Power Station and [SPECIFY Transmission Line] before transferringittoGON ontheexpiryoftheGenerationLicenseandTransmissionLicense.
NOWTHEREFOREthePartieshaveagreedasfollows:
1 GENERAL
1.1 Purpose ThisAgreementdescribesthemainactivitiesoftheProjectandoutlinesthekeyrolesand responsibilitiesoftheParties.EachPartyshallcarryoutitsobligationsunderthetermsand conditionssetoutinthisAgreement,aimedattheexecutionoftheProject.Fortheclarity, theAgreementshallbereadtogetherwiththeAnnexes,whichformanintegralpartofthis Agreement. 1.2 Definitions Whereverusedandunlessthesubjectorthecontextotherwiserequire,inthisagreement, thefollowingtermshavethefollowingmeanings: "Agreement" meansthisProjectDevelopmentAgreement(hereinafter referred to as "PDA") betweenGON and the Company as amended, modified and supplemented from time to timeinaccordancewiththetermshereof. meansanyDayonwhichtheofficesof GONareopen. means the royalty charged on the installed capacity of each generating unit at the Power Station pursuant to Section 10.5 ofthisAgreement means theoccurrence, afterthedateof issuance ofthe GenerationLicenseof anyofthefollowingevents: a. b. c. achangeinorrepealofanexistinglaw achangeintheapplicationorinterpretationofan existinglaw anyChangeinLaw,whichprohibitsorlimitsthe sale and purchase of electricity under this Agreement, including any prohibition or limitation of exportof electricity outof Nepal and the imposition of a tax on the Company which the Company was not or would not have been obliged to pay as at the date of issuance of the GenerationLicense.
"BusinessDay" "CapacityRoyalty"
"ChangeinLaw"
d.
"CommercialOperation meansthedatespecifiedinacertificatedeliveredbythe Date(COD)" IndependentEngineer,asdefinedinthePowerPurchase Agreement stating that all Units have satisfied and successfully demonstrated performance in accordance withtherequirementsoftheProject. Contractor means the Construction Contractor, the O&M Contractor, any other direct contractors and/or any of theirdirectsubcontractorsappointedbytheCompany. means any court,tribunal orother judicial authority of NepalhavingjurisdictionovertheCompany,theProject oranyactionortransactioncontemplatedthereby. means the twentyfour (24) hour period beginning at 00:00hoursNepalStandardTime. means the Detailed Engineering Report of the Project prepared or to be prepared pursuant to the Survey License. means compliance with standards for civil, electrical and mechanical works related to dam safety, design of waterways and power generation facilities including all of the electrical, mechanical and civil works of the Projects in accordance with the applicable version of international standards and International Electrotechnical Commission (IEC). Design standards forotherrelatedstructuresmeanstherelevantstandards of GON,orotheravailableinternationalstandards. means the legal currency of the United States of America. means the Environmental Impact Assessment or Initial EnvironmentalExamination,asthecase may be, ofthe Projectconductedorthereportonwhichtobeprepared aspartoftheDERinaccordancewiththeEnvironment Protection Act, 2053 Environment Protection Regulation, 2054 National Environmental Impact AssessmentGuidelines,2050 andotherapplicablelaws, regulationsandguidelinesmadethereunder. meanstheroyaltychargedongeneratedelectricalenergy pursuanttoSection 10.5 ofthisAgreement means collectively the documents evidencing subscription to the Company's equity capital to the 3
"Court"
"Day"
"DER"
DesignStandards
"Dollar"
EIA/IEE
EnergyRoyalty
"EquityDocuments"
extentofequitycomponentofcostoftheProject. Financial Closure Date meansthedateonwhichtheFinancingDocumentsand Equity Documents have become effective, and the Companyhasaccesstothefundsorfinancialassistance committedthereunder.
"FinancingDocuments" means collectively the documents evidencing Lenders' commitment to finance the debt component of cost of theProject. "FinancingParties" means the lenders, export credit agencies, multilateral institutions, equity providers and others providing financingorrefinancingtooronbehalfoftheCompany for the development, ownership, operation and maintenanceoftheProjectoranyportionthereof,orany trusteeoragentactingonbehalfofanyoftheforegoing. means any unforeseeable and exceptional events or circumstances affecting the implementation of this Agreement by one or more Parties, which is beyond their control and cannot be overcome despite their reasonable endeavour, within the meaning set forth in Section 20.1 meansanycurrencyotherthan NepaleseRupees. means Dollars or, in the case of nonavailability of Dollars,anyotherdenominationofcurrencyacceptable totheCompanyandavailabletoGON. means the license for the generation of electricity as amendedorsupplementedfromtimetotime. means the exercise of that degree of skill, diligence, prudence and foresight that reasonably would be expected from the designers or builders oroperatorsof facilities for the generation and transmission of electricity in accordance with internationally accepted practices in a hydropower project under conditions comparabletothoseapplicabletotheProject,consistent with applicable Laws and taking into account factors such as the use of hydroelectric technology and the relative size, performance, age and technology of the physicalcomponentsoftheProject. means any national, regional, local/municipal level authorityoradministrativeorregulatory bodyortaxing 4
ForceMajeureEvents
"ForeignCurrency" "ForeignExchange"
"GenerationLicense"
"GoodElectricity IndustryPractice"
"GONAgency"
authority or quasijudicial authority in Nepal having jurisdiction over the Company or the Project or any action or transaction contemplated in connection with thisAgreementinNepal. "Government Approval" means any Authorisation issued or required under any Law by or from GON or any GON Agency in connectionwiththeProject. meansmillionkilowatthours. meanskilowatt. meanskilowatthour. means any law, legislation, statute, rule, order, regulation, court decision or any interpretation thereof enacted, issued or promulgated in Nepal by any competentauthorityapplicabletotheProject. means the area leased or to be leased by GON to the Company for the purposes of the Project pursuant to Section 5.6(a). means any lenders, export credit agencies, multilateral institutions and others providing financing or refinancing to or on behalf of the Company for the development, ownership, operation and maintenance of theProjectoranyportionthereoforanytrusteeoragent actingonbehalfofanyoftheforegoing. meansGON'sMinistryofEnergy means a calendar month according to the Nepali calendarbeginningat12:00midnightonthelastdayof the preceding month and ending at 12:00 midnight on thelastdayoftherelevantmonth. meansthousandkilowatt. meansthousandkilowatthour. means a bond in the amount pursuant to Section 29.2 hereof in Dollars , which shall be in the form of an unconditionaland irrevocable bankguarantee issuedby a Nepalese bank or an unconditional and irrevocable bank guarantee of an international bank duly endorsed byafirstcategoryNepalesebank,acceptabletoGON. 5
"GWh" "kW" "kWh" "Law"
"LeaseArea"
"Lenders"
"MoEn" Month
"MW" "MWh" "PerformanceSecurity"
"PowerStation"
meansthepowerstationtobeconstructedaspartofthe Project including all structures, fixtures, fittings, plant, machinery and equipment associated with the power generation, details of which are set out in Annexure [Specifynumber]of thisAgreement. means the Power Purchase Agreement between the Company and [SPECIFY]concerning the sale and purchase of electrical power and energy from the Project. means the [SPECIFY] Hydroelectric Project as described in Annexure [Specify number] of this Agreement. means the geographical area within which the Project shall be developed, constructed and operated and includes the Right of Way between the Power Station and the designated substation(s) or an international border over which the high voltage transmission lines shallbeconstructed. means the Unit Delivery Date of the electricity generating unit at the Power Station which is last to commencecommercialoperation. meansallroadsconstructedbytheCompanywithinthe ProjectArea. meanstheNepalesecurrency. means any combination of, but not limited to, the following: (a) ProjectDevelopmentAgreement (b) PowerPurchaseAgreement (c) GenerationLicense (d) O&MAgreement,ifany (e) ConstructionContract (f) ShareholdersAgreement,ifany (g) FinancingDocuments,mortgagesand othersecuritydocumentation (h) EscrowAgreement (i) InsurancePoliciesand (j)TransmissionLicense 6
"PPA"
"Project"
"ProjectArea"
"Project CommissioningDate"
"ProjectRoad"
"Rupees"or"NRs" SecurityPackage
"SurveyLicense"
means the License to conduct survey, study and investigation for the Production of Electricity, License number [SPECIFY]issued by GON on [SPECIFY] and License to conduct study and investigation for TransmissionofElectricity,Licensenumber[SPECIFY] issuedby GONon [SPECIFY] tothe[SPECIFY]. means any tax, financialcharge, impost,tariff, duty or fee of any kind charged, imposed or levied, directly or indirectly, by any GON Agency in Nepal applicable to the Company orthe Project and includes any corporate income tax, value added tax, import duty, withholding tax (whether on dividends, interest payments, fees, equipment rentals or otherwise), property tax, excise duty, export duty, tax on foreign currency loans or foreign exchange transactions, registration or license fee, water tax, or environmental tax or any other non tax. meansthedatefollowingthelastdateofthevalidityof theGenerationLicense.
"Tax"
"TransferDate"
"TransmissionLicense meanstheLicenseforconstructionoftransmissionline andtransmissionofelectricitythroughitasamendedor supplementedfromtimetotime. "Unit" means any of the electricity generating turbine generatingunitsincorporatedintotheProject. means, as to any Unit for any period [SPECIFY] MW or such other amount of net electricity generating capacity of such Unit as demonstrated by the performance tests conducted under the PPA for such Unit. meansforeachUnit,thedatedeclaredbytheCompany to be the date on which such Unit is available for test generation at the Unit Capacity thereof, as such date is specified in a written notice given at least 15 (Fifteen) days in advance by the Company to [Specify name of PowerPurchaser(s)]. meanstheUnitedNationsCommissiononInternational TradeLaw. meanseach 12(Twelve12)monthsperiodcommencing on00:00 midnightonChaitraend andendingon00:00 midnightthefollowingChaitraend. 7
"UnitCapacity"
"UnitDeliveryDate"
"UNCITRAL"
Year
1.3 Interpretation InthisAgreementunlessthecontraryintentionappears: (a) a reference tothis Agreement or a reference to another instrument includes any variationorreplacementofeitherofthem a reference to a statute, ordinance, code or other law includes regulations and other instruments made under it and consolidations, amendments, reenactments orreplacementsofanyofthem areferencetostatute,regulation,ordinance,codeorotherlawisareferencetoa statute,regulation,ordinance,codeorotherlawofNepal thesingularincludesthepluralandviceversa onegenderincludesbotheithergenders the word "person" includes a firm, a body corporate, an unincorporated association,aGONAgency a reference to a person includes a reference to the person's executors, administrators,successors,substitutes(includingpersonstakingbynovation)and permittedassignees wheneverapartyheretoistoprovideitsconsentorperformitsdutyorexerciseits discretion or conduct any act, it shall do so acting reasonably and with due dispatch in case of a period of time unless otherwise specified, time periods within or following which any payment is to be made or any act is to be done shall be calculated by excluding the day on which the period commences and including thedayonwhichtheperiodends if awordorphrase isspecificallydefined inthis Agreement,thenotherpartsof speech and grammatical forms of that word or phrase have corresponding meanings headingsareforeaseofreferenceonlyanddonotaffectinterpretation the terms "including" and "include" mean including or include (as applicable) withoutlimitationand ininterpretingthisAgreement,aconstructionthatwouldpromotethepurposeor objectunderlyingthisAgreementmustbepreferred. 8
(b)
(c)
(d) (e) (f)
(g)
(h)
(i)
(j)
(k) (l)
(m)
1.4 GoverningLaw This Agreement shall be interpreted, construed and governed by the Laws in force in Nepal. 1.5 ScopeofCoverage (a) This Agreement applies to all investments by the Company, whether the investmentismadebeforeoraftertheentryintoforceofthisAgreement. ThisAgreementappliestoanymeasureadoptedormaintainedbyaPartybefore or after theentryintoforceofthisAgreement. ThisAgreementappliestomeasurestakenbyGONAgency. This Agreement, however, does not create retroactive obligations or responsibilitiesfortheCompany. TheCompany,whoisnotincompliancewith ongoing obligations and responsibilities, shall seek to enter into compliance as soonaspossible,andwithin90daysoftheentryintoforceofthisAgreement.
(b)
(c) (d)
1.6 MinimumInternationalStandard GON shall accord to the Company or its investments treatment in accordance with customary international law, including fairand equitabletreatment.Itshallaccordnon discriminatorytreatmentwithrespecttomeasuresitadoptsormaintains. 1.7 TransferofAssets GONshallpermitalltransfersrelatingtoaninvestmentfreelyandwithoutdelay.Such transfersshallinclude: (a) profits, dividends, interest, and other fees and amounts derived from the investment proceedsfromthesaleofenergyalloranypartoftheinvestment payments madeunderacontractenteredintobytheCompanyor its investment, includingpaymentsmadepursuanttoaloanagreementand paymentsarisingunderanydisputesettlementprocess.
(b) (c)
(d)
Notwithstandingparagraph(b)and(c),GONmayrestricttransfersorreturns inkind in circumstanceswhereitcouldotherwiserestrictsuchtransfersunderthisAgreement.
1.8 ScopeofProject The Project shall be executed on the site, which is described in Annexure [Specify number] of this Agreement. The Scope of the Project shall include performance and execution by the Company of all design, engineering, financing, procurement, construction, completion, operation and maintenance of the Project as described in Annexure [Specify number] of this Agreement. It shall include the performance and fulfilment of other obligations by the Company under this Agreement. The Company shallundertakeitsobligationsatitsowncostandrisk. 1.9 FinancialClosure a) The Company shall accomplish its Financial Closure within 18 (Eighteen) months, [SPECIFY Financial Closure Date) after the signing of this Agreement. In case of the failureofthetheCompanytoaccomlishFinancialClosurewithintheforegoingdate,the Company shall provide to GON detailed reasons within 1 (One) month as to why the target date was not achieved. If GON, acting reasonably, is satisfied with the detailed reasons,thenthetargetdateshallbeextendedfurther6(Six)months. b) TheCompanyshall,promptlyafterFinancialClosure,provideGONwithevidencethat FinancialClosureDatehasoccurredandacopy ofeachFinancingDocument. 1.10 GON's InitialObligation Subjecttoand inaccordancewiththetermsand conditions setforthinthis Agreement, GONshallgranttotheCompany: (a) All material Government Approvals and permits including the license and authority for Generation and Transmissionof Electricitywithin 45 (Fortyfive) daysuponreceiptofacompletedapplicationfromtheCompanyfortheProject and Allexclusiverightsofaccessto,useandpossessionoftheProjectAreatherewith save and except as expressly permitted in the respective Licenses to implement theProject.
(b)
2 CONDITIONPRECEDENT
The rights and obligations of the Company under this Agreement are subject to the satisfaction in full of the following conditions precedent to be fulfilled on or before FinancialClosureDateunlessanysuchconditionhasbeenwaivedasprovidedelsewhere inthisAgreement: (1) TheCompanyshallapplyfortheGenerationLicensewithinthevalidperiodofthe Survey License.
10
(2) Certified copies of all Project related agreements including the Financing DocumentsandEquityDocumentshavetobedeliveredbytheCompanytoGON. (3) TheCompanyshall promptly notifyGONofthe PPAafter it is finallyconcluded, providingacopyofeachsignedPPA.TheCompanyshallpromptlynotifyGONof anyvariation,modificationorreplacementtothePPA. (4) The Performance Security in full has been provided by the Company to GON in accordancewith Section 29.2. (5) CertifiedcopiesofallresolutionsadoptedbytheBoardofDirectorsoftheCompany authorizing the execution, delivery and performance by the company have to be deliveredbytheCompanytoGON. (6) Subjecttotheprovisionsofthis Agreement,theCompany shall have beengranted allrequiredpermits,approvalandlicensesinconnectionwiththeProject,including rightofway frompublicroadstothesiteandpermissiontoenteruponandutilize thesitefortheconstructionpursuanttoandin accordancewiththisAgreement. TheCompanyshallmakeallreasonableendeavourstoprocurethesatisfactioninfullof the Conditions Precedent set out in this Section and GON shall make all reasonable endeavourstoprocurefulfilmentoftheconditionssetforthin Section 1.10.
3 DERANDEIA/IEE
3.1 DetailedEngineering Report (DER) ThedesignoftheProjectistheresponsibilityoftheCompanyunderthisAgreement.The design shall be as per Design Standards, includingthatthe Facility should be fit for its purpose in accordance with Good Electricity Industry Practice and carried out to the specified level of skill, care and diligence such that the facility is designed, except the replaceableelectricalandmechanicalcomponentsthatundergowearandtear,toachieve usefullifeof: (i) (ii) 3.2 100 (One Hundred) years for all civil works creating reservoir such as storage damspillway,etc.,and/ordiversion weir/barrage/dam. 50(Fifty)yearsforallothercivilworks.
EnvironmentalImpact Assessment(EIA)/InitialEnvironmental Examination(IEE) The EIA/IEE of the Project as a result of infrastructures including, but not limited to, such as access road, power house, embankments, tunnels or canals, headworks, camps, quarries muck disposal, spoil banks, transmission lines and substations shall be conducted and complied with the requirements of applicable Laws and Regulations. Provision shall be made to release such quantum of water which is higher of10 (Ten) percent of the monthly average discharge of the river or the minimum required as 11
stipulated in the EIA/IEE report in natural watercourse downstream of the dam or the diversion structures. While preparing EIA/IEE report, the company shall also refer the Guidelines of International Financial Agencies, Donors and Lenders. The executive summaryoftheEIA/IEEreportshallbeproducedbothinEnglishandNepalilanguages. The EIA/IEE will be approved by GON, provided such assessment complies with the requirementsofapplicableLawsandRegulationslikeEnvironmentProtectionAct,2053 Environment Protection Regulation, 2054 and National Environmental Impact Assessment Guidelines, 2050 other applicable laws, regulations and guidelines made thereunder. (a) The approved EIA/IEE Report is to be an integral part of the detailed design, construction,commissioning,operationandmaintenanceoftheProject. The Company shall use reasonable endeavours to ensure that the Project is executedwithdueregardtoecological,environmentalandsocialfactors. The Company shall comply with and promptly rectify any noncompliance with the environmental, occupational, health and safety requirements detailed in the approvedEIA/IEEreport.
(b)
(c)
4 ESTABLISHMENTOFCOMMITTEEANDTASKFORCE
4.1 EstablishmentofaProjectCoordinationCommittee GONshallformaProjectCoordinationCommitteeassetforthbelowtocoordinatewith concernedagencies,providefacilitiesandconductnecessaryworksforthedevelopment andoperationoftheProject. Ministerfor Energy MinisterofStateforEnergy Secretary,MinistryofEnergy Secretary,MinistryofFinance Secretary,MinistryofEnvironment Secretary,MinistryofHome Secretary,MinistryofLandReformandManagement Secretary,MinistryofForest Secretary,MinistryofIndustry DirectorGeneral,DoED 4.2 EstablishmentofProjectTaskForce (a) GONshallestablish aProjectTaskForce(the"TaskForce") inaccordancewith this Section within 30 (Thirty) days from the signing of this Agreement. The working procedures of the Task Force may be prescribed by the committee 12 Chairman DeputyChairman Member Member Member Member Member Member Member MemberSecretary
established under Section 4.1 of this Agreement and notification to that effect shallbecommunicatedtotheCompany. (b) The Task Force will comprise senior Technical and Professional representatives from relevant ministries of GON and coordinated by Member Secretary of the ProjectCoordinationCommittee(DirectorGeneral,DoED)formedunderSection 4.1. ThemainobjectiveoftheTaskForceistofacilitateandexpeditecommunication andtofacilitateandexpeditetheprocessforthemakingofdecisionsaffectingthe Project by the relevant ministries, and GON shall ensure that the Task Force meetsandperformsexpeditiouslytomosteffectivelyachievetheobjectives. TheCompanymayappoint1(One)person(andatitsdiscretion,anysubstitute)as an observer to communicate with and participate in the operations of the Task Force. The observer shall be present at all meetings of the Task Force and the Task Force shall notify the observer (other than in an emergency) at least 7(Seven)daysinadvanceofsuchmeetings.
(c)
(d)
4.3 GrantofGovernmentApprovals SubjecttotheprovisionsasmentionedunderSection1.10ofthisAgreement,GONshall grant all required Government Approvals to the Company and/or the Companys contractors and subcontractors(as the case may be) which are required for the Project (includingsecuringtenureorleasefortheProjectArea)asandwhentheyarenecessary orrequestedbytheCompany. 4.4 Generation andTransmission License (a) TheGenerationLicensewillbeforaperiodof 35(ThirtyFive)yearsfordomestic projectand30(Thirty)yearsforexportorientedprojectfromthedateofissuance of the License in accordance with the Electricity Act, 2049 and Electricity Regulations,2050 GON shall confer on the Companythrough the Generation License the right of theuninterruptedflowofthe[Specify]RivertotheProject.GONshallnotissue, andshallensurethatnoGONAgencyissues,anyotherLicenseorpermitforuse of the water in the catchment area that substantially impairs the flow of such water. TheTransmissionLicenseissuedtotheCompanyshallbeforaperiodforwhich theGenerationLicenseremainsvalid.
(b)
(c)
4.5 LocalGovernmentApprovals GON shall, if requested by the Company, provide assistance to the Company in its discussions with GON Agencies (including local bodies such as district and village 13
development committees and municipalities) for obtaining any necessary license, consent,permit,authorizationorapprovalinconnectionwiththeProject. 4.6 CommunicationsPermits (a) GON shall, in accordance with prevailing laws, issue necessary permits to the Company to import, install and use suitable radio communication systems including satellite communication equipment and "walkietakies" during the constructionphaseoftheProjectaswellasduringregularoperationsasrequired tomaintaincontactinternally withintheProjectaswell asexternallytoexisting andfuturesystems. Any system connecting with either the national telecommunications system or directly with any international system shall be subject to approval from the MinistryofCommunicationsoranyotherrelated GONAgency.
(b)
4.7 Explosives GON shall assist the Company in making the necessary arrangements under prevailing Laws and Regulation with relevant GON Agencies to obtain permission to import, transport,storeanduseexplosivesasarerequiredfortheProjectconstructionworkatthe Projectsite. 4.8 Security TheCompanyshallitselfcarryoutarrangementsfortheProjectSecurity andifnecessary, upon request from the Company along with special reason, GON will make necessary arrangements for particular type of security during the term of the Generation License. TheCompanyshallbearalltheexpensesincurredforsuchsecurity.
5 LANDANDWATER
5.1 StrategicPlan (a) The Company shall develop a strategic plan for land acquisition in compliance with the Land Acquisition Act, 2034, to ensure satisfactory and timely resettlementandcompensationwherenecessarywithintheProjectArea. GONwill assist(ProjectCompany)with itsobligationsunderClause(a)above, includingnegotiationtoprocureprivatelandandimmovableproperty.
(b)
5.2 Acquisition,CompensationandResettlement (a) TheCompanyshallcarryoutarrangementstoresettleandrehabilitatepersonsor families to be displaced from personal property and land which is acquired through GONinaccordancewithprevailingActsandRegulations. 14
(b)
For the land and houses directly acquired by the Project Company, it shall be responsible to arrange resettlement and rehabilitation of the people to be displaced. The resettlement and rehabilitation program shall be conducted in an integratedwayandcomplywithprovisionsofapprovedEIA/IEE report. GON shall provide administrative coordination and assistance needed while implementingtheresettlementandrehabilitationprogram,andtheCompanyshall bearthecostassociatedwithit. Theresettlementandrehabilitationprogramshallbepreparedinsuchawaythat thelivingstandardandtheearningsoftheaffectedpersonsorfamiliesshouldnot belowerthanprevioustocommencementoftheProject. TheCompany shall bearall costsassociatedwithresettlementandrehabilitation programoftheProject. TheCompanywillprepareformalarrangementsforresettlementorcompensation of persons affected by the Project before construction works the Project begins. Where such resettlement or compensation is notresolved by the Company with such affected persons within reasonable time, GON will, under prevailing Law, compulsorilyacquiresuchlandandpropertyasmayberequiredbytheCompany fortheProjectandtheCompanyshallpaycompensationforthelandandproperty so acquired. The amount of compensation will be determined by the district compensationcommitteeformedaccordingtotheLandAcquisitionAct,2034.
(c)
(d)
(e)
(f)
5.3 LocalShare TheCompany,dependinguponcapacityoftheProject,shallallotamaximum10(Ten) percent equity share of the Project to the resettled and rehabilitated people, people residing permanently in Village Development Committees or Municipalities of the Project siteduring initiationofconstructionactivitiesoftheProject,ifthesepeoples so desire. 5.4 GLOFEarlyWarningSystem Thecompanyagreestoconductastudy,atitscosts,ofthepotentialeffectstotheProject of a glacier lake outburst flood (GLOF), if any. Upon completion of such study, the reportshallbesubmittedtoGONandifGONdeterminesthattheinstallationofanearly warning system in respect of a GLOF is required, the Company shall, at its own cost, establishsuchsystem. 5.5 ElectrificationandFreeEnergytoLocalResidence The Company shall carry out electrification of households within a periphery of 500 (FiveHundred)metresfromthepowerhousesiteanddamsite.Thecompanyshallalso berequiredtosupply20(Twenty)Units(kWh)ofelectricitypermonthforeachfamily residingintheareafreeofcost. 15
5.6 Inrespectof LandandWater (a) If the land is already owned byGON,the land shall be made available on lease, with either a reasonable annual rent or such other rent as may be required by applicable Law, for the period of the Generation License, for land needed for permanentuse,orforsuchshorterperiodasmaybenecessaryfortemporaryuse. InrespectoflandandwaterownedbyGON,GONshallprovidetotheCompany, itsemployees,contractors,subcontractorsandadvisersunrestrictedaccesstoforest land,riverbeds,riverbanksandwater,inorderto: (i) construct and use all necessary buildings and other structures, roads, ropeways,raillinesandtransmissionlines open tunnel audits and dump spoil from tunnels in mutually agreed designatedareas laypipelinestotakewaterfromsprings during the construction period, open quarries, take out or deposit stone, sandandearththereonand perform any other activity necessary for the construction, operation and maintenanceoftheProjectandthegenerationofenergyfromtheProject.
(b)
(ii)
(iii) (iv)
(v)
While performing above activities, the Company shall comply with the approved EIA/IEE report. GONshallnotchargeanypaymentotherthanleasingchargeincaseof GONownedland for activities permitted pursuant to Section 5.6(b) in respect of the Lease Area, nevertheless, the Company shall pay any charges imposed pursuant to the Forest Act, 2049, and the Forest Regulations, 2050, with respect to any forest area used by the Company.TheCompanymayexcludeanypersonfromareastowhichtheCompanyhas accessunderthisSection,wherenecessaryordesirableintheinterestofsafety. 5.7 TransmissionLine If GON, pursuant to Section 20 of the Electricity Act, 2049, specifies that the transmissionlinebuiltandownedbytheCompanyisanationaltransmissionlineorpart ofthenationalgridofNepal,thenGONoritsdulyappointedauthorityshallenterintoa separateagreementwiththeCompanywithrespecttothetermsandconditionsfortheuse of such transmission line prior to the time of such action, provided that the Company shallatalltimeshavepriorityuseofsuchtransmissionline. 5.8 RoadstoProjectSite (a) GONshallmakeavailabletotheCompanyallexistingpublicroads. 16
(b)
GON shall allow the Company, its employees, contractors, subcontractors and advisers the use of existing public roads for necessary transport in connection withtheconstructionandoperationoftheProject,includingwithoutanycostto GONtherighttomodify,improveandstrengthenroadsandbridges,temporarily orpermanently,asmaybenecessaryfortransportofheavyequipment. TheCompanyshallrepairorcausetoberepairedanydamagetoexistingroadsor bridgescaused bytheCompany'suse insuch mannerastoensurethatanysuch damaged roads or bridges are returned to substantially the same condition they were in immediately prior to such damage. The Company shall use reasonable efforts to minimize the obstruction of traffic during any repair contemplated by thisparagraph. GON shall allow the Company, its employees, contractors, subcontractors and advisers to construct temporary and permanent roads, tracks, bridges and ropewaysasrequiredwithintheProjectAreatopermitthemobilizationofheavy constructionandpowerequipment.Suchfacilitiesshallbeconstructed,andsuch temporary facilities shall be dismantled and disposed of, by the Company in accordance with section 24 of the Electricity Act, 2049, the environmental conditionsprovided intheGenerationLicenseandTransmissionLicenseandall otherapplicableenvironmentlaws.TheCompanyshallobtainthepriorconsentof GONfortheseconstructionworkswithinforestareasasreferredtointheForest Act,2049andtheForestRegulations,2050.
(c)
(d)
5.9 ProjectArea The Company shall have control over access to the Project sites including the dam or diversion structure,PowerStation,reservoirand itsforeshoreandtheuseofallProject Roads, with the authority to restrict access and use to personnel authorized by the Company in the interests of safety. The Company shall allow local residents free and unfettered access to the reservoir and its foreshore, other than the area restricted for safety.
6 USEOFLOCALRESOURCESANDSERVICES
6.1 UseofLocalResources,InstitutionsandHumanResourcesandNational ProductandServices TheCompany,as muchaspossibleandtotheextentqualified,shalluse and maximize theuseof,theavailablelocalskillsandlabourcrafts,localinstitutionsincluding,butnot limited to, community based organizations, nongovernmental organizations, consulting firms,professionals,individuals,contractors,suppliersandnationalproductsandservices forthedevelopmentandoperationoftheProjectpursuanttotheLabourAct,2048,and theLabourRegulations,2050.TheCompanyisentitledtodetermineallhumanresource proceduresrequiredtoadministertheseservices. 17
6.2 TechnologyandTraining (a) Throughout the construction, operation and maintenance of the Project, the Company shallperformthetransferoftechnologyand skills forthepurposesof Section6.8oftheHydropowerDevelopmentPolicy,2058,throughthesystematic jobrelatedtrainingof localpersonnelengaged bytheCompanyandthroughthe introduction of modern management methods and practices in accordance with prudentutilitypractice. TheCompanyshallemployNepalesecitizenstotheextentpossibletoreceivethe transferoftechnologyandskillsasreferredtoinSection10.2(a)andshallensure that, to the extent possible, its contractors and subcontractors also employ Nepalesecitizens,wherequalified. TheCompanyacknowledgesthattheobjectiveofthetransferoftechnologyand skills as referred to in Section 10.2(a) is to build the technical and managerial competenceoflocalpersonnel,andtoestablishasystemforqualitymanagement inhydropower design,construction,operationandmaintenance. Forthepurposeoftransferoftechnology,MoEn/DoEDmay sendondeputation ofits3(Three)technicalpersonneltotheCompanyduringtheconstructionofthe Project. Such personnel shall work in association with Project Companys technical experts and their general guidance. MoEn/DoED shall pay the basic salaryandotherentitlementstosuchpersonnelaspertherulesof GONwhilethe Company shallprovide hardshipandotherallowancescomparabletothesimilar allowancestotheProjectCompanyspersonnel.
(b)
(c)
(d)
7 PROCUREMENTANDENTRYREQUIREMENTS
7.1 PortofEntryandTransportArrangements (a) GON will facilitate the import of plant, construction materials and equipment requiredfortheProjectatthepointofentryintoNepalandtheirtransportationto theProjectArea. GONwillissueallnecessaryimportLicensesforplant,constructionmaterialsand equipmentimportedforthepurposesoftheProject.
(b)
7.2 Fuel In the event of shortage in the supply of fuel during construction of the Project, GON shall use its best endeavours to ensure the supply of fuel during construction of the Projectonaprioritybasis. 18
7.3 Visas (a) GON shall issue appropriate visas and permits in accordance with Applicable Laws to expatriate personnel and their dependents, whom the Company recommendsandtheGONconsiders,areneededinNepalinconnectionwiththe Project. TheCompanyshallfurnishtoGON,totheextentpossible,priornotificationsand details,includingtiming,jobdescriptionandqualificationsofthepersonneltobe assignedtotheProject.
(b)
8 INFRASTRUCTURE
GON will facilitate the construction and operation of the Project, and in particular the followinginfrastructurerequirements,whichtheCompanywillconstructatitsowncost: (a) (b) (c) educationfacilities medicalandemergencymedicalevacuationfacilitiesand ahelipadoralandingstrip.
9 REPATRIATION
9.1 Export(IfApplicable) The Company intends to export energy generated by the Project to [Specify Name of Country] pursuant to PPAs to be negotiated with [Specify]. In case some portion of energy is sold in Nepal, the GON willprovide Foreign Currencyexchange facilities in proportiontotheinvestmentinforeigncurrencyintheProject. 9.2 ForeignCurrencyandRepatriation InaccordancewithSection13oftheElectricityAct,2049,GONwill,onrequestbythe Company, provide or will ensure the availability of, all necessary Foreign Currency at prevailingmarketratesofexchange,andwillpermitatnochargeinaccordancewiththe Foreign Investment and Technology Transfer Act, 2049, the repatriation of monies receivedfromtimetotimebytheCompany,fromthesaleofenergyinNepal.
10 TAXESANDROYALITIES
10.1 IncomeTaxExemption FullIncomeTaxforaperiodof7(Seven)yearsfromtheCODandthereafter,50(Fifty) percent of the Income Tax for additional 3(Three) year shall be waived, provided 19
howeverthattheprojectreachesCODbeforeendofChaitra2075BSinaccordancewith Section11(3d)of IncomeTaxAct,2058. 10.2 TaxDepreciationofProjectCosts (a) The Company will be entitled to depreciate any item of plant, machinery or equipmentprocuredduringtheconstructionperiodbyReducingBalanceMethod each year from the date of commissioning of the item over the term of the GenerationLicenseandTransmissionLicense. TheCompany mayadjust itstaxable income by amortisingallProjectcostsand expenses in accordance with Income Tax Act, 2058 (including all costs and expenses incurred in providing the principal features of the Project and interest andfinancechargescapitalizedduringtheconstructionperiod).
(b)
10.3 ValueAddedTax (a) GONshallensurethatthevalueaddedtaxpayableontheProjectcontractbythe Company shall not be levied on the value of the plants, machinery, equipment, andtheirsparepartsandthesteelusedtofabricatepenstockpipes,whichwillbe permanentlyusedintheProject,inaccordancewithSection5(3),Schedule1(no. 21)andSection7(2),Schedule2(no.7)ofValueAddedTaxAct,2052. GON may inspect the inventory records for the goods and materials to satisfy itselfthattheyarebeingusedexclusivelyfortheProject.
(b)
10.4 CustomsandImportDuties (a) GON shall provide an exemption from import license fees and value added tax and impose customs duty of 1(One) percent on plant, machinery and equipment including spare parts imported into Nepal for the purpose of the Project (in accordancewithSection12(7)oftheElectricityAct,2049. GONshallprovideafacilitytotheCompanytoimportequipmentandotheritems (excludingconsumablegoods)onareexportbasisnolaterthan3(Three)months fromthedateofProjectcommissioning,andnoimportLicensefees,valueadded taxorcustomsdutyshallbeleviedbyGONonsuchitems.IfrequiredbyGON, theCompany shall lodgeabankguaranteeforthisfacilityfortheamountofthe import License fees, value added tax and customs duty, GON shall promptly releasethebankguaranteeonreceiptofconfirmationthattheitemshavebeenre exported. The Company shall furnish a list of required equipment and other items (excluding consumable goods) under this reexport scheme to GON before the commencementofconstructionoftheProjectsanditisagreedthatthelistmaybe revisedevery6months,ifrequired.
(b)
(c)
20
10.5 RoyaltiesPayableto GON EnergyRoyaltyandCapacityRoyaltyshallbepaidbytheCompanytoGONassetforth below:

Seria lNo. Upto15yearsfromCOD Type Annualbase capacityroyalty, perkW 1 Exportoriented runofriver Project Exportoriented storageProject Rs.400/ Energy royalty After15yearsfromthedateof COD Annualbase capacityroyalty, perkW Rs.1,800/ Energy royalty
7.5%
12%
Rs.500/
10%
Rs.2000/
15%
Note:RelatedChartforroyaltypaymentwillbeaddedaspertherequirement Note: The following formula shall be used to work out the energy royalty and the capacity royalty: Energyroyalty=(GeneratedenergySelfconsumption)xAverage SellingPricexEnergyRoyaltyRate.
(Year of royalty payment Year of Capacity royalty = Base Capacity Royalty Rate x (1+0.05) GenerationLicensedobtained ) xInstalledcapacity(kW)
Royalty payments shall be paid to GON in the currency in which the PPA has been concludedandmadeasfollows: i. Capacity Royalty shall be paid quarterly in advance, irrespective of energy generation.Thefirstsuchquarterlypaymentshallbepaidwithin30(Thirty)days ofthefirstUnitDeliveryDateandshallthereafterbecontinuedtobepaidonor beforethesamedateseveryyearthroughouttheperiodofGenerationLicense. EnergyRoyaltyshallbepaidquarterlyinarrearsonthesamedateastheCapacity Royaltyispaid,otherthanonthefirstpaymentdatefortheCapacityRoyalty. EnergyRoyaltyshallbeapplicablefromtheCommercialOperationDate(COD).
ii.
iii.
EnergyRoyaltyshallnotbepayablebytheCompanytoGONinrespectoftheenergyto beprovidedbytheCompanytoGONfreeofchargepursuanttoSection 12.1hereof. 10.6 LandTax The Company shall pay land tax for any land procured by the Company at the rates prevailingatthetimeoftheissuanceoftheGenerationLicense. 21
10.7 BonusandHousingFacilities The Company shall allocate 2 (Two) percent of its taxable income in every fiscal year and distribute to its workers and staff as a bonus. However, the distributed bonus shall notexceedtheyearlysalarypaidtotheworker/staff.ThecompanyshallestablishaStaff Welfare Fund and the remainder of the bonus after distributing to its workers and staff shallbedepositedinthisfundandtheCentralWelfareFundinproportionprescribedby theprevailingLabourAct.TheStaffWelfareFundshallbeoperatedwithcriteriasetup bytheProjectCompany. TheCompanyshallarrangeaccommodation/facilitiestoitsworkersandstaff. 10.8 LocalTaxes GONshallassisttheCompanyindiscussionswithlocalbodiesregardingthepaymentof localTaxesforlocalconstructionmaterialssuchasstone,gravel,sand,clayandthelike andtollsforallgoods,plant,materialsandequipmenttransportedtotheProjectAreain ordertoensurethattheeffectofsuchTaxesandtollsisfairandequitable. 10.9 RegistrationFees A registrationfeeof0.0001(DecimalpointZeroZeroZeroOne)percentshallbecharged fortheregistrationofdeedsrelatedtoaforeignloanforinvestmentondevelopmentand operationinelectricityandontheregistrationofdeedsconveyedtopledgethemovable andimmovableassetsinthenameofforeignlenderforsuchloan.
11 PROJECTDEVELOPMENT
11.1 ResponsibilitiesoftheCompany (a) TheCompanywillbesolelyresponsiblefor: i. ii. planning,scheduling,monitoring,reportingandcostcontrol procedures for drawings, specifications and technical documents to be prepared by contractors, subcontractors, equipment manufacturers and otherperson conceptual construction contract packages for turnkey implementation, andprojectmanagementandadministrationprocedures arrangingfinancingfortheProject sitesupervision qualityassurance 22
iii.
iv. v. vi.
vii.
obtaining performance guarantees by equipment suppliers of individual equipmentitems monitoringoverallperformanceoftheProjectand liaising between GON and the Company's employees, contractors, subcontractorsandadvisers.
viii. ix.
(b)
DuringconstructionoftheProject,theCompanyshallsubmitsemiannualreports to GON in accordance with the Electricity Regulations, 2050 and shall submit progressreportatevery3(Three)months. GON shall deal exclusively with the Company in making arrangements for providing all rights granted under this Agreementto the Company's employees, contractors,subcontractorsandadvisers
(c)
11.2 SubmissionofDocumentation (a) The Company shall at its own cost submit 3 (Three) hard copies of the design drawings,constructiondrawings,as builtdrawingsandotherengineeringdetails to GON. In addition, the Company shall provide operation & maintenance manualsanddigitalcopy of 'asbuiltdrawings'freeofcost. TechnicalandprofessionalofficialsofGONanypersonauthorizedbytheLaw office bearers of any electricity regulatory commission, a panel of experts personnel of Project Compensation Committee, Project Task Force and Project CoordinationCommitteemayinspecttheProjectworkstosatisfythemselvesthat the work is being performed in accordance with the Generation License, the TransmissionLicenseandGoodElectricityIndustryPractice. ItisresponsibilityoftheCompanytoinformGONofanymaterialchangesinthe design, construction or engineering details within a reasonable time ifany such changeismade.
(b)
(c)
11.3 GON AssistanceandCosts(IfApplicable) GONagreestomakeavailabletotheCompanyallavailabledocuments,data,information andallotherreportsandpapersrelevanttothestudyoftheProjectincludingcopiesofall investigations and studies carried out since the inception of the Project, to enable the Company to use this information in the best interest and exclusively for the survey, investigation,preparationoftheDERanddevelopmentoftheProject.Thecost andthe costrecovery modality byGONof suchstudyreports,documentsandthe like supplied by GON to the Company shall be mutually agreed at the time of concluding this Agreement. 11.4 Insurance 23
(a)
TheCompanyshallduringconstructionoftheProjectmaintainappropriatelevels ofinsuranceasrequiredforprojectsofthisnature. The Company shall be responsible for insuring the Project against all risks (for whichinsuranceisavailableonreasonablecommercialterms)duringoperationof theProject. TheCompanyshallberesponsiblefordeveloping,monitoringandcontrollingan insuranceprogramforallinsurancesrequiredfortheProject. The Company shall provide GON with copies of all policies of insurance or policycertificatestakenoutandmaintainedunderthisSection 11.4.
(b)
(c)
(d)
12 FREEENERGYANDSALEOFELECTRICITY(IFAPPLICABLE)
12.1 PowerandEnergyto GON TheCompany,exportingpowerandenergyoutsideofNepal,shalldesigntheProjectto enableGONtotakeasupplyofenergy,assetforthbelowin(a)and(b),fromtheProject into Integrated Nepalese Power System (INPS). The terms and conditions (such as Metering,Schedules,Dispatch,Outages,etc.)oftheconnectionshallbemutuallyagreed uponinaSeparateAgreementwhichshallformanintegralpartofthisAgreement. (a) The Company shall at its own cost deliver [Specify percentage] of power and energy generated from the Power Station free of charge to GON from power house. The switchyard infrastructure for such supply of power and energy to GON shall be constructed,operated and maintained by the developer at free of cost. IncaseGONexpressesitsdesiretopurchaseelectricityfromtheCompanyatthe timeofconcludingthisAgreement,theCompanyshallsellGONoritsdesignated agency maximum of 10 (Ten) percent of power and energy generated at the Power Station to meet domestic demand. The Company shall be responsible to deliver the energy from power house. The switchyard infrastructure for such supply of power and energy to GON shall be constructed, operated and maintainedbythedeveloperatfreeofcost. Payment The Company shall be paid for the energy delivered to meet domestic demand pursuant Section 12.1 (b). The price and mode of payment shall be mutually agreeduponatthetimeofconcludingtheSeparateAgreementassetforthinthis Section.
(b)
(c)
24
13 OPERATIONANDMAINTENANCE
13.1 Procedures,ManualsandReports (a) TheCompanyshalldevelop,prepareandupdateasnecessaryfromtimetotime, procedures, manuals and drawings for the safe and efficient operation and maintenanceoftheProject. TheCompanyshallprovide3(Three)hardcopiesofallprocedures,manualsand drawings prepared under paragraph (a) to GON within 90 (Ninety) days after ProjectCommissioning. DuringtheoperationandmaintenanceoftheProject,theCompanyshallsubmitto GONannualreportsincludingauditreportandoperationandmaintenancedetails inaccordancewiththeElectricityRegulations,2050.
(b)
(c)
13.2 PowerStationOperatingArrangements (a) TheCompanyshallensurethattheProjectisdevelopedandoperatedwithGood ElectricityIndustryPractice. The Company may engage substitute qualified entities or organizations to collaborate in the operation and maintenance of the Project with prior notice to GON/DoED.
(b)
14 PROJECTHANDOVER
TheCompanyshalloperateandmaintaintheProjectinaccordancewithGoodElectricity Industry Practice until the expiration of the Generation License and Transmission License.UpontheexpirationofthisAgreement,theProject(togetherwithallapplicable manuals and technical documents, Permits and Project Rights) shall promptly be duly transferred in good running condition to GON or its designee, free of cost and without anyliabilitieswhatsoevertoGON,andtheCompanyshallbewoundupanddissolvedin accordance with its corporate enabling documentation, including its Articles of Association.
25
14.1 TrainingPriortoProjectTransfer TwoyearpriortothedateonwhichtheProjectistobetransferredtoGON(hereinafter referredtoas theTransferDate),theCompanyshallarrangeforthetrainingatitsown cost,ofasufficientnumberofstaffof GONordesignatedentityforGONtoenablethem to operate and maintain the Project and Project Facilities after GON has obtained ownershipofthesame. 14.2 TransferFreeofAllLiens On the Transfer Date, the Company shall transfer or cause to be transferred the ownership of the Project and Project Facilities to GON (and shall execute such documentsasmayreasonablybeconsiderednecessarytoeffectsuchtransfer)freefrom any and all Environmental Liabilities and all Liens and encumbrances other than PermittedLiensandwithoutthepaymentofanycompensationtotheProjectCompany, togetherwithallofitsright,titleandinterestinandtothefixtures,fittings,spareparts, plant and equipment (including test equipment and special tools and vehicles used in plantmanagementandoperation)andallimprovementscomprisingtheProject. 14.3 OperatingManualsandOtherMaterials OntheTransferDate,theCompanyshall alsodeliverorcausetobedeliveredto GON such operating manuals, operation summaries/transfer notes, design drawings, historic operatingandmaintenancerecordsandotherinformationasmayreasonablyberequired fortheoperation, maintenance andrehabilitation oftheProjectandProjectFacilitiesto becometheresponsibilityof GON.TheCompanyshallarrangethemaintenanceschedule for the Project and Project Facilities so that any and all major overhauls of the Project thatarethenrequiredtohavebeenperformedarecompletedbeforetheTransferDate.
15 ASSIGNMENTANDMORTGAGE
15.1 Assignment and MortgagebytheCompany (a) TheCompanymayforthepurposesofarrangingorrearrangingfinancingforthe Project,assignorotherwisetransferalloranypartofitsrightsorbenefits(butnot itsobligations)underthisAgreementtoanybankorfinancialinstitution(whether domesticorinternational)providingfinancingfortheProject. Upon an assignment or transfer under paragraph (a), the assignee or transferee shall be vested with all the rights and benefits assigned or transferred to it provided that such assignment or transfer shall not increase GON's financial obligationsunderthisAgreement. The Company shall promptly give GON written notice of any assignment or transfer under paragraph (a) and GON shall promptly acknowledge in writing suchassignment. 26
(b)
(c)
(d)
The Company may mortgage or otherwise give security over its assets and undertaking including any lease, License or other interest granted by GON pursuantofthisAgreementtoanybankorfinancialinstitution(whetherdomestic orinternational)providingfinancingfortheProject.
15.2 Assignmentby GON GONmayassignortransferitsrightsorobligationsunderthisAgreementtoany official or entity.
16 VALIDITY
This Agreement becomes effective upon the issuance of the Generation License of the Project and shall terminate on the expiration of the Generation License and the Transmission License unless terminated earlier pursuant to the provisions of this Agreement.
17 COMPLIANCEWITHLAW
The Company and its employees, together with their contractors and subcontractors involvedintheProjectshallabidebytheLawsofNepal.
18 RESOLUTIONOFDISPUTES
ForthepurposeofthisSection,thetermDisputeshallmeananydispute,discrepancy or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, breach or termination. The Parties shall use their best efforts to resolve any differences of opinion in the interpretation or applicationofthisAgreementinaneffectiveandtimelymanner. 18.1 DisputeResolutionbyConsultation Should issues remain outstanding, the following procedures shall be adopted to resolve throughdirectdiscussionsandcollaborationbetweentheParties: (a) Each of GON and the Company shall designate in writing to the other Party a representativewhoshallbeauthorizedtoresolveanydisputeordifferencearising outofthisAgreementinanequitablemanner. The Parties agree to attempt to resolve all disputes or differences promptly, equitablyandinagoodfaithmanner. The Parties further agree to provide each other with reasonable access during normal business hourstoanyandallrecords,informationanddatapertainingto any such dispute or difference other than any confidential communications betweenanyPartyanditslegaladvisersoranysuchrecords,informationordata whichanyPartyhasagreedwithanythirdPartytokeepconfidential.
(b)
(c)
27
(d)
If a Party (the "Notifying Party") wishes a dispute or difference under this AgreementtobesettledunderthisSection,itmustgivetheotherPartynoticeof the dispute or difference. Within 15 days of receipt of such notice, the other Party'sdesignatedrepresentative mustcommencediscussionswiththeNotifying Party'sdesignatedrepresentativetoattempttoresolvethedisputeordifferencein accordancewithparagraph(b) If the designated representatives are unable to resolve a dispute under this Agreementwithin90(Ninety)daysoftheNotifyingPartygivinganoticeunder paragraph (d), such dispute shall be referred to arbitration in accordance with Section 18.2.
(e)
18.2 DisputeResolutionbyArbitration (a) In the event that the parties are unable to resolve any dispute or difference betweenthePartiespursuanttoSection18.1,thensuchdisputeordifferenceshall be settled exclusively and finally by arbitration irrespective of the magnitude of thedisputeordifference,theamounttowhichthedisputeordifferencerelatesor whether such dispute or difference would otherwise be considered justifiable or suitableforresolutionbyanycourtorarbitraltribunal. This Agreement and the right and obligations of the Parties shall remain in full forceandeffectpendingtheawardinsucharbitrationproceeding. Arbitration shall be conducted in accordance with the Rules of Arbitration of UNCITRALasinforceatthetimeofregistrationofthedispute. The Arbitral tribunal shall consist of 3 (Three) arbitrators. Each Party shall appoint one arbitrator for each arbitration, and the third arbitrator shall be appointed by the London Court of International Arbitration ("LCIA") in accordance with the Arbitration Rules of the LCIA. No arbitrator shall be a present employee or agent of, or consultant or counsel to, either Party or any affiliateofeitherParty. ArbitrationshallbeconductedinKathmandu,Nepal. The language to be used in each arbitration shall be English, and all written documentstobeprovidedineacharbitrationshallbeinEnglish. Any decision or awardof an arbitral tribunal appointed pursuant tothis Section shall be finaland bindingupontheParties.GoNandtheCompany agreesthata judgmentuponanyarbitrationawardmaybeenteredasajudgmentinanycourt ofcompetentjurisdiction. The feeofeacharbitratorandthecostofthearbitralproceedingsshall be borne bythePartiesinaccordancewiththeUNCITRALRulesofArbitration.
(b)
(c)
(d)
(e) (f)
(g)
(h)
28
19 CONFIDENTIALITYANDINFORMATION
19.1 DisclosureofConfidentialInformation Each Party shall not divulge any trade, commercial or technical secrets or confidential matters, reports, documents, data, information (including the DER) of another Party to anythirdPartyexcept: (i) (ii) (iii) asrequiredbylaw withtheconsentofsuchotherParty tosuchofitsofficers,employeesandthoseofitsrelatedbodiescorporateasneed toknowofsuchmatterfortheordinarybusinesspurposesoftheParty,provided thatitmustalsouseitsbestendeavorstoensurethatallmattersdivulgedarekept confidential toanyofitsconsultants,banks,financers,insurersorotheradvisersor toanyaccountantorlegaladviser
(iv) (v)
19.2 ProvisionofInformation EachofthePartiesshallprovidetotheotherPartywithinareasonabletimeofarequest such information as that Party has available which is or may be necessary or usefulto enablesuchotherPartytoperformitsobligationsunderthisAgreement.
20 FORCEMAJEURE
20.1 DefinitionofForceMajeureEvent "Force Majeure Event" shall mean an event occurred in Nepal of any NonPolitical Event,IndirectPoliticalEventorPoliticalEventasdefinedhereinafter,whichpreventthe Party claiming force majeure referred to as the Affected Party from performing its obligations under this Agreement and which act or event (i) is beyond the reasonable controlandnotarisingoutofthefaultoftheAffectedParty,(ii)theAffectedPartyhas beenunabletoovercomebytheexerciseofduediligenceandreasonableefforts,skilland careconsistentwithGoodElectricityIndustryPractices,includingthroughexpenditureof reasonablesumsof moneyand(iii) hasa materialadverseeffectontheProject."Force MajeureEvents"hereundershallincludeeachofthefollowingeventsandcircumstances, butonlytotheextentthateachsatisfiestheaboverequirements:
29
(a)
NonPoliticalForceMajeureEventmeans: (i) Acts of God or events including but not limited to fire (to the extent originating from a source external to the site or beyond the design specificationfortheConstructionWorks),lightening,earthquake,volcanic eruption, devastating flood and landslide, storm cyclone, tornado, typhoon, hurricane, wildfire, exceptionally adverse weather conditions includingseveredrought epidemic,orplague
(ii)
(iii) radioactive contamination or ionizing radiation, toxic or dangerous chemical contamination, excluding circumstances where the source or causeofcontaminationorradiationisbroughtorhasbeenbroughtintoor near the site of contamination or radiation by the Company or those employedbytheCompanyorengagedby theCompany (iv) strikes or boycotts, works stoppage or goslows (other than those involvingprimarilyProjectCompanysownemployeesorthoseofanyof Project Companys contractors or subcontractor or their respective employees/representativesorattributabletoanyactoromissionofanyof them) interrupting supplies and services to the Project for a period exceedingacontinuousperiodof14(Fourteen)dayss,and (v) any judgmentororderofanycourtofcompetentjurisdictionorstatutory authority in Nepal made in contravention of this Agreement, in any proceedings for reasons other than failure of the Project Company to comply with any applicable law or applicable permits or on account of breach thereof, or of any contract, or enforcement of this Agreement or exercise of any of its right under this Agreement by any Government Agency.
(b)
Indirect Political Force Majeure Event means, where the Company is the AffectedParty,oneormoreofthefollowingactsorevents: (i) anyactofwar(whetherdeclaredorundeclared),invasion,armedconflict oractofforeignenemy,revolution,riot,insurrection,civilcommotion,act of terrorism, military action, blockade, embargo, malicious damage or motivatedsabotage anypublicagitationwhichpreventsconstructionoroperationactivitiesof the Project for a period exceeding a continuous period of 14 (Fourteen) dayss.
(ii)
(c)
Political Force Majeure Event means, where the Company is the Affected Party,oneormoreofthefollowingactsorevents:
30
(i)
nationalization, expropriation or compulsory acquisition ofany assets or rightsoftheCompanyoritscontractorsbyanyGovernmentAgency unlawfulorunauthorizedrevocationof,orrefusaltorenew byGON(on terms no less favourable to a Party than those attached to the original Authorisation),anyAuthorisationrequiredbyaPartyoritscontractorsto performitsobligationsorexerciseitsrightsunderthisAgreementorany refusaltograntanysuchAuthorisation and
(ii)
(iii) any other action or inaction on the part of a GON Agency which is directedagainsttheProject. 20.2 AForceMajeureEventshallnotinclude: 1. strikes,lockouts,industrialdisputes,industrialdifficulties,workbans,blockages, picketingorsimilaractionwhichisspecifictotheProjectinvolvingemployeesat theProjectrelatingtoProjectissues mechanical or electrical breakdown and failure of equipment despite the compliance bythe AffectedPartywithGoodElectricityIndustryPracticeunless such breakdown or failure has been caused by any one or more of the Force Majeure Events examples of which appear in paragraphs (a) or (b) or (c) of Section20.1above economic hardship or financial inability, including any failure, inability or difficulty in making payment or lack of funding sufficientto meet any payment obligationaccruedbywitheredParty fluctuationsorreductions indemand forthesupply including,butnotlimitedto aneventor circumstanceconstitutedby,orwhichisaconsequenceofreductions indemandforelectricitysuppliedtopowerpurchaser(s) thebreachofthisAgreementbythePartywhoisnottheAffectedParty theexerciseofarightarisingbecauseofsuchabreach unavailability, late delivery or changes in cost of the machinery, equipment, materials,sparepartsorfuelorconsumablesunlesssuchisitselfthedirectresult ofaForceMajeureEvent delay in the performance of any contractor, subcontractor or supplier or their agent,unlesssuchdelayisitselfthedirectresultofaForceMajeureEvent and nonperformance resulting from normal wear and tear or random flaws in materialsandequipmentorbreakdownsinequipment.
2.
3.
4.
5. 6. 7.
8.
9.
31
20.3 ObligationtoNotify (a) If an Affected Party reasonably considers that a circumstance has arisen which constitutesorislikelytoconstituteorresultinaForceMajeureEventinrelation toit,theAffectedPartyshall, inany casewithin7(Seven)dayssofthedateof occurrence of a force majeure event or the date of knowledge thereof give the otherPartynoticesettingoutthefollowinginreasonabledetail: (i) (ii) ofthateventorcircumstanceand of the rights or obligations of the Affected Party under this Agreement whichhavebeenorshallbe,orarelikelytobe,affectedbythateventor circumstance.
(b)
In the case of a Force Majeure Event which prevents the Affected Party from performinganobligationunderthisAgreement,theAffectedPartyshallkeepthe otherPartyinformedonthefollowing: (i) the Affected Party's estimate of the likely duration of the Force Majeure Event theactiontakenandtheactionproposedtobetakenbytheAffectedParty incomplyingwithitsobligationsunderSection 20.3(a) thecessationofthatForceMajeureEventorthesuccessful mitigationor minimizationoftheeffectsofthatForceMajeureEventand any other matter which the other Party may reasonably request in connection with the occurrence of the Force Majeure Event and the mattersreferredtointhisSection.
(ii)
(iii)
(iv)
20.4 EffectonPerformanceofObligation (a) IfaParty(theAffectedParty)isunablewhollyorpartly: (i) (ii) toexerciseanyrightor toperform anyobligation asrequired,underthisAgreement,
theAffectedPartyshall beexcused fromperformanceofsuchobligationstothe extentitisunabletoperformthesameonaccountofsuchforcemajeureeventthe duration so affected shall be extended so as tomake the Affected Partyable to perform thesameasitisaffectedbythatForceMajeureEvent., (b) Iftheoccurrenceofa ForceMajeureEventresults in anyperiodofdelay inthe time planned by the Company for Project Commissioning, or any inability to generateortransmitenergyforaperiodoftimeafterProjectCommissioning,then 32
GON will, upon receipt of an application with supporting evidences by the Company, extend the Generation License and the Transmission License, for a period equal to that period or the aggregate of such periods which in any case shallnotexceed5(Five)yearsintotal. 20.5 ObligationtoMitigate (a) If aForceMajeureEventoccurs,theAffectedPartyshallassoonaspracticable aftertheoccurrenceofthatForceMajeureEvent,usereasonableendeavoursto: (i) mitigate or limit damage, if any, caused or likely to be caused to the Projectfacilitiesasaresultofsucheventstorestoresuchfacilitiesand takeallremedialmeasurestominimizeanyresultingdelayintheexercise oftheAffectedRightortheperformanceoftheAffectedObligation.
(ii)
TheconsequenceofafailurebytheAffectedPartytocomplywithitsobligation underthisparagraph(a)tominimizedelayislimitedtoareductionintheperiod andextentoftheextensioninaccordancewithparagraph(b). (b) TheperiodofextensionunderSection 20.4shallexcludeanydelayintheexercise of the Affected Right or performance of the Affected Obligation which is attributabletoafailurebytheAffectedPartytocomplywithparagraph(a). Furthermore,theextenttowhichobligationsareextendedunderSection20.4will be reduced to the extent that the Affected Partys inability to perform the obligationisattributabletoafailurebytheAffectedPartytocomplywithSection 20.5(a). (c) TheAffectedParty,whenabletoresumeperformanceofitsobligationsunderthis Agreement,shallnotifytheotherPartytothateffectinwritingandshallpromptly resumeperformanceofitsobligations. TheAffectedPartyshallcontinuetoperformsuchofitsobligationswhicharenot affectedbytheforcemajeureeventandwhicharecapableofbeingperformedin accordancewiththeprovisionofthisAgreement. Despite anything in this Section to the contrary, an Affected Party shall not be obligedtoincuranyexpenditureinsofarasaForceMajeureEventiscausedbya breach of this Agreement by the other Party (other than a breach involving a failuretopayanyamountunderthisAgreement). The Affected Party shall bear the onus of proving that it has complied with its obligationsunderparagraph(a).
(d)
(e)
(f)
33
20.6 CompensationPayableduringForceMajeureEvent Upon the occurrence of any Force Majeure Event prior to Financial Closure, the followingshallapply: (i) There shall be no termination except as provided in Section 20.8 of this Agreement (ii) ThedateforachievingtheFinancial Closureshallbeextendedbytheperiodfor whichsuchforcemajeureshallsubsistand (iii) The Parties shall bear their respective costs and no party shall be required to paytotheotherpartyanycostsarisingoutofsuch ForceMajeureEvent. Upon the occurrence of any Force Majeure Event after the Financial Closure, the followingshallapply: (a) GON shall form a Project Compensation Committee for the purpose of determiningtheadditionaltimeperiodrequiredtomitigatetheeffectsofNon Political/Indirect Political Force Majeure Events or compensation amount in theeventofPoliticalForceMajeureEventandbreachofthisAgreementbythe Parties. The Parties shall be bound by the decisions of the Committee to compensate the Affected Party pursuant to the paragraphs (b), (c) and (d) of thisSection 20.6. (b) WheretheForceMajeureEventisaNonPoliticalForceMajeureEvent(except for severe drought in which the Project could generate less than 75 (Seventy Five) percent of the deemed electricity generation for a period or periods on account of drought), the Parties shall bear their respective costs and neither Partyshall berequiredtopaytootherPartyany costsarisingoutofany such ForceMajeureEvent.In theeventof severedroughtinwhichtheProjectcould generate less than 75 (Seventy Five) percent of the deemed electricity generationforaperiodorperiodsonaccountofdroughtassetforthinSection 20.1(a),theprovisionsstipulatedinSection 20.6(a)and20.6(c)shallapply (c) WhereForceMajeureEventisIndirectPoliticalForceMajeureEvent,eventof severedroughtinwhichtheProjectcouldgeneratelessthan75(SeventyFive) percentofthedeemedelectricitygenerationforaperiodorperiodsonaccount ofdrought,orbreachofthisAgreementbyGON,thecostsattributabletosuch Force Majeure Event and directly relating to the Project (the Force Majeure Costs) shallbe borne by the Company tothe extentof the Insurance Claims (Section11.4 hereof), and tothe extent such Force Majeure Costs exceed the Insurance Claims, the Company along with supporting evidences shall apply for the extension of the Licenses (Generation/Transmission). Upon receiving the application, the Committee set forth in Section 20.6 (a) shall assess and evaluatethetype,nature,outcomeoftheeventthereinfromtheForceMajeure 34
Event(s)anddeterminetheadditionaltimerequiredtoextendthevalidityofthe LicensesoastooffsettheincrementalfinancialliabilityoftheCompany.The committee may invite relevant professionals, insurer(s) if deemed necessary whilescrutinizingthelosses. (d) WheretheForceMajeureEventisaDirectPoliticalForceMajeureEvent,the compensation amount attributable to such Force Majeure Event shall be determined by the Project Compensation Committee as set forth in Section 20.6(a) andthe compensation amount shall be paid inthree equalinstalments byGON withina year.Ifthe GONcompensates thecompany intheeventof DirectPoliticalForceMajeure,theCompanyshalleitherhandovertheProject freeofallitsrights,titleandinterestwithoutanyfurtherliabilitiestoGON,or continue developing oroperating the Project as the case may be in which the compensationamounthasbeendetermined. 20.7 Termination dueto ForceMajeureEvent (a) IfaForceMajeureEventoccurswhichpreventstheAffectedPartyfromexercising amaterialrightorperformingamaterialobligationunderthisAgreement,andthat Force Majeure Event likely to continues beyond a period of 24 (Twenty Four) monthsfromthedayonwhichnoticewasgivenbytheAffectedPartyunderSection 20.3, then, at the expiration of that period, the Parties may mutually decide to terminate this Agreement or continue this Agreement on mutually agreed revised terms. (b) If the Parties are unable to reach an agreement in this regard, the Affected Party shallaftertheexpiryofthesaidperiodof24(TwentyFour)months,beentitledto terminatethisAgreement.ProvidedthatGONmayatitsdiscretionhavetheoption to terminate this Agreement any time after the occurrence of the Political Force Majeure Event, provided, however, GON shall not be entitled to claim that it has beenaffectedbyaPoliticalForceMajeureEventassetforthinSection20.1(c). (c) NotwithstandinganythingtothecontrarycontainedinthisAgreement,Termination pursuant to any of the provisions of this Agreement shall be without prejudice to accruedrightsofeitherpartyincludingitsrighttoclaimandrecoveranydamagesor compensations as the case may be and other rights and remedies available under thisAgreementandtheprevailinglawsofNepal. 20.8 TERMINATIONNOTICE If either Party having become entitled to decide toterminate this Agreement pursuant to theprovisionofSection 20.7,itshallissueTerminationNoticesettingoutthefollowing: (i) (ii) sufficientdetailoftheunderlyingForceMajeureEvent TerminationDate,whichshallbeadateoccuringnotearlierthan90(Ninety)days fromthedateofTerminationNotice 35
(iii)
theestimatedcompensationpaymentincludingthedetailsofcomputationthereof, iftheForceMajeureEventisaDirectPoliticalForceMajeureEventand otherrelevantinformation,ifany.
(iv)
21 CHANGESINLAW
If thereisachangeinlaw,whichincreasesordecreasesthecostorrevenueornetincome oftheCompany inconnection withthe financing,ownership,operationormaintenance of the Project (including without limitation, any cost in connection with capital expenditurestomodifytheProjectorotherconditionsaffectingtheperformance bythe Companyof itsobligationsunderthisagreement oranyrestrictionontheabilityofthe CompanytoremitfundsoutsideofNepal)oraffectsthetimingoftheincurrenceofsuch costsorreceiptofsuchrevenuesornetincomes,thentheCompanyshall: a) determinetheamountofsuchincreaseordecreaseincostsorrevenuesornetincome ortheeffectonthetimingof theincurrenceofsuchcostorreceiptofsuchrevenueor netincome b) submit to GON certificate of a statutory auditor setting forth reasonable details the basisofandthecalculationsforsuchamountsorsucheffectsand, c) calculateequitableadjustmenttothefreeenergyinthecaseofincrementalfinancial liability to the company and upon receipt of statutory auditor reports, GON may adjust the incremental financial liability in a equitable adjustment to free energy or financiallycompensatetheCompany. d) in the case of increased revenues due to the change in law, the Company shall reimburseGONtheamountasdeterminedbythestatutoryauditor.
22 REPRESENTATIONSANDWARRANTIES
22.1 GON RepresentationsandWarranties GONrepresentsandwarrantstotheCompanythat: (a) ithasthepowertoexecute,deliverandperformfullyallitsobligationsunderthis AgreementandeachGovernmentApproval,andthatallnecessaryactionhasbeen taken to authorize the execution, delivery and performance by it of this AgreementandeachGovernmentApproval the execution, delivery and performance by it of its obligations under this Agreement and each Government Approval is in accordance with existing Law and
(b)
36
(c)
thisAgreementandeachGovernmentApprovalhasbeendulyissuedorexecuted and delivered on behalf of GON and constitutes a valid obligation of GON, legallybindingonitandenforceableinaccordancewithitsterms.
22.2 TheCompanyRepresentationsandWarranties TheCompanyrepresentsandwarrantstoGON that: (a) ithasthepowertoexecute,deliverandperformfullyallitsobligationsunderthis AgreementandtoauthorizeperformanceofitsliabilitiesundereachGovernment Approval, and that all necessary action has been taken to authorize such execution,delivery andperformance the execution, delivery and performance by it of its obligations under this Agreement and the performance by it of its obligations under each Government Approvalisinaccordancewithexistinglawand thisAgreementhasbeendulyexecutedanddeliveredonbehalfoftheCompany and it, and each Government Approval, constitutes a valid obligation of the Company,legallybindingonitandenforceableinaccordancewithitsterms.
(b)
(c)
22.3 No UntrueStatementsorOmissions EachPartytothis AgreementrepresentsandwarrantstotheotherPartythatnowritten informationsuppliedbyitoronitsbehalftotheotherPartyrelatingtotheProjectorto any transactions contemplated by this Agreement contains any untrue statement or omissioninrelation toamaterialfactorapplicableLaw.
23 ADDITIONALFOREIGNSHAREHOLDERS
The Company may, for the purposes of arranging or rearranging financing for the Project,issue sharesto,orotherwiseacceptequity investments from,additional foreign shareholdersprovidingfinancingfortheProject.
24 NOTICES
Anycommunicationordocumentgiven, madeorsentbyeitherPartytotheotherParty pursuant to this Agreement must be in writing and shall be deemed to have been duly given, made or sent tothe Party to which it is addressed at the time of its delivery by mail,facsimileordelivery,atthefollowingaddresses. GON Address: MinistryofEnergy SinghaDurbar Katmandu NEPAL 37
FacsimileNo.
97714211510
Address:
DepartmentofElectricityDevelopment P.O.Box2507 BhaktiThapaMarg,Anamnagar Katmandu NEPAL
FacsimileNo. 9771227537]
TheCompany Address: FascimileNo.: EitherPartymaychangeitsaddressbypriornotificationtotheotherPartyinaccordance withthisSection.
25 AMENDMENTS
Where there is an agreement that an amendment is warranted, and where such amendmentisconsideredsignificant,eitherPartymayprovidetheproposedamendment forconsideration.TheprovisionsofthisAgreementmayonlybeamendedbythemutual consentofthePartiesinwriting.
26 WAIVER
ArightgrantedunderthisAgreementmaynotbewaived,exceptinwritingsignedbythe Partygrantingthewaiver.
27 APPROVALSANDCONSENTS
GON and the Company must each act reasonably in making a decision or giving or withholdingapprovalorconsentunderanyprovisionofthisAgreement.
28 FURTHERASSURANCES
(a) Each Party shall at its own expense do everything reasonably necessary to give effecttothisAgreement. GONandtheCompanyshallmakeeveryeffortnecessarytoobtainbenefitsfrom CDM (Clean Development Mechanism), and such benefit, if obtained, shall be sharedequally.
(b)
38
29 NONREFUNDABLEFEEANDPERFORMANCESECURITY
29.1 NonRefundableFee The Company has provided to the Department of Electricity Development a non refundable feeattherateof1,500.00(OneThousand Five Hundred)Dollarsper MWof proposedinstalledcapacityoftheProjectpriortosigningofthisAgreement. 29.2 Performance Security The Company shall provided a Performance Security at the rate of 7000 (Seven Thousand) Dollars per MW of installed capacity of the Project for which capacity the application issubmitted forGeneration License, priorto the issuanceoftheGeneration License. Such Performance Security hereof, shall be drawable by GON only if this Agreement shallhavebeenterminatedinaccordancewithSection 29.3hereof. 29.3 TerminationofAgreementand Forfeiture ofPerformance Security GON may, in its sole discretion, upon written notice to the Company, terminate this AgreementwithoutfurtherliabilitytoeitherPartyandGONshallhavetheunconditional right to draw upon the Performance Security by delivering a written notificationtothe issuerofthePerformanceSecurity: i. ii. iftheCompanyfailstoaccomplish Finacial ClosurepursuanttoSection1.9or iftheCompany failstoachieveCODwithinthe timeperiodas stipulated inthe PPA.
29.4 Release of PerformanceSecurity GONshall,withwrittennotificationtotheissuerofthePerformanceSecurity,releasethe PerformanceSecurity promptly aftertheCompanysubmitsan application withanevidence ofoccurrenceoftheCODtoreleasethePerformanceSecurity.
30 GOODFAITH
a) The Parties undertake to act in good faith in relation to the performance and implementationofthisAgreementandtotakesuchotherreasonablemeasuresasmaybe necessaryfortherealizationofitsobjectives. b) The Parties recognize that circumstances may arise which the provisions of this Agreement may have notforeseen in whicheventthePartiesundertaketoconsulteach other promptly and in good faith in an effort to reach agreement as to what should be done.
39
c) ThePartiesconsiderthetermsofthisAgreementtobefairatthedateofthisAgreement, but if during the term of this Agreement either Party believes that this Agreement has become grossly unfair to that Party, it shall notify the other and the Parties shall use reasonable efforts to agree on such action as may be necessary to remove the cause or causes of the unfairness, but failure to agree shall not be submitted to the dispute resolutionproceduressetoutinSection22hereof.
31 ETHICALSTANDARDS
In the developmentof the Project and the conductof all actions under this Agreement, GON and the Company shall each conduct itself in accordance with the highest ethical standardsandobservethespiritofallapplicableLaws.
32 SEVERABILITY
Any provision of this Agreement which is illegal, void or unenforceable shall be ineffective to the extent only of such illegality, voidness or unenforceability, without invalidatingtheremainingprovisionsofthisAgreement.
33 ANNEXURE
ThefollowingSchedulesshallbeseentobeinconjunctionwithandtobeapartofthis Agreement: Annexure[SpecifyNumber]: SeparateAgreementpursuanttotheSection12.1 Annexure[SpecifyNumber]:MemorandumofAssociation oftheCompany Annexure[SpecifyNumber]:ArticleofAssociation oftheCompany IN WITNESS WHEREOF, the Parties hereto, acting through their duly authorized representatives,havecausedthisAgreementtobesignedin10(Ten)copiesinEnglishlanguage, at Department of Electricity Development, 576Bhakti Thapa Sadak (4), Thapagaon, Anamnagar,Kathmandu,Nepalonthe ________________________________ Signedonbehalfof GovernmentofNepalofNepal (.) DirectorGeneral DepartmentofElectricityDevelopment Kathmandu,Nepal Witnessedby: . DeputyDirectorGeneral DepartmentElectricityDevelopment Kathmandu,Nepal 40 Witnessedby: Signedonbehalfof TheProjectCompany (......................................)
TableofContents
PREAMBLE..............................................................................................................................1 1 GENERAL .........................................................................................................................2

1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 PURPOSE .............................................................................................................................................. 2 DEFINITIONS ......................................................................................................................................... 2 INTERPRETATION .................................................................................................................................. 8 GOVERNINGLAW ................................................................................................................................. 9 SCOPEOFCOVERAGE ............................................................................................................................ 9 MINIMUM INTERNATIONALSTANDARD .................................................................................................. 9 TRANSFEROFASSETS ........................................................................................................................... 9 SCOPEOFPROJECT .............................................................................................................................. 10 FINANCIALCLOSURE .......................................................................................................................... 10 GON'S INITIAL OBLIGATION ............................................................................................................... 10
2 3
CONDITIONPRECEDENT ..........................................................................................10 DERANDEIA/IEE .........................................................................................................11

3.1 3.2 DETAILED ENGINEERINGREPORT(DER) ............................................................................................. 11 ENVIRONMENTAL IMPACTASSESSMENT(EIA)/INITIAL ENVIRONMENTAL E XAMINATION(IEE).............. 11
ESTABLISHMENTOFCOMMITTEEANDTASKFORCE .....................................12
4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 ESTABLISHMENTOFA PROJECTCOORDINATION COMMITTEE ............................................................... 12 ESTABLISHMENTOFPROJECTT ASK FORCE .......................................................................................... 12 GRANTOF GOVERNMENTAPPROVALS ................................................................................................. 13 GENERATIONANDTRANSMISSIONLICENSE ......................................................................................... 13 LOCALGOVERNMENTAPPROVALS ...................................................................................................... 13 COMMUNICATIONS PERMITS ............................................................................................................... 14 EXPLOSIVES ....................................................................................................................................... 14 SECURITY ........................................................................................................................................... 14
LANDANDWATER ......................................................................................................14
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 STRATEGIC PLAN ................................................................................................................................ 14 ACQUISITION, COMPENSATIONANDRESETTLEMENT ............................................................................ 14 LOCALSHARE .................................................................................................................................... 15 GLOF E ARLYWARNING SYSTEM ........................................................................................................ 15 ELECTRIFICATIONANDFREE ENERGYTOLOCAL RESIDENCE................................................................ 15 INRESPECTOFLANDANDWATER ....................................................................................................... 16 TRANSMISSIONLINE ........................................................................................................................... 16 ROADSTO PROJECTSITE ..................................................................................................................... 16 PROJECTAREA ................................................................................................................................... 17
USEOFLOCALRESOURCESANDSERVICES .......................................................17
6.1 USEOFLOCAL RESOURCES, INSTITUTIONSANDHUMANRESOURCESAND NATIONALPRODUCTAND SERVICES ......................................................................................................................................................... 17 6.2 TECHNOLOGYANDTRAINING .............................................................................................................. 18
PROCUREMENTANDENTRYREQUIREMENTS ...................................................18
7.1 7.2 7.3 PORTOF ENTRYAND TRANSPORTARRANGEMENTS.............................................................................. 18 FUEL .................................................................................................................................................. 18 VISAS ................................................................................................................................................. 19
8 9
INFRASTRUCTURE ......................................................................................................19 REPATRIATION ............................................................................................................19

9.1 9.2 EXPORT(IFAPPLICABLE) .................................................................................................................... 19 FOREIGN CURRENCYANDREPATRIATION ............................................................................................ 19
10 TAXESANDROYALITIES..........................................................................................19
10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 INCOMETAX E XEMPTION .................................................................................................................... 19 TAX DEPRECIATIONOFPROJECTCOSTS ............................................................................................... 20 VALUE ADDED T AX ............................................................................................................................ 20 CUSTOMSAND IMPORTDUTIES ........................................................................................................... 20 ROYALTIES PAYABLETO GON ............................................................................................................ 21 LAND T AX .......................................................................................................................................... 21 BONUSANDHOUSINGFACILITIES ........................................................................................................ 22 LOCALTAXES..................................................................................................................................... 22 REGISTRATION FEES ........................................................................................................................... 22
11 PROJECTDEVELOPMENT .........................................................................................22
11.1 11.2 11.3 11.4 RESPONSIBILITIESOFTHECOMPANY ................................................................................................... 22 SUBMISSIONOFDOCUMENTATION ....................................................................................................... 23 GON ASSISTANCEAND COSTS (IFAPPLICABLE) .................................................................................. 23 INSURANCE ........................................................................................................................................ 23
12 FREEENERGYANDSALEOFELECTRICITY(IF APPLICABLE) .....................24

12.1 POWERAND ENERGYTO GON............................................................................................................ 24
13 OPERATIONANDMAINTENANCE ...........................................................................25
13.1 13.2 PROCEDURES, MANUALSANDREPORTS ............................................................................................... 25 POWERSTATION OPERATING ARRANGEMENTS .................................................................................... 25
14 PROJECTHANDOVER ................................................................................................25
14.1 14.2 14.3 TRAININGPRIORTO PROJECTTRANSFER ............................................................................................. 26 TRANSFERFREEOF ALLLIENS ............................................................................................................ 26 OPERATING MANUALSAND OTHERMATERIALS .................................................................................. 26
15 ASSIGNMENTANDMORTGAGE ..............................................................................26
15.1 15.2 ASSIGNMENTANDMORTGAGEBYTHE COMPANY ................................................................................ 26 ASSIGNMENTBYGON ........................................................................................................................ 27
16 VALIDITY......................................................................................................................27 17 COMPLIANCEWITHLAW .........................................................................................27 18 RESOLUTIONOFDISPUTES ......................................................................................27

18.1 18.2 DISPUTERESOLUTIONBY CONSULTATION ........................................................................................... 27 DISPUTERESOLUTIONBY ARBITRATION .............................................................................................. 28
ii
19 CONFIDENTIALITYANDINFORMATION ..............................................................29
19.1 19.2 DISCLOSUREOF CONFIDENTIAL INFORMATION..................................................................................... 29 PROVISIONOFINFORMATION ............................................................................................................... 29
20 FORCEMAJEURE ........................................................................................................29
20.1 20.2 20.3 20.4 20.5 20.6 20.7 20.8 DEFINITIONOF FORCEMAJEURE EVENT .............................................................................................. 29 A FORCEMAJEURE E VENTSHALLNOTINCLUDE: ................................................................................. 31 OBLIGATIONTO NOTIFY ...................................................................................................................... 32 EFFECTON PERFORMANCEOFOBLIGATION ......................................................................................... 32 OBLIGATIONTO MITIGATE .................................................................................................................. 33 COMPENSATION PAYABLEDURINGFORCE MAJEURE E VENT ................................................................. 34 TERMINATIONDUETO FORCEMAJEURE E VENT ................................................................................... 35 TERMINATION NOTICE ................................................................................................................. 35
21 CHANGESINLAW .......................................................................................................36 22 REPRESENTATIONSANDWARRANTIES ...............................................................36

22.1 22.2 22.3 GON REPRESENTATIONSANDWARRANTIES ........................................................................................ 36 THE COMPANY REPRESENTATIONSANDWARRANTIES ......................................................................... 37 NOUNTRUE STATEMENTSOR OMISSIONS ............................................................................................ 37
23 ADDITIONALFOREIGNSHAREHOLDERS .............................................................37 24 NOTICES ........................................................................................................................37 25 AMENDMENTS .............................................................................................................38 26 WAIVER.........................................................................................................................38 27 APPROVALSANDCONSENTS ...................................................................................38 28 FURTHERASSURANCES ............................................................................................38 29 NONREFUNDABLEFEEANDPERFORMANCESECURITY ................................39
29.1 29.2 29.3 29.4 NONREFUNDABLE FEE ....................................................................................................................... 39 PERFORMANCE SECURITY ................................................................................................................... 39 TERMINATIONOFAGREEMENTAND FORFEITUREOF PERFORMANCE SECURITY ..................................... 39 RELEASEOF PERFORMANCESECURITY ................................................................................................ 39
30 GOODFAITH .................................................................................................................39 31 ETHICALSTANDARDS...............................................................................................40 32 SEVERABILITY .............................................................................................................40 33 ANNEXURE ....................................................................................................................40
iii

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ModelProjectDevelopmentAgreement

PROJECT DEVELOPMENT AGREEMENT

"GWh" "kW" "kWh" "Law"

"MW" "MWh" "PerformanceSecurity"

(d) (e) (f)

Notwithstandingparagraph(b)and(c),GONmayrestricttransfersorreturns inkind in circumstanceswhereitcouldotherwiserestrictsuchtransfersunderthisAgreement.

10.5 RoyaltiesPayableto GON EnergyRoyaltyandCapacityRoyaltyshallbepaidbytheCompanytoGONassetforth below:

15.2 Assignmentby GON GONmayassignortransferitsrightsorobligationsunderthisAgreementtoany official or entity.

theestimatedcompensationpaymentincludingthedetailsofcomputationthereof, iftheForceMajeureEventisaDirectPoliticalForceMajeureEventand otherrelevantinformation,ifany.

DepartmentofElectricityDevelopment P.O.Box2507 BhaktiThapaMarg,Anamnagar Katmandu NEPAL

TheCompany Address: FascimileNo.: EitherPartymaychangeitsaddressbypriornotificationtotheotherPartyinaccordance withthisSection.

PREAMBLE..............................................................................................................................1 1 GENERAL .........................................................................................................................2

CONDITIONPRECEDENT ..........................................................................................10 DERANDEIA/IEE .........................................................................................................11

INFRASTRUCTURE ......................................................................................................19 REPATRIATION ............................................................................................................19

12 FREEENERGYANDSALEOFELECTRICITY(IF APPLICABLE) .....................24

21 CHANGESINLAW .......................................................................................................36 22 REPRESENTATIONSANDWARRANTIES ...............................................................36

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