LOAN NUMBER 1871 TR

Loan Agreement

(Second Accelerated Rural Electrification Project)

between

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

and

PROVINCIAL ELECTRICITY AUTHORITY

Dated od , 1980

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

LOAN NUMBER 1871 TH

LOAN AGREEMENT

AGREEMR,NT, dated 1d , 1980,between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT(hereinafter called the Bank) and PROVINCIAL ELECTRICITY AUTHORITY(hereinafter called the Borrower), a body established and opera-ting under the Provincial Electricity Authority Act, B.E. 2503(1960) of the Guarantor.

WHEREAS (A) the Borrower has requested the Bank to assist inthe financing of the Project described in Schedule 2 to thisAgreement by making the Loan as hereinafter provided;

(B) the Kingdom of Thailand (hereinafter called the Guar-antor) intends to contract from the Saudi Fund for Development(hereinafter called SFD) a loan (hereinafter called the SFD Loan)in an aggregate principal amount equivalent to about twentymillion dollars ($20,000,000) to assist in the financing of PartA of the Project under terms and conditions to be set forth in anagreement (hereinafter called the SFD Agreement) to be enteredinto between the Guarantor and SFD, 3nd the Guarantor intends torelend to the Borrower the proceeds of the SFD Loan;

(C) the Guarantor intends to contract from the Governmentof Norway, a grant (hereinafter called the Norwegian Grant) in anaggregate principal amount equivalent to about one million fivehundred thousand dollars ($1,500,000) to assist in the financingof Part B of *the Project under terms and conditions set forthin an agreement (hereinafter called the Norwegian Agreement)to be entered into between the Guarantor and the Government ofNorway, and the Guarantor intends to make available to the Bor-rower the proceeds of the Norwegian Grant;

(D) the Guarantor intends to contract from the OPEC SpecialFund, a loan (hereinafter called OPEC Loan) in an aggregateprincipal amount equivalent to about eight million dollars($8,000,000) to assist in the financing of Part A of the Projectunder terms and conditions set forth in an agreement (hereinaftercalled the OPEC. Agreement) to be entered into between the Guaran-tor and OPEC, and the Guarantor intends to relend to the Borrowerthe proceeds of the OPEC Loan; and

(E) the Bank has agreed, on the basis inter alia of theforegoing, to make the Loan to the Borrower upon the terms andconditions hereinafter set forth;

NOW THEREFORE the parties hereto hereby agree as follows:

-2-

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept allthe provisions of the General Conditions Applicable to Loan andGuarantee Agreements of the Bank, dated March 15, 1974, withthe same force and effect as if they were fully set forth herein(said General Conditions Applicable to Loan and Guarantee Agree-ments of the Bank being hereinafter called the General Con-ditions).

Section 1.02. Wherever used in this Agreement, unless thecontext otherwise requires, the several terms defined in theGeneral Conditions and in the Preamble to this Agreement have therespective meanings therein set forth and the following additionalterms have the following ueanings:

(a) "EGAT" means the Electricity Generating Authority ofThailand, a body established by the Electricity Generating Author-ity of Thailand Act, B.E. 2511 (1968), of the Guarantor;

(b) "MEA" means the Metropolitan Electricity Authority,a body established by the Metropolitan Electricity Authority Act,B.E. 2501 (1958), of the Guarantor;

(c) "Fiscal Year" means a financial year commencing Octo-ber 1 and ending September 30;

(d) "Baht" means the currency unit of the Guarantor;

(e) "Guarantor's Electricity Sector" and "Sector" meanthe consolidated operations of the Borrower, MEA and EGAT;

(f) "First Loan Agreement" means the Loan Agreement(Accelerated Rural Electrification Project) between the Bank andthe Borrower, dated March 9, 1978; and

(g) "First Guarantee Agreement" means the GuaranteeAgreement (Accelerated Rural Electrification Project) between theKingdom of Thailand and the Bank, dated March 9, 1978.

-3-

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower,on the terms and conditions in the Loan Agreement set forthor referred to, an amount in various currencies equivalentto seventy-five million dollars ($75,100,000).

Section 2.02. The amount of the Loan may be withdrawnfrom the Loan Account in accordance with the provisions' ofSchedule 1 to this Agreement, as such Schedule may be amended fromtime to time, for expenditures made (or, if the Bank shall soagree, to be made) in respect of the reasonable cost of goods andservices required for the Project and to be financed out of theproceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree,procurement of the goods to be financed out of the proceeds of theLoan shall be governed by the provisions of Schedule 4 to thisAgreement.

Section 2.04. The Closing Date shall be June 30, 1986,or such later date as the Bank shall establish. The Bank shallpromptly notify the Borrower and the Guarantor of such laterdate.

Section 2.05. The Borrower -shall pay to the Bank a commitmentcharge at the rate of three-fourths of one per cent (3/4 of1%) per annum on the principal amount of the Loan not withdrawnfrom time to time.

Section 2.06. The Borrower shall pay interest at the rateof eight and one-fourth per cent (8.25%) per annum on thE princi-pal amount of the Loan withdrawn and outstanding from time totime.

Section 2.07. Interest and other charges shall be payablesemi-annually on January 15 and July 15 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set forthin Schedule 3 to this Agreement.

-4-

ARTICLE III

Execution of the Project

Section 3.01. The Borrower shall carry out the Projectwith due diligence and efficiency and in conformity with appro-priate administrative, financial, engineering and public utilitypractices.

Section 3.02. In order to carry out Part C of the Project,the Borrower shall (a) employ at a time mutually agreed betweenthe Bank and the Borrower consultants whose qualifications,experience and terms and conditions of employment shall be satis-factory to the Bank; and

(b) promptly following completion of the studies by suchconsultants, exchange views with the Bank regarding their findingsand recommendations and the implementation thereof.

Section 3.03. (a) The Borrower undertakes to insure, or makeadequate provision for the insurance of, the imported goods to befinanced out of the proceeds of the Loan against hazards incidentto the acquisition, transportation and delivery thereof to theplace of use or installation, and for such insurance any indemnityshall be payable in a currency freely usable by the Borrower toreplace or repair such goods.

(b) Except as the Bank shall otherwise agree, the Borrowershall cause all goods and services financed out of the proceedsof the Loan to be used exclusively for the Project.

Section 3.04. (a) The Borrower shall furnish to the Bank,promptly upon their preparation, the plans, specifications,contract documents and construction and procurement schedules forthe Project, and any material modifications thereof or additionsthereto, in such detail as the Bank shall reasonably request.

(b) The Borrower: (i) shall maintain records and proceduresadequate to record and monitor the progress of the Project(including its cost and the benefits to be derived from it), toidentify the goods and services financed out of the proceeds ofthe Loan, and to disclose their use in the Project; (ii) shallenable the Bank's accredited representatives to visit the facili-ties and construction sites included in the Project and to examine

-5-

the goods financed out of the proceeds of the Loan and any rele-vant records and documents; and (iii) shall furnish to the Bankat regular intervals all such information as the Bank shallreasonably request concerning the Project, its cost and, whereappropriate, the benefits to be derived from it, the expendituresof the proceeds of the Loan and the goods and service financedout of such proceeds.

(c) Promptly after completion of the Project, but in anyevent not later than six months after the Closing Date or suchlater date as may be agreed for this purpose between the Borrowerand the Bank, the Borrower shall prepare and furnish to the Banka report, of such scope and in such detail as the Bank shallreasonably request, on the execution and initial operation of theProject, its cost and the benefits derived and to be derived fromit, the performance by the Borrower and the Bank of their re-spective obligations under the Loan Agreement and the accom-plishment of the purposes of the Loan.

(d) The Borrower shn''I enable the Bank's representativesto examine all plants, ie tallations, sites, works, buildings,property and equipment ol the Borrower and any relevant recordsand documents.

ARTICLE IV

Management and Operations of the Borrower

Section 4.01. The Borrower shall at all times carry out itsoperations, manage its affairs and maintain its financial positionin accordance with appropriate engineering, business, financialand public utility principles and practices, and under thesupervision of experienced and competent mavagement.

Section 4.02. The Borrower shall take out and maintain withresponsible insurers, or make other provision satisfactory to theBank for, insurance against such risks and in such amounts asshall be consistent with appropriate practice..

Section 4.03. The Borrower shall operate and maintain itsplant, equipment and properties, and from time to time make allnecessary renewals and repairs thereof, in accordance withappropriate engineering and public utility practices.

ARTICLE V

Financial Covenants

Section 5.01. (a) The Borrower shall maintain recordsadequate to reflect in accordance with consistently maintainedappropriate accounting practices its operations and financialcondition.

. (b) The Borrower shall ensure, through implementation of asample monitoring program acceptable to .the Bank, that appropriaterecords are maintained in relation to the villages electrifiedunder the Project to permit analysis of consumer demand, costs ofproviding services, effectiveness of various management andpromotional procedures, and the impact of the Project, for vil-lages in selected areas, on development of local agriculture,agro-industries, commerce, and living rtandards.

Section 5.02. The Borrower shall: (i) have its accountsand financial statements (balance sheets, statements of incomeand expenses and related statements) for each Fiscal Year audited,in accordance with appropriate auditing principles consistentlyapplied, by independent auditors acceptable to the Bank; (ii)furnish to the Bank as soon as available, but in any case notlater than six months after the end of each such year, (A)certified copies of its financial statements for such year asso audited and (B) the report of such audit by said auditors,of such scope and in such detail as the Bank shall hhve reasonablyrequested; and (iii) furnish to the Bank such other informationconcerning the accounts and financial statements of the Borrowerand the audit thereof as the Bank shall from time to time reason-

ably request.

Section 5.03. (a) The Borrower represents that at the dateof this Agreement no lien exists on any of its assets as securityfor any debt.

(b) The Borrower undertakes that, except as the Bank shallotherwise agree (i) if the Borrower shall create any lien on anyof its assets as security for any debt, such lien will equally andratably secure the payment of the principal of, and interest andother charges on, the Loan, and in the creation of any such lienexpress provision will be made to that effect, at no cost to theBank; and (ii) if any statutory lien shall be created on anyassets of the Borrower as security for any debt, the Borrower

-7-

shall grant, at no cost to the Bank, an equivalent lien satisfac-tory to the Bank to secure the payment of the principal of, andinterest and other charges on, the Loan; provided, however,that the foregoing provisions of this paragraph shall not applyto: (A) any lien created on property, at the time of purchasethereof, solely as security for the payment of the purchase priceof such property; or (B) any lien arising in the ordinary courseof banking transactions and securing a debt maturing not more thanone year after the date on which it is originally incurred.

Section 5.04. Except as the Bank may otherwise agree:

(a) The Borrower shall from time to time take all suchmeasures (including, without limitation, seeking the Guarantor'sauthorization for adjustments of the structure or levels of

its electricity tariffs) as shall be required to permit theachievement of an annual rate of return on the average current netvalue of its fixed assets in service consistent with the achieve-ment of the Guarantor's obligation set forth in Section 3.02 ofthe Guarantee Agreement.

(b) for the purposes of this Section:

(i) the annual rate 'of return shall be calculated bydividing the Borrower's net operating income forthe Fiscal Year in question by one-half of the sumof the current net value of the Borrower's fixedassets in service at the beginning and at the endof that Fiscal Ye-r, expressed as a percentage;

(ii) the term "net operating income" means gross rev-enues from all sources related to the Borrower'selectricity operations less all expenses of elec-tricity operations, including cost of purchasedpower and fuels, administrative expenses, adequatemaintenance and taxes or any payments in lieu oftaxes, and provision for depreciation. Interest andother charges on debt are not considered to beoperating expenses for the purposes of determiningsaid net operating income;

(iii) the term "average current net value of the Bor-rower's fixed assets in service" means the grossvalue of the Borrower's fixed assets in service for

electricity operations less the amount of accumu-lated depreciation and consumers contributions, all

-8-

valued annually in accordance with the fixedcapital formation deflator used for public invest-ment in the Guarantor's annual accounts; and

(c) except as the Bank shall otherwise agree, the Borrowershall, on the basis of realistic forecasts, review, not laterthan April 30 in each of its Fiscal Years, the adequacy of itstariffs to produce for the current and next following Fiscal Yearsthe annual rates of return specified in Section 5.04 (a) above,and shall furnish to the Bank a copy of such review promptly uponits completion;

(d) Without limitation or restriction upon the generality ofparagraph (a) of this Section, except as the Bank shall otherwiseagree, the Borrower shall at all times maintain in its tariffschedule a provision for fuel and power purchase adjustments toincrease or decrease the energy charges to its consumers tocompensate for changes in the cost of all fuels and purchasedpower; and

(e) the provisions of Section 5.04 of the First Loan Agree-ment are amended to read as provided in Section 5.04 of thisAgreement.

Section 5.05. Without limitation or restriction upon theprovisions of Section 5.06 of this Agreement, except as the Bankand the Borrower shall from time to time otherwise agree, theBorrower shall not incur any debt if, after the incurring of suchdebt, the debt of the Borrower then incurred and outstanding wouldbe greater than 1.5 times the capital and surplus of the Borrower.For the purposes of this Section:

(a) "incurring of debt" includes the assumption and guar-antee of debt and any renewal, extension or modification of theterms of the debt or of the assumption of guarantee thereof;

(b) "debt" means any debt incurred by the Borrower;

(c) debt shall be deemed to be incurred: (i) under a loancontract or agreement (including the Loan Agreement) on the datesuch debt becomes outstanding and repayable in accordance with theloan contract, agreement or other instrument providing forsuch debt; and (ii) under a guarantee agreement, on the date theagreement providing for such guarantee is entered into;

-9-

(d) whenever in connection -with this Section it shall benecessary co value 'in. terms*. of Baht debt payable in foreigncurrency, such valuation shall be made at the prevailing lawfulrate of exchange at which such foreign currency is, at the time ofsuch valuation, -obtainable by the Borrower for the purposes ofservicing such debt, or if such currency is not obtainable,-at therate of exchange reasonably determined by the Bank; and

(e) "capital and surplus -of the Borrower" means the aggre-gate of the unimpaired paid-up capital, surplus and free reservesof the Borrower including accumulated surpluses and deficitsarising from the revaluation of net fixed assets, consumerscontribution and debt.

Section 5.06. (a) Without limitation or restriction uponthe provisions of Section 5.05 of this Agreement, except as theBank and the Borrower shall from time to time otherwise agree, theBorrower shall not incur short- or medium-term debt, includingoverdraft. arrangements and bonds, if by such incurrence theBorrower's total outstanding short- and medium-term debt wouldexceed 10% of all debt of the Borrower, including its short- andmedium-term debt and the debt proposed to be incurred.

(b) For the purposes of thin Section:

(i) short- and medium-term debt means debt maturingby its terms within five years; and

(ii) the provisions of paragraphs (a), (c) and (d)of Section 5.05 shall apply.

Section 5.07. Except as the Bank shall otherwise agree, ifthe Borrower shall repay in advance of maturity any part of theproceeds of the SFD and OPEC Loans, the Borrower shall simul-taneously repay a proportionate amount of the Loan then outstand-ing. All the provisions of the General Conditions relating torepayment in advance of maturity shall be applicable to anyprepayment by the Borrower in accordance with this Section.

ARTICLE VI

Remedies of the Bank

Section 6.01. For the purposes of Section 6.02 of the GeneralConditions, the following additional events are specified pursuantto paragraph (k) thereof:

- 10 -

(a) the Provincial Electricity Authority Act, B.E. 2503(1960), or the Electricity Generating Authority of Thailand Act,B.E. 2511 (1968), or the Metropolitan Electricity AuthorityAct, B.E. 2501 (1958), of the Guarantor, shall have been sus-pended, terminated or repealed, or materially amended, without theprior agreement of the Bank; and

(b) (i) subject to subparagraph (ii) of this paragraph:

(A) the right of the Guarantor or the Borrower towithdraw the proceeds of the SFD Loan or theOPEC Loan or of any other loan or grantmade to the Guarantor or the Borrower for thefinancing of the Project shall have beensuspended, cancelled or terminated in whole orin part, pursuant to the terms of the agree-ment providing therefor or the agreement oragreements between the Guarantor and theBorrower for the relending of the proceedsthereof; or

(B) any such loan shall have become due andpayable prior to the agreed maturity thereof.

(ii) Subparagraph (i) of this paragraph shall not applyif the Borrower establishes to. the sa-isfaction ofthe Bank that:

(A) such suspension, cancellation, termination orprematuring is not caused by the failure ofthe Borrover to perform any of its obligationsunder such agreement or agreements; and

(B) adequate funds for the Project are availableto the Borrower from other sources on termsand conditions consistent with the obligationsof the Borrower under this Agreement.

Section 6.02. For the purposes of Section 7.01 of the GeneralConditions, the following additional events are specified pursuantto paragraph (h) thereof, namely, that the events specified inparagraphs (a) or (b) (i) (B) of Section 6.01 of this Agreementshall occur.

- 11 -

ARTICLE VII

Effective Date; Termination

Section 7.01. The following event is specified as an addi-tional condition to the effectiveness of the Loan Agreementwithin the meaning of Section 12.01 (c) of the General Conditions,namely, that all conditions precedent to the effectiveness of theSFD and OPEC Agreements, and of the agreements between theGuarantor and the Borrower for the relending of the proceedsthereof, other than (if applicable) the effectiveness of thisAgreement, have been satisfied, or other arrangements, satisfac-tory to the Bank, have been arranged for the financing of thegoods and services covered thereby.

Section 7.02. The date /' , is herebyspecified for the purpose of Section 12.04 of the GeneralConditions.

ARTICLE VIII

Addresses

Section 8.01. The following addresses are specified forthe purposes of Section 11.01 of the General .Conditions:

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)For the Borrower:

Provincial Electricity Authority200 Ngarm Wong Warn RoadBangkok Metropolis 9Thailand

- 12 -

Cable address: Telex:

PEA 7991-PEABKK TH

BangkokThailand

IN WITNESS WHEREOF, the parties hereto, acting through

their representatives thereunto duly authorized, have caused this

.Agreement to be signed in,their respective names in the District

of Columbia, United States of America, as of the day and year

first above written.

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

By /~Regional Vice President

East Asia and Pacific

PROVINCIAL ELECTRICITY AUTHORITY

ByAuthorized Representative

- 13 -

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth. the Categories of items to befinanced out of the proceeds of the Loan, the allocation ofamounts of the Loan to each Category, and the percentage ofexpenditures for items so to be financed in each Category:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Equipment and 47,500,000 100% of foreignmaterials (other expenditures,than concrete 100% of localpoles) expenditures

(ex-factory)and 65% oflocal expendi-tures for off-the-shelf pro-curements

(2) Concrete poles 10,400,000 47%

(3) Studies 1,000,000 100%

(4) Unallocated 16,100,000

TOTAL 75,000,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expendituresin the currency of any country other than the Guarantor and forgoods or services supplied from the territory of any country otherthan the Guarantor; and

(b) the term "local expenditures" means expenditures in.the currency of the Guarantor and for goods or services suppliedfrom the territory of the Guarantor.

- 14 -

3. The disbursement percentages have been calculated in compli-ance with the policy of the Bank that no proceeds of the Loanshall be disbursed on account of payments for taxes leviedby, or ia the territory of, the Borrower on goods or services,or on tne importation, manufacture, procurement or supply thereof;to thas; end, if the amount of any such taxes levied on or inrespect of any item to be financed out of the proceeds of the Loandecreases or increases, the Bank may, by notice to the Borrower,increasc or decrease the disbursement percentage then applicableto such item as required to be consistent with the aforementionedpolicy of the Bank.

4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of payments made for expendi-tures prior to the date of this Agreement.

5. Notwithstanding the allocation of an amount of the Loanor the disbursement percentages set forth in the table in para-graph 1 above, if the Bank has reasonably estimated that theamount of the Loan then allocated to any Category will be insuffi-cient to finance the agreed percentage of all expenditures inthat Category, the Bank may, by notice to the Borrower: (i)reallocate to such Category, to the extent required to meet theestimated shortfall, proceeds of the Loan which are then allocatedto another Category and which in the opinion of the Bank arenot needed to meet other expenditures; and (ii) if such reallo-cation cannot fully meet the estimated shortfall, reduce thedisbursement percentage then applicable to such expenditures inorder that further withdrawals under such Category may continueuntil all expenditures thereunder shall have been made.

6. If the Bank shall have reasonably determined that theprocurement of any item in any Category is inconsistent withthe procedures set forth or referred to in this Agreement, noexpenditures for such item shall be financed out of the proceedsof the Loan and the Bank may, without in any way restrictingor limiting any other right, power or remedy of the Bank underthe Loan Agreement, by notice to the Borrower, cancel such amountof the Loan as, in the Bank's reasonable opinion, representsthe amount of such expenditures which would otherwise have beeneligible for financing out of the proceeds of the Loan.

- 15 -

SCHEDULE 2

Description of the Project

The Project is part of the Borrower's program of electrifi-cation during the Fiscal Years 1980-86 and consists of:

Part A: Accelerated Rural Electrification Stage II

Electrification over a period of five years (1981-85)of about 8,000 villages in the Guarantor's Northern, Central,Eastern and Southern Regions.

Part B: Mini-Hydro Pilot Project

Feasibility study, detailed design and construction ofmini hydro pilot projects.

Part C: Studies

The provision of technical services for the carrying out of(i) a study on mini-hydro schemes in the territory of the Guaran-tor, and (ii), a study of Borrower's operations development.

The Project is expected to be completed by December 31,1985.

- 16 -

SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each January 15 and July 15

. beginning January 15, 1986through July 15, 2000 2,500,000

* To the extent that any portion of the Loan is repayable ina currency other than dollars (see General Conditions,Section 4.02), the figures in this column represent dollarequivalents determined as for purposes of withdrawal.

- 17 -

Premiums on Prepayment

The following percentages are specified as the premiumspayable on repayment in advance of maturity of any portion ofthe principal amount of the Loan pursuant to Section 3.05 (b)of the General Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 1.25%

More than three years but notmore than six years beforematurity 2.50%

More than six years but notmore than eleven yearsbefore maturity 4.55%

More than eleven years but notmore than sixteen yearsbefore maturity 6.60%

More than sixteen years but notmore than' eighteen yearsbefore maturity 7.40%

More than eighteen yearsbefore maturity 8.25%

- 18 -

SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part C hereof, contracts for thepurchase of goods shall be procured in accordance with proceduresconsistent with those set forth in the "Guidelines for Procurementunder World Bank Loans and IDA Credits" published by the Bank inMarch 1977 (hereinafter called the Guidelines), on the basis ofinternational competitive bidding as described in Part A of theGuidelines.

2. For goods to be procured on the basis of internationalcompetitive bidding, and in addition to the requirements ofparagraph 1.2 of the Guidelines, the Borrower shall prepareand forward to the Bank as soon as possible, and in any event notlater than 60 days prior to the proposed date of availability tothe public of the first tender or prequalification documentsrelating thereto, as the case may be, a general procurementnotice, in such form and detail and containing such information asthe Bank shall reasonably request; the Bank will arrange for thepublication Qf such notice in order to provide timely notificationto prospective bidders of the opportunity to bid for the goods inquestion. The Borrower shall provide the necessary information toupdate such notice annually so long as any goods remain to beprocured on the basis of international competitive bidding.

3. For the purpose of evaluation and comparison of bids forthe supply of goods to be procured on the basis of internationalcompetitive biddingi (i) bidders shall be required to statein their bid the c.i.f. (port of entry) price for imported goods,or the ex-factory price or off-the-shelf price of other goods,offered in such bid; and (ii) customs duties and other importtaxes levied in conncection with the importation, or the sales andsimilar taxes levied in connection with the sale or delivery,pursuant to the bid, of the goods shall not be taken into accountin the evaluation of the bids.

B. Preference for Domestic Manufacturers

In the procurement of goods in accordance with the proceduresdescribed in Part A of this Schedule, goods manufactured inThailand may be granted a margin of preference in accordance with,and subject to, the following provisions:

- 19 -

(a) All bidding documents for the procurement of goodsshall clearly indicate any preference which will be granted,the information required to establish the eligibility of a bidfor such preference and the following methods and stages that willbe followed in the evaluation and comparison of bids.

(b) After evaluation, responsive bids will be classifiedin one of the following three groups:

(1) Group A: bids offering goods manufactured inThailand if the bidder shall have established tothe satisfaction of the Borrower and the Bank thatthe manufacturing cost of such goods includes avalue added in Thailand equal to at least 20% ofthe ex-factory bid price of such goods.

(2) Group B: all other bids offering goods manufacturedin Thailand.

(3) Group C: bids offering any other goods.

(c) In order to determine the lowest evaluated bid of eachgroup, all evaluated bids in each group shall be first com-pared among themselves, without taking into account customs dutiesand other import taxes levied in connection with the importation,and sales and similar taxes levied in connection with the sale ondelivery, pursuant to the bids, of the goods. Such lowest eval-uated bids shall then be compared with each other, and if, as aresult of this comparison, a bid from group A or group B is thelowest, it shall be selected for the award.

(d) If, as a result of the comparison under paragraph(c) above, the lowest bid is a bid from group C, all group Cbids shall be further compared with the lowest evaluated bidfrom group A after adding to the evaluated bid price of theimported goods offered in each group C bid, for the purpose ofthis further comparison only, an amount equal to (i) the amount ofcustoms duties and other import taxes which a non-exempt importerwould have to pay for the importation of the goods offered insuch group C bid, or (ii) 15% of the c.i.f.. bid price of suchgoods if said customs duties and taxes exceed 15% of such price.If the group A bid in such further comparison is the lowest,it shall be selected for the award; if not, the bid from group Cwhich as a result of the comparison under paragraph (c) isthe lowest evaluated bid shall be selected.

- 20 -

C. Other Procurement Procedures

Each contract for the supply of (i) concrete poles, and (ii)other goods estimated to cost less than the equivalent of $100,000may be awarded either following competitive bidding procedures ofthe Borrower advertised locally or following prudent shopping,including at least three price quotations, and in accordance withthe Borrower's normal procurement procedures; all such proceduresto be satisfactory to the Bank. The procurements under the.preceding sub-paragraph (ii) shall not in the aggregate exceed theequivalent of $2,500,000.

D. Review of Procurement Decisions by the Bank

1. Review of invitations to bid and of proposed awards andfinal contracts:

With respect to all contracts for goods (other than theconcrete poles) estimated to cost the equivalent of $100,000 ormore:

(a) Before bids are invited, the Borrower shall furnish tothe Bank, for its comments, the text of the invitations tobid and the specifications and other bidding documents, togetherwith a description of the advertising procedures to be followedfor the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request. Anyfurther moCification to the bidding documents shall require theBank's concurrence before it is issued to the prospective bidders.

(b) After bids have been received and evaluated, theBorrower shall, before a final decision on the award is made,inform the Bank of the name of the bidder to which it intends toaward the contract and shall furnish to the Bank, in sufficienttime for its review, a detailed report on the evaluation andcomparison of the bids received, together with the recommendationsfor award and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the intended awardwould be inconsistent with the Guidelines or this Schedule,promptly inform the Borrower and state the reasons for suchdetermination.

(c) The terms and conditions of the contract shall not,without the Bank's concurrence, materially differ from thoseon which bids were asked or prequalification invited.

- 21 -

(d) Two conformed copies of the contract shall be furnishedto the Bank promptly after its execution and prior to the submis-sion to the Bank of the first application for withdrawal offunds from the Loan Account in respect of such contract.

2. With respect to each contract to be financed out of theproceeds of the Loan and not governed by the preceding paragraph,the Borrower shall furnish to the Bank, promptly after itsexecution and prior to the submission to the Bank of the firstapplication for withdrawal of funds from the Loan Account inrespect of such contract, two conformed copies of such contract,together with the analysis of the respective bids, recommendationsfor award and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the award ofthe contract was not consistent with the Guidelines or thisSchedule, promptly inform the Borrower and state the reasons forsuch determination.

3. Before agreeing to any material modification or waiver ofthe terms and conditions of a contract, or granting an extensionof the stipulated time for performance of such contract, orissuing any change order under such contract (except in cases ofextreme urgency) which would increase the cost of the contract bymore than 15% of the original price, the Borrower shall informthe Bank of the proposed modification, waiver, extension or changeorder and the*reasons therefor. The Bank, if it determines thatthe proposal would be inconsistent with the provisions of thisAgreement, shall promptly inform the Borrower and state thereasons for its determination.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true

copy of t*e original in the archives of the Interna-

tional Bank for Reconstruction and Develop-

ment.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Bank thereunto

this /L d -day of JdZ - , 198 AL.

FOR SECRETARY