Page  1
CONFORMED COPY  
LOAN NUMBER B-105-1  
Indemnity Agreement
(Yen Loan and Guarantee Agreement)
(Zhejiang Power Development Project)
between
PEOPLE'S REPUBLIC OF CHINA
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated March 28, 1995
LOAN NUMBER B-105-1
INDEMNITY AGREEMENT
AGREEMENT, dated March 28, 1995 between PEOPLE'S REPUBLIC OF CHINA (China) 
and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD).
WHEREAS (A)
IBRD has agreed to make available to China a loan, under a 
loan agreement to be entered into between China and IBRD (IBRD Loan Agreement), 
in the aggregate principal amount in various currencies equivalent to 
US$400,000,000 to assist in the financing of the project (the Project) described 
in Schedule 2 of the IBRD Loan Agreement;
(B)
Pursuant to a Loan and Guarantee Agreement (the Dollar Loan 
Agreement) being entered into herewith between China as borrower, IBRD as 
partial guarantor, Bank of America National Trust and Savings Association, The 
Fuji Bank, Limited, Daiwa Overseas Finance Limited, The Norinchukin Bank, Korea 
First Bank as arrangers and lead managers, The Asahi Bank, Limited, The Dai-Ichi 
Kangyo Bank, Limited, The Long-Term Credit Bank of Japan, Limited, The Sumitomo 
Trust & Banking Company, Limited, The Tokai Bank, Limited as expanded lead 
managers, The Fuji Bank, Limited (Hong Kong Branch) as agent, and The Financial 
Institutions named in the First Schedule thereto (the Dollar Lenders) as 
lenders, the Dollar Lenders have agreed to make available to China a loan in the 
aggregate principal amount of one hundred million Dollars (US$100,000,000) (the 
Dollar Loan) to assist in the financing of a portion of the Project;
(C)
Pursuant to another Loan and Guarantee Agreement (the Yen Loan 
Agreement) being entered into herewith among China as borrower, IBRD as partial 
Page  2
guarantor, the Lenders listed therein (the Yen Lenders) as lenders, The Fuji 
Bank, Limited as agent, The Yasuda Fire and Marine Insurance Company, Limited as 
lead manager, and Asahi Mutual Life Insurance Company and The Zenshinren Bank as 
Managers, the Yen Lenders have agreed to make available to China a loan in the 
aggregate principal amount of five billion Yen (¥5,000,000,000) (the Yen Loan) 
to also assist in the financing of another portion of the Project;
(D)
At the request and with the agreement of China, IBRD has agreed to 
guarantee the repayment of a portion of the principal amount of the Yen Loan 
(the IBRD Yen Guarantee) on the terms and conditions set forth in the Yen Loan 
Agreement;
(E)  IBRD has agreed to provide the IBRD Yen Guarantee only on condition 
that China agree to undertake to make to IBRD prompt payment of all amounts paid 
by IBRD directly or indirectly in relation to or arising from the IBRD Yen 
Guarantee and to undertake such other obligations as hereinafter provided; and
(F)  In consideration of IBRD's entering into the Yen Loan Agreement and 
providing the IBRD Yen Guarantee, China has agreed to undertake certain 
obligations towards IBRD as hereinafter provided.
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1.01.  IBRD's General Conditions Applicable to Loan and Guarantee 
Agreements, dated January 1, 1985 (the General Conditions), are hereby 
incorporated in and constitute an integral part of this Agreement, subject, 
however, to the following modifications thereto:
(a)  the terms "Borrower" or "Guarantor", wherever used in the General 
Conditions, mean China;
(b)  the term "Loan", wherever used in the General Conditions, means the 
Yen Loan (as said term is defined herein), except that in Sections 2.01 (12), 
8.01 and 9.03, the term "Loan" shall mean the IBRD Yen Guarantee and include any 
other amount payable under this Agreement.
(c)  the terms "Loan Agreement" and "Guarantee Agreement", wherever used 
in the General Conditions, mean this Agreement, except that in Section 9.01 (a) 
and (b) and Section 9.07 (a) and (c), the terms "Loan Agreement" and "Guarantee 
Agreement" shall mean this Agreement and the Yen Loan Agreement (as said term is 
defined herein);
(d)  the term "Project", wherever used in the General Conditions, means 
the Zhejiang Power Development Project as described in Schedule 2 of the IBRD 
Loan Agreement.
(e)  Sections 2.01 (3), (4), (5), (6), (7), (10), (11), (15), and (20), 
Article III, Article IV, Article V, Article VI, Article VII, the phrase: "but in 
any event not later than six months after the Closing Date or such later date as 
may be agreed for this purpose between IBRD and the Borrower," in the first 
sentence of Section 9.07 (c), the opening phrase: "Except as provided in Section 
6.07," in Section 10.02, and Article XII of the General Conditions are hereby 
deleted.
Section 1.02.  Wherever used in this Agreement, unless otherwise defined 
or unless the context otherwise requires, the several terms defined in the 
Preamble to this Agreement and in the General Conditions (subject to the 
modifications noted above) have the respective meanings herein and therein set 
forth and the following additional terms have the following meanings:
(a)
"Agent", "Business Day", "Drawdown Date", "Guarantee Release Date", 
Page  3
and "Lender" have the same meanings ascribed thereto in the Yen Loan Agreement.
(b)
"Eligible Expenditures" means expenditures in respect of the 
reasonable cost of goods and services required for the Project and to be 
financed out of the proceeds of the Yen Loan in a manner acceptable to IBRD.
(c)
"Guarantee Fee Payment Date" means each of the thirty (30) 
consecutive semi-annual dates occurring on the anniversary and semi-anniversary 
of the Drawdown Date of each year, the first (lst) Guarantee Fee Payment Date 
being the first such date after the Drawdown Date and the thirtieth (30th) and 
final Guarantee Fee Payment Date being the fifteenth (15th) anniversary of the 
Drawdown Date; provided that, if there is no such semi-annual date corresponding 
to the Drawdown Date in the relevant month due to differing lengths of calendar 
months, then the relevant Guarantee Fee Payment Date shall end on the last day 
of such relevant month and provided further that if any such date is not a 
Business Day, the relevant Guarantee Fee Payment Date shall be the next 
succeeding Business Day unless such succeeding Business Day falls in the next 
calendar month, in which case the relevant Guarantee Fee Payment Date shall be 
the immediately preceding Business Day.
(d)
"Guarantee Fee Period" means the period commencing on the Drawdown 
Date and ending on the first (1st) Guarantee Fee Payment Date and each 
successive period thereafter commencing on the date immediately following the 
last preceding Guarantee Fee Payment Date and ending on the next succeeding 
Guarantee Fee Payment Date.
(e)
"Project Agreement" means the agreement entered or to be entered 
into between IBRD and ZPEPC for carrying out the Project.
(f)
"Project Beneficiary" or "ZPEPC" means the Zhejiang Provincial 
Electric Power Company, a state owned enterprise, organized and existing under 
the laws of the People's Republic of China.
(g)
"Special Deposit Account" means the account referred to in Section 
3.02 (a) of this Agreement.
(h)
"Yen" means the lawful currency of Japan.
ARTICLE II
Indemnity by China to IBRD; Guarantee Fee
Section 2.01.  In consideration of IBRD providing the IBRD Yen Guarantee, 
China hereby: (a) agrees to reimburse IBRD forthwith on demand or as IBRD may 
otherwise direct for any amount paid by IBRD under the IBRD Yen Guarantee in the 
currency so paid, or if payment shall have been made in any currency which IBRD 
shall have purchased with another currency for the purposes of such payment, in 
such other currency, together with interest thereon at the rate per annum 
specified by IBRD in respect of such currency, which rate shall be based on 
IBRD's prevailing borrowing cost in such currency plus the applicable margin 
over such cost from the date such payment is made by IBRD until such amount is 
paid;  (b) agrees to indemnify IBRD on demand in respect of all actions, 
proceedings, liabilities, claims, losses, damages, costs and expenses suffered 
or incurred by IBRD directly or indirectly in relation to or arising out of the 
IBRD Yen Guarantee; (c) irrevocably authorizes IBRD to comply with any demands 
and make any payments which may be due from or claimed or made upon IBRD under 
the IBRD Yen Guarantee (IBRD shall notify China of any such demand, but failure 
to give any such notice shall in no way affect IBRD's obligation to make payment 
under the IBRD Yen Guarantee or China's obligation to reimburse or indemnify 
IBRD pursuant to this Agreement) and agrees that it shall not be incumbent on 
IBRD to enquire whether or not any such demands are in fact correct or payments 
are in fact due or whether or not any dispute exists between China and the Agent 
or the Yen Lenders; and (d) agrees that, in the absence of any manifest and 
material error, any such demand or payment shall, as between China and IBRD, be 
conclusive evidence that the demand is properly made and/or payment properly 
due.
Page  4
Section 2.02.  (a) IBRD may at any time, without thereby discharging, 
impairing or otherwise affecting any rights, powers and remedies hereby created 
or conferred upon it by this Agreement, the Yen Loan Agreement, any related 
agreement or by law: (i) offer or agree to or enter into any agreement for the 
extension or variation of the IBRD Yen Guarantee; or (ii) offer or give or agree 
to give any time or other indulgence to any other person from whom it may seek 
reimbursement in respect of sums paid out by IBRD under the IBRD Yen Guarantee.
(b)  Any rights conferred on IBRD by this Agreement shall be in addition 
to, and not in substitution for or derogation of, any other right which IBRD may 
at any time have to seek, from China or any other person, reimbursement of or 
indemnification against payments made or liabilities incurred under the IBRD Yen 
Guarantee.
(c)  IBRD shall not be obliged before taking steps to enforce any rights 
conferred on it by this Agreement or exercising any of the rights, powers and 
remedies conferred upon IBRD by this Agreement, the Yen Loan Agreement, any 
related agreement or by law: (i) to take action or obtain judgement in any court 
against any other person (including persons from whom it may seek reimbursement 
in respect of sums paid out under the IBRD Yen Guarantee); or (ii) to enforce or 
seek to enforce any other rights it may have against China or its rights against 
any other person.
Section 2.03.  Any payment required to be made by China pursuant to the 
terms of this Agreement shall be:
(a)  paid at such places as IBRD shall reasonably request;
(b)  made in such manner, and in currencies acquired in such manner, as 
shall be permitted under the laws applicable to the making of such payment and 
effecting the deposit of such currencies to the account of IBRD with a 
depository designated by IBRD for this purpose;
(c)  paid without any restrictions of any kind imposed by, or in the 
territory of, China; and
(d)  applied first, to pay all interest and other charges due to IBRD and 
second, after such interest and other charges are paid, to pay all principal 
then due.
Section 2.04.  In consideration of IBRD providing the IBRD Yen Guarantee, 
China shall pay directly to IBRD a guarantee fee on each Guarantee Fee Payment 
Date for the Guarantee Fee Period then ending in accordance with the payment 
schedule set forth in the Schedule to this Agreement; provided, that in the 
event (i) (a) any portion of the Yen Loan has not been disbursed on the Drawdown 
Date, or (b) any portion of the Yen Loan has been prepaid, the portion of the 
guarantee fee applicable to such undisbursed or prepaid Yen Loan amount shall be 
proportionately reduced for the relevant Guarantee Fee Period set forth in the 
Schedule to this Agreement, or (ii) any Lender exercises the option to release 
the IBRD Guarantee under Clause 3.08 of the Yen Loan Agreement, the portion of 
the guarantee fee applicable to such released amount shall be reduced for the 
relevant Guarantee Fee Period set forth in the Schedule to this Agreement by the 
amount calculated based on the formula under Clause 3.08 of the Yen Loan 
Agreement.  These reductions of the guarantee fee shall be applied to all the 
subsequent guarantee fee payments thereafter until maturity of the Yen Loan.  In 
the event any Lender exercises the guarantee release option under Section 3.08 
of the Yen Loan agreement, the portion of the guarantee fee applicable to such 
released amount shall after the Guarantee Release Date be paid to the Agent for 
the account of such Lender in accordance with the provisions of Section 3.08 of 
the Yen Loan Agreement. 
ARTICLE III
Other Covenants
Page  5
Section 3.01. China declares its commitment to the objectives of the 
Project as set forth in Schedule 2 to the IBRD Loan Agreement, and, to this end, 
without any limitation or restriction upon any of its other obligations under 
this Agreement or the IBRD Loan Agreement, shall cause ZPEPC to perform in 
accordance with the provisions of the Project Agreement all the obligations of 
ZPEPC therein set forth, shall take or cause to be taken all actions, including 
the provision of funds, facilities, services and other resources, necessary or 
appropriate to enable ZPEPC to perform such obligations, and shall not take or 
permit to be taken any action which would prevent or interfere with such 
performance.
Section 3.02.  The purpose of the Yen Loan is to partly finance Eligible 
Expenditures under the Project. For that purpose China shall: (a) upon receipt 
of the proceeds of the Yen Loan, deposit the same in a special deposit account 
to be operated by China exclusively for the purposes of the Project; and (b) 
make available the proceeds of the Yen Loan to ZPEPC for the purposes of the 
Project under onlending arrangements satisfactory to IBRD. The Special Deposit 
Account shall be opened in a bank and on terms and conditions, satisfactory to 
IBRD, including appropriate protection against set-off, seizure or attachment.
Section 3.03. (a)  China shall disburse the proceeds of the Yen Loan 
deposited in the Special Deposit Account only to the Project Beneficiary to meet 
Eligible Expenditures, as they are actually incurred and which have not been 
financed out of the funds provided by IBRD under the IBRD Loan Agreement or the 
Dollar Lenders under the Dollar Loan Agreement, in the manner agreed with IBRD.
(b)  For each payment made by China out of the Special Deposit Account, 
China shall, at such times as IBRD shall reasonably request, furnish to IBRD 
such documents and other evidence showing that such payment out of the proceeds 
of the Yen Loan was made exclusively for Eligible Expenditures.
(c)  If IBRD shall have determined at any time that any payment out of the 
Special Deposit Account was not made on account of any Eligible Expenditure or 
was not justified by the evidence furnished to IBRD, China shall, promptly upon 
notice from IBRD, deposit into such account out of which the payment was made 
(or, if China cannot or fails to do so, prepay to the Agent for the account of 
the Yen Lenders in accordance with the terms of the Yen Loan Agreement) an 
amount equal to the amount of such payment or the portion thereof not so 
eligible or justified.  Any such deposits made hereunder shall be utilized for 
the purpose indicated in Section 3.02 hereof.
(d)  If IBRD shall have determined at any time that any amount outstanding 
in the Special Deposit Account will not be required to cover further payments 
for Eligible Expenditures, the Borrower shall, upon notice from IBRD, prepay to 
the Agent for the account of the Yen Lenders such outstanding amount in 
accordance with the terms of the Yen Loan Agreement.
Section 3.04.  China shall ensure that: (a) the goods and consultants' 
services required for the Project and to be financed out of the proceeds of the 
Yen Loan shall be purchased at a reasonable price, account being taken also of 
other relevant factors such as time of delivery and efficiency and reliability 
of the goods and availability of maintenance facilities and spare parts 
therefor, and, in the case of services, of their quality and competence of the 
parties rendering them; and (b) such goods and services shall be used 
exclusively in the carrying out of the Project.
Section 3.05.  China shall: (a) have the Special Deposit Account for each 
fiscal year of China audited, in accordance with appropriate auditing principles 
consistently applied, by independent auditors acceptable to IBRD; (b) furnish to 
IBRD as soon as available, but in any case not later than six months after the 
end of each such year: (i) certified copies of the said accounts for such year 
as so audited, and (ii) the report of such audit by said auditors of such scope 
and in such detail as IBRD shall have reasonably requested; and (c) furnish to 
IBRD such other information concerning the said account, as well as the audit 
thereof, as IBRD shall from time to time reasonably request.
Section 3.06. IBRD and China hereby agree that the obligations set forth 
Page  6
in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions 
(relating to insurance, use of goods and services, plans and schedules, records 
and reports, maintenance and land acquisition, respectively) in respect of the 
Project shall be carried out by ZPEPC pursuant to Section 2.03 of the Project 
Agreement.
ARTICLE IV
Remedies of IBRD
Section 4.01.  If China fails to make any payments due to IBRD under this 
Agreement or to perform any of its obligations under this Agreement, and such 
failure is continuing, IBRD may, by notice to China, suspend or cancel in whole 
or in part the right of China to make withdrawals under: (a) the IBRD Loan 
Agreement; and (b) any other loan or credit agreement between China and IBRD.
ARTICLE V
Effective Date
Section 5.01.  This Agreement shall come into force and effect upon 
signature.
ARTICLE VI
Miscellaneous Provisions
Section 6.01.  The Minister of Finance of China is hereby designated as 
representative of China for the purposes of Section 11.07 of the General 
Conditions.
Section 6.02.  The following addresses are specified for the purposes of 
Section 6.01 above:
For China:
Ministry of Finance
Sanlihe
Beijing 100820
People's Republic of China
Cable address:
Telex:
FINANMIN
22486 MFPRC CN
Beijing
For IBRD:
International Bank for 
  Reconstruction and Development
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INTBAFRAD
197688 (TRT),
Washington, D.C.
248423 (RCA),
        64145 (WUI) or
                      82987 (FTCC)
IN WITNESS WHEREOF, the parties hereto, acting through their 
representatives thereunto duly authorized, have caused this Agreement to be 
Page  7
signed in their respective names as of the day and year first above written.
PEOPLE'S REPUBLIC OF CHINA
By /s/ Jin Renquing
Authorized Representative
INTERNATIONAL BANK FOR
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Hiroo Fukui
Vice President
Cofinancing and Financial
Advisory Services
SCHEDULE 
Guarantee Fee Period
                    Guarantee Fee Amount
  (Japanese Yen)   
1st
1,575,336
2nd
1,614,720
3rd
1,655,087
4th
1,696,465
5th
1,738,876
6th
1,782,348
7th
1,826,907
8th
1,872,580
9th
1,919,394
10th
1,967,379
11th
2,016,563
12th
2,066,977
13th
2,118,652
14th
2,171,618
15th
2,225,909
16th
2,281,556
17th
2,338,595
18th
2,397,060
19th
2,456,987
20th
2,518,411
21st
2,581,372
22nd
2,645,906
23rd
2,380,952
24th
2,083,333
25th
1,785,714
26th
1,488,095
27th
1,190,476
28th
  892,857
29th
  595,238
30th
  297,619