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CONFORMED COPY
LOAN NUMBER B-105-0
Indemnity Agreement
(Dollar 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-105-0
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 Yen 
Loan Agreement) being entered into herewith among China as 
borrower, IBRD as partial 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 
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(¥5,000,000,000) (the Yen Loan) to assist in the financing of a 
portion of the Project;
(C)
Pursuant to another 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 Yamaguchi Bank, Ltd. as 
manager, 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 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 Dollar Loan (the IBRD Dollar Guarantee) on the terms 
and conditions set forth in the Dollar Loan Agreement;
(E)  IBRD has agreed to provide the IBRD Dollar 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 Dollar Guarantee and to 
undertake such other obligations as hereinafter provided; and
(F)  In consideration of IBRD's entering into the Dollar 
Loan Agreement and providing the IBRD Dollar 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 Dollar 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 Dollar 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 Dollar 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; and
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(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", "Bank", "Guarantee Release Date", "Interest 
Payment Date", "Interest Period", "Release Option", and "Releasing 
Bank" have the same meanings ascribed thereto in the Dollar Loan 
Agreement.
(b)
"Dollars" means the lawful currency of the United 
States of America.
(c)
"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 Dollar Loan 
in a manner acceptable to IBRD.
(d)
"Guarantee Fee Payment Date" means each semi-annual 
date which corresponds to the Interest Payment Date specified in 
the Dollar Loan Agreement.  
(e)
"Guarantee Fee Period" means any period which 
corresponds to the Interest Period specified in Clause 7 of the 
Dollar Loan Agreement.
(f)
"Project Agreement" means the agreement entered or to 
be entered into between IBRD and ZPEPC for carrying out the 
Project.
(g)
"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.
(h)
"Special Deposit Account" means the account referred 
to in Section 3.02 (a) of this Agreement.
ARTICLE II
Indemnity by China to IBRD; Guarantee Fee
Section 2.01.  In consideration of IBRD providing the IBRD 
Dollar 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 Dollar 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, 
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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 Dollar 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 Dollar 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 Dollar 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 Dollar 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.
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 Dollar 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 Dollar 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 Dollar 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 Dollar 
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 Dollar 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 Dollar 
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 
Dollar Guarantee, China shall pay directly to IBRD a guarantee fee 
on each Guarantee Fee Payment Date for the Guarantee Fee Period 
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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 Dollar Loan has not been disbursed during the 
availability period under the Dollar Loan Agreement, or (b) any 
portion of the Dollar Loan has been prepaid, the portion of the 
guarantee fee applicable to such undisbursed or prepaid Dollar Loan 
amount shall be proportionately reduced for the relevant Guarantee 
Fee Period set forth in the Schedule to this Agreement, or (ii) any 
Bank exercises the guarantee Release Option under Clause 26 of the 
Dollar 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 28 of the 
Dollar Loan Agreement.  These reductions of the guarantee fee shall 
be applied to all the subsequent guarantee fee payments thereafter 
until maturity of the Dollar Loan.  In the event any Bank exercises 
the guarantee Release Option under Clause 26 of the Dollar 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 Releasing Bank in accordance with 
the provisions of Clause 28 of the Dollar Loan Agreement.
ARTICLE III
Other Covenants
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 Dollar Loan is to partly 
finance Eligible Expenditures under the Project.  For that purpose 
China shall: (a) upon receipt of the proceeds of the Dollar 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 Dollar 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 
Dollar 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 Yen Lenders 
under the Yen 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 
Dollar 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, 
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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 Dollar Lenders in accordance with the terms of the Dollar 
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 Dollar Lenders such outstanding amount in accordance 
with the terms of the Dollar 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 Dollar 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 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
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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 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
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Guarantee Fee Period
Guarantee Fee Amount
(US $)      
1st
23,056.85
2nd
23,979.12
3rd
24,938.29
4th
25,935.82
5th
26,973.25
6th
28,052.18
7th
29,174.27
8th
30,341.24
9th
31,554.89
10th
32,817.08
11th
34,129.77
12th
35,494.96
13th
36,914.76
14th
38,391.35
15th
39,927.00
16th
41,524.08
17th
43,185.04
18th
44,912.45
19th
46,708.94
20th
48,577.30
21st
50,520.39
22nd
52,541.21
23rd
47,619.05
24th
41,666.67
25th
35,714.29
26th
29,761.91
27th
23,809.52
28th
17,857.14
29th
11,904.76
30th
 5,952.38