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CONFORMED COPY  
LOAN NUMBER 3746 PH
Counter-Put Option Agreement
(Leyte-Luzon Geothermal Project)
between
REPUBLIC OF THE PHILIPPINES
NATIONAL POWER CORPORATION
and
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
Dated as of July 11, 1994
LOAN NUMBER 3746 PH
COUNTER-PUT OPTION AGREEMENT
Agreement, dated as of July 11, 1994 between REPUBLIC OF THE PHILIPPINES (the 
"Republic") and NATIONAL POWER CORPORATION (NPC) of the one part and INTERNATIONAL 
BANK FOR RECONSTRUCTION AND DEVELOPMENT (the "Bank") of the other part.
WHEREAS (A) pursuant to a Subscription Agreement (the "Subscription Agreement") 
dated July 1, 1994 among NPC, as issuer, the Republic, as guarantor as to the payment 
of interest (the "Republic Guarantee"), and Morgan Stanley & Co. International Limited 
and Salomon Brothers International Limited (the "Managers") , the Managers have agreed 
to subscribe and pay for the 9.75% Guaranteed Bonds due 2009 to be issued by NPC (the 
"Bonds") in an aggregate amount of US$100,000,000, upon the terms and conditions 
contained in the Subscription Agreement;
(B)
the proceeds of the Bonds are to be used to assist in financing the 
Sub-Project referred to in Section 1.02 (t) of this Agreement and spare parts required 
under Part A of the Project referred to in Section 1.02 (r) of this Agreement;
(C)
at the request and with the agreement of the Republic and NPC, the Bank 
has agreed to provide a put option with respect to the Bonds, on terms and conditions 
set forth in the Option Deed referred to in Section 1.02 (p) of this Agreement (the 
"Put Option"); and
(D)
in consideration of the Bank's agreeing to provide the Put Option, the 
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Republic and NPC have agreed to undertake the obligations towards the Bank as 
hereinafter provided;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01. Sections 8.01 (b), 9.01, 9.02, 9.03, 9.04, 9.05, 9.06, 9.07 (a) 
and (c), 9.08, 9.09, 10.01, 10.03, 10.04, 11.01, 11.02, 11.03, 11.04, 12.01 and 12.02 
of the General Conditions Applicable to the Loan and Guarantee Agreements of the Bank, 
dated January 1, 1985, are hereby incorporated and constitute an integral part of this 
Agreement, and the several terms defined in said General Conditions have the 
respective meanings assigned to them therein, provided, however, and except as the 
context may otherwise require, that references in said Sections to:
(a)
the "Borrower" and the "Guarantor" shall be deemed to be made to "NPC" 
and "the Republic," respectively;
(b)
the "Loan Agreement" and "Guarantee Agreement" shall be deemed to be made 
to "this Agreement;"
(c)
the "proceeds of the Loan" shall be deemed to be made to the "proceeds of 
the Bonds;"
(d)
principal, interest and/or charges on the "Loan" shall be deemed to be 
made to amounts payable to the Bank under this Agreement; and
(e)
the "purposes of the Loan" shall be deemed to be made to the "objectives 
of the Sub-Project."
Section 1.02. Wherever used in this Agreement, unless otherwise defined below or 
unless the context otherwise requires, the several terms defined in the Preamble to 
this Agreement have the respective meanings therein set forth and the following 
additional terms have the following meanings:
(a)
"BITS Grant" means the grant of 325 million Swedish kronor to provide 
partial financing for the Sub-Project, to be made by the Swedish Board for Investment 
and Technical Support to NPC;
(b)
"Business Day" means a day on which commercial banks and foreign exchange 
markets are open for business in Washington, D.C. and New York City;
(c)
"Closing Date" has the meaning set forth in the Subscription Agreement;
(d)
"Counter-Put Exercise Period" means any day from and including the date 
on which notice of exercise of the Put Option is given to the Bank by the Option 
Trustee under the Option Deed to but excluding July 1, 2010;
(e)
"Counter-Put Option" means the options granted pursuant to Section 2.01 
(a) (i) hereof;
(f)
"Counter-Put Option Price" means the aggregate principal amount of the 
Option Bonds;
(g)
"Counter-Put Purchase Date" means the later of (i) the fifth Business Day 
after the Bank gives the Republic and/or NPC notice that it has received notice of 
exercise of the Put Option from the Option Trustee, and (ii) the date on which the 
Bank purchases the Option Bonds;
(h)
"Eligible Expenditures" means expenditures for goods and services 
reasonably required for the Sub-Project and for spare parts under Part A of the 
Project as they are actually incurred and which have not been financed out of the 
proceeds of the BITS Grant or out of the proceeds of the IBRD Loan;
(i)
"Fiscal Agency Agreement" has the meaning set forth in the Subscription 
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Agreement;
(j)
"Fiscal Agent" has the meaning set forth in the Fiscal Agency Agreement;
(k)
"General Conditions" means the General Conditions Applicable to Loan and 
Guarantee Agreements of the Bank, dated January 1, 1985;
(1)
"IBRD Loan" means the US$113 million equivalent loanmade by the Bank to 
NPC pursuant to the IBRD Loan Agreement;
(m)
"IBRD Loan Agreement" means the loan agreement between the Bank and NPC 
in respect of the Leyte-Luzon Geothermal Project (Loan No. 3746 PH);
(n)
"Maturity Date" means July 1, 2009;
(o)
"Option Bonds" means any Bonds which the Bank has purchased in accordance 
with the Option Deed;
(p)
"Option Deed" means the deed dated July  11,  1994  among NPC, the
Republic, the Bank, the Option  Trustee  and  the  Registrarrelating to the Bonds;
(q)
"Option Trustee" has the meaning set forth in the  Option Deed;
(r)
"the Project" means the Project described in  Schedule  2 of the IBRD 
Loan Agreement;
(s)
"Registrar" has the  meaning set forth in the Option Deed;
(t)
"the Sub-Project" means Part A (1) of the  Project; and
(u)
"Special Deposit Account" has the meaning set forth in Section 3.02 
hereof.
ARTICLE II
Counter-Put Option
Section 2.01. (a) Without limitation or restriction upon any of its respective 
obligations under this Agreement, NPC and the Republic hereby (i) jointly and 
severally grant to the Bank the option to require of NPC and/or the Republic (in such 
proportions as the Bank deems fit) to purchase all of the Option Bonds at the 
Counter-Put Option Price, (ii) agree that the Bank may exercise the Counter-Put Option 
at any time during the Counter-Put Exercise Period by giving notice to NPC and/or the 
Republic, as the case may be, (iii) agree that the Counter-Put Option Price will be 
paid on the Counter-Put Purchase Date or as the Bank may otherwise direct, (iv) 
irrevocably authorize the Bank to comply with any demands and make any payments which 
may be due from or claimed or made upon the Bank under the Put Option, (v) undertake 
to punctually perform all of their respective obligations under the Bonds and the 
Republic Guarantee, (vi) agree that the Bank, having paid the Option Trustee the 
Option Price (as defined in the Option Deed), will have title to the Option Bonds and 
will have the ability to transfer such title to NPC and/or the Republic, as the case 
may be, whether or not the Bank is at the time registered as the holder of the Option 
Bonds, (vii) jointly and severally agree to indemnify the Bank on demand in respect of 
all actions, proceedings, liabilities, claims, losses, damages, costs and expenses 
suffered or incurred by the Bank in relation to or arising out of the Put Option or 
the Counter-Put Option, including those in relation to or arising out of the grant of 
the Put Option or the Counter-Put Option, the exercise of the Put Option or the 
Counter-Put Option, the purchase, holding or sale of Option Bonds by the Bank and the 
exercise of any rights or performance of any obligations by the Bank as holder of 
Option Bonds, and (viii) waive all defenses of whatever nature they may in future have 
against the Bank as purchaser or holder of the Option Bonds and agree that their 
obligations hereunder shall not be discharged except by performance and then only to 
the extent of such performance.
(b)
NPC and the Republic jointly and severally agree that any payment 
required to be made by the Republic and/or NPC pursuant to the terms of this Agreement 
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shall be:
(i)
paid in the currency paid by the Bank in respect of such amount, 
or if such 
payment shall have been made in a currency which the Bank 
shall have purchased 
with another currency for the purpose of such 
payment, in such other currency;
(ii)
paid with interest at the rate per annum specified by the Bank in 
respect of 
such currency, which rate will be based on the Bank's 
prevailing borrowing 
cost in such currency plus the 
applicable margin over such cost, from the due 
date until such 
amount is paid to the Bank;
(iii)
paid at such places as the Bank shall reasonably request;
(iv)
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 the Bank with a 
depository designated by the Bank 
for this purpose;
(v)
paid without deduction for, and free from, any taxes levied by, or 
in the 
territory of, the Republic;
(vi)
paid without any restrictions of any kind imposed by, or in the 
territory of, 
the Republic; and
(vii)
applied first to pay all interest and other charges due to the 
Bank and 
second, after such interest and other charges are 
paid, to pay all principal 
then due.
For the purposes of Section 2.01 (b) (ii), "due date" shall mean the date on which the 
corresponding liability, claim, loss, damage, cost or expense was suffered or incurred 
by the Bank, which, in the case of the principal amount of the Option Bonds, shall be 
the date on which the Bank purchased the Option Bonds.
(c)
The Bank agrees that, if (but only if) it is at the time registered as 
the holder of the Option Bonds and is able to obtain a certificate or certificates 
evidencing its title to the Option Bonds, it will deliver such certificate or 
certificates, together with an instrument or instruments of transfer in respect 
thereof, to NPC and/or the Republic, as the case may be, against payment in full of 
the Counter-Put Option Price pursuant to Section 2.01 (a) (iii) above.
(d)
The Bank agrees that any interest paid to it by NPC or the Republic 
pursuant to its rights as holder of the Option Bonds shall be deducted from any 
interest payable to the Bank by NPC or the Republic pursuant to Section 2.01 (b) (ii) 
above and that any principal paid to it by NPC pursuant to its rights as holder of the 
Option Bonds shall be deducted from any amounts payable to the Bank by NPC or the 
Republic pursuant to Section 2.01 (a) (i) above.
(e)
In consideration of the Bank's providing the Put Option, NPC shall pay to 
the Bank a put option fee of one million, two hundred and seven thousand, three 
hundred and fifty-eight Dollars (US$1,207,358) on the Closing Date.  The Republic 
hereby unconditionally guarantees, as primary obligor and not as surety merely, the 
punctual payment by NPC of the said put option fee.
Section 2.02. The Bank 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 on it by this Agreement, the Bonds, the Option Deed or by law (i) 
to take action or obtain judgment in any court against any other person or entity, or 
(ii) to enforce or seek to enforce any other rights it may have against the Republic 
or NPC or its rights against any other person or entity.
Section 2.03.  Without limitation or restriction upon any of its other 
obligations under this Agreement, the Republic agrees that any amount due to the Bank 
by the Republic and NPC jointly and severally hereunder shall be deemed, for purposes 
of Sections 6.02 (b) and 7.01 (d) of the General Conditions, an amount due in 
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consequence of a financial obligation extended by the Bank to a third party with the 
agreement of the Republic.
ARTICLE III
Other Covenants
Section 3.01. The proceeds of the Bonds shall be used as follows:
(a)
Except as provided in Section 3.01 (b) below, the proceeds of the Bonds 
shall be used for the purposes of financing Eligible Expenditures as set forth in this 
Article III.
(b)
On the Closing Date, NPC shall use two million, three hundred and 
ninety-four thousand, eight hundred and fifty-eight Dollars (US$2,394,858) from the 
proceeds of the Bonds to pay the amounts payable to the Managers, the Fiscal Agent, 
the Registrar, the Exchange Agents, the Transfer Agents, the Paying Agents and the 
Option Trustee as specified in the Subscription Agreement, the Fiscal Agency Agreement 
and the Option Deed, and the put option fee specified in Section 2.01 (e) of this 
Agreement.
Section 3.02. NPC shall on the Closing Date deposit the balance, after 
application of Section 3.01 (b) above, of the proceeds of the Bonds in a special 
deposit account (the "Special Deposit Account") to be opened and maintained by NPC 
exclusively for the purposes of meeting Eligible Expenditures.  The Special Deposit 
Account shall be opened in the Bangko Sentral ng Pilipinas or another financial 
institution acceptable to the Bank, on terms and conditions satisfactory to the Bank, 
including appropriate protection against set-off, seizure or attachment.  NPC agrees 
that such proceeds shall be paid out of the Special Deposit Account only to meet 
Eligible Expenditures.
Section 3.03.  The goods and services required for the Sub-Project and to be 
financed out of the proceeds of the Bonds shall be procured with due regard to 
considerations of economy and efficiency in accordance with procedures satisfactory to 
the Bank.
Section 3.04.  NPC shall:
(a)
(i) maintain records and separate accounts adequate to identify the 
expenditures financed out of the proceeds of the Bonds, and (ii) furnish to the Bank 
all such information as the Bank shall reasonably request concerning the expenditure 
of the proceeds of the Bonds and the goods and services financed out of such proceeds 
including, without limitation, all such documents and other evidence as shall be 
required to show that amounts disbursed from the Special Deposit Account were 
disbursed for Eligible Expenditures; and
(b)
(i) have the records and accounts referred to in paragraph (a) of this 
Section and those for the Special Deposit Account for each fiscal year audited, in 
accordance with appropriate auditing principles consistently applied, by independent 
auditors acceptable to the Bank, (ii) furnish to the Bank as soon as available, but in 
any case not later than six (6) months after the end of each such year: (A) certified 
copies of said accounts for such year as so audited; and (B) the report of such audit 
by said auditors, of such scope and in such detail as the Bank shall have reasonably 
requested, and (iii) furnish to the Bank such other information concerning said 
records, accounts and financial statements as well as the audit thereof as the Bank 
shall from time to time reasonably request.
Section 3.05. (a) If at any time the Bank determines that any sum paid out of 
the Special Deposit Account was paid out in respect of any expenditure which was not 
an Eligible Expenditure, or was not justified by the evidence furnished pursuant to 
Section 3.04 of this Agreement, NPC shall, promptly following notice from the Bank, 
deposit in the Special Deposit Account an amount equal to such sum.
(b)
If at any time the Bank determines that any sum outstanding in the 
Special Deposit Account will not be required to cover further payments for Eligible 
Expenditures, NPC may, upon notice to that effect from the Bank, use such funds for 
such other expenditures under the Project as the Bank may determine to be eligible for 
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this purpose.
Section 3.06.  NPC shall take such actions, satisfactory to the Bank, as shall 
be necessary to protect itself against the risk of loss resulting from changes in the 
rates of exchange between the currencies used in the financing of the Sub-Project and 
spare parts required under Part A of the Project out of the proceeds of the Bonds.
Section 3.07.  NPC and the Republic shall obtain the prior written consent of 
the Bank before agreeing to any change (whether by way of amendment, waiver or 
otherwise) in the terms and conditions of the Bonds, the Republic Guarantee or the 
Fiscal Agency Agreement.
ARTICLE IV
Remedies of the Bank
Section 4.01. If NPC or the Republic fails to make any payment due to the Bank 
under this Agreement or to perform any of its obligations under this Agreement, and 
such failure is continuing, the Bank may, by notice to NPC or the Republic, as the 
case may be, suspend in whole or in part the right of NPC or the Republic, as the case 
may be, to make withdrawals under: (a) the IBRD Loan Agreement, and (b) any other 
loan, credit or grant agreement between the Republic and the Bank or NPC and the Bank, 
as the case may be.
ARTICLE V
Miscellaneous Provisions
Section 5.01. (a) The Secretary of Finance of the Republic of the Philippines is 
hereby designated as representative of the Republic for the purposes of Section 11.03 
of the General Conditions.
(b)
The President of NPC is hereby designated as representative of NPC for 
the purposes of Section 11.03 of the General Conditions.
Section 5.02. The following addresses are specified for the purposes of Section 
11.01 of the General Conditions:
For the Republic:
Secretary of Finance 
Department of Finance 
Manila 
Republic of the Philippines
Cable Address:
Telex:
SECFIN
40268 CB-CONF
Manila
For NPC:
National Power Corporation 
Quezon Avenue 
East Triangle, Diliman 
Quezon City 
Republic of the Philippines
Cable Address:
Telex:
NAPOCOR
742-40120 (PM)
For the Bank:
International Bank for
  Reconstruction and Development 
1818 H Street, N.W. 
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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.
REPUBLIC OF THE PHILIPPINES
By /s/ Romeo L. Bernardo
Authorized Representative
NATIONAL POWER CORPORATION
By /s/ Francisco L. Viray
Authorized Representative
INTERNATIONAL BANK FOR 
  RECONSTRUCTION AND DEVELOPMENT
By /s/ Nina B. Shapiro
Authorized Representative