Page  1
CONFORMED COPY
LOAN NUMBER
3252
PAK
(Corporate Restructuring and System Expansion Project)
 
between
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
and
SUI NORTHERN GAS PIPELINES LIMITED
Dated October
22, 1990
 
LOAN NUMBER
3252
PAK
LOAN AGREEMENT
AGREEMENT, dated October
22,
1990, between
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
(the Bank) and SUI NORTHERN GAS PIPELINES LIMITED (the
Borrower).
WHEREAS
(A)
The Islamic Republic of Pakistan
(the
Guarantor)
and the Borrower, having been satisfied as to
the feasibility and priority of the Project described in
Schedule
2
to this Agreement, have requested the Bank to
assist in the financing of the Project;
(B)
by an agreement
(the Guarantee Agreement) of
even date herewith between the Guarantor and the Bank,
the Guarantor has agreed to guarantee the obligations of
the Borrower in respect of the Loan and to undertake such
other obligations as set forth in the Guarantee
Agreement;
Page  2
(C)
the Borrower intends to contract from the Habib
Bank Limited, the National Bank of Pakistan, the Muslim
Commercial Bank, the United Bank Limited, the Allied Bank
Limited and the National Development Finance Corporation
of Pakistan
(the Commercial Banks) loans (the Commercial
Banks Loans) in an amount totalling one billion five
hundred million Rupees
(Rs
1,500,000,000) to assist in
financing the Project on the terms and conditions set
forth in agreements to be entered into between the
Borrower and the Commercial Banks
(the Commercial Banks
Loan Agreements); and
 
WHEREAS the Bank has agreed, on the basis, inter
alia, of the foregoing, to extend the Loan to the
Borrower upon the terms and conditions set forth in this
Agreement;
NOW THEREFORE the parties hereto hereby agree as
follows:
ARTICLE I
General Conditions; Definitions
Section
1.01. The "General Conditions Applicable to
Loan and Guarantee Agreements" of the Bank, dated January
1, 1985, with the last sentence of Section 3.02 deleted
(the General Conditions) constitute an integral part of
this Agreement.
Section
1.02. Unless the context otherwise requires,
the several terms defined in the General Conditions have
the respective meanings therein set forth and the
following additional terms have the following meanings:
 
(a)  "Special Account" 
means the account referred to
in Section
2.02 (b) of this Agreement;
 
(b)  "Rs" and "Rupees" 
mean the currency of the
Guarantor;
(c)  "MCF" 
means
1,000
cubic feet of gas;
(d)  "MMCFD" 
means
1,000,000 cubic feet of gas per
day;
(e)  "BHP" 
means brake horsepower;
(f)  "fiscal year" 
means the Borrower's fiscal year
commencing on July
1
and ending on June
30
of each year;
(g)  "Gas Development Surcharge" 
means the gas
surcharge which is collected for and on behalf of the
Guarantor by the Borrower pursuant to the Natural Gas
Development Surcharge Ordinance,
1967
(1
of
1976),
Section
3, Clause
(1) and Government Notification Number
NG-10 (62)/74, dated June 8, 1974; and
 
(h)  "Prescribed Prices" 
means the prices of gas
charged to consumers by the Borrower, net of the
applicable Gas Development Surcharge, as such prices are
fixed by the Guarantor, from time to time, under the
Natural Gas
(Development Surcharge) Ordinance, 1967 and
the Natural Gas Rules,
1960.
ARTICLE II
Page  3
The Loan
Section
2.01. The Bank agrees to lend to the
Borrower, on the terms and conditions set forth or
referred to in the Loan Agreement, various currencies
that shall have an aggregate value equivalent to the
amount of one hundred thirty million dollars
($130,000,000), being the sum of withdrawals of the
proceeds of the Loan, with each withdrawal valued by the
Bank as of the date of such withdrawal.
 
Section
2.02. (a) The amount of the Loan may be
withdrawn from the Loan Account in accordance with the
provisions of Schedule
1
to this Agreement for
expenditures made
(or, if the Bank shall so agree, to be
made
)
in respect of the reasonable cost of goods and
services required for the Project described in Schedule
2
to this Agreement and to be financed out of the
proceeds of the Loan.
 
(b)
The Borrower shall, for the purposes of the
Project, open and maintain in dollars a special account
in a commercial bank in the Islamic Republic of Pakistan
on terms and conditions satisfactory to the Bank.
Deposits into, and payments out of, the Special Account
shall be made in accordance with the provisions of
Schedule
5
to this Agreement.
 
Section
2.03. The Closing Date shall be December 31,
1996, or such later date as the Bank shall establish. The
Bank shall promptly notify the Borrower and the Guarantor
of such later date.
 
Section
2.04. The Borrower shall pay to the Bank a
commitment charge at the rate of three-fourths of one
percent
(3/4 of 1%) per annum on the principal amount of
the Loan not withdrawn from time to time.
 
Section
2.05. (a) The Borrower shall pay interest on
the principal amount of the Loan withdrawn and
outstanding from time to time, at a rate for each
Interest Period equal to the Cost of Qualified Borrowings
determined in respect of the preceding Semester, plus
one-half of one percent (1/2 of 1%). On each of the dates
specified in Section
2.06 of this Agreement, the Borrower
shall pay interest accrued on the principal amount
outstanding during the preceding Interest Period,
calculated at the rate applicable during such Interest
Period.
 
(b)
As soon as practicable after the end of each
Semester, the Bank shall notify the Borrower and the
Guarantor of the Cost of Qualified Borrowings determined
in respect of such Semester.
 
(c)
For the purposes of this Section:
 
(i)  "Interest Period" 
means a six
-
month
period ending on the date immediately
preceding each date specified in Section
2.06 of this Agreement, beginning with
the Interest Period in which this
Agreement is signed.
 
(ii) "Cost of Qualified Borrowings" 
means the
cost, as reasonably determined by the
Page  4
Bank and expressed as a percentage per
annum, of the outstanding borrowings of
the Bank drawn down after June
30, 1982,
excluding such borrowings or portions
thereof as the Bank has allocated to
fund: (A) the Bank's investments; and (B)
loans which may be made by the Bank after
July
1,
1989
bearing interest rates
determined otherwise than as provided in
paragraph
(a)
of this Section.
 
(iii)     "Semester" 
means the first six
months or the second six months of a
calendar year.
 
(d)
On such date as the Bank may specify by no less
than six months' notice to the Borrower, paragraphs
(a),
(b) and (c) (iii) of this Section shall be amended to
read as follows:
"(a) The Borrower shall pay interest on the
principal amount of the Loan withdrawn and
outstanding from time to time, at a rate for each
Quarter equal to the Cost of Qualified Borrowings
determined in respect of the preceding Quarter,
plus one-half of one percent (1/2 of 1%). On each
of the dates specified in Section
2.06
of this
Agreement, the Borrower shall pay interest accrued
on the principal amount outstanding during the
preceding Interest Period, calculated at the rates
applicable during such Interest Period."
 
"(b) As soon as practicable after the end of
each Quarter, the Bank shall notify the Borrower of
the Cost of Qualified Borrowings determined in
respect of such Quarter."
 
"(c) (iii) `Quarter' means a three-
month
period commencing on January
1, April
1, July
1
or
October
1
in a calendar year."
 
Section
2.06. Interest and other charges shall be
payable semiannually on March
1
and September
1
in each
year.
 
Section
2.07. The Borrower shall repay the principal
amount of the Loan in accordance with the amortization
schedule set forth in Schedule
3
to this Agreement.
 
ARTICLE III
Execution of the Project
Section
3.01. The Borrower declares its commitment
to the objectives of the Project as set forth in Schedule
2
to this Agreement, and, to this end, shall carry out
the Project with due diligence and efficiency and in
conformity with appropriate administrative, commercial,
industrial and engineering practices, and in accordance
with health, safety and environmental standards accept-
able to the Bank, and shall provide, promptly as needed,
the funds, facilities, services and other resources
required for the Project.
 
Section
3.02. The Borrower shall, not later than
June
30,
1991, establish criteria, satisfactory to the
Bank and the Guarantor, for providing, during fiscal
Page  5
years
1991
through
1996
, gas to towns in the territory of
the Guarantor which have not yet been supplied.
 
Section
3.03. Except as the Bank shall otherwise
agree, procurement of the goods and consultants' services
required for the Project and to be financed out of the
proceeds of the Loan shall be governed by the provisions
of Schedule
4
to this Agreement.
 
Section
3.04. For purposes of Section 9.09 of the
General Conditions, the Borrower shall take all the
necessary action to commence, not later than December
31,
1990, the process of acquisition of the land required for
the construction of transmission pipelines under Part B
(2) and (3) of the Project.
 
Section
3.05. The Borrower shall, not later than
June
30,
1991, or such other date as shall be agreed with
the Bank, conclude contractual arrangements, under terms
and conditions satisfactory to the Bank, with a private
sector gas utility acceptable to the Bank, for the
purpose of providing technical assistance and training to
the staff of the Borrower in connection with Part C
(4)
of the Project.
Section
3.06. The Borrower shall appoint a financial
adviser with qualifications, experience and terms of
reference satisfactory to the Bank to assist the Borrower
in the management and implementation of the measures
necessary to enable the Borrower to raise the resources
required to carry out the Project through equity issues
and loans.
Section
3.07. Except as the Bank shall otherwise
agree, the Borrower shall increase its share capital by
issuing
219
million new equity shares for subscription by
the general public and, subject to Section
3.02
of the
Guarantee Agreement, by the Guarantor, as follows: (i)
not later than June
30, 1991, 57.5 
million such shares;
(ii) not later than June 30, 1992, 37.5 
million such
shares;
(iii)
not later than June
30, 1993, 50 
million
such shares;
(iv) not later than June 30, 1994, 57
million such shares; and
(v) not later than June 30,
1995, 17 
million such shares
.
Section
3.08. The Borrower shall: (i) not later than
June
30,
1991, undertake, under terms of reference
satisfactory to the Bank, a study to establish a new
formula for the setting of the Borrower's Prescribed
Prices and performance criteria referred to in Part A
(3)
of the Project;
(ii) not later than June 30, 1992,
furnish to the Bank and the Guarantor the findings and
recommendations of such study for review and comment; and
(iii) not later than July 1, 1993, taking into account
the Bank's comments, implement the formula established by
the Guarantor pursuant to said findings and
recommendations referred to in Section
3.05
of the
Guarantee Agreement.
 
Section
3.09. The Borrower shall: (i) not later than
June
30,
1992, complete and furnish to the Bank for its
review the findings, recommendations of the study
referred to under Part C
(2)
of the Project, together
with a proposed plan for their implementation; and
(ii)
thereafter, carry out such plan in accordance with a time
schedule which shall have been approved by the Borrower
and the Bank.
Page  6
Section
3.10. Except as the Bank shall otherwise
agree, the Borrower shall, not later than March
31,
1992,
reconstitute its Board of Directors so that it reflects
the then current levels of shareholdings in the Borrower.
 
ARTICLE IV
Management and Operations of the Borrower
Section
4.01. The Borrower shall carry on its
operations and conduct its affairs in accordance with
sound administrative, financial, commercial, industrial
and engineering practices under the supervision of
qualified and experienced management assisted by compe-
tent staff in adequate numbers.
 
Section
4.02. The Borrower shall at all times
operate and maintain its plants, machinery, equipment and
other property, and from time to time, promptly as
needed, make all necessary repairs and renewals thereof,
all in accordance with sound administrative, engineering
and financial practices.
 
Section
4.03. The Borrower shall take out and
maintain with responsible insurers, or make other
provision satisfactory to the Bank for, insurance against
such risks and in such amounts as shall be consistent
with appropriate practice.
 
Section
4.04. (a) The Borrower shall at all times
take all such action within its powers to maintain its
corporate existence and right to carry on its operations,
and take all steps necessary to acquire, maintain and
renew all rights, powers, privileges and franchises which
are necessary or useful in the conduct of its business
and for the execution of the Project.
 
(b)
Except in the normal course of its business,
the Borrower shall not sell, lease, transfer or otherwise
dispose of any of its properties or assets which shall be
required for the efficient operation of its business and
undertaking so as to, in the opinion of the Bank, affect
materially and adversely the ability of the Borrower to
perform any of its obligations under this Agreement.
 
Section
4.05. In order to enhance the capabilities
of the Borrower's Corporate Planning Department, the
Borrower shall, not later than March
31,
1991, or such
other date as shall be agreed with the Bank, appoint to
the staff of such Department an economist, a financial
analyst and a system planner, all with appropriate
qualifications and experience.
 
ARTICLE V
Financial Covenants
Section
5.01. (a) The Borrower shall maintain
records and accounts adequate to reflect in accordance
with sound accounting practices its operations and
financial condition.
 
(b)
The Borrower shall:
 
(i)
have its records, accounts and financial
statements
(balance sheets, statements of
income and expenses and related
Page  7
statements) and the records and accounts
for the Special 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 months
after the end of each such year: (A)
certified copies of its financial
statements for such year as so audited;
(B) the report of such audit by said
auditors, of such scope and in such
detail as the Bank shall have reasonably
requested, and
(C) a certificate from
said auditors that the Borrower has
complied with Sections
5.02
through
5.07
of this Agreement; 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.
 
(c)
For all expenditures with respect to which
withdrawals from the Loan Account were made on the basis
of statements of expenditure, the Borrower shall:
 
(i)
maintain, in accordance with paragraph
(a) of this Section, records and accounts
reflecting such expenditures;
(ii) retain, until at least one year after the
Bank has received the audit report for
the fiscal year in which the last
withdrawal from the Loan Account was
made, all records
(contracts, orders,
invoices, bills, receipts and other
documents)
evidencing such expenditures;
(iii) enable the Bank's representatives to
examine such records; and
(iv) ensure that such records and accounts are
included in the annual audit referred to
in paragraph
(b)
of this Section and that
the report of such audit contains a
separate opinion by said auditors as to
whether the statements of expenditure
submitted during such fiscal year,
together with the procedures and internal
controls involved in their preparation,
can be relied upon to support the related
withdrawals.
 
Section
5.02. (a) Except as the Bank shall otherwise
agree, the Borrower shall earn, for each of its fiscal
years after its fiscal year ending on June
30,
1990, an
annual return of not less than
17.5% of the average
current net value of the Borrower's fixed assets in
operation.
(b)
Before December
31
in each of its fiscal years,
the Borrower shall, on the basis of the accounts prepared
by the Borrower for the previous fiscal year and a
Page  8
forecast prepared by the Borrower and satisfactory to the
Bank for the current fiscal year, review whether it would
meet the requirements set forth in paragraph
(a) in
respect of the previous fiscal year and the current
fiscal year and shall furnish to the Bank the results of
such review upon its completion.
 
(c)
If any such review shows that the Borrower
would not meet the requirements set forth in paragraph
(a) for the Borrower's fiscal years covered by such
review, the Borrower shall promptly take all measures
necessary on its part
(including, without limitation,
adjustments of the structure or levels of its prices for
the supply of gas) in order to meet such requirements.
 
(d)
For purposes of this Section:
 
(i)
The annual return shall be calculated by
dividing the Borrower's net operating
income for the fiscal year in question by
one half of the sum of the current net
value of the Borrower's fixed assets in
operation at the beginning and at the end
of that fiscal year.
 
(ii) The term "net operating income" 
means
total operating revenues less total
operating expenses.
 
(iii) The term "total operating revenues" 
means
revenues from all sources related to
operations, but excluding interest,
dividends and other non-operating income.
 
(iv) The term "total operating expenses" 
means
all expenses related to operations,
including administration, adequate
maintenance, compulsory con
-
tributions
to employee funds, taxes and payments in
lieu of taxes such as development
surcharges or other levies on gas
revenues, and provision for depreciation
on a straight-line basis at a rate of not
less than
6%
per annum of the average
current gross value of the Borrower's
fixed assets in operation, or other basis
acceptable to the Bank, but excluding
corporate income tax, interest and other
charges on debt.
 
(v)
The average current gross value of the
Borrower's fixed assets in operation
shall be calculated as one-half of the
sum of the gross value of the Borrower's
fixed assets in operation at the begin-
ning and at the end of the fiscal year,
as valued at their historical cost.
 
(vi) The term "current net value of the
Borrower's fixed assets in operation"
means the gross value of the Borrower'd
fixed assets in operation less the amount
of accumulated depreciation, as valued at
their historical cost.
 
Section
5.03. (a) Except as the Bank shall otherwise
agree, the Borrower shall produce for each of its fiscal
Page  9
years after its fiscal year ending on June
30
,
1990
total
revenues equivalent to not less than the sum of its
(i)
total operating expenses; and
(ii) the amount by which
debt service requirements exceed the provision for
depreciation.
(b)
Before December
31
in each of its fiscal years,
the Borrower shall, on the basis of the accounts prepared
by the Borrower for the previous fiscal year and a
forecast prepared by the Borrower and satisfactory to the
Bank for the current fiscal year, review whether it would
meet the requirements set forth in paragraph
(a) in
respect of the previous fiscal year and the current
fiscal year and shall furnish to the Bank the results of
such review upon its completion.
 
(c)
If any such review shows that the Borrower
would not meet the requirements set forth in paragraph
(a) for the Borrower's fiscal years covered by such
review, the Borrower shall promptly take all measures
necessary on its part
(including, without limitation,
adjustments of the structure or levels of its prices for
the supply of gas) in order to meet such requirement.
 
(d)
For purposes of this Section:
 
(i)
The term
"total revenues" 
means the sum
of total operating revenues and net non-
operating income.
(ii)
The term
"total operating revenues"
means revenues from all sources
related to operations, but excluding
interest, dividends and other non-
operating income.
 
(iii) The term "net non-operating income" 
means
the difference between:
 
(A)
revenues from all sources other than
those related to operations; and
(B)
expenses, including current and
deferred income and other taxes and
payments in lieu of taxes, incurred
in the generation of revenues in
(A)
above.
(iv) The term "total operating expenses" 
means
all expenses related to operations,
including administration, adequate
maintenance, compulsory contributions to
employee funds, current and deferred
income and other taxes and payments in
lieu of taxes, and provision for
depreciation on a straight-line basis at
a rate of not less than
6%
per annum of
the average current gross value of the
Borrower's fixed assets in operation, or
other basis acceptable to the Bank, but
excluding interest and other charges on
debt.
 
(v)
The average current gross value of the
Borrower's fixed assets in operation
shall be calculated as one half of the
sum of the gross value of the Borrower's
Page  10
fixed assets in operation at the begin-
ning and at the end of the fiscal year,
as valued at their historical cost.
 
(vi) The term "debt service requirements"
means the aggregate amount of repayments
(including sinking fund payments, if any)
of, and interest and other charges on,
debt.
 
(vii) Whenever for the purposes of this Section
it shall be necessary to value, in terms
of the currency of the Guarantor, debt
payable in another currency, such
valuation shall be made on the basis of
the prevailing lawful rate of exchange at
which such other currency is, at the time
of such valuation, obtainable for the
purposes of servicing such debt, or, in
the absence of such rate, on the basis of
a rate of exchange acceptable to the
Bank.
 
Section
5.04. (a) Except as the Bank shall otherwise
agree, the Borrower shall not incur any debt, if after
the incurrence of such debt the ratio of debt to equity
shall be greater than
70
to
30.
 
(b)
For purposes of this Section:
 
(i)
The term
"debt" 
means any indebtedness of
the Borrower maturing by its terms more
than one year after the date on which it
is originally incurred.
 
(ii) Debt shall be deemed to be incurred: (A)
under a loan contract or agreement or
other instrument providing for such debt
or for the modification of its terms of
payment on the date of such contract,
agreement or instrument; and
(B)
under a
guarantee agreement, on the date the
agreement providing for such guarantee
has been entered into.
 
(iii) The term "equity" 
means the sum of the
total unimpaired paid-up capital,
retained earnings and reserves of the
Borrower not allocated to cover specific
liabilities.
 
(iv) Whenever for the purposes of this Section
it shall be necessary to value, in terms
of the currency of the Guarantor, debt
payable in another currency, such
valuation shall be made on the basis of
the prevailing lawful rate of exchange at
which such other currency is, at the time
of such valuation, obtainable for the
purposes of servicing such debt, or, in
the absence of such rate, on the basis of
a rate of exchange acceptable to the
Bank.
 
Section
5.05. (a) Except as the Bank shall otherwise
agree, the Borrower shall not declare any dividend or
make any other distribution with respect to its share
Page  11
capital, unless, after such dividend has been paid or
other distribution has been made, the current assets of
the Borrower would equal or exceed the current
liabilities of the Borrower.
 
(b)
For the purposes of this Section:
 
(i)
The term
"current assets" 
means cash,
accounts receivable and readily
marketable securities, but shall not
include stocks and spares.
 
(ii) The term "current liabilities" 
means all
liabilities which will become due and
payable or could under circumstances then
existing be called for payment within
twelve months, including accounts
payable, customer advances, debt service
requirements, taxes and payments in lieu
of taxes, and dividends.
 
(iii) The term "debt service requirements"
means the aggregate amount of repayments
(including sinking fund payments, if any)
of, and interest and other charges on,
debt.
 
(iv)
Whenever for the purposes of this Section
it shall be necessary to value, in terms
of the currency of the Guarantor, debt
payable in another currency, such
valuation shall be made on the basis of
the prevailing lawful rate of exchange at
which such other currency is, at the time
of such valuation, obtainable for the
purposes of servicing such debt, or, in
the absence of such rate, on the basis of
a rate of exchange acceptable to the
Bank.
 
Section
5.06. The Borrower shall: (i) prepare and
furnish to the Bank for review and comment, not later
than June
30, 1991, a five-year corporate investment and
financing plan; and
(ii) annually revise such plan and
furnish it to the Bank for review and comment.
 
Section
5.07. The Borrower shall: (i) not later than
January
31, 1991, appoint underwriters, or a consortium
thereof, satisfactory to the Bank, on a fully-committed
basis, to market the new equity shares referred to in
Section
3.07; and (ii) not later than December 31, 1990
provide to the Bank evidence, satisfactory to the Bank,
that it has obtained all necessary consents and
clearances for the marketing of such new equity shares.
 
Section
5.08. Section 5.05 (a)(i) of the Loan
Agreement Fifth Sui Northern Gas Project
-
Loan No. 2324
PAK dated July
21, 1983 between the Bank and the Borrower
is hereby amended to read as set forth in Section
5.02
of
this Agreement.
ARTICLE VI
Remedies of the Bank
Section
6.01. Pursuant to Section 6.02 (k) of the
General Conditions, the following additional events are
Page  12
specified namely, that
:
(a)  (i)
Subject to subparagraph
(ii) of this
paragraph:
(A)
the right of the Borrower to
withdraw the proceeds of the
Commercial Banks Loans shall have
been suspended, cancelled or
terminated in whole or in part,
pursuant to the terms of the loan
agreement providing therefor; or
(B)
the Commercial Banks Loans shall
have become due and payable prior to
the agreed maturity thereof;
(ii) subparagraph (i) of this paragraph shall
not apply if the Borrower establishes to
the satisfaction of the Bank that:
 
(A)
such suspension, cancellation,
termination or prematuring is not
caused by the failure of the
Borrower to perform any of its
obligations under such agreement;
and
(B)
adequate funds for the Project are
available to the Borrower from other
sources on terms and conditions
consistent with the obligations of
the Borrower under this Agreement.
 
(b)
The Articles of Association of the Borrower
shall have been amended, repealed or waived so as to
affect materially and adversely the ability of the
Borrower to perform any of its obligations under this
Agreement.
Section
6.02. Pursuant to Section 7.01 (h) of the
General Conditions, the following additional events are
specified:
(a)
that the event specified in paragraph
(a) (i)
(B) of Section 6.01 of this Agreement shall occur,
subject to the proviso of paragraph
(ii)
of that Section;
and
(b)
the event specified in paragraph
(b)
of Section
6.01 of this Agreement shall occur.
 
ARTICLE VII
Effective Date; Termination
Section
7.01. The following events are specified as
additional conditions to the effectiveness of the Loan
Agreement within the meaning of Section
12.01 (c) of the
General Conditions, namely, that:
 
(a)
the Borrower shall have appointed the financial
advisor referred to in Section
3.06 of this Agreement
pursuant to the provisions thereof;
(b)
the PC-1 document for the Project has been
approved by the Executive Committee of the National
Page  13
Economic Council of the Guarantor and the pro forma
Environmental Impact Assessment of the Project has been
approved by the Pakistan Environmental Protection Agency;
and
(c)
all conditions precedent to the effectiveness
of the Commercial Banks Loan Agreements have been
fulfilled, other than those related to the effectiveness
of this Agreement.
 
Section
7.02. The date ninety (90) days after the
date of this Agreement is hereby specified for the
purposes of Section
12.04 of the General Conditions.
 
ARTICLE VIII
Representative of the Borrower; Addresses
Section
8.01. The Managing Director of the Borrower
is designated as representative of the Borrower for the
purposes of Section
11.03 of the General Conditions.
 
Section
8.02. The following addresses are specified
for the purposes of Section
11.01 of the General
Conditions:
 
For the Bank:
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)
 
For the Borrower:
Sui Northern Gas Pipelines Limited
Gas House
21
Kashmir Road
Lahore, Pakistan
Cable address:
Telex:
Sui North
445-677 SNGP PK
Lahore
IN WITNESS WHEREOF, the parties hereto, acting
through their duly authorized representatives, 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
/s/ K. Dervis
Page  14
Acting Regional Vice President
Europe, Middle East and North Africa
SUI NORTHERN GAS PIPELINES LIMITED
By
/s/ Nasim Qureshi
Authorized Representative
SCHEDULE
1
Withdrawal of the Proceeds of the Loan
1.
The table below sets forth the Categories of items
to be financed out of the proceeds of the Loan, the
allocation of the amounts of the Loan to each Category
and the percentage of expenditures for items so to be
financed in each Category:
 
Amount of the
Loan Allocated
%
of
(Expressed in    Expenditures
Category         Dollar Equivalent)to be Financed
 
(1)
Materials and
120,000,000100% of foreign
equipment                            expenditures
and
100% of local
expenditures
(ex-factory cost)
 
(2)
Engineering and
2,000,000       100% of foreign
consulting
expenditures and
services
80%
of
local
expenditures
(3)
Technical assistance
2,000,000100%
and training
(4)
Unallocated
6,000,000
___________
TOTAL
130,000,000
===========
2.
For the purposes of this Schedule:
 
(a)
the term
"foreign expenditures" 
means
expenditures in the currency of any country other than
that of the Guarantor for goods or services supplied from
the territory of any country other than that of the
Guarantor; and
(b)
the term
"local expenditures" 
means
expenditures in the currency of the Guarantor or for
goods or services supplied from the territory of the
Guarantor.
3.
Notwithstanding the provisions of paragraph
1
above,
no withdrawals shall be made in respect of payments made
for expenditures prior to the date of this Agreement,
except that withdrawals, in an aggregate amount not
Page  15
exceeding the equivalent of $
12
,
000
,
000
, may be made in
respect of Category
(1) on account of payments made for
expenditures before that date but after October
1,
1989.
SCHEDULE
2
Description of the Project
The objectives of the Project are to assist in: (a)
restruc-turing of the ownership of the Borrower by the
Guarantor;
(b) expanding the infrastructure for the
purification, transmission and distribution of gas to
meet demand at least cost;
(c) promoting the substitution
of gas for higher value petroleum imports in the northern
part of the country;
(d) rationalizing the supply and
consumption of gas through pricing and demand management;
and
(e)
strengthening the Borrower's capabilities in
long-term planning, inventory control, operation and
maintenance
.
The Project consists of the following parts, subject
to such modifications thereof as the Bank and the
Borrower may agree upon from time to time to achieve such
objectives:
 
Part A:
Corporate Restructuring
(1)
Restructuring of the ownership of the Borrower
by reducing the Guarantor's ultimate direct and indirect
shareholdings in the Borrower to a maximum of
40% and by
increasing Borrower's share capital.
 
(2)
Restructuring of the Borrower's management
organization.
(3)
Establishing a new basis for setting of the
Borrower's Prescribed Prices and financial performance
criteria examening, inter alia, the possibility of
capping the Borrower's prices for the purpose of
improving the efficiency and competitiveness of the
Borrower and enhancing its ability to raise equity
capital from capital markets.
 
Part B:
Infrastructure Development
(1)
Installation of gas a purification plant at Sui
of
120
MMCFD capacity.
 
(2)
Expansion of the Borrower's transmission system
capacity by
300
MMCFD, including construction of
approximately
215
miles of
30
inch diameter pipeline
between Sui and Multan, and the installation of six
4000
BHP compressor units.
 
(3)
Expansion of the Borrower's distribution
network to supply gas to the power station at Kot Addu
and to two fertilizer plants, to be constructed between
Sahiwal and Lahore, and to connect, during the course of
fiscal years
1993
through
1996, approximately 330,000
domestic,
6,000 commercial and 400 industrial new
consumers.
(4)
Provision of equipment to enhance the
Borrower's construction capabilities.
 
(5)
Installation of a linepipe coating plant to
improve the coating process and operational safety during
Page  16
construction
.
(6)
Installation of a telecommunication system to
monitor the operations of the transmission and
distribution network.
 
Part C:
Technical Assistance, Studies and Training
(1)
Provision of financial advisory services to the
Borrower.
(2)
Carrying out of a study to formulate a plan for
further development of the Borrower's financial
management information systems and data processing,
including definition of its computer hardware and
software needs and a review of the Borrower's billing
cycle.
 
(3)
Training of the Borrower's staff in the area of
internal auditing of computerized accounting systems.
 
(4)
Provision of technical assistance to and
training of the Borrower's staff in the areas of long-
term planning, pipeline system operations and mainte-
nance, inventory control and safety.
 
(5)
Carrying out of a study to upgrade the
regulatory capabilities of the Guarantor's Directorate
General of Gas.
*     *     *     *
The Project is expected to be completed by June
30,
1996.
 
SCHEDULE
3
Amortization Schedule
Payment of Principal
Date Payment Due
(expressed in dollars)
 
March
1,
1996                      2,365,000
September
1,
1996                  2,460,000
March
1,
1997                             2,555,000
September
1,
1997                         2,655,000
March
1,
1998                             2,755,000
September
1,
1998                         2,860,000
March
1,
1999                             2,975,000
September
1,
1999                         3,090,000
March
1,
2000                             3,210,000
September
1,
2000                         3,330,000
March
1,
2001                             3,460,000
September
1,
2001                         3,595,000
March
1,
2002                             3,735,000
September
1,
2002                         3,880,000
March
1,
2003                             4,030,000
September
1,
2003                         4,185,000
March
1,
2004                             4,350,000
September
1,
2004                         4,515,000
March
1,
2005                             4,690,000
September
1,
2005                         4,875,000
March
1,
2006                             5,065,000
September
1,
2006                         5,260,000
March
1,
2007                             5,465,000
September
1,
2007                         5,675,000
March
1,
2008                             5,895,000
Page  17
September
1
,
2008                         6
,
120
,
000
March
1,
2009                             6,360,000
September
1,
2009                         6,605,000
March
1,
2010                             6,860,000
September
1,
2010                         7,125,000
 
Premiums on Prepayment
The following premiums are specified for the
purposes of Section
3.04 (b) of the General Conditions:
 
Time of Prepayment              Premium
The interest rate
(expressed as a
percentage per annum)
applicable to the balance
outstanding on the Loan
on the day of prepayment
multiplied by
:
Not more than three years
0.15
before maturity
More than three years but
0.30
not more than six years
before maturity
More than six years but
0.55
not more than eleven years
before maturity
More than eleven years but not
0.80
more than sixteen years
before maturity
More than sixteen years but not
0.90
more than eighteen years
before maturity
More than eighteen years before
1.00
maturity
SCHEDULE
4
Procurement and Consultants' Services
Section I.
Procurement of Goods
Part A:
International Competitive Bidding
Except as provided in Part C hereof, goods shall be
procured under contracts awarded in accordance with
procedures consistent with those set forth in Sections I
and II of the
"Guidelines for Procurement under IBRD
Loans and IDA Credits" published by the Bank in May 1985
(the Guidelines).
 
Part B:
Preference for Domestic Manufacturers
In the procurement of goods in accordance with the
procedures described in Part A hereof, goods manufactured
in Islamic Republic of Pakistan may be granted a margin
of preference in accordance with, and subject to, the
provisions of paragraphs
2.55
and
2.56 of the Guidelines
and paragraphs
1
through
4
of Appendix
2
thereto.
 
Page  18
Part C
:
Other Procurement Procedures
1.
Equipment which the Bank shall agree to be
proprietary may be procured through direct negotiations
with suppliers under procedures satisfactory to the Bank,
provided, however, that items so procured shall not
exceed $8,500,000 equivalent in the aggregate.
 
2.
Equipment which the Bank agrees needs to be
compatible with installed equipment and spare parts,
estimated to cost in the aggregate not more than
$4,000,000 equivalent, may be procured under contracts
awarded through limited international bidding procedures
on the basis of bids invited from at least four qualified
suppliers eligible under the Guidelines and in accordance
with the procedures set forth in Sections I and II of the
Guidelines
(excluding paragraphs 2.8,2.9, 2.55 and 2.56
thereof).
Part D:
Review by the Bank of Procurement Decisions
1.
Review of invitations to bid and of proposed awards
and final contracts:
 
(a)
With respect to each contract estimated to cost
the equivalent of $1,000,000 equivalent or more, the
procedures set forth in paragraphs
2
and
4
of Appendix
1
to the Guidelines shall apply. Where payments for such
contract are to be made out of the Special Account, such
procedures shall be modified to ensure that the two
conformed copies of the contract required to be furnished
to the Bank pursuant to said paragraph
2
(d) shall be
furnished to the Bank prior to the making of the first
payment out of the Special Account in respect of such
contract.
(b)
With respect to each contract not governed by
the preceding paragraph, the procedures set forth in
paragraphs
3
and
4
of Appendix
1
to the Guidelines shall
apply. Where payments for such contract are to be made
out of the Special Account, such procedures shall be
modified to ensure that the two conformed copies of the
contract together with the other information required to
be furnished to the Bank pursuant to said paragraph
3
shall be furnished to the Bank as part of the evidence tobe furnished pursuant to
paragraph
4
of Schedule
5
to
this Agreement.
(c)
The provisions of the preceding subparagraphs
(a) and (b) shall not apply to contracts on account of
which the Bank has authorized withdrawals from the Loan
Account on the basis of statements of expenditure. Such
contracts shall be retained in accordance with Section
5.01 (c) (ii) of this Agreement.
 
2.
The figure of
15%
is hereby specified for purposes
of paragraph
4
of Appendix
1
to the Guidelines.
 
Section II.
Employment of Consultants
In order to assist the Borrower in the carrying out
of the Project, the Borrower shall employ consultants
whose qualifications, experience and terms and conditions
of employment shall be satisfactory to the Bank:
 
(a)
by March
31,
1991, to: (i) prepare the detailed
design and engineering of the high-pressure pipelines
Page  19
across the Sutlej and Ravi rivers; and
(
ii
)
supervise
construction of these pipelines;
(b)
by March
31,
1991, to: (i) formulate a strategy
for further development of Borrower's financial
management information systems and data processing,
including definition of its computer hardware and
software requirements;
(ii) review Borrower's billing
cycle; and
(iii) train Borrower's staff in computer
auditing; and
(c)
by June
30,
1991, to establish the new basis
for setting of the Borrower's Prescribed Prices and
performance criteria referred to in Part A
(3)
of the
Project.
The consultants referred to above shall be selected
in accordance with principles and procedures satisfactory
to the Bank on the basis of the
"Guidelines for the Use
of Consultants by World Bank Borrowers and by The World
Bank as Executing Agency" published by the Bank in August
1981.
 
SCHEDULE
5
Special Account
1.
For the purposes of this Schedule:
 
(a)
the term
"eligible Categories" 
means Categories
(1), (2) and (3) set forth in the table in paragraph 1 of
Schedule
1
to this Agreement;
(b)
the term
"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 Loan allocated from time to
time to the eligible Categories in accordance with the
provisions of Schedule
1
to this Agreement; and
(c)
the term
"Authorized Allocation" 
means an
amount equivalent to $5,000,000 to be withdrawn from the
Loan Account and deposited into the Special Account
pursuant to paragraph
3
(a) of this Schedule.
 
2.
Payments out of the Special Account shall be made
exclusively for eligible expenditures in accordance with
the provisions of this Schedule.
 
3.
After the Bank has received evidence satisfactory to
it that the Special Account has been duly opened,
withdrawals of the Authorized Allocation and subsequent
withdrawals to replenish the Special Account shall be
made as follows
:
(a)
For withdrawals of the Authorized Allocation,
the Borrower shall furnish to the Bank a request or
requests for a deposit or deposits which do not exceed
the aggregate amount of the Authorized Allocation. On the
basis of such request or requests, the Bank shall, on
behalf of the Borrower, withdraw from the Loan Account
and deposit in the Special Account such amount or amounts
as the Borrower shall have requested.
 
(b)  (i)
For replenishment of the Special Account,
the Borrower shall furnish to the Bank
requests for deposits into the Special
Page  20
Account at such intervals as the Bank
shall specify.
 
(ii) Prior to or at the time of each such
request, the Borrower shall furnish to
the Bank the documents and other evidence
required pursuant to paragraph
4
of this
Schedule for the payment or payments in
respect of which replenishment is
requested.
On the basis of each such
request, the Bank shall, on behalf of the
Borrower, withdraw from the Loan Account
and deposit into the Special Account such
amount as the Borrower shall have
requested and as shall have been shown by
said documents and other evidence to have
been paid out of the Special Account for
eligible expenditures.
 
All such deposits shall be withdrawn by the Bank from the
Loan Account under the respective eligible Categories,
and in the respective equivalent amounts, as shall have
been justified by said documents and other evidence.
 
4.
For each payment made by the Borrower out of the
Special Account, the Borrower shall, at such time as the
Bank shall reasonably request, furnish to the Bank such
documents and other evidence showing that such payment
was made exclusively for eligible expenditures.
 
5.
Notwithstanding the provisions of paragraph
3
of
this Schedule, the Bank shall not be required to make
further deposits into the Special Account:
 
(a)
if, at any time, the Bank shall have determined
that all further withdrawals should be made by the
Borrower directly from the Loan Account in accordance
with the provisions of Article V of the General
Conditions and paragraph
(a)
of Section
2.02 of this
Agreement; or
(b)
once the total unwithdrawn amount of the Loan
allocated to the eligible Categories, minus the amount of
any outstanding special commitment entered into by the
Bank pursuant to Section
5.02
of the General Conditions
with respect to Project, shall equal the equivalent of
twice the amount of the Authorized Allocation.
Thereafter, withdrawal from the Loan Account of the
remaining unwithdrawn amount of the Loan allocated to the
eligible Categories shall follow such procedures as the
Bank shall specify by notice to the Borrower. Such
further withdrawals shall be made only after and to the
extent that the Bank shall have been satisfied that all
such amounts remaining on deposit in the Special Account
as of the date of such notice will be utilized in making
payments for eligible expenditures.
6.   (a)
If the Bank shall have determined at any time
that any payment out of the Special Account: (i) was made
for an expenditure or in an amount not eligible pursuant
to paragraph
2
of this Schedule; or
(ii)
was not
justified by the evidence furnished to the Bank, the
Borrower shall, promptly upon notice from the Bank: (A)
provide such additional evidence as the Bank may request;
or
(B)
deposit into the Special Account
(or, if the Bank
shall so request, refund to the Bank) an amount equal to
the amount of such payment or the portion thereof not so
eligible or justified. Unless the Bank shall otherwise
Page  21
agree, no further deposit by the Bank into the Special
Account shall be made until the Borrower has provided
such evidence or made such deposit or refund, as the case
may be
.
(b)
If the Bank shall have determined at any time
that any amount outstanding in the Special Account will
not be required to cover further payments for eligible
expenditures, the Borrower shall, promptly upon notice
from the Bank, refund to the Bank such outstanding
amount.
 
(c)
The Borrower may, upon notice to the Bank,
refund to the Bank all or any portion of the funds on
deposit in the Special Account.
 
(d)
Refunds to the Bank made pursuant to paragraphs
6
(a),
(b)
and
(c) of this Schedule shall be credited to
the Loan Account for subsequent withdrawal or for
cancellation in accordance with the relevant provisions
of this Agreement, including the General Conditions.