EXHIBIT 10.86
CONSTRUCTION AGREEMENT
The Parties to this Construction Agreement, dated February
10, 1996 (this "Agreement"):
North China Power Group Company (hereinafter referred to as
"Party A"), and Tangshan Panda Heat and Power Co., Ltd. ("Panda")
and Tangshan Pan-Western Heat and Power Co., Ltd. referred to as
the "Parties." Panda has been appointed agent of Pan-Western to
act on behalf of Pan-Western for all matters under this
Agreement.
The Parties have entered into a General Interconnection
Agreement dated September 22, 1995 (the "General Interconnection
Agreement") and the Sub-Agreements described therein. This
Agreement sets forth the terms and conditions to design,
construct and maintain the Facilities. This Agreement is subject
to and complies with the "Approval Notice on the Transmission
System Design Hearing of the Luannan Heat and Power Plant"
(Document - Huabeidianshe [1995] No. 65 dated July 13, 1995
issued by North China Electric Power Administration of the
Ministry of Electric Power) and "Approval Comments on the Scope
of Work of the 110 kV Transmission and Substation System for 2 x
50 MW Units of the Luannan Heat and Power Plant" (Document -
Huabeidianshe [1995] No. 75 dated August 24, 1995 issued by Party
A) (collectively the "Approvals"). Copies of such Approvals are
attached hereto.
1. SCOPE OF WORK AND DEFINITIONS
(a) The "Scope of Work" shall mean all designs, plans,
specifications, technical requirements and drawings, and mutually
agreeable changes or modifications therein, all as prepared by
Party A in consultation with Party B, together with all labor,
management, procurement, land use and other permissions and land
acquisitions, needed to design, engineer, construct,
interconnect, test-run and operate the Facilities capable of
transmitting safely and adequately the design capacity of the
Power Plants to the Grid. The telemetering equipment used to
read meters from remote locations, the wire between the dead end
support structure of the Power Plants (the "Dead End Structure")
and the main switch Interconnection Point, and the wire between
such structure and the first tower outside the fence line of the
Power Plants (on Party A's land), shall be Party A's
responsibility, within the Scope of Work, The Dead End Structure
itself shall not be within the Scope of Work and shall be Party
B's responsibility. The Scope of Work shall comply with the
Approvals.
(b) Work (the "Work") shall mean the performance of the
Scope of Work and all other obligations of Party A hereunder.
(c) Party B shall give Party A a written notice of when to
proceed with the Work (the "Notice to Proceed with Preliminary
Design") at least 18 months prior to the scheduled
Interconnection Date of the Facilities. Party A confirms that
Party B has delivered to Party A, such information about the
Power Plants as Party A requires to prepare the Scope of Work.
Party A shall deliver a written report containing the
interconnection plan, construction schedule (including timely
completion date), technical analysis confirming such completion
date and the feasibility of the interconnection plan for Party
B's confirmation as soon as possible but in no event more than 6
months after receiving the Notice to Proceed with Preliminary
Design from Party B.
(d) Party A shall design the Facilities so as to ensure an
adequate reverse supply of electric energy to the Power Plants
necessary for the Test Period as well as the needs of the Power
Plants for transmission of their generated electric energy from
the Interconnection Point to the Grid.
(e) Party A shall give Party B at least 30 days prior
written notice that the Facilities are available at the
Interconnection Point.
(f) In accordance with Article Seven of the General
Interconnection Agreement, Party A will provide construction
power to Party B at the Power Plants prior to and during
construction. Party B shall file relevant applications in
accordance with the relevant rules of the Grid for electric
energy supply for construction, and bear the relevant costs.
(g) Unless defined herein, all terms in this Agreement
shall have the same meanings as the ones in the General
Interconnection Agreement and Sub-Agreements or any supplemental
agreements thereunder.
2. TOTAL CONSTRUCTION COST, OTHER COSTS
Party B shall loan to Party A the total construction cost
for the Work equal to U.S. dollar equivalent of RMB Yuan
78,218,000 (converted according to the exchange rate on the loan
date) as adjusted by the change in the Price Index for Investment
determined by the State Planning Commission from December 31,
1994 to the date of issuance of the Notice to Proceed with
Preliminary Design (the "Total Construction Cost") pursuant to a
separate loan agreement. Unless the Scope of Work changes at the
request of Party B or the Total Construction Cost is adversely
affected by an event of Force Majeure or a breach by Party B of
its obligations under this Agreement or the loan agreement
relating hereto, no adjustment of the Total Construction Cost
shall be permitted (excluding the index adjustment described
above). The Total Construction Cost will cover the cost of all
of the Work.
3. GUARANTEES
3.1 Party A hereby guarantees (the "Party A Guarantees") the
following:
(a) It shall provide adequate reverse supply of electric
power to the Power Plants in compliance with voltage requirements
so as to satisfy the needs of the general contractor of the Power
Plants for test-runs of the Power Plants during power-on and
interconnecting, within not more than 17 months from the date on
which Party B gives Party A the Notice to Proceed with
Preliminary Design.
(b) It shall complete the Work, including the construction
of Facilities so that the Power Plants can transmit continuously
and/or intermittently on the Facilities all electric energy that
can be generated by the Power Plants and thereby meet the
requirements of the interconnecting system within not more than
18 months from the date on which Party B gives Party A the Notice
to Proceed with Preliminary Design.
(c) Design, construction and installation of the Facilities
shall be completed with new materials and in a good and
workmanlike manner in accordance with the standard for the same
category of transmission lines and sub-stations adopted by the
Grid on the date of the Notice to Proceed with Preliminary
Design.
3.2 Party B guarantees that it will make punctual loans of the
Total Construction Cost in accordance with the requirements of
the loan agreement relating hereto.
4. OWNERSHIP, MAINTENANCE AND SERVICES
(a) Party A shall be solely responsible for (excluding
problems caused by Party B or by Force Majeure) and own the
Facilities.
(b) Party A shall perform all operations, maintenance and
repair of the Facilities during the term of the General
Interconnection Agreement, including the supply, procurement,
storage and installation of the usual spare-parts needed in the
maintenance of interconnecting systems. Party A shall schedule
and perform normal and routine maintenance of the Facilities
during the scheduled maintenance of the Power Plants. Party A
shall perform all maintenance so as to avoid any interference
with the full operation of the Power Plants pursuant to the
General Interconnection Agreement and the Sub Agreements.
5. DAMAGES, OTHER REMEDIES
(a) In case of a breach of this Agreement, the breaching
Party shall be liable for the loss/damage of the other Party. In
addition, if Party B breaches this Agreement or the loan
agreement relating hereto, Party A shall be entitled to receive
appropriate schedule relief required because of the breach by
Party B. Party A shall also be entitled to charge Party B for
any increased costs in performing the Work resulting from the
breach of Party B.
(b) If Party A fails to meet any Party A Guarantee, Party B
may on written notice to Party A, assume responsibility for
completing all or any portion of the Work. In this case, Party A
shall have a 60 day cure period during which Party A must correct
the stated problem. If Party A does not correct such problem and
Party B assumes the responsibility for any portion of the Work,
Party B shall do so at Party A's expense with payments of
expenses by Party B for such Work treated as loans of a portion
of the Total Construction Cost to Party A. In the event that
such expenses exceed any balance not yet loaned on the Total
Construction Cost, Party A shall promptly pay or reimburse Party
B for such expenses.
6. COOPERATION
Party A acknowledges that payment for the Work shall be made
with loans obtained by Party B from international financial
entities. Such entities may require that relevant documents be
provided by the signatory parties of this Agreement. In order to
guarantee the obtaining of the loan, Party A agrees to cooperate
with Party B in this respect.
7. MISCELLANEOUS
The relevant terms of the General Interconnection Agreement
and the Sub Agreements are hereby incorporated into and made a
part of this Agreement with this Agreement treated as a "Sub-
Agreement" for such purposes.
IN WITNESS WHEREOF, the Parties, intending to be legally
bound, have caused this Agreement to be signed by their duly
authorized representatives, as of the day and year above written.
Legal Representative of Party A.
North China Power Group Company
By: ___________________________
Name:
Title:
Legal Representative of Party B
Tangshan Panda Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
Tangshan Pan-Western Heat and Power Co. Ltd.
By: ___________________________
Name:
Title:
