Ppa Kalimantan Timur

KALIMANTAN TIMUR COAL FIRED STEAM POWER PLANT 2 x 60 MW

POWER PURCHASE AGREEMENT

Between

PT PLN (PERSERO) as PLN

and

PT [tba] as SELLER

Dated as of ………………

Also including including the Sponsors Agreement as of same date between PT PLN (PERSERO), PT [tba] (as SELLER) and [tba] and [tba] (as Sponsors)

PART 2

MODEL PPA

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RECIT RECITALS 1 Article 1 1 DEFINITION DEFINITIONS........ S.................. ..................... ..................... ..................... ..................... ..................... ..................... ..................... ....................................... ............................ 1 Article 2 8 THE PROJECT......................................................................................................................8 2.1 The Purpose and Objective................................................................. Objective...................................................................................... ..................... 8 2.2 The Project............................................ Project................................................................... .............................................. ............................................8 .....................8 2.3 Term of Agreement..................... Agreement............................................ .............................................. .............................................. ...............................8 ........8 Article 3 8 CERTAIN OBLIGATIONS COMMENCE UPON SIGNING OF THE AGREEMENT AND CONDITIONS PRECEDENT................................................................................8 3.2.1 Other Agreements and Documents.................................................. Documents....................................................................... ..................... 9 3.2.2 Governmental Authorizations .............................................................. ..............................................................................9 ................9 3.2.3 Representations and Warranties....................... War ranties.............................................. .............................................. ..............................9 .......9 3.2.4 Financing Close.......................................... Close................................................................. ................................................... ............................ .......9 ....... 9 3.2.5 Legal Opinion..................................... Opinion............................................................ .................................................................. ........................................... 9 Article 4 9 IMPLEMENTATION OF THE PROJECT................................................................................9 4.1 SELLER Responsibilities...................... Res ponsibilities............................................. .................................................................. ........................................... 9 4.2 PLN Responsibilities..................... Responsibilities ............................................ .............................................. ..................................... .......................... ............11 11 4.3 PLN Approvals...................................... Approvals............................................................. ................................................................ ......................................... 11 4.4 Delays Caused by PLN.................................... PLN........................................................... ......................................................12 ...............................12 Article 5 12 CONSTRUCTION OF THE PROJECT................................................................................12 5.1 Construction Responsibility................ Responsibility....................................... .............................................. ............................................12 .....................12 5.3 PLN’s Grid System.......................................... System................................................................. ......................................................12 ...............................12 5.4 Permits, Licenses, etc................................................. etc........................................................................ ............................................12 .....................12 5.5 Drawings, Test Result, etc............................................................. etc.................................................................................. ........................13 ...13 5.6 Interconnection Points and Electrical Interconnection Facilities .........................13 5.7 Special Facilities ............................. .................................................... .............................................. .............................................. ....................... 13 Article 6 16 START-UP AND COMMISSIONING....................................................................................16 6.1 Initial Energization...................................................... Energization........................................................................................ .................................. ........16 ........ 16 6.2 Initial Synchronization to PLN’s Grid Gr id System......................................................17 System......................................................17 6.3 Commissioning Testing.......................................... Testing................................................................. ............................................ ........................17 ...17 Article 7 17 OPERATION AND MAINTENANCE OF THE PLANT.........................................................17 7.1 Operation, Maintenance and Repair......................................................................17 7.2 Pollution Control......................................... Control................................................................ .............................................. ....................................18 .............18 ii

7.3 Coordination with PLN..................................... PLN............................................................ .............................................. ..............................18 .......18 7.4 Test Schedules....................................... Schedules.............................................................. ............................................................. ...................................... ...18 Article 8 18 SALE AND PURCHASE OF ENERGY................................................................................18 8.1 Sale and Purchase.......................................... Purchase................................................................. ............................................... ........................ .........18 ......... 18 8.2 Operation and Dispatch Program....................................... Program.............................................................. ....................................20 .............20 Article 9 23 BILLING AND PAYMENT....................................................................................................23 9.1 Billing............................................ Billing................................................................... .............................................. ..................................... .......................... ............23 23 9.2 SELLER Electricity Requirements...................... Requirements............................................. ..................................................24 ...........................24 9.3 Late Payments..................... Payments............................................ .............................................. .............................................. .....................................24 ..............24 Article 10 24 METERING. METERING........... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ........................... ................ 24 10.1 Metering System........................................ System............................................................... ..........................................................24 ...................................24 10.2 Retroactive Adjustments...................... Adjustments............................................. .............................................. .........................................24 ..................24 10.3 PLN’s Access............................................... Access....................................................................... ............................................... ................................24 .........24 Article 11 25 COVENAN COVENANTS..... TS............... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ........................................ ............................. 25 11.1 Other Business.......................................... Business................................................................. ........................................................... .................................... 25 11.2 Amendments...................................... Amendments............................................................. .............................................. ..................................... ....................25 ......25 11.3 Coal Supply................................... Supply.......................................................... .............................................. ................................................25 .........................25 11.4 Compliance with Indonesian Laws........................................................ Laws......................................................................25 ..............25 Article 12 25 INSURANCE........................................................................................................................25 12.1 Insurances Policies........................ Policies............................................... .............................................. ................................................25 .........................25 12.2 Endorsements................ Endorsements....................................... .............................................. .............................................. .........................................26 ..................26 Article 13 27 INDEMNIFICATION AND LIABILITY...................................................................................27 13.1 Indemnity by SELLER............................... SELLER...................................................... ................................................... ............................ ......27 13.2 Indemnity by PLN..................................................... PLN....................................................................................... .................................. ........27 ........ 27 13.3 Notice of Proceedings............................................................... Proceedings..........................................................................................27 ...........................27 13.4 Conduct of Proceedings............................................................ Proceedings....................................................................................... ........................... 28 13.5 Consequential Losses........................................... Losses.................................................................. ................................................28 .........................28 13.6 Survival....................................... Survival.............................................................. .............................................. ..................................................28 ...........................28 Artic Article le 14 28 FORCE MAJEURE..............................................................................................................28 14.1 Events of Force Majeure.......................... Majeure................................................. .............................................. .....................................28 ..............28 14.2 Instances of Force Majeure......................... Majeure................................................ ............................................... ..................................29 ..........29

Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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14.3 Effect of Force Majeure.............................................. Majeure..................................................................... ......................................... ..................29 29 14.4 Certain Delays Not Excused............................................. Excused................................................................................31 ...................................31 14.5 Coal Supply Force Majeure.......................... Majeure................................................. ....................................................... ................................ 31 14.6 Notice of Force Majeure; Procedure........................................... Procedure....................................................................32 .........................32 Article 15 32 TERMINA TERMINATION TION........... ..................... ..................... ..................... ..................... ..................... ..................... ..................... .......................................... ................................ 32 15.1 Termination upon SELLER and PLN Events......................................................32 Events......................................................32 15.2 Termination Other than Upon SELLER Non-Remediable Events or PLN NonRemediable Events.......................................................................................37 15.3 Consequences of Termination and the Payment of Bank Guarantees.................38 15.4 Other Rights and Remedies................................................................................ Remedies................................................................................ .38 Article 16 39 REPRESENTATIONS AND WARRANTIES.........................................................................39 16.1 Representations and Warranties of SELLER............................................... SELLER.......................................................39 ........39 16.2 Representations and Warranties of PLN..................................... PLN..............................................................40 .........................40 16.3 Representations Regarding Consents........................................................... Consents...................................................................40 ........40 Article 17 40 SETTLEMEN SETTLEMENT T OF DISPUTES... DISPUTES.............. ..................... ..................... ..................... ..................... ............................................... .................................... 40 17.1 Mutual Discussions...................... Discussions............................................. .............................................. .................................................40 ..........................40 17.2 Referral to an Expert....................................... Expert.............................................................. .....................................................41 ..............................41 17.3 Arbitration..................... Arbitration............................................ .............................................. .............................................. .........................................42 ..................42 Article 18 43 PLN PROJECT PURCHASE OPTION................................................................................44 Article 19 44 ASSIGNMEN ASSIGNMENT........ T.................. ..................... ..................... ..................... ..................... ..................... ..................... ..................... .................................... ......................... 44 Article 20 44 MONITORING, RECORDS, REPORTS, AUDIT .................................................................44 20.1 Monitoring Rights: Reports................................................................................. Reports................................................................................. 44 20.2 Books and Records: Audit....................................................... Audit................................................................................... ............................ 45 20.3 Disclaimer........................... Disclaimer.................................................. .............................................. ..........................................................46 ...................................46 20.4 Provision.................................... Provision........................................................... .............................................. ................................................... ............................ 46 Article 21 46 MISCELLANEOUS..............................................................................................................46 21.1 Language................................... Language.......................................................... .............................................. ....................................................46 .............................46 21.2 Notices............................................. Notices..................................................................... .................................................................... ............................................ 46 21.3 Confidentiality.................. Confidentiality......................................... .............................................. ............................................................ ..................................... 47 21.4 Severability of Provisions............................................................. Provisions....................................................................................48 .......................48 21.5 Waiver........................................... Waiver.................................................................. .............................................. ................................................48 .........................48 21.6 Amendment................................... Amendment.......................................................... .............................................. ................................................48 .........................48 Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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21.7 Entire Agreement.................... Agreement........................................... .............................................. ......................................................48 ...............................48 21.8 Further Acts and Assurances...............................................................................48 21.9 Expenses....................................... Expenses.............................................................. ....................................................................... ................................................ 48 21.10 Indonesian Participation.............................................. Participation.......................................................................... ............................ ..........49 .......... 49 21.11 Interpretation....................... Interpretation.............................................. ............................................... ............................................... ................................49 .........49 21.12 Conflicts Of Interest; Commission Payments........................................... Payments....................................................50 .........50 21.13 No Partnership....................... Partnership.............................................. .............................................. ............................................ .............................. .........50 50 21.14 Governing Law.......................................... Law................................................................. ...................................................... ............................... ..50 21.15 Headings........................................ Headings............................................................... ................................................................... ............................................ .50


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APPENDICES

APPENDIX A

-

PROJECT DESCRIPTION AND DESIGN CONDITIONS

APPENDIX B

-

TECHNICAL LIMITS

APPENDIX C

-

PROJECT MILESTONE SCHEDULE

APPENDIX D

-

FINANCING DATE DOCUMENTS

APPENDIX E

-

SCHEDULE OF MINIMUM INSURANCE REQUIREMENTS

APPENDIX F

-

CONSEQUENCES OF TERMINATION

APPENDIX G

-

CALCULATION OF PAYMENT

APPENDIX H

-

ADJUSTMENT IN CERTAIN EVENTS

APPENDIX I

-

SPECIAL FACILITIES

APPENDIX J

-

TESTING, TAKING-OVER, COMMISSIONING AND NET DEPENDABLE CAPACITY TESTING

APPENDIX K

-

ELECTRICITY MEASUREMENT AND TESTING PROCEDURES

APPENDIX L

-

OPERATING PROCEDURES

APPENDIX M

-

ACTIVITY REPORTS

APPENDIX N

-

ENVIRONMENTAL REQUIREMENTS AND PROCEDURES

APPENDIX 0

-

ADDITIONAL PLN OBLIGATIONS

APPENDIX P

-

INVOICING AND PAYMENT PROCEDURES

APPENDIX Q

-

CONSENTS

APPENDIX R

-

LAND AND GOVERNMENTAL AUTHORIZATIONS FOR SPECIAL FACILITIES

APPENDIX S

-

COAL PRICE DETERMINATION

APPENDIX T

-

SITE DESCRIPTION


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SCHEDULES

SCHEDULE 1

-

FORM OF SPONSOR'S AGREEMENT

SCHEDULE 2

-

FORM OF LEGAL OPINION

SCHEDULE 3

-

FORM OF MINISTER OF ENERGY AND MINERAL RESOURCES LETTER

SCHEDULE 4

-

FORM OF BANK GUARANTEE STAGE I

SCHEDULE 5

-

FORM OF BANK GUARANTEE STAGE II

SCHEDULE 6

-

LETTER OF INTENT

SCHEDULE 7

-

LIST OF MANUFACTURERS OF MAJOR EQUIPMENT

SCHEDULE 8

-

LIST OF LOCAL GOODS AND SERVICES


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POWER PURCHASE AGREEMENT

This Power Purchase Agreement (the “ Agreement ”) is entered into as of [tba], by and between:

1.

[PT. [tba]] , a limited liability company duly incorporated and organized pursuant to the laws of the Republic of Indonesia and having its principal place of business at [tba], [tba], Indonesia (hereinafter referred to as “SELLER”);

2.

PT. PLN (PERSERO), a state owned company established and organized under the laws of the Republic of Indonesia, with its principal address at Jl. Trunojoyo Blok M I/135, Jakarta Selatan, Indonesia (hereinafter referred as “PLN”).

Each of the parties hereto hereinafter respectively referred to as the “ Party” and collectively hereinafter referred to as the “ Parties”, furthermore the Parties hereby witness the following issues:

RECITALS A.

WHEREAS, in order to anticipate the electricity demand growth in Java, PLN requires an additional electricity supply from SELLER.

B.

WHEREAS, SELLER has countersigned Letter of Intent dated on ..........which confirm to provide PLN with the supply of electricity power generated or produced from its coal fired power plant facility consisting of 2 units, having a net nominal design capacity of 60 MW located at Panajam, Kalimantan Timur, Indonesia, which will be designed, financed, constructed, owned and operated by the SELLER. WHEREAS, PLN desires to purchase such power from SELLER and SELLER desires to sell such power to PLN on the terms and conditions contained herein; and WHEREAS, PLN and SELLER desire to define and set forth their respective rights and obligations with respect to the Project as hereinafter defined.

C. D.

NOW, THEREFORE, in view of the foregoing premises and in consideration of the mutual covenants and agreements hereinafter set forth, PLN and SELLER hereby agree as follows:

Article 1 DEFINITIONS When used in this Agreement, the defined terms set forth in this Article 1 shall have the following meanings: “Accounting Principles” shall mean generally accepted accounting principles applicable from time to time in the Republic of Indonesia (known as Pernyataan Standar Akuntansi Keuangan, or “PSAK”). “Activity Report” shall mean a quarterly and annual report submitted by SELLER to PLN pursuant to Section 20.1(b) hereof, as further contemplated by Appendix M.

“Actual Availability Factor” shall mean the term “ AFa” as defined in Appendix G hereto. 1

“Adjustment Period” shall have the meaning specified in Section 10.2 hereof. “Agreement” shall mean this Power Purchase Agreement including its appendices, attachments, and schedules hereto, as may be amended from time to time in accordance with the terms and conditions hereof. “Applicant” shall have the meaning specified in Section 17.2.2 hereof. “Arbitration Law” shall have the meaning specified in Section 17.3.1 hereof.

“Availability Analysis” shall mean for each Contract Year of the Plant, a schedule agreed upon by SELLER and PLN for such Contract Year (subject to the provisions of Attachment A to Appendix G) showing the Projected Availability Factors for each Billing Period during such Contract Year. “Billing Period” shall mean: (i)

the period from the date when the reliability run test of the operating Unit commences until the last Day of that calendar month;

(ii)

each successive period of one calendar month thereafter, and

(iii)

the period from the first Day of the last month of the Term to the last Day of the Term, or, if this Agreement is terminated earlier in accordance with the terms hereof, from the first Day of the month in which this Agreement is terminated until the Day of termination.

“Bank Guarantees” shall mean the bank guarantees provided by SELLER in favor of PLN on the terms set forth in Section 4.1(h) and Schedule 4 (“Bank Guarantee Stage I”) and Schedule 5 (“Bank Guarantees Stage II”) hereto.

“Business Day” shall mean any Day excluding Saturday, Sunday and any Day which in the Republic of Indonesia is a legal holiday or a day on which banking institutions are permitted to be closed. “Coal Supply Contracts” shall mean any contract entered into between SELLER and any entity(ies) relating to the supply of coal to the Project, as the same may be amended from time to time in accordance with the terms and conditions thereof. “Coal Supply Force Majeure Event” shall mean any disruption in the supply of coal needed to operate the Plant, but only if and to the extent that (i) such disruption, despite the exercise of reasonable diligence by SELLER, cannot be or be caused to be prevented, avoided or removed by SELLER, (ii) such disruption materially adversely affects the ability of the SELLER to operate the Plant, and SELLER has taken all reasonable precautions, due care and reasonable alternative measures in order to avoid the effect of such disruption on SELLER's ability to operate the Plant (iii) such disruption is not the direct or indirect result of the failure of SELLER to perform any of its obligations under any of the Project Documents, and (iv) SELLER has given PLN prompt notice describing such disruption and its effect upon the ability of SELLER to operate the Plant. “Coal Supply Plan” shall have the meaning specified in Section 11.3 hereof.


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“Commercial Operation Date” shall mean the Day following the date on which the Plant shall have first established its Net Dependable Capacity in accordance with the test procedures described under Appendix J. “Commissioned Date” shall mean, for a Unit, the Day following the date on which such Unit shall have first established its Net Dependable Capacity in accordance with the test procedures set forth in Appendix J.

“Confidential Information” shall have the meaning specified in Section 21.3 hereof. “Consent” shall mean any approval, consent, authorisation or other requirement that is required from any Government Instrumentality under the laws of the Republic of Indonesia with respect to the Project. “Contract Year” shall mean: (a)

initially the period consisting of each Billing Period to occur until, but not including the first Billing Period to commence, at least one year following the Commercial Operation Date (such initial period, “ Contract Year 1”) and;

(b)

thereafter, each successive period consisting of twelve (12) monthly Billing Periods, provided that the final Contract Year shall end on the date of termination of this Agreement for purposes of Article 15 hereof.

“Contractor” shall mean a party appointed by SELLER as a contractor for the Project pursuant to the EPC Contract. “Contractors” shall mean Contractor, and any other contractors engaged by SELLER in connection with the design, engineering, construction, testing and commissioning of the Plant, and the operation, management and maintenance of the Plant, and the supply of materials for the Plant. “Day” shall mean the 24-hour period beginning and ending at 00:00 midnight Western Indonesian Time. “Dispatch Centre” shall mean PLN’s control and dispatching centre PLN Area Penyaluran dan Pusat Pengatur Beban Kalimantan Timur (“AP2B Kalimantan Timur”) located at Balikpapan, designated by PLN from time to time in writing as being the primary PLN’s control point for Dispatch Instructions to SELLER for the Plant. “Dispatch” and “Dispatch Instructions” shall mean instructions issued by PLN from the Dispatch Centre in accordance with this Agreement for SELLER to schedule and control the generation of electricity by the Unit in order to increase or decrease the electric energy delivered to PLN’s Grid System. “Dispute” shall have the meaning specified in Section 17.1 hereof. “Dollars” or “US Dollars” or “ US$” shall mean the lawful currency of the United States of America. “Easements” shall have the meaning specified in Appendix T hereto. “Electrical Interconnection Facilities” shall mean the facilities as defined in Appendix A hereto and as further described in Appendix I hereto. Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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“Emergency Maintenance Outage” shall mean a removal from service initiated by SELLER of a Unit’s or the Plant's generating capability: (i)

that is not a Forced Outage or a Scheduled Outage or a Maintenance Outage;

(ii)

notification of which has been given to PLN in accordance with Appendix L hereto; and

(iii)

that is for the purpose of performing inspection, testing, preventive maintenance, corrective maintenance, repairs, replacement or improvement which cannot be postponed for more than six (6) Days.

“Emergency Output” shall have the meaning specified in Appendix G hereto. “EPC Contract” shall mean an engineering and procurement and construction contract entered into between SELLER and Contractor for the construction of the Plant.

“Event of Force Majeure” shall have the meaning specified in Article 14 hereof . “Equity” shall mean the capital of SELLER attributable to the Sponsors or their affiliates in respect of their investment in SELLER (including share capital and indebtedness for principal borrowed by SELLER from a Sponsor or any affiliate of a Sponsor which by its terms is subordinated to any indebtedness for borrowed money incurred by SELLER under any Financing Agreement). “Financing Agreements” shall mean, collectively, the loan and security agreements entered in to on or prior to the Financing Date to finance the Project, as the same may be amended from time to time in accordance with the terms and conditions thereof. “Financing Date shall have the meaning specified in Article 3 hereof.

“Forced Outage” shall mean any interruption of a Unit’s generating capability that is not the result of (i) Scheduled Outage, Maintenance Outage or Emergency Maintenance Outage, or (ii) Dispatch Instructions. “Good Utility Practice” shall mean, at a particular time, those practices, methods and acts as are in accordance with standards of prudence applicable to the coal-fired electric utility industry which would have been expected to accomplish the desired result at the lowest reasonable cost consistent with reliability, safety and expedition. “Governmental Authorisations” shall mean all authorisations, consents, decrees, permits, waivers, privileges, approvals from and filings with all Governmental Instrumentalities necessary for the realisation of the Project in accordance with the Project Documents, and shall include the Consents. “Governmental Instrumentality” shall mean the Government of Indonesia and any ministry, department, political subdivision, instrumentality, or agency. “Interconnection Point(s)” shall mean the physical point(s) where the Plant and PLN’s Grid System are connected at the Site, as specified in Appendix I hereto. “Invoice” shall have the meaning specified in Appendix P hereto. “kV” shall mean kiloVolts.


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“kWh” shall mean kiloWatt-hours. “Late Payment Interest Rate” shall mean LIBOR plus 2%, which shall be applied to any overdue amount from and including the Day on which such amount is due and payable under this Agreement to the Day of actual payment, and shall be calculated on the basis of the actual number of Days elapsed and a 360 day year and shall accrue from Day to Day.

“Legal Requirements” shall mean all laws, statutes, orders, decrees, injunctions, licenses, permits, approvals, agreements and regulations of any Governmental Instrumentality having jurisdiction over the matter in question. “Lenders” shall mean any of the lenders party to any of the Financing Agreements. “LIBOR” shall mean, in relation to any relevant period and any relevant sum: (a)

(b)

the rate per annum at which six (6) month Dollar deposits are offered for a period equal or comparable to such period shown on the Telerate Screen as at 11:00 a.m. (London time); for this purpose the “ Telerate Screen” means the display designated as page 3750 on the Telerate system or such other page as may replace page 3750 on that system for the purpose of displaying offered rates for Dollar deposits; or; if at or about such time on the relevant Day no such rate appears on the Telerate Screen, then the rate to be applied shall be the rate which are agreed between the Parties on that Day, or if the Parties, on that Day, fail to reach an agreement on such rate, then the rate to be applied shall be the LIBOR rate on the immediate previous Day.

“Maintenance Outage” shall mean a removal from service initiated by SELLER of a Unit’s orthe Plant's generating capability that (i) is not a Forced Outage or a Scheduled Outage or Emergency Maintenance Outage; (ii) has been scheduled by the Parties in accordance with Appendix L hereto and (iii) is for the purpose of performing inspection, testing, preventive maintenance, corrective maintenance, repairs, replacement or improvements which could be postponed by at least six (6) Days but should not be postponed until the next Scheduled Outage. “Metering System” shall mean all meters, metering devices and related instruments used to measure and record the delivery and receipt of Net Electrical Output and Net Dependable Capacity at the Interconnection Point, as f urther described in Appendix K hereto. “Milestone Schedule” shall mean the schedule for construction of the Project set forth in Appendix C hereto, as amended from time to time in accordance with the terms hereof. “MW” shall mean MegaWatts. “MWh” shall mean MegaWatt-hours. “Net Dependable Capacity” shall have the meaning specified in Appendix J hereto. “Net Dependable Capacity Test” shall have the meaning specified in Appendix J hereto. “Net Electrical Output” shall mean net energy delivered by SELLER to PLN at the Interconnection Point, consistent with Section 8.1 hereof.


5

“Non Exclusive Easements” shall have the meaning specified in Appendix T hereto. “Notice of Intention to Refer ” shall have the meaning specified in Section 17.2.2 hereof. “Notice of Intention to Defend” shall have the meaning specified in Section 17.2.4 hereof.

“Operating Committee” shall mean the committee established pursuant to Section 7.1(e) hereof. “Operating Procedures” shall mean the procedures set forth in Appendix L hereto. “Payment Date” shall have the meaning specified in Appendix P hereto. “Person ” shall mean any individual, corporation, partnership, association, joint stock company, unincorporated organization, joint venture or Governmental Instrumentality.

“PLN” shall have the meaning specified in the second paragraph of this agreement, and its permitted successors and assigns “PLN Non-Remediable Event” shall mean the events specified in Section 15.1.4 hereof. “PLN Remediable Event” shall mean the events specified in Section 15.1.3 hereof. “PLN’s Grid System” shall mean any generating stations and other generating, transmission or distribution facilities through which the Net Electrical Output of the Plant will be distributed by PLN to users of electricity. “PLN’s Representative” shall have the meaning specified in Appendix O hereto. “PLN Shareholder Approval” shall mean the approval of the Minister of State Owned Enterprises (BUMN).

“Plant” shall mean the Kalimantan Timur 2 x 60 MW Coal Fired Steam Power Plant as more particularly described in Appendix A hereto. “Price” shall mean the terms set forth in Appendix G hereto upon which the amounts to be paid hereunder by PLN to SELLER for the purchase of Net Dependable Capacity, Net Electrical Output, Emergency Output and other items as provided in Appendix G are calculated, including any indexation thereof and all adjustments and modifications thereto. “Project” shall mean the project as described in Section 2.2 hereof. “Project Documents” shall mean this Agreement, EPC Contract, the Financing Agreements, Coal Supply Contracts, shareholders loan agreement and other agreements, contracts or documents related thereto.

“Projected Availability Factor” shall mean the term AF pm as defined and used in Appendix G hereto. “Proprietary Information” of a Person shall mean information rightfully in the possession of such Person, which information derives economic value from not being generally known to and not being readily ascertainable by proper means by another Person who can obtain economic value from its disclosure and use, and which is the subject of reasonable efforts to maintain its secrecy. Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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“Remedial Notice” shall have the meaning specified in Section 15.1.5 (a) hereof. “Remedial Program” shall have the meaning specified in Section 15.1.5 (b) hereof. “Required Commercial Operation Date” shall mean the date specified in the Milestone Schedule as the date by which the Commercial Operation Date is required to occur. “Rupiah” or “Rp” shall mean the lawful currency of the Republic of Indonesia. “Respondent” shall have the meaning specified in Section 17.2.2 hereof.

“Scheduled Commercial Operation Date” shall mean the date advised to PLN by SELLER, as may be revised from time to time for the Commercial Operation Date of the Plant, in accordance with the procedures set f orth in Appendix J hereto. “Scheduled Commissioned Date” shall mean, for each Unit, the date advised to PLN by SELLER, as may be revised from time to time for the Commissioned Date of such Unit, in accordance with the procedures set forth in Appendix J. “Scheduled Outage” shall mean a removal from service initiated by the SELLER of a Unit’s or the Plant’s generating capability that (i) has been scheduled and allowed by PLN in accordance with Section 8.2.1 hereof, and (ii) is for regularly scheduled inspection, testing, preventive maintenance, corrective maintenance, repairs, replacement or improvement. “SELLER” shall have the meaning specified in the first paragraph of this agreement, and its permitted successors and assigns. “SELLER Non-Remediable Event” shall mean the events specified in Section 15.1.2 hereof. “SELLER Remediable Event” shall mean the events specified in Section 15.1.1 hereof. “Senior Debt” shall mean indebtedness for borrowed money incurred by SELLER under the Financing Agreements other than indebtedness constituting Equity. “Site” shall mean the land on which the Plant is located at Panajam, Kalimantan Timur, as described in Appendix T. “Special Facilities” shall have the meaning specified in Appendix I hereto. “Sponsors” shall mean parties mentioned as sponsors under the Sponsors’ Agreement. “Sponsors’ Agreement” shall mean the agreement to be entered into between Sponsors and SELLER in the form of Schedule 1 hereto, as the same may be amended from time to time in accordance with the terms and conditions thereof. "Technical Limits" shall mean the operation limits and constraints described in Appendix B hereto relating to the operation, maintenance and dispatch of the Plant. “Term” shall have the meaning specified in Section 2.3 hereof. “Termination Notice” shall have the meaning specified in Section 15.1.6 hereof.


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“Tribunal” shall have the meaning specified in Section 17.3.1 hereof. “Unit” shall have the meaning given in Appendix A hereto.

“Unscheduled Outage” shall mean an Emergency Maintenance Outage, Forced Outage or Maintenance Outage, as the case may be. ”Warranties” shall mean the warranties specified in Article 16 hereof.

Article 2 THE PROJECT 2.1

The Purpose and Objective The purpose and objective of this Agreement is to set forth the rights and obligations of each of the Parties with regard to the sale and purchase of the electricity to be generated by the Plant and in respect of the Project.

2.2

The Project The Project comprises the design, engineering, financing, construction, testing, commissioning of the Plant, the Electrical Interconnection Facilities, the Interconnection Points, and the Special Facilities which consist of 150 kV transmission line from the Plant to existing PLN’s 150 kV transmission line between Karang Joang Substation – Kuaro Substation, including the necessary modification of the related transmission tower(s). The Special Facilities will be transfered to PLN. The SELLER shall own, operate, manage and maintain the Plant, including the Electrical Interconnection Facilities, the Interconnection Points (as per Appendix I), and the Plant shall operate as a base load station in accordance with and pursuant to the terms hereof.

2.3

Term of Agreement This Agreement shall have a term (the “Term”) commencing on the date this Agreement is executed and delivered by the Parties hereto and expiring 30 (thirty) years from and after the Commercial Operation Date, unless earlier terminated in accordance with the terms hereof.

Article 3 CERTAIN OBLIGATIONS COMMENCE UPON SIGNING OF THE AGREEMENT AND CONDITIONS PRECEDENT 3.1

Certain obligations commence upon signing of the Agreement.


8

Despite Section 3.2, hereunder the terms and conditions as set forth in Sections 4.1(a), (c), (d), (f), (g) and (h); 4.2(a), (b) and (c) and, to the extent reasonably required prior to the Financing Date, (d), and 4.3; 15.2.1; Article 17; and Article 21 (other than Section 21.10), or as otherwise provided herein, shall have full force and effect on and from the signing of this Agreement.

3.2

Conditions Precedent Except of the certain obligations as set forth in the section 3.1, the Parties’ obligations hereunder shall commence on the date on which each of the following conditions shall have been fulfilled to the satisfaction of both Parties as evidenced by a certificate jointly signed by both Parties (the “ Financing Date”), provided such conditions shall have been satisfied within three hundred and sixty five (365) Days as of the signing date of this Agreement:

3.2.1Other Agreements and Documents Each of the documents and agreements listed in Appendix D on terms consistent with the material provisions of this Agreement shall be in full force and effect and all conditions precedent to its effectiveness shall have been duly satisfied.

3.2.2Governmental Authorizations All Governmental Authorizations which are required to have been obtained by the Financing Date in connection with the execution, delivery and commencement of performance of this Agreement and the other Project Documents, including PLN Shareholder Approval, shall have been duly obtained and be in full force and effect.

3.2.3Representations and Warranties The Representations and Warranties of SELLER and PLN contained or incorporated by reference herein shall be true and correct in all material respects on and as of the Financing Date with the same force as though made on and as of the Financing Date and each Party shall have received on the Financing Date a certificate to the foregoing effect signed by a duly authorised officer of the other Party.

3.2.4Financing Close The initial borrowing of Senior Debt shall have occurred.

3.2.5Legal Opinion Each of the Parties shall have received from the other Party a legal opinion from independent counsel for PLN and independent counsel for SELLER in the form substantially set forth in Schedule 2 hereto.

Article 4 IMPLEMENTATION OF THE PROJECT 4.1

SELLER Responsibilities


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SELLER shall be responsible as follows: (a)

the preparation of the EPC Contract, the Coal Supply Contracts, the financing arrangements for the Project and any other agreements to be entered into by SELLER in connection therewith;

(b)

arranging for the design, engineering, supply and construction of the Project in accordance with the design and equipment parameters set forth in Appendices A and B, for the financing of the Project, and for operation and maintenance of the Plant, in each case in accordance with applicable Legal Requirements, and using reasonable and prudent business judgment, all contracts entered into by and on behalf of SELLER providing for any of the foregoing;

(c)

the due and proper application for, and diligent effort to obtain, all Consents, all renewals thereof, and any other Governmental Authorizations that are required in connection with the transactions contemplated by the Project Documents and that are required to be in SELLER’s name;

(d)

the due and proper application for, and diligent effort to obtain, all work permits, employment passes, dependence’s passes, visas and other permits required for all individuals involved in the Project on behalf of or pursuant to contracts with SELLER;

(e)

the provision of all reasonable and customary measures within its control required to ensure the protection and security of the Site;

(f)

making the Non-Exclusive Easement available to PLN in accordance with the provisions of Appendix T;

(g)

delivery to PLN with reasonable promptness after the execution and delivery thereof and in any event on or prior to the Financing Date, true and complete copies (but un-priced and excluding Proprietary Information) of each of the Project Documents and other documents and agreements specified in Appendix D to be entered into on or prior to the Financing Date and to which PLN is not a party; and

(h) delivery to PLN on or prior to the date this Agreement is executed and delivered by the Parties hereto, a Bank Guarantee Stage I in the amount of Rp 9,000,000,000 (nine billions Rupiah) under the conditions and in the form set forth in Schedule 4 to this Agreement, which shall remain valid and in full force and effect until the earlier to occur of (i) the Financing Date, or (ii) 30 (thirty) Days after the date specified in the notice of termination issued by PLN to SELLER following non fulfillment by SELLER of the conditions to Financing Date as specified in Section 15.2.1 and Section 15.3.1(a) of this Agreement. Such Bank Guarantee Stage I shall be replaced on or prior to Financing Date with 3 (three) Bank Guarantees Stage II in the aggregate amount of Rp 18,000,000,000 (eighteen billions Rupiah) and therefore in an amount of Rp 6,000,000,000 (six billions Rupiah) each under the conditions and in the form set forth in Schedule 5 to this Agreement, which shall remain valid and in full force and effect until the earlier to occur of (i) the Commercial Operation Date, or (ii) thirty (30) Days after the date specified in the notice of termination issued by PLN to SELLER due to a SELLER NonRemediable Event as specified in Section 15.1.6 and Section 15.3.1 (b) of the Agreement, or (iii) 30 (thirty) Days after the date specified in the notice of termination issued by SELLER to PLN due to a PLN Non-Remediable Event as Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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specified in Section 15.1.6 of the Agreement, or (iv), the last date on which a drawing under any of the Bank Guarantees Stage II can be made as specified in any of the Bank Guarantees Stage II. The Bank Guarantee Stage I or Bank Guarantees Stage II may be renewed or extended from time to time, provided that if any Bank Guarantee which is expressed to expire not later than a specified date shall by virtue of that term fail to meet the requirements of this paragraph (h) then SELLER shall remain responsible for ensuring that the Bank Guarantee is renewed, extended or replaced with an equivalent Bank Guarantee before such expiry date so that the Bank Guarantee remains valid and in force. SELLER will appoint a bank which will coordinate the drawdown of the Bank Guarantee.

4.2

PLN Responsibilities PLN shall be responsible for:

4.3

(a)

Cooperating and reasonably assisting SELLER in the identification of the applications of SELLER referred to in Sections 4.1(c) and 4.1(d) and promoting and supporting such applications, including in the preparation thereof, so as to expedite the consideration thereof by the appropriate Governmental Instrumentality of the Republic of Indonesia, provided that such applications are in compliance with all applicable Legal Requirements and the terms and conditions of each Project Documents in connection with which such application is made;

(b)

the due and proper application for, and diligent effort to obtain, all Consents, all renewals thereof, and, any other Governmental Authorizations of the Republic of Indonesia that are required to be in PLN’s name, if any, in connection with the transactions contemplated by this Agreement;

(c)

as reasonably requested by SELLER, discussing the Project with and providing publicly available information about PLN to any other party providing financing for the Project; provided, in any event, that PLN shall not be required itself or on behalf of any other entity to make any representations or undertakings in connection with any such discussion or in connection with any financing arrangement (other than its representations contained in Section 16.2 hereof in connection with an assignment of this Agreement to such other party pursuant to Article 19 hereof); and

(d)

Performing the obligations set forth in Appendix O.

PLN Approvals SELLER shall consult with PLN with respect to the Electrical Interconnection Facilities and the Interconnection Points. On a regular basis during the period prior to the Financing Date, SELLER shall advise PLN as to the status of all of the Project Documents. No review or approval by PLN of the Project Documents or any other agreement, document, instrument, drawing, specification or design proposed by SELLER concerning the Project shall relieve SELLER from any liability that it would otherwise have had in respect of or under such agreement, document, instrument, drawing, specification or design or failure to comply with applicable Legal Requirements with


11

respect thereto, except insofar as such review or approval constitutes a Governmental Authorization pursuant to any applicable Indonesian Legal Requirements, nor shall PLN be liable to SELLER or any other person by reason of its review or approval of an agreement, document, instrument, drawing, specification, or design. Except as otherwise expressly provided herein, this Agreement shall not confer any right, benefit or cause of action whatsoever in favour of any third person.

4.4

Delays Caused by PLN If because of delay or default by PLN, and in the case of default, for so long as such default shall not have been excused, remedied, or waived, which circumstance shall be confirmed in writing by SELLER, in the performance of its obligations under this Agreement which are not attributable to SELLER, Contractors or any subcontractor to Contractors, the implementation of the Project by SELLER in accordance with the Milestone Schedule actually has been delayed, the Parties shall confer as to the effect, if any, of such delay and the Milestone Schedule shall be adjusted equitably, taking into account the effect which SELLER demonstrates is directly attributable to such delay by PLN and the ability of the Parties to reschedule activities to minimise the overall delays resulting therefrom and the Price shall be subject to adjustment to the extent and in the manner provided in Appendix H.

Article 5 CONSTRUCTION OF THE PROJECT 5.1

5.2

Construction Responsibility (a)

SELLER shall engineer, design and construct the Project in all material respects in accordance with the design and equipment parameters set forth in Appendices A and B. Any dispute regarding compliance with the foregoing obligation shall be referred pursuant to Article 17 hereof.

(b)

SELLER shall implement the Project with the intention of satisfying the Milestone Schedule. SELLER shall promptly inform PLN of any material deviations from the Milestone Schedule.

Easements The Easements shall be made available on the terms and conditions provided in Appendix T.

5.3

PLN’s Grid System Each Party shall notify the other Party in advance of any changes to either the Plant or PLN’s Grid System that may affect the proper adjustment and calibration of protective relays and other similar devices between the two (2) systems.

5.4

Permits, Licenses, etc


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SELLER shall, on or before the Commercial Operation Date, deliver to PLN copies of all Governmental Authorisations that have been issued to SELLER prior to such date and not previously delivered to PLN.

5.5

Drawings, Test Result, etc SELLER shall obtain and retain at the Site: (a)

for all items of equipment incorporated in to the Plant and identified in Appendix A, copies of the specifications and operation manuals for such equipment;

(b)

copies of all test result for tests performed in accordance with the EPC Contract on the Plant and for all items of equipment incorporated into the Plant and identified in Appendix A, to the extent such items are normally retained in accordance with Good Utility Practice;

(c)

as-built drawings for the Plant, including the civil and architectural works; and

(d)

all detailed technical documents related to the design, engineering and construction of the Project, to the extent that such items are normally retained in accordance with Good Utility Practice.

In the event that all or any part of the Plant should be transferred to PLN, all of the foregoing information and any other similar information in the possession of SELLER pertaining to the Plant or such part thereof, including Proprietary Information (subject to the provisions of Section 21.3) shall be provided to PLN.

5.6

Interconnection Points and Electrical Interconnection Facilities 5.6.1 General SELLER shall design, construct, install, commission, operate and maintain the Interconnection Points and the Electrical Interconnection Facilities in accordance with Appendix A and Appendix I. 5.6.2 Approval of the Interfacing at the Interconnection Points The design for the interfacing at the Interconnection Points and the Electrical Interconnection Facilities shall be prepared by SELLER taking into consideration compatibility of such design with PLN’s Grid System which will be connected with such Interconnection Points and the Electrical Interconnection Facilities. PLN shall have the right to review such design of the interfacing at the Interconnection Points and the Electrical Interconnection Facilities, but shall not object thereto provided it is compatible with PLN’s Grid System and the basic design and design criteria. PLN shall have the right to inspect the construction of the interfacing at the Interconnection Points and the Electrical Interconnection Facilities in order to verify compliance with the design for the interfacing at the Interconnection Points and the Electrical Interconnection Facilities mentioned above.

5.7

Special Facilities


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5.7.1

General SELLER shall design, construct and install the Special Facilities in accordance with Appendix A and Appendix I. SELLER shall have care, custody and control and bear risk of loss with respect to Special Facilities until they are accepted by PLN in accordance with the procedures set forth in Appendix J. Thereafter, PLN shall own the Special Facilities and shall operate the same in accordance with Good Utility Practice and the terms of this Agreement. PLN shall be responsible for, and shall indemnify SELLER with respect to, all taxes imposed by any Governmental Instrumentality of the Republic of Indonesia as a result of the acceptance of the Special Facilities by PLN in accordance with this Agreement.

5.7.2

Financing of Special Facilities The costs incurred by SELLER as contemplated by this Agreement, both direct and indirect, including, but not limited to material and labour, of the construction, testing and commissioning of the Special Facilities, shall be borne by SELLER and financed under the Financing Agreements. SELLER is responsible for acquiring, at its own cost, the land on which the footings for the transmission towers will be constructed and will transfer the land to PLN at the time that PLN takes over the transmission line in accordance with Appendix J.

5.7.3

Approval of Special Facilities Certain basic designs and design criteria for the Special Facilities will be provided to SELLER by PLN or agreed to by SELLER and PLN not later than 2 (two) months following the date of this Agreement. SELLER shall review such basic designs and design criteria provided by PLN, to the extent necessary to perform SELLER's responsibilities for design, construction and installation of the Special Facilities and based on such review, shall recommend the modifications, revisions and improvements, if needed or desirable, in accordance with Good Utility Practice. Except as specifically provided in Section 5.7.5, notwithstanding any review by SELLER or recommendations or failure to make recommendations for changes, PLN shall be responsible for basic designs and design criteria provided by PLN. Any change from such basic designs and design criteria requested by PLN shall be treated in accordance with Section 5.7.4 hereof. PLN shall have the right to inspect the construction of the Special Facilities in order to verify compliance with such basic designs and design criteria. Procedures for the acceptance of this Special Facilities as set forth in Appendix J.

5.7.4

Changes in Special Facilities After PLN approval is given in respect of the Special Facilities in accordance with Appendix A and I, SELLER agrees to effect any changes requested by PLN in the scope, specifications (including performance standards) or other characteristics of any thereof as previously approved by PLN, provided that: (a) Any change requested must have as its purpose a design improvement required by or desirable under Good Utility Practice or the modification of a


14

design in order to ensure that the Special Facilities are constructed, installed and equipped suitably for the use intended; (b) Any request by PLN for changes in Special Facilities shall be given to SELLER in writing and in sufficient detail to enable SELLER to prepare revisions in the design and schedule for construction of Special Facilities; and (c)

5.7.5

Before effecting such change, the Parties shall have agreed on any equitable adjustment of the Milestone Schedule that may be required, taking into account any elimination or avoidance of work or scope of supply resulting from such change and shall have agreed on the additional cost of such change and on the means of payment and funding of any such additional cost, including but not limited to design costs and/or additional financing costs, which may be by direct current payment, by adjustment of Price or otherwise.

Warranties (a)

General SELLER warrants that the design and engineering of the Special Facilities shall be free from defects and deficiencies, provided that no warranty is made by SELLER of any basic design or design criteria provided by PLN, except to the extent such basic design, design criteria, is provided or revised in writing by SELLER, by recommendation pursuant to Section 5.7.3 or otherwise, in which event SELLER will warrant that the design and engineering of the Special Facilities shall conform in all material respects with the basic designs, and design criteria provided or revised by it. SELLER further warrants that the fabrication, construction and installation of the Special Facilities shall be in accordance in all material respect with the design, drawings and specifications prepared in accordance with this Agreement and approved by PLN and that all workmanship of SELLER's Contractors and subcontractors with respect thereto shall be in full conformity with the requirements of this Agreement and free from defects and deficiencies.

(b)

Duration of Warranties SELLER's obligations under the previous Section 5.7.5(a) (hereinafter referred to as the "Warranties") shall commence on the Financing Date and shall continue through the period ending twelve (12) months after the date on which this Special Facilities were taken-over by PLN in accordance with Appendix J. In the event SELLER repairs or replaces any part of the Special Facilities pursuant to its obligations in subsequent paragraph, the part so replaced will be covered by the same Warranty as the original part if replaced prior to the date on which the original part were taken over by PLN in accordance with Appendix J and will also be covered by the same Warranty as the original part but with a new twelve (12) months Warranty Period if replaced after such date, provided that in no event shall the obligations of SELLER in respect of any such new warranty extend past the date which is eighteen (18) months after the Commercial Operation Date.


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(c)

(d)

Breach of Warranty (i)

In the event of a breach of SELLER's Warranties in respect of any element of the Special Facilities, SELLER shall be obligated to effect at its own expense and in the shortest reasonably possible time such repairs or replacements necessary to remedy such breach. In no event shall SELLER be liable for any consequential damages of any kind whatsoever;

(ii)

PLN shall notify SELLER of any purported breach of warranties specifying in reasonable detail the circumstances of such breach and providing such relevant data and records regarding the breach as are available to PLN. PLN also shall make available to SELLER such other data and records in its possession or within its reasonable control which are reasonably required to enable SELLER to understand and remedy the breach;

(iii)

The obligations of SELLER under this Section 5.7.5 are subject to the condition that the element in question has been operated and maintained in accordance with manufacturer's operating manuals, where relevant, and otherwise has not been the subject of improper operation or maintenance and the condition that ordinary wear and tear is expected;

(iv)

If any dispute exists between PLN and SELLER under this Section 5.7.5, either Party may submit the same to an expert for resolution in accordance with the provisions of Section 18.2.

Assignable Warranties of Equipment SELLER shall obtain from all of its Contractors, subcontractors and equipment suppliers involved in the construction of the Special Facilities, warranties and guarantees with respect to the materials, workmanship and equipment comprising such Special Facilities. Such warranties shall be standard for the coal fired electric utility industry in all material respects. All such warranties and guarantees shall be written so as to survive all SELLER and PLN inspections, tests and approvals. SELLER shall use reasonable efforts to provide that all such warranties in existence at the conclusion of the Warranty Period, if any, shall be assigned for the benefit of PLN.

Article 6 START-UP AND COMMISSIONING 6.1

Initial Energization SELLER shall not energize or back-feed 150 kV power into either Unit without the prior written approval of PLN’s Representative, which approval shall not be unreasonably


16

withheld. SELLER shall notify PLN of the initial energization at least thirty (30) Days prior to the proposed date of energizing the main step-up transformers and backfeeding power to either Unit.

6.2

Initial Synchronization to PLN’s Grid System SELLER shall not operate its generator in parallel with PLN’s electrical system without the prior written approval of PLN’s Representative, which approval shall not be unreasonably withheld. SELLER shall notify PLN of the initial synchronisation of the generator to PLN’s Grid System at least fourty five (45) Days prior to the proposed date of synchronisation. Upon SELLER’s request, PLN shall provide energy for testing and commissioning the Plant, which SELLER shall pay for as provided in Appendix O.

6.3

Commissioning Testing SELLER shall be responsible for the development and implementation of test procedures during the construction, start-up and commissioning of the Plant, and other facilities (as per Appendix I), and shall notify PLN in advance of all testing as provided in Appendix J. PLN and its designees shall be entitled to be present at any such testing as provided in Appendix J. The generated electricity from each Unit during commissioning and prior to the Commercial Operation Date that is transmitted to PLN’s Grid System shall be paid by PLN as set forth in Attachment E Appendix G.

Article 7 OPERATION AND MAINTENANCE OF THE PLANT 7.1

Operation, Maintenance and Repair (a)

SELLER shall at all times during the Term, operate, maintain and repair the Plant in a manner consistent with Good Utility Practice. SELLER shall also operate the Plant in accordance with the Operating Procedures and the Dispatch Instructions, subject to the Technical Limits.

(b)

SELLER shall employ in the Plant all safety devices and safety practices required by Good Utility Practice. To the extent consistent with Good Utility Practice, SELLER shall keep accurate records of any accident or other occurrence at the Site, which results in injury to persons or damage to property. SELLER shall provide to PLN reasonable access to these records subject to requirements of confidentiality.

(c)

SELLER and PLN shall respectively ensure that their personnel are on duty at the Project and the Dispatch Centre, as the case may be, at all times, twentyfour (24) hours a day and seven (7) Days a week commencing as of the Commissioned Date of the first operating Unit.

(d)

The appointment of the Contractors shall not relieve SELLER of any of its liabilities or obligations hereunder.


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(e)

7.2

The Parties shall establish an Operating Committee comprising of four (4) members, two (2) appointed by each of SELLER and PLN. The obligations and responsibilities of the Operating Committee and the rules governing meetings of the Operating Committee shall be as set forth in Appendix L.

Pollution Control SELLER shall construct and operate the Plant in accordance with the environmental standards set forth in Appendix N and all other Legal Requirements relating to pollution control and environmental standards. The obligations of SELLER pursuant to this Section 7.2 shall not derogate from its rights under Appendix H if the Triggering Event (as defined in Appendix H hereto) which is caused by the adoption, enactment, or application of any Legal Requirement of any Governmental Instrumentality of the Republic of Indonesia (not existing or not applicable on the date of the Agreement) that results in the imposition of environment requirements different from those set-forth in Appendix N, causing the procurement of additional equipments and/or services.

7.3

7.4

Coordination with PLN (a)

SELLER and PLN shall maintain operating communications between the Plant and the Dispatch Centre in accordance with procedures to be developed by the Operating Committee.

(b)

SELLER and PLN shall each keep a daily operations log for the Plant which shall include information known to it on Unit availability, Maintenance outages, Emergency Maintenance Outages, Scheduled Outages, Forced Outages, circuit breaker trip operations requiring a manual reset and any significant events related to the operation of the Plant. SELLER and PLN shall each have the right to review the other Party’s log at all reasonable times and upon reasonable notice.

Test Schedules (a)

SELLER shall provide to PLN not later than sixty (60) Days prior to the Scheduled Commissioned Date of the first operating Unit, a proposed Net Dependable Capacity Test schedule for each Unit and for the Plant in accordance with the requirements of Appendix J.

(b)

SELLER and PLN shall mutually develop a load rejection test schedule for testing of each Unit in accordance with the requirements of Appendix J. Rejection tests will provide for the testing of sub-systems and a Unit partial load rejection test consistent with Appendix A in a manner that will effectively establish the load rejection capability of such Unit, but such tests will not include a full load dynamic load rejection physical test.

Article 8 SALE AND PURCHASE OF ENERGY 8.1

Sale and Purchase Subject to the terms and conditions of this Agreement:


18

(a)

Prior to the Commissioned Date of each Unit, SELLER shall make available to PLN and PLN shall purchase from SELLER for the consideration and on the terms described in Appendix G, the Net Electrical Output of such Unit.

(b)

From and after the Commissioned Date of the first operating Unit until the Commercial Operation Date, SELLER shall make available to PLN, and PLN shall purchase from SELLER for the consideration and on the terms described in Appendix G, the Net Dependable Capacity and Net Electrical Output of such Unit.

(c)

From and after the Commercial Operation Date until the termination of this Agreement, SELLER shall make available to PLN, and PLN shall purchase from SELLER for the consideration and on the terms described in Appendix G, the Net Dependable Capacity and Net Electrical Output of the Plant.

(d)

In the event SELLER shall be unable to conduct the Net Dependable Capacity test for the Unit on the date selected in accordance with the requirements of Appendix J because of any action or failure to act without justifiable cause, by PLN or any Governmental Instrumentality of the Republic of Indonesia affecting PLN’s Grid System or other PLN owned facilities for more than six (6) continuous hours, then the Unit concerned shall be deemed t o be commissioned and deemed to be providing Net Dependable Capacity equivalent to 60 MW with Actual Availability Factor (AF a) deemed to be 80%. In the event that the Unit is deemed commissioned, then PLN shall compensate to SELLER for the consideration set forth in Appendix G for Net Dependable Capacity at 60 MW with Actual Availability Factor (AF a ) deemed to be 80% for the Unit concerned when the Net Dependable Capacity Test is so delayed on and after the Day following the date so selected; provided, however, that if the Unit concerned shall have been deemed commissioned pursuant to this Section 8.1(d) and thereafter when tested shall have failed to satisfy the requirements of Appendix J, then the Unit concerned shall cease to be deemed commissioned and PLN shall have no further obligation to make payment under this Section 8.1(d) with respect to the Unit concerned; and provided further, that if upon satisfactory completion of the Net Dependable Capacity Test in accordance with Appendix J, the Unit concerned shall have been commissioned and shall have been providing the Net Dependable Capacity at less than 60 MW, then the amounts paid by PLN during the period of having been deemed commissioned in excess of the amount that PLN would have had to pay if the Unit concerned had been deemed commissioned at a Net Dependable Capacity as so commissioned shall be credited against future payment made pursuant to Appendix G.

(e)

From and after the Commissioned Date of the first operating Unit, if there is a declared emergency condition on PLN’s Grid System, PLN may request SELLER to deliver Emergency Output. SELLER will use all reasonable efforts to provide Emergency Output during the declared emergency condition and SELLER shall make available to PLN, and PLN shall purchase from SELLER such Emergency Output for the consideration and on the terms set forth in Appendix G.

(f)

From and after the Commercial Operation Date, there shall be a penalty imposed on SELLER if it fails at any time to maintain an Availability Factor equal to or greater than the Projected Availability Factor for such period. During Billing Periods in which SELLER fails to maintain the required Availability Factor,


19

SELLER shall pay a penalty to PLN equal to Component A payment for such Billing Period assuming the Projected Availability Factor for such Billing Period times 1% for every 1% shortfall in availability factor below the required availability for such Billing Period with a maximum of 10% (ten percent). During Billing Period in which SELLER succeeds to maintain Availability factor above the Projected Availability Factor, and PLN purchases such produced energy, then SELLER be paid accordingly based on a 50% of Capital Cost Recovery Rate. Such calculations are stipulated in Appendix G Part 2.

8.2

Operation and Dispatch Program 8.2.1 (a)(i)

At least three (3) months prior to the Scheduled Commissioned Date of the first operating Unit, SELLER shall submit to PLN its desired schedule of Scheduled Outage periods for the period until December 31 in such calendar year. Within thirty (30) Days after the Commercial Operation Date actually occurs SELLER shall submit to PLN any desired changes in such desired schedule for Contract Year 1, which changes shall take into account any difference between the date anticipated for the occurrence of the Commercial Operation Date at the time such desired schedule was submitted and the date on which the Commercial Operation Date actually occurs. In the event the Scheduled Commissioned Date will or is estimated to take place on November or December then SELLER shall submit to PLN the Scheduled Outage three (3) months prior to such schedule covering the period starting from January 1 until December 31 of the following calendar year. SELLER’s desired schedule of Scheduled Outages for Contract Year 1 and its desired changes in such schedule shall be prepared using the Projected Availability Factor applicable to Contract Year 1, and to each portion thereof, as provided in Appendix G. If applicable, SELLER’s desired schedule for Scheduled Outage periods for Contract Year 2 shall be prepared using the Projected Availability Factor applicable to Contract Year 2, as provided in Appendix G.

(a)(ii)

Not less than 60 (sixty) Days after submission by SELLER of its desired schedule of Scheduled Outages for Contract Year 1 and not less than thirty (30) Days after submission by SELLER of (x) its desired changes, if any, in such schedule and (y) if applicable its desired schedule of Scheduled Outage periods for Contract Year 2, PLN shall notify SELLER in writing whether any of the Scheduled Outage periods involved are not acceptable. If PLN does not accept one or more of the requested Scheduled Outage periods, the provisions of Section 8.2.1 (b)(iii) shall apply.

(b)(i)

Not later than every November 1 in the calendar year commencing after the Commercial Operation Date SELLER shall submitted Schedule Outage for the next 2 (two) calendar year period. SELLER’s desired schedule of Scheduled Outages for each Contract Year shall be prepared using the Projected Availability Factor applicable to such Contract Year. (The foregoing procedures are intended and shall be construed to enable PLN to reach agreement on the ongoing schedules of Scheduled Outages in a manner which is consistent with its fiscal year planning procedures, the fiscal year of PLN being from January 1 in any year to December 31 in that same year. Accordingly, the schedule of


20

Scheduled Outages as applicable to a fiscal year of PLN shall consist of two (2) parts, one (1) part being the Scheduled Outages to occur in the portion of the Contract Year which ends during such fiscal year, which will have been previously agreed upon as part of the planning procedures for the previous fiscal year, and the other part being the Scheduled Outages to occur in the portion of the Contract Year which commences during such fiscal year, which will be the subject of agreement as part of the planning procedures for the current fiscal year.) (b) (ii)

Not later than December 1 in each calendar year commencing after the Commercial Operation Date, PLN shall notify SELLER in writing whether the schedule of Scheduled Outages proposed for the Contract Year commencing in the following calendar year is acceptable, if PLN does not accept one or more of the requested Scheduled Outage periods, the provisions of Section 8.2.1(b)(iii) shall apply.

(b)(iii)

If PLN does not accept one or more of the requested Scheduled Outage periods referred to in Section 8.2.1 (a)(ii) or Section 8.2.1(b)(ii) , PLN shall advise SELLER of a period when PLN determines any such unacceptable Scheduled Outage period can be rescheduled. SELLER and PLN will then negotiate towards a mutually agreeable Scheduled Outage period. Such rescheduled period shall be as close as reasonably practicable to the requested period, shall comply with the Technical Limits, shall be of equal duration as the requested period, and shall be consistent with the Projected Availability Factor for the Contract Year involved. If PLN does not advise SELLER within the applicable time period of the unacceptability of any requested Scheduled Outage period or if having done so does not advise SELLER of a rescheduled period which is consistent with the conditions stated in the foregoing sentence, the Scheduled Outage period originally requested by SELLER shall be deemed to have been accepted by PLN for all purposes of implementing the terms of this Agreement.

(c) (i)

Either Party may, upon written notice given not later than thirty (30) Days prior to a Scheduled Outage, request the rescheduling of such Scheduled Outage, provided, however, that a Scheduled Outage may not be brought forward more than thirty (30) Days from the date of such notice nor may a Scheduled Outage be deferred by more than three months from the date originally scheduled therefor. Any rescheduling of a Scheduled Outage in accordance with this Section 8.2.1(c) shall be subject to mutual agreement of the Parties, which approval shall not be unreasonably withheld.

(c)(ii)

For purposes of Appendix G, if a Scheduled Outage is rescheduled in accordance with this Section 8.2.1(c), the Projected Availability Factor for each Billing Period in which the Scheduled Outage was previously to occur shall be adjusted by deducting the number of maintenance hours in such rescheduled Scheduled Outage and concurrently the Projected Availability Factor for each Billing Period in which, as rescheduled, it will occur shall be adjusted by adding such number of maintenance hours, with each such adjustment to be reflected in the Availability Analysis then in effect for each such Billing Period. All other factors in each affected Availability Analysis shall remain the same.


21

(d)(i)

If during an Unscheduled Outage, SELLER is able to perform maintenance that effectively replaces maintenance that would have been performed during a future Scheduled Outage, SELLER may, upon prior written notice to PLN, reduce, in whole or in part, the duration of such future Scheduled Outage by the number of hours of maintenance so performed during such Unscheduled Outage. If no further Scheduled Outage will occur in the Contract Year during which such Unscheduled Outage occurs, SELLER in such notice may apply the number of hours so performed to reduce the number of hours of maintenance in a future Scheduled Outage to occur in the following Contract Year.

(d)(ii)

For purposes of Appendix G, if the hours of maintenance in a future Scheduled Outage are reduced in accordance with this Section 8.2.1 (d), the Projected Availability Factor for each Billing Period in which the related Unscheduled Outage did occur shall be adjusted by adding the number of Maintenance hours involved to the number of maintenance hours allocated for Scheduled Outages during each such Billing Period and concurrently the Projected Availability Factor for each Billing Period in which such future Scheduled Outage will occur shall be adjusted by deducting such number of maintenance hours from the number of maintenance hours allocated for Scheduled Outages during each such Billing Period, with each such adjustment to be reflected in the Availability Analysis then in effect for each such Billing Period. All other factors in each affected Availability Analysis shall remain the same.

(e)(i)

If SELLER is able to complete the maintenance to be performed during a Scheduled Outage more quickly than originally anticipated, SELLER may, upon telephone notice to the Dispatch Centre, request reconnection to PLN’s Grid System at a time earlier than that originally scheduled for completion of the Scheduled Outage. Early reconnection to PLN’s Grid System in accordance with this Section 8.2.1 (e) shall be subject to the approval of PLN, which approval shall not be unreasonably withheld. If early reconnection is approved, the originally scheduled number of maintenance hours not used during the Scheduled Outage being terminated early shall be deducted from the period of such Scheduled Outage and concurrently added to the period of the immediately succeeding Scheduled Outage, provided that if the immediately succeeding Scheduled Outage will occur in the following calendar year the maximum number of maintenance hours which can be deducted from the period of the Scheduled Outage being terminated early and concurrently added to the period of the immediately succeeding Scheduled Outage shall not exceed three-hundred and thirty six (336) hours.

(e)(ii)

For purposes of Appendix G, if a Scheduled Outage is terminated early in accordance with this Section 8.2.1(e), the Projected Availability Factor for each Billing Period in which such Scheduled Outage occurred and for each Billing Period in which the immediately succeeding Scheduled Outage will occur will both be adjusted to reflect the adjustments provided for in the paragraph e(i) above, with such adjustments to be reflected in the Availability Analysis then in effect for each such Billing Period. All other factors in each affected Availability Analysis shall remain the same. The Parties agreed that the Schedule


22

Outage shall be subject to adjustment by mutual discussion and agreement between the Parties in a manner consistent with the applicable regulation. 8.2.2 SELLER shall keep the Dispatch Centre informed as to the available capacity of each Unit prior to the Commercial Operation Date and thereafter, including, without limitation, any Forced Outages, in accordance with the Operating Procedures. 8.2.3 PLN shall have the right to issue Dispatch Instructions for the first operating Unit after the Commissioned Date thereof and prior to the Commercial Operation Date and thereafter in accordance with the Operating Procedures. 8.2.4 SELLER shall cooperate with PLN in establishing agreed emergency plans for the Plant at least ninety (90) Days before the Scheduled Commissioned Date of the first operating Unit, including, without limitation, recovery from a local or widespread electrical blackout and voltage reduction in order to effect load curtailment, subject in each case to the Technical Limits.

Article 9 BILLING AND PAYMENT 9.1

Billing 9.1.1 SELLER shall render to PLN an itemized Invoice for each Billing Period in accordance with the provisions of Appendix P. Invoices shall be due and payable by PLN as provided in Appendix P. 9.1.2 In the event PLN disputes any portion of an Invoice, PLN may refer it to an expert pursuant to Article 17. No previously undisputed Invoice or payment may be disputed more than twelve (12) months after the Payment Date of such Invoice. 9.1.3 PLN shall pay undisputed amounts and, pending resolution pursuant to Article 17, PLN shall continue to make payment of the amounts in dispute on the following basis: (a)

The readings of the Metering System shall be those observed in accordance with Appendix P; and

(b)

The Price shall be that agreed to be in effect for the Billing Period or, if there is no such agreement, the Price in effect for the immediately preceding Billing Period.

9.1.4 The Parties agree that any disputed amounts paid by PLN pursuant to the provision of Section 9.1.3 above, pending resolution pursuant to Article 17, shall be placed into a separate interest bearing account under the name of SELLER. After a decision on such disputed amounts has been reached, then such disputed amounts placed into such account shall be given to the Party who has been declared as the rightful owner of such disputed amount. Any and all administrative costs and expenses incurred in relation to the opening and Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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maintenance of such account shall be borne by the Party who has been declared as the rightful owner of such disputed amount.

9.2

SELLER Electricity Requirements For the power to be purchased by SELLER from PLN for its own use before and during construction through a construction transformer and during maintenance, SELLER shall pay PLN for such electrical energy at the applicable PLN tariff.

9.3

Late Payments Except as otherwise provided in Appendix P, late payments by either Party shall bear interest at the Late Payment Interest Rate from the date on which such payment was originally due until the date that such payment was made.

Article 10 METERING 10.1 Metering System The Net Electrical Output and Emergency Output delivered and capacity made available to PLN pursuant to this Agreement shall be measured at the Interconnection Point by the Metering System, as specified in Appendix K.

10.2 Retroactive Adjustments If any seal securing the Metering System is found broken, if the Metering System fails to register, or if the measurement made by a metering device is found upon testing to vary by more than the allowable error (zero point twenty five percent (0.25%)) from the measurement made by the standard meter used in the test, an adjustment shall be made correcting all measurements of energy made by the Metering System during (i) the actual period when measurements were made by the Metering System, if that period can be determined to the mutual satisfaction of the Parties, or (ii) if the actual period cannot be determined to the mutual satisfaction of the Parties, one-half of the period from the date of the last test of the Metering System to the date such failure is discovered or such test is made (such period herein the “Adjustment Period”). If the Parties are unable to agree on the amount of the adjustment to be applied to the Adjustment Period, the amount of the adjustment shall be determined (x) by correcting the error if the percentage of error is ascertainable by calibration, tests or mathematical calculation, or (y) if not so ascertainable, by estimating on the basis of deliveries under similar conditions during the period since the last test. Within thirty (30) Days after the determination of the amount of any adjustment, PLN shall pay to SELLER any additional amounts then due for deliveries of Net Electrical Output Emergency Output or Net Dependable Capacity, during the Adjustment Period or PLN shall be entitled to a credit against any subsequent payments for Net Electrical Output, Emergency Output, or Net Dependable Capacity, as the case may be.

10.3 PLN’s Access Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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PLN and its representatives shall be entitled to be present at any test, inspection, maintenance and replacement of any part of the Metering System performed by SELLER.

Article 11 COVENANTS 11.1 Other Business Except as otherwise provided herein, SELLER shall not (i) engage in any business activity other than as reasonably required to perform its obligations and enjoy its rights under the Project Documents, or (ii) enter into any agreement of merger, consolidation or amalgamation with any entity, or (iii) except as may otherwise be required by Lender(s) for the purpose of enforcing SELLER’s payment obligation to Lender(s), dispose of all or substantially all of its assets.

11.2 Amendments Promptly upon the execution and delivery thereof, SELLER shall deliver to PLN, unpriced and excluding Proprietary Information, any material amendments, modifications or supplements to, or consents to any change of any provision of or grants of any waiver under, any of the Project Documents with respect to such matters as affect the rights and obligations of the Parties.

11.3 Coal Supply SELLER shall be responsible for the preparation and implementation of a plan (the “Coal Supply Plan”) for the safe, adequate and reliable supply of coal to the Project throughout the Term. SELLER shall, prior to the Financing Date, submit to PLN for its review and approval, which approval shall not be unreasonably withheld, the proposed Coal Supply Plan, including the material terms of Coal Supply Contract. The price of coal for purposes of Appendix G for each calendar year shall be determined in the manner described in Appendix S.

11.4 Compliance with Indonesian Laws SELLER and PLN shall comply with all applicable Legal Requirements and each respectively shall comply in all material respects with and shall keep in full force and effect all Governmental Authorisations required to be in their respective names for the performance of their respective obligations under t his Agreement.

Article 12 INSURANCE 12.1 Insurances Policies SELLER, at its sole cost and expense, shall obtain and maintain the policies of insurance described in Appendix E hereto in the amounts and on the terms set forth Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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herein and therein and during the periods mentioned therein, provided, however, that such amounts and terms may be changed from time to time with the prior written consent of PLN, which shall not be unreasonably withheld. Nothing shall prevent SELLER, at its sole cost and expense, from procuring insurance coverage in addition to those specified herein or in Appendix E.

12.2 Endorsements (a)

SELLER shall cause its insurers to provide the following endorsement items in its comprehensive or commercial general liability insurance policies and, if capable, umbrella or excess liability policies with respect to any liabilities relating to the construction, commissioning, operation or maintenance of the Plant: (i)

PLN and its employees shall be additional insured under such policies;

(ii)

the insurance shall be primary with the respect to the interest of PLN and its employees and any other insurance maintained by them is excess and not contributory with such policies;

(iii)

such policies shall include standard cross liability clauses; and

(iv)

notwithstanding any provision of the policies, the policies may not be cancelled, non-renewed or materially changed by the insurer without giving thirty (30) Days or, in the case of cancellation for non-payment of premium, ten (10) Days prior written notice to PLN.

The Parties agree that in order to enable SELLER to implement the above mentioned endorsement in its comprehensive or commercial general liability insurance policies, PLN shall submit a list which of the assets and the value of such assets located at the Site to be covered by SELLER’s comprehensive or commercial general liability insurance policies prior to the time when SELLER shall procure such insurance policies. (b)

SELLER shall cause its insurers to provide the endorsement referred to in Section 12.2(a) (iv) in its Construction or Erection All Risks (CAR/EAR) and Property All Risks (PAR)/Boiler Machinery Insurance policies covering the Project.

(c)

Each of PLN and SELLER shall cause its insurers to waive all rights of subrogation against the other Party and against the other Party’s employees, directors, commissioners, agents, shareholders and contractors in respect of a claim arising under its insurance policies, unless such claim arises from wilful misconduct or gross negligence of the other Party or of the other Party’s employees, directors, commissioners, agents, shareholders or contractors.

12.3 Insurances Certificates SELLER shall cause its insurers or agents to provide PLN with certificates of insurance evidencing the policies and terms specified in this Article 12 and in Appendix E hereto. Failure by SELLER to obtain the insurance coverage or certificates of insurance required by this Article 12 or Appendix E shall not relieve SELLER of the insurance requirements set forth herein or therein or in any way relieve or limit SELLER’s obligations and liabilities under any other provision of this Agreement. If Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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SELLER shall fail to procure or maintain any insurance required pursuant to this Article 12 or Appendix E, then PLN shall have the right to procure such insurance at SELLER’s expense, provided PLN shall have given thirty (30) Days prior written notice to SELLER of its intention to exercise such right unless such intention arises from SELLER’s non-payment of premiums for existing insurance in which case PLN shall have given at least five (5) Days prior written notice of such intention.

Article 13 INDEMNIFICATION AND LIABILITY 13.1 Indemnity by SELLER SELLER will bear the responsibility for any claim against PLN in respect of loss of or damage to property, death or injury to person and all expenses relating thereto (including without limitation reasonable legal fees) due to an event occurring before the termination of this Agreement and arising out of the design or construction of the Plant and the Interconnection Points or the ownership, operation or maintenance of the Plant or the Interconnection Points and resulting from any act or omission of SELLER or its Contractors, without recourse to PLN. SELLER will hold PLN (and its employees, directors, commissioners) fully indemnified in respect thereof. The indemnity shall not extend to and PLN hereby waives any claims against SELLER for and indemnifies SELLER against (a) any such loss, damage, death or injury suffered by PLN or its employees, directors, commissioners, or (b) any such claim to the extent that it was caused by any act or omission of PLN or the failure of PLN to take reasonable steps in mitigation thereof. Notwithstanding anything to the contrary contained in the preceding sentences, nothing in this Section 13.1 shall apply to any loss, damage, cost or expense in respect of which, and to the extent that, PLN is otherwise compensated pursuant to the terms of the other Project Documents.

13.2 Indemnity by PLN PLN will bear the responsibility for any claim against SELLER or its Contractors in respect of loss of or damage to property, death or injury to person and all expenses relating thereto (including without limitation reasonable legal fees) due to an event occurring before the termination of this Agreement and arising out of the design, construction, ownership, operation or maintenance of PLN-owned or operated facilities and resulting from any act or omission of PLN, without recourse to SELLER or its Contractors. PLN will hold SELLER and its Contractors (and their respective employees, directors, commissioners) fully indemnified in respect thereof. The indemnity shall not extend to and SELLER hereby waives any claim against PLN for and indemnifies PLN against (a) any such loss, damage, death or injury suffered by SELLER or its Contractors or their respective employees, directors, commissioners, or (b) any such claim to the extent that it was caused by any act or omission of SELLER or its Contractors or the failure of SELLER or its Contractors to take reasonable steps in mitigation thereof. Notwithstanding anything to the contrary contained in the preceding sentences, nothing in this Section 13.2 shall apply to any loss, damage, cost or expense in respect of which, and to the extent that, SELLER or its Contractors, as the case may be, are otherwise compensated pursuant to the terms of the other Project Documents.

13.3 Notice of Proceedings


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Each Party shall promptly notify the other Party of any claim or proceeding in respect of which it is entitled to be indemnified under this Article 13. Such notice shall be given as soon as reasonably practicable after the relevant Party becomes aware of such claim or proceeding.

13.4 Conduct of Proceedings Each Party shall have the right, but not the obligation, to contest, defend and litigate (and to retain legal advisers of its choice in connection therewith) any claim, action, suit or proceeding by any third party alleged or asserted against it arising out of any matter in respect of which it is entitled to be indemnified hereunder, and the reasonable costs and expenses thereof shall be subject to the said indemnity; provided that, the indemnifying Party shall be entitled, at its option, to assume and control the defense of such claim, action, suit or proceeding at its expense and through legal advisers of its choice if it (i) gives notice of its intention to do so to the indemnified Party, (ii) acknowledges in writing its obligation to indemnify that Party to the full extent provided by this Article, and (iii) reimburses that Party for the reasonable costs and expenses previously incurred by it prior to the assumption of such defense by the indemnifying Party. Neither Party shall settle or compromise any claim, action, suit or proceeding in respect of which it is entitled to be indemnified by the other Party without the prior written consent of that Party.

13.5 Consequential Losses In no case shall any Party hereto be entitled to its indirect or consequential losses or damages which arising out of its own faults and/or negligence, whether or not such losses or damages are subject to the indemnities in Sections 13.1 and 13.2.

13.6 Survival The provisions of this Article 13 shall survive termination of this Agreement.

Article 14 FORCE MAJEURE 14.1 Events of Force Majeure An “ Event of Force Majeure” shall mean any circumstance not within the reasonable control, directly or indirectly, of the Party affected, but only if and to the extent that (i) such circumstance, despite the exercise of reasonable diligence, cannot be or be caused to be prevented, avoided or removed by such Party, (ii) in the case of claims by SELLER, such event materially adversely affects (in cost and/or time) the ability of SELLER to perform its obligations under this Agreement, and SELLER has taken all reasonable precautions, due care and reasonable alternative measures in order to avoid the effect of such event on SELLER’s ability to perform its obligations under this Agreement and to mitigate the consequences thereof, (iii) such event is not the direct or indirect result of the failure of such Party to perform any of its obligations under any of the Project Documents, and (iv) such Party has given the other Party prompt notice describing such event the effect thereof and the actions being taken in order to comply with this Section 14.1. Model PPA Kalimantan Timur CFSPP 2 x 60 MW

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14.2 Instances of Force Majeure Subject to the provisions of Section 14.1 and 14.4, Events of Force Majeure shall include, but not be limited to: (a)

acts of war or the public enemy whether war be declared or not;

(b)

public disorders, demonstrations;

(c)

explosions, fires, earthquakes, floods, or other natural calamities and acts of God, or the discovery of hazardous materials or historical artefacts on the Site;

(d)

strikes or other industrial action by workers or employees of : (i) SELLER and/or any other parties engaged or appointed by SELLER, (ii) Contractor or any subcontractors of Contractor, or (iii) PLN and/or any other parties engaged or appointed by PLN;

(e)

with respect to SELLER only, any action or failure to act without justifiable cause by any Governmental Instrumentality of t he Republic of Indonesia (including any action or failure to act without justifiable cause by any duly authorized agent of any such Governmental Instrumentality), affecting SELLER, any Contractor or the Project, including without limitation the denial of or delay in, without justifiable cause, the granting of any Consent upon due application therefor and diligent effort by applicant to obtain, the failure without justifiable cause of any such Consent once granted to remain in full force and effect or to be renewed on substantially similar terms, and any delay in the importation of equipment or supplies into Indonesia resulting from any action or failure to act without justifiable cause by any Governmental Instrumentality of the Republic of Indonesia;

(f)

with respect to SELLER only, the adoption, enactment or application to SELLER, any Contractor or the Project of any Legal Requirement of any Governmental Instrumentality of the Republic of Indonesia not existing or not applicable to SELLER, such Contractor or the Project on the date of this Agreement, or any change in any Legal Requirement or the application thereof by a Governmental Instrumentality of the Republic of Indonesia after the date of this Agreement, but not including any Legal Requirement or the application thereof in existence at such date which by its terms become or will become effective and applicable to SELLER, such Contractor or the Project after such date; and

(g)

in respect to SELLER only, the occurrence of a Coal Supply Force Majeure Event.

insurrection,

rebellion,

sabotage,

riots

or

violent

14.3 Effect of Force Majeure (a)

Except as provided in Section 14.3 (c) and in Section 14.4, either Party shall be excused from performance and shall not be construed to be in default in respect of any obligation hereunder for so long as failure to perform such obligation shall be due to an Event of Force Majeure;

(b)

If an Event of Force Majeure shall have occurred, the Parties shall consult with one another as soon as practicable concerning the effect of such delay upon the


29

Milestone Schedule, and the Milestone Schedule shall be equitably adjusted by the Parties to take into account such effect and the ability of the SELLER, Contractor or their subcontractors to reschedule Project activities to avoid or minimize overall delays resulting from the Event of Force Majeure. (c)

To the extent that an Event of Force Majeure affects PLN’s ability to accept Net Electrical Output and as long as the SELLER is able to deliver Net Electrical Output in accordance with the terms and conditions of this Agreement, if such remedies or repairs to recover PLN’s ability are not succesfully completed within a period mutually agreed upon following the termination of such Force Majeure Event or failing such mutual agreement within fourteen (14) Days following the termination of such Force Majeure Event, then immediately afterwards the Plant shall be deemed dispatched. For the purposes of this Section 14.3 (c), a Force Majeure Event shall be deemed ‘terminated’ no later than fourteen (14) Days after the date on which the Force Majeure Event first occurred;

(d)

(i)

If an Event of Force Majeure described in Section 14.2(e) or (f) shall have occurred, the provisions of Appendix H shall be applied for purposes of determining adjustments, if any, in the Price or otherwise; or

(ii)

If an Event of Force Majeure described in Section 14.2 (e) or (f) of the Agreement shall have occurred after the Commercial Operation Date and such Event of Force Majeure prevents the SELLER from operating the Plant for a period exceeding thirty (30) consecutive days, then at the expiry of such thirty (30) days period, SELLER shall promptly send written Notice to PLN in respect thereof (A “GFME Notice”) which shall serve as a notice satisfying the requirements of Section 14.6 hereof, setting forth a description of the GFM Event that has occurred. If within thirty (30) day of the date PLN receives the GFME Notice from SELLER, PLN deliver written notice to the SELLER confirming that a GFM Event has occurred, then SELLER may terminate the Agreement by thirty (30) Days written notice to PLN if such event of force Majeure is continuing for one hundred and eighty (180) consecutive days and PLN shall purchase the Plant at the price pursuant to Appendix F Section 2.2(b) and the Calculation Date shall be the Date which is one hundred and eighty one (181) Days after the date commencement of the Event of Force Majeure.

(iii) If within thirty (30) Days of the date PLN receives the notice, PLN does not deliver written notice to the SELLER confirming that a GFM Event has occured and such GFM Event is continuing for one hundred and eighty (180) consecutive days, SELLER may refer the matter to Arbitration pursuant to Section 17.3 herein, for determination of the following two issues : (1) whether such Event of Force Majeure has in fact occurred and if so, (2) whether such Event of Force Majeure has continued for one hundred eighty (180) consecutive Days after its commencement. If the arbitration Tribunal determines that those two (2) issues have occurred, then the Tribunal shall award the SELLER the right to terminate the agreement by 30 (thirty) Days notice to PLN, and if the SELLER does exercise that right, PLN shall purchase the Project on the date of termination at the price calculated pursuant to Appendix F Section 2.2(b) and for such purpose the Calculation Date shall be the Date which is one hundred and eighty one (181) Days after the date of commencement of the Event of Force Majeure.


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(iv) In relation with the Arbitration proceeding as refered to section 14.3.d. (ii), SELLER shall be responsible for all costs and expenses to perform a proper preservation to the Plant for a period from the the date of commencement of the Event of Force Majeure until one hundred and eighty (180) Days thereafter. Both Parties agreed that the preservation cost of the Plant for a period following one hundred and eighty (180) Days until the Plant is transfered to PLN shall be equally shared by SELLER and PLN. (e)

If an Event of Force Majeure shall have occurred that results in a material delay in the completion of the Project or causes material damage to the Plant, and such Event of Force Majeure (i) is of a type not normally insured against by entities engaged in activities substantially similar to those engaged in by SELLER, is not required to be insured against in accordance with Good Utility Practice, and in fact has not been insured against by SELLER or (ii) could not be insured against by SELLER prior to the time of its occurrence, then both Parties shall enter into good faith negotiations to agree a satisfactory solution regarding continuation of construction of the Project or operation of t he Plant, and SELLER shall use its best efforts to obtain funding to complete or repair the Plant. During such period, SELLER shall not be required to complete the Project or to repair the Plant, as the case may be, and such failure to complete, repair or operate the Plant shall not constitute SELLER Remediable Event or SELLER NonRemediable Event. If the Parties do not reach such satisfactory solution within six (6) months after the end of such Event of Force Majeure, or other time as mutually agreed upon, SELLER and PLN may terminate this Agreement in accordance with Section 15.2.3.

14.4 Certain Delays Not Excused Notwithstanding that an Event of Force Majeure otherwise exists, the provisions of this Article 14 shall not excuse: (a)

late payment of money;

(b)

except in the case of a Coal Supply Force Majeure Event, late delivery of equipment or materials caused by negligent acts or omissions on the part of SELLER, Contractors, or any subcontractor to Contractors, except any such late delivery otherwise arising from an Event of Force Majeure shall be excused if it arose from a negligent act or omission of a Contractor or a subcontractor which a reasonable and prudent business person would not have anticipated from a qualified Contractor or subcontractor;

(c)

except in the case of a Coal Supply Force Majeure Event, late performance by SELLER or Contractors caused by SELLER’s or Contractor’s failure to engage qualified subcontractors or to hire an adequate number of personnel or labor; submission of documents and/or drawings for approval by PLN at such a time which does not leave sufficient time to permit review thereof within the time periods provided therefor in Appendix I prior to purchase or manufacture; or

(d)

(e)

delays resulting from reasonably foreseeable unfavorable weather or reasonably foreseeable unsuitable ground or sea conditions or other similar reasonably foreseeable adverse conditions.

14.5 Coal Supply Force Majeure


31

In the case of a Coal Supply Force Majeure Event, the requirement that SELLER take all reasonable alternative measures to avoid the effect of such event and to mitigate the consequences thereof as provided in paragraph (ii) of the definition of Coal Supply Force Majeure Event shall be satisfied in all respects by SELLER’s compliance with the provisions of Section 4 of Appendix S.

14.6 Notice of Force Majeure; Procedure As soon as possible following the date of commencement of any Event of Force Majeure, if either Party desires to invoke such Event of Force Majeure as a cause for delay in the performance of any obligation (other than the payment of money) hereunder or under the Project Documents, it shall advise the other Party in writing of such date and the nature and expected duration of such Event of Force Majeure. As soon as practicable and in any event within three (3) Days following the termination of such Event of Force Majeure, the Party having invoked such Event of Force Majeure as a cause for such delay shall submit to the other Party reasonable proof of the nature of such delay and its effect upon the time of performance. The Parties: (i)

shall make all reasonable efforts to prevent and reduce to a minimum and mitigate the effect of any delay occasioned by any Event of Force Majeure including recourse to alternate acceptable sources of services, equipment and materials and construction equipment; and

(ii)

shall use their best efforts to ensure resumption of normal performance of this Agreement after the termination of any Event of Force Majeure and shall perform their obligations to the maximum extent practicable and agreed between the Parties.

Article 15 TERMINATION 15.1 Termination upon SELLER and PLN Events 15.1.1

SELLER Remediable Event Each of the events described below shall be SELLER Remediable Event: (a)

(b)

(c)

the failure of SELLER within ninety (90) Days after the Financing Date to commence constructions of the Project as evidenced by the undertaking of the activities usually and customarily undertaken under internationally accepted construction standards and practices in connection with the commencement of construction of projects similar to the Project; the failure of SELLER to achieve the Commercial Operation Date within ninety (90) Days after the Required Commercial Operation Date; after commencement of construction of the Project, a general suspension or abandonment by SELLER or Contractor of the construction of the Project for more than sixty (60) consecutive Days;


32

15.1.2

(d)

the wilful and unexcused failure by SELLER to operate the operable Unit in accordance with the provisions of this Agreement for more than seven (7) consecutive Days without the written consent of PLN after the Commissioned Date of such Unit;

(e)

the breach by SELLER of any of its material obligations under this Agreement (other than such breach referred to in Section 15.1.1(a), Section 15.1.1(b), Section 15.1.1(c), Section 15.1.1(d) or Section 15.1.1(f)) which is not remedied within forty five (45) Days after notice from PLN to SELLER stating that such a breach has occurred, identifying the breach in question in reasonable detail and demanding remedy thereof;

(f)

(i) the failure by SELLER to make any payment under this Agreement when due and payable or (ii) the failure by any Sponsors to make any payment under Sponsors’ Agreement when due and payable; and

(g)

The breach by any of the Sponsors of any material obligation under Sponsors’ Agreement (other than any such breach referred to in Section 15.1.1 (f)(ii)) which is not remedied by such Sponsor or otherwise within forty five (45) Days after notice from PLN to SELLER stating that such a breach has occurred, identifying the breach in question in reasonable detail and demanding remedy thereof.

SELLER Non-Remediable Event Each of the events set forth below shall be an SELLER Non-Remediable Event: (a)

the occurrence of any of the following events: (i) the passing of a resolution for the bankruptcy, insolvency, winding up, liquidation of, or other similar proceeding relating to SELLER; (ii) the appointment of a trustee, liquidator, custodian, provisional manager or similar person in a proceeding referred to in point (i), which appointment has not been set aside or stayed within sixty (60) Days of such appointment; or (iii) the making by a court having Jurisdiction of an order winding up or otherwise confirming the bankruptcy or insolvency of SELLER, which order has not been set aside or stayed within sixty (60) Days;

(b)

after an SELLER Remediable Event shall have occurred and a Remedial Notice shall have been given by PLN to SELLER: (i)

in the case of an SELLER Remediable Event described in Section 15.1.1(a), the failure of SELLER to commence construction of the Project (evidenced as provided in Section 15.1.1(a)) within ninety (90) Days after receipt of the Remedial Notice;

(ii)

in the case of an SELLER Remediable Event described in Section 15.1.1(c) the failure of SELLER to resume construction of the Project within thirty (30) Days after receipt of the Remedial Notice;


33

15.1.3

(iii)

in the case of an SELLER Remediable Event described in Section 15.1.1(d), the failure of SELLER to resume operation of the Plant within seven (7) Days after receipt of the Remedial Notice;

(iv)

in the case of an SELLER Remediable Event described in Section 15.1.1(b), Section 15.1.1(e), or Section 15.1.1(f), (1) the failure of SELLER to furnish PLN with a Remedial Program within the time provided in Section 15.1.5(b), or (2) the failure of SELLER to implement such Remedial Program with due diligence, or (3) the manifest or demonstrated inability of the Remedial Program so furnished to be capable of reasonable implementation or (4) the manifest or demonstrated inability to remedy the SELLER Remediable Event notwithstanding the exercise of due diligence of SELLER in implementing the Remedial Program, provided however, that the foregoing shall not be considered to be an SELLER Remediable Event in the case of Section 15.1.1(b) if, subject to Section 15.1.2(c), the Commercial Operation Date shall have occurred or in the case of Section 15.1.1(e) and Section 15.1.1(f), if, subject to Section 15.1.2(d), the breach in question shall have been remedied;

(c)

the failure of the Commercial Operation Date to occur within 180 (one hundred and eighty) Days following the Required Commercial Operation Date; or

(d)

the failure of any breach described in Section 15.1.1(e) or Section 15.1.1(f) to have been remedied within 180 (one hundred and eighty) Days after receipt of a Remedial Notice in respect thereof.

PLN Remediable Event Each of the events described below shall be a PLN Remediable Event:

15.1.4

(a)

the failure of PLN to make any payment under this Agreement, including without limitation any payment to be made in accordance with Appendix P when due and payable; and

(b)

the breach by PLN of any of its material obligations under this Agreement (other than any such breach referred to in Section 15.1.3(a)), which is not remedied within thirty (30) Days after notice from SELLER to PLN stating that such a breach has occurred, identifying the breach in question in reasonable detail and demanding remedy thereof.

PLN Non-Remediable Event Each of the events set forth below shall be a PLN Non-Remediable Event: (a)

the dissolution, merger, consolidation, amalgamation, reorganization, reconstruction or privatization of PLN, except to the extent that it does not affect the ability of the resulting entity to perform its obligations under this Agreement;


34

(b)

(c)

15.1.5

after a PLN Remediable Event shall have occurred and a Remedial Notice shall have been given by SELLER to PLN: (i)

in the case of a PLN Remediable Event described in Section 15.1.3(a), the failure of PLN to make such payment within forty five (45) Days after receipt of the Remedial Notice; and

(ii)

in the case of a PLN Remediable Event described in Section 15.1.3(b), (1) the failure of PLN to furnish SELLER a satisfactory Remedial Program within the time provided in Section 15.1.5(b); or (2) the failure of PLN to implement such satisfactory Remedial Program with due diligence; or (3) the manifest or demonstrated inability of the Remedial Program so furnished to be capable of reasonable implementation or (4) the manifest or demonstrated inability to remedy the PLN Remediable Event notwithstanding the exercise of due diligence in implementing the Remedial Program, provided, however, that the foregoing shall not be considered to be a PLN Non-Remediable Event in the case of Section 15.1.3(b) if, subject to Section 15.1.4(c), the breach in question shall have been remedied;

the failure of any breach described in Section 15.1.3(b) to have been remedied within one hundred and fifty (150) Days after receipt of a Remedial Notice in respect thereof.

Remedial Procedures Upon the occurrence of SELLER Remediable Event or a PLN Remediable Event, the following procedures shall be strictly followed by t he Parties: (a)

PLN may give notice to SELLER of SELLER Remediable Event and SELLER may give notice to PLN of a PLN Remediable Event (“Remedial Notice”).

(b)

Upon SELLER’s receipt of a Remedial Notice notifying SELLER of SELLER Remediable Event described in Section 15.1.1(b) or Section 15.1.1(e) and upon PLN’s receipt of a Remedial Notice notifying PLN of a PLN Remediable Event described in Section 15.1.3(b), the Party receiving the Remedial Notice shall prepare and furnish to the other Party as promptly as practicable, and in any event within thirty (30) Days, a detailed program (“ Remedial Program”) for the remedy of the Remediable Event giving rise to such Remedial Notice.

(c)

In the event of a SELLER Remediable Event described in Section 15.1.1(b) (being the failure of the SELLER to achieve Commercial Operation Date within ninety (90) Days after the Required Commercial Operation Date), the next day thereafter PLN shall be entitled to call and immediately collect the first of the Bank Guarantees Stage II (Bank Guarantee Stage II No. 1), thirty one (31) Days thereafter PLN shall be entitled to call and immediately collect the second of the Bank Guarantees Stage II (Bank Guarantee Stage II No. 2), and sixty one (61) Days thereafter PLN shall be entitled to call and immediately collect the third of the Bank Guarantees Stage II (Bank Guarantee Stage II No. 3), provided that such SELLER Remediable Event


35

continues to occur and shall not have been excused, remedied or waived. (d)

15.1.6

In case of failure to perform by SELLER with respect to achieving COD based on the agreed schedule and after the collection of the Bank Guarantee Stage II No. 3 by PLN, if the Parties agree not to terminate this Agreement and instead extend the deadline for the SELLER to perform, then SELLER shall issue new Bank Guarantees Stage II No. 1, 2, and 3 of the same amount with previous Bank Guarantees Stage II No. 1, 2, and 3 after the new scheduled COD is mutually agreed to by the Parties.

Termination upon SELLER or PLN Non-Remediable Events Upon the determination that an SELLER Non-Remediable Event or a PLN Non-Remediable Event has occurred, the following procedure shall apply: (a)

The Party which is not the subject of such Event may give a notice (“Termination Notice”) to the other Party, specifying in reasonable detail the SELLER Non-Remediable Event or PLN Non-Remediable Event, as the case may be, giving rise to such Termination Notice, and the date on which the Party giving such Termination Notice proposes to terminate this Agreement, which date shall not be less than thirty (30) Days after the date of such notice;

(b)

During the period of thirty (30) Days (or such longer period set forth in the Termination Notice or as the Parties may agree) following the giving of such Termination Notice, the Parties shall consult as to what steps shall be taken with a view to mitigating or remedying the consequences of the relevant event having regard to all the circumstances;

(c)

If the Party receiving the Termination Notice intends to raise a-Dispute regarding the right to give effect to the Termination Notice and to refer such Dispute to an expert pursuant to Section 17.2 or to arbitration pursuant to Section 17.3, such Party shall within fifteen (15) Days of receipt of the Termination Notice so inform the Party giving the Termination Notice and shall immediately refer to an expert in accordance with the provisions of Section 17.2.5 the question of whether the Party receiving the Termination Notice has a reasonable basis to dispute the other Party’s right to give effect to the Termination Notice, which reference shall instruct the expert to render such determination not later than thirty (30) Days after the appointment of such expert; and

(d)

At the expiry of the period referred to in Section 15.1.6(b) and unless: (i)

the Parties shall have otherwise agreed, or

(ii)

the event giving rise to the Termination Notice and, in the case of any SELLER Non-Remediable Event, any existing SELLER Remediable Event described in Section 15.1.1(d), and, in the case of any PLN Non-Remediable Event, any existing PLN


36

Remediable Event described in Section 15.1.3(a), shall have been remedied, or (iii)

an expert proceeding regarding the question whether the Party receiving the Termination Notice has a reasonable basis to dispute the right to give effect thereto has been commenced pursuant to Section 15.1.6(c) and not yet been concluded, or

(iv)

(x) the expert proceeding contemplated by Section 15.1.6 (c) has been concluded with a determination that there is a reasonable basis to dispute the right to give effect to the Termination Notice and (y) the events giving rise to the Termination Notice have been referred to an expert pursuant to Section 17.2 or are the subject of arbitration and such expert proceeding or arbitration, as the case may be, has not concluded and is being diligently pursued, or

(v)

the expert proceeding or arbitration referred to in point (iv) above has concluded with a final determination that the Party having given the Termination Notice does not have a right to give effect thereto,

the Party having given the Termination Notice may terminate this Agreement by giving written notice thereof to the other Party, whereupon this Agreement shall terminate on the date specified for termination in such notice or such later date as the Parties shall have agreed and Section 15.4 shall apply.

15.2 Termination Other than Upon SELLER Non-Remediable Events or PLN NonRemediable Events 15.2.1

Non-Fulfilment of Conditions to Financing Date Either Party has the right to terminate this Agreement by giving written notice of such termination to the other Party if any condition to the Financing Date has not been fulfilled within 270 Days as of the signing date of this Agreement, unless the fulfillment of such condition is within the control of such Party. Upon the giving of a notice of termination under this Section 15.2.1, this Agreement shall terminate on the date specified for termination in such notice without liability of either Party to the other, other than PLN’s right to receive payment under the Bank Guarantee pursuant to Section 15.3.1 (a).

15.2.2

Termination on Expiration Date This Agreement shall terminate on the last Day of the Term.

15.2.3

Termination in the Event of Certain Event of Force Majeure If (i) any Event of Force Majeure (other than an Event of Force Majeure described in Sections 14.2(e), (f) or (g)), prevents, or it is apparent that such an Event of Force Majeure will prevent SELLER from constructing the Project or operating the Plant for a continuous period of more than twenty-four (24) months, and such Event of Force Majeure fundamentally frustrates the


37

economic basis of the transaction contemplated by this Agreement, or (ii) an Event of Force Majeure shall have occurred under the circumstances and having the consequences described in Section 14.3(f) and the Parties have failed to agree on a solution satisfactory to each of the Parties, SELLER may terminate this Agreement upon sixty (60) Days prior written notice to PLN.

15.2.4

Termination In the Event of Certain Construction Period Force Majeure If an Event of Force Majeure described in Section 14.2(e) or (f) occurs prior to the Commercial Operation Date and has delayed or would delay construction of the Project or the Commercial Operation Date for more than one hundred eighty (180) Days, SELLER may terminate this Agreement upon sixty (60) Days prior written notice to PLN.

15.3 Consequences of Termination and the Payment of Bank Guarantees 15.3.1

15.3.3

Consequences (a)

In the event of termination of this Agreement pursuant to Section 15.2.1 due to SELLER failure to achieve the Financing Date pursuant to Article 3 herein, then PLN shall be entitled to payment under the terms of the Bank Guarantee(s) in the aggregate amount of Rp 9,000,000,000 (nine billions Rupiah) established pursuant to Section 4.1 (h)

(b)

In the event of termination of this Agreement after the Financing Date until the Commercial Operation Date, pursuant to Section 15.1.6 due to an SELLER Non-Remediable Event, then (i) PLN shall be entitled to payment under the terms of the Bank Guarantee(s) in the aggregate amount of Rp 18,000,000,000 (eighteen billions Rupiah) established pursuant to Section 4.1(h); and (ii) PLN shall have the option to purchase the Project at the purchase price determined in accordance with Section 2.1 of Appendix F hereto.

(c)

In the event of termination of this Agreement after the Commercial Operation Date pursuant to section 15.1.6 due to an SELLER NonRemediable Event, PLN shall have the option to purchase the Project at the purchase price determined in accordance with Section 2.1 of Appendix F hereto.

(d)

In the event of termination of this Agreement after the Financing Date pursuant to Section 15.1.6 due to a PLN Non-Remediable Event or pursuant to Section 15.2.4, PLN shall purchase the Project at the purchase price determined in accordance with Section 2.2 Appendix F hereto.

Survival The provisions of Section 15.3 shall survive the termination of this Agreement.

15.4 Other Rights and Remedies Upon the breach by either Party hereto of any covenant or warranty hereunder, the Party damaged by any such default or breach may, in its sole discretion, in addition to Model PPA Kalimantan Timur CFSPP 2 x 60 MW

38

exercising any other remedies provided for hereunder, proceed in accordance with Article 17 hereof to protect and enforce its rights, to recover any damages to which it may be entitled (including all costs and expenses reasonably incurred in the exercise of its remedy) or to seek specific performance by the other Party of such other Party’s obligations under this Agreement. During the pendency of a PLN Non-Remediable Event described in Section 15.1.4(b)(i), and, if occurring in the meantime, of any PLN Remediable Event described in Section 15.1.3(a), the failure by SELLER to make Net Dependable Capacity and Net Electrical Output available to PLN pursuant to this Agreement shall not constitute SELLER Remediable Event, provided that SELLER shall have given PLN notice that such PLN Non-Remediable Event has occurred and specified in such notice the date and time at which SELLER proposes to cease making Net Dependable Capacity and Net Electrical Output available, which time shall not be less than seventy-two (72) hours after the time such notice is given to PLN.

Article 16 REPRESENTATIONS AND WARRANTIES 16.1 Representations and Warranties of SELLER SELLER represents and warrants that: (a)

SELLER is a limited liability company duly organised and validly existing under the laws of the Republic of Indonesia and has all requisite legal power and authority to execute this Agreement and the other Project Documents to which it is a party and to carry out the terms, conditions and provisions hereof and thereof;

(b)

All legislative, administrative and other governmental action required to authorise the execution and delivery, and to the best of SELLER’s knowledge and belief after due inquiry, all Indonesian legislative, administrative and other governmental action required to authorise the performance by SELLER, of this Agreement and the other Project Documents and the transactions contemplated hereby and thereby have been taken and are in full force and effect except to the extent of actions which by the terms of such documents are to be taken at a later time and except to the extent that the effectiveness of any other document is conditioned upon the effectiveness of this Agreement;

(c)

Each of the Project Documents to which SELLER is a party constitutes the valid, legal and binding obligation of SELLER, enforceable in accordance with the terms thereof except as the enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally;

(d)

There are no actions, suits or proceedings pending or, to SELLER’s knowledge, threatened, against or affecting SELLER before any court or administrative body or arbitral tribunal that might materially adversely affect the ability of SELLER to meet and carry out its obligations under this Agreement or any other Project Documents to which it is a party;

(e)

The execution, delivery and performance by SELLER of this Agreement and the other Project Documents to which it is a party have been duly authorized by all


39

requisite corporate action, and will not contravene any provision of, or constitute a default under, any other agreement or instrument to which it is a party or by which it or its property may be bound; and (f)

No later than the Financing Date, SELLER shall have all requisite legal rights to, and authority and control over, the Site necessary for the Project.

16.2 Representations and Warranties of PLN PLN represents and warrants that: (a) PLN has all requisite legal power and authority to execute this Agreement and to carry out the terms, conditions and provisions hereof; (b)

All legislative, administrative or other governmental action required to authorise the execution, delivery and performance by PLN of this Agreement and the transactions contemplated hereby have been taken and are in full force and effect;

(c)

This Agreement constitutes the valid, legal and binding obligation of PLN, enforceable in accordance with the terms hereof except as the enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally;

(d)

There are no actions, suits or proceedings pending or, to PLN’s knowledge, threatened, against or affecting PLN before any court or administrative body or arbitral tribunal which might materially adversely affect the ability of PLN to meet and carry out its obligations under this Agreement; and

(e)

The execution, delivery and performance of this Agreement by PLN have been duly authorized by all requisite corporate action, and will not contravene any provision of, or constitute a default under, any other agreement or instrument to which it is a party or by which it or its property may be bound.

16.3 Representations Regarding Consents SELLER and PLN each represent that to the best of its knowledge and belief after due inquiry, the Consents specified in Appendix Q hereto constitute all of the material Consents required to be in the name of SELLER or Contractor in connection with the Project at the date of this Agreement. The Parties understand and agree that neither Party shall bear any liability to the other Party with respect to the foregoing representation and such representation shall not affect any obligation of either Party hereunder or any other Project Documents

Article 17 SETTLEMENT OF DISPUTES 17.1 Mutual Discussions If any dispute or difference of any kind whatsoever (a “ Dispute”) shall arise between the Parties in connection with, or arising out of, this Agreement, or the breach, termination or validity hereof, the Parties shall attempt, for a period of thirty (30) Days Model PPA Kalimantan Timur CFSPP 2 x 60 MW

40

after the receipt by one Party of a notice from the other Party of the existence of the Dispute to settle such Dispute in the first instance by mutual discussions between the Parties.

17.2 Referral to an Expert 17.2.1

17.2.2

17.2.3

If the Dispute cannot be settled by mutual discussion within the 30-Day period provided in Section 17.1 and the Parties so agree in writing, the Dispute shall be referred to an expert for determination. The Party specified in the relevant provision as having the right (or either Party if no single Party is so specified) may give notice (“Notice of Intention to Refer ”) to the other Party of its intention to so refer the Dispute. The Party giving that notice is referred to herein as the “ Applicant” and the Party to whom such notice is given is referred to herein as the “ Respondent”. A Notice of Intention to Refer shall include, inter alia: (a)

a description of the Dispute;

(b)

the grounds on which the Applicant relies in seeking to have the Dispute determined in its favor;

(c)

all written material which the Applicant proposes to submit to the expert;

provided that this Section 17.2.3 shall not be construed so as to prevent the Applicant from using or producing further written material which comes into existence or comes to the Applicant’s attention after the Notice of Intention to Refer is given, but in such event the Applicant, shall give the Respondent prior written notice of the Applicant’s intention to use or produce such material and the Respondent shall be allowed a reasonable time to respond thereto. 17.2.4

The Respondent shall, within twenty-one (21) Days after receipt of the Notice of Intention to Refer, give to the Applicant a notice (“ Notice of Intention to Defend”) of its intention to defend which shall include, inter alia: (a)

the grounds upon which the Respondent relies in seeking to have the Dispute determined in its favor; and

(b)

all written material that the Respondent proposes to submit to the expert;

provided that this Section 17.2.4 shall not be construed so as to prevent the Respondent from using or producing further written material which comes into existence or comes to the Respondent’s attention after the Notice of Intention to Defend is given, but in such event the Respondent shall give the Applicant prior written notice of the Respondent’s intention to use or produce such material and the Applicant shall be allowed a reasonable time to respond thereto. 17.2.5

If within fourteen (14) Days after Applicant’s receipt of a Notice of Intention to Defend, the Parties have agreed on an expert and on the terms under which the Dispute shall be referred, the Dispute shall be so referred. In the event that the Parties are unable within such fourteen (14) Day period to agree upon an expert to be appointed hereunder or upon the terms of such expert’s


41

reference or both, then either Party may request the International Chamber of Commerce (“ICC”) to appoint an expert, and the matters to be determined by such expert shall be those set out in the Notice of Intention to Refer and the Notice of Intention to Defend. 17.2.6

17.2.7

Within seven (7) Days of the appointment of the expert, the expert shall designate a time and place for a hearing of the Parties on the Dispute, which time shall not be more than twenty-one (21) Days after the expert’s appointment. The Parties shall not be entitled to apply for discovery of documents but shall be entitled to have access to the other Party’s records and data in accordance with such Party’s demonstrated need to prove its case.

17.2.8

At the time nominated for the hearing, each Party must appear before the expert and present its case. The Parties may each be assisted in such hearing by advisors of their choosing.

17.2.9

The expert must render his decision on the Dispute as soon as possible after completion of the hearing and must forthwith advise the Parties in writing of his determination and his reasons therefor. The decision rendered shall apportion the cost of the referral to the expert to one or both of the Parties as the expert determines.

17.2.10 Any evidence given or statements made in the course of the hearing may not be used against a Party in any other proceedings. 17.2.11 Any proceeding under this Section 17.2 shall not be required to follow the procedural laws related to arbitrations. The expert need not be bound by strict rules of law where he considers the application thereof to particular matters to be inconsistent with the spirit of this Agreement and the underlying intent of the Parties, and as to such matters his conclusions shall reflect his judgment of the correct interpretation of all relevant terms hereof and the correct and just enforcement of this Agreement in accordance with such terms. 17.2.12 The decision of the expert shall be final and binding upon both Parties upon the delivery to them of the expert’s written determination, save in the event of fraud or manifest error. 17.2.13 If the expert does not render a decision within a period of ninety (90) Days of completion of the hearing or such longer or shorter period as the Parties may agree in writing, either Party may, upon giving notice to the other, terminate such appointment, and a new expert shall be appointed who shall resolve the Dispute in accordance with this Section 17.2. If the Dispute is not resolved by one or more experts within twelve (12) months after receipt by the Respondent of the Notice of Intention to Refer, or enforcement of this Section 17.2 or of any decision under this Section 17.2 is denied for any reason, then either Party may refer the Dispute for arbitration in accordance with Section 17.3.

17.3 Arbitration 17.3.1

If the Dispute cannot be settled within thirty (30) Days by mutual discussions as contemplated by Section 17.1, and referral to an expert is not elected by the Parties pursuant to Section 17.2.1, or if a Party so requests in accordance


42

with Section 17.2.13, the Dispute shall finally be settled by an arbitral tribunal (the “Tribunal”) under the rules of ICC. Each Party will appoint an arbitrator within thirty (30) Days of the date of a request to initiate arbitration who will then jointly appoint a third arbitrator within thirty (30) Days of the date of the appointment of the second arbitrator, to act as Chairman of the Tribunal. Arbitrators not appointed within the time limits set forth in the preceding sentence shall be appointed by the Secretary General of the Chairman of ICC. Both Parties undertake to implement the arbitration award. The site of the arbitration shall be Paris, France. Pursuant to Section 48.1 of Law No. 30 Year 1999 concerning Arbitration and Alternative Dispute Resolution (“Arbitration Law”), the Parties agree that the arbitration shall be completed within one hundred eighty (180) Days from such later Day as may be extended in accordance with Article 33 and Article 48 of the Arbitration Law. The language of the arbitration shall be English. 17.3.2

The award rendered shall apportion the costs of the arbitration. In accordance with Section 56.1 of Arbitration Law, the Parties agree that the Tribunal need not be bound by strict rules of law where they consider the application thereof to particular matters to be inconsistent with the spirit of this Agreement and the underlying intent of the Parties, and as to such matters their conclusions shall reflect their judgment of the correct interpretation of all relevant terms hereof and the correct and just enforcement of this Agreement in accordance with such terms.

17.3.3

The award rendered shall be in writing and shall set forth in reasonable detail the facts of the Dispute and the reasons for the Tribunal’s decision.

17.3.4

The award rendered in any arbitration commenced hereunder shall be final and binding upon the Parties and judgment thereon may be entered in any court having jurisdiction for its enforcement. The Parties hereby renounce their right to appeal from the decision of the arbitral Tribunal and agree neither Party shall appeal to any court from decision of the arbitral Tribunal. In addition, the Parties agree that neither Party shall have any right to commence nor to maintain any suit or legal proceeding concerning a Dispute hereunder until the Dispute has been determined in accordance with the arbitration procedure provided for herein and then only to enforce or facilitate the execution of the award rendered in such arbitration.

17.3.5

During the pendency of any expert proceeding or arbitration (a)

SELLER, subject to the final sentence of Section 15.4, shall continue to perform its obligations hereunder to produce and deliver energy and PLN shall continue to pay all amounts due hereunder and not in dispute without set-off, during the pendency of such expert proceeding or arbitration, and

(b)

Neither PLN nor SELLER shall exercise any other remedies hereunder arising by virtue of the matters in dispute, provided in any event that the right to terminate the Agreement pursuant to Article 15 may be exercised notwithstanding pendency of any arbitration, or expert proceeding, except as otherwise provided in Section 15.1.6 (d).

Article 18


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PLN PROJECT PURCHASE OPTION At any time after the Financing Date through the end of the Term, PLN may exercise an option to purchase all of SELLER right, title and interest in the Project, including SELLER title and interest in and rights and obligations under the Project Documents, for the price set forth in Section 2.2 of Appendix F. In such event, PLN shall give SELLER not less than one hundred eighty (180) Days written notice (a “ Purchase Option Notice”) of its decision to exercise this option. SELLER’s right, title and interest in the Project and the Project Documents shall be transferred to PLN in accordance with the provisions of Appendix F.

Article 19 ASSIGNMENT Neither Party may sell, assign or otherwise transfer its rights or obligations under or pursuant to this Agreement without the prior written consent of the other Party, except that for the purpose of financing the Project, SELLER may assign or create a security interest over its rights and interest under or pursuant to this Agreement, any other Project Documents, the Project, the right to use of land in Site, the moveable property and intellectual property of SELLER, or the revenues or any of the rights or assets of SELLER. Any actual, attempted or purported sale, assignment or other transfer by a Party of any of its rights or obligations or interests in, under or pursuant to this Agreement that does not comply with the terms of this Article 19 shall be null, void and of no force or effect. PLN hereby irrevocably consents to the assignment of SELLER’s rights hereunder to the Lenders pursuant to the Financing Agreements and agrees, if required by such Financing Agreements, to make payments owing from PLN to SELLER directly into a collateral security account thereunder; to accept in the event of a default under the Senior Debt, as a substitute for SELLER under this Agreement, the agent for the Lenders, any designee or transferee of such agent or any purchaser of SELLER upon a foreclosure sale on behalf of the Lenders of SELLERs interest in the Project or of the Equity, and to afford Lenders an opportunity to remedy the event giving rise to a Remedial Notice prior to giving effect to any termination of this Agreement. SELLER acknowledges and agrees that any assignment to a secured party pursuant to the Financing Agreements shall not relieve SELLER of its performance obligations to PLN under this Agreement. PLN acknowledges and agrees that no such assignee shall be liable for the performance of SELLER’s obligations hereunder, provided, however, that the exercise by any such assignee of any rights hereunder shall be subject to the terms of this Agreement. Any obligation of PLN to make payments directly to such a collateral security account shall be subject to any claims or rights PLN may have against SELLER hereunder.

Article 20 MONITORING, RECORDS, REPORTS, AUDIT 20.1 Monitoring Rights: Reports (a)

PLN and its duly appointed representatives, shall have the right to (i) monitor the Project and the Site, and (ii) and make copies as reasonably requested by PLN of all materials required to be obtained and retained by SELLER pursuant to Section 5.5 (other than Proprietary Information of SELLER or others) and all materials pertinent to the exercise of PLN’s audit rights pursuant to Section 20.2.


44

The purpose of such monitoring shall be to determine, in the case of construction, whether the Project is designed and constructed in accordance with the design and equipment parameters set forth in Appendices A and B and to observe the progress of construction and installation work, and, in the case of operations, to determine whether the Plant is operated and maintained in accordance with the terms of this Agreement. SELLER shall permit PLN and its duly authorized representatives to conduct such monitoring and review during normal business hours upon reasonable notice. PLN shall be entitled to conduct such monitoring and review at least twice each month and at such additional times as SELLER may approve upon the request of PLN, which approval shall not be unreasonably withheld. Such monitoring and review shall be conducted in the presence of and, in the case of inquiries addressed to SELLER’s employees and contractors, through a representative of SELLER designated by SELLER for this purpose. SELLER agrees to designate such a representative or representatives and to make such representative available for all such monitoring and review. In the case of monitoring of equipment or supplies, PLN shall have the right to conduct such monitoring with the prior approval of SELLER (which shall not be unreasonably withheld) and in the presence of a representative of SELLER, at any and all locations inside or outside the Republic of Indonesia at which such equipment and supplies are designed, manufactured, assembled or tested. The foregoing provisions shall not derogate from PLN’s inspection, monitoring and review rights with respect t o the Interconnection Point and in connection with testing as provided in Appendix J or as otherwise provided in this Agreement. (b)

SELLER shall supply to PLN an Activity Report at the times and covering the periods and matters required therefor in Appendix M. SELLER also shall provide to PLN promptly upon becoming aware thereof a report describing point (a) above as well as any act or condition materially affecting the Project or its ability to perform its obligations under this Agreement and the other Project Documents.

(c)

Performance of the activities set forth in this Section 20.1 shall not imply any obligation of PLN to perform any obligations of SELLER hereunder or under any other Project Document or constitute the basis of any waiver by PLN of any rights hereunder or thereunder.

20.2 Books and Records: Audit (a)

SELLER shall comply with the Accounting Principles and maintain proper books and records in accordance with Indonesian Legal Requirements.

(b)

PLN and its designees may at reasonable times during the Term, and at its own expense, conduct monitoring pertaining to metering, billing, direct pass-through elements of the Price, adjustment of the Price, indemnity claims, termination payments, reimbursements and any other charges to PLN based on SELLER’s costs, in all such cases for the purpose of determining whether SELLER charges to PLN have been computed in accordance with the provision of this Agreement. SELLER shall have the equivalent right to review the records and data possessed by PLN relating to the foregoing matters.

(c)

Each Party shall have the right, upon reasonable prior written approval from the other Party, to examine and/or make copies of the records and data referred to


45

in Section 20.2 (b) at any time during normal office hours during the period such records and data are required to be maintained. All such records and data shall be maintained for a minimum of sixty (60) months after the creation of such record or data and for any additional length of time required by regulatory agencies with jurisdiction over the Parties. Upon expiration of such sixty (60) months period, neither Party shall dispose of nor destroy any such records or data without thirty (30) Days prior written notice to the other Party, and the Party receiving such notice may receive such records or data in lieu of such disposal or destruction by giving the notifying Party notice of its intention to receive such records or data at least ten (10) Days prior to the expiration of the thirty (30) Days period.

20.3 Disclaimer SELLER: (a)

understands and agrees that any receipt of any matter or review thereof conducted by PLN is solely for its own information and accordingly by conducting such review PLN makes no endorsement of the design or representation or warranty of the safety, durability or reliability of the Plant; and

(b)

shall in no way represent to any third party that, as a result of any receipt of any matter or review thereof by PLN, PLN is responsible for the engineering or construction soundness of the Plant.

20.4 Provision No exercise of any of PLN’s prerogatives or rights pursuant to this Article 20 or otherwise in this Agreement (i) shall extend to proprietary pricing and cost information of the SELLER, (ii) shall hinder or impede the design, construction, management or operation of the Project by SELLER. Any monitoring, inspection, and observation, by PLN under this Agreement shall be conducted at PLN’s sole expense.

Article 21 MISCELLANEOUS 21.1 Language The language of this Agreement is English. Each Party or the Parties together may translate this Agreement into Bahasa Indonesia, however, any such translation would be without legal effect and the original English language version shall always govern and control.

21.2 Notices Any notice or other communication to be given hereunder, may be made in Indonesian language, in writing and shall be sufficiently given if delivered by registered mail, courier or hand-delivered against written receipt or if transmitted and clearly received by facsimile transmission addressed as follows:


46

(a)

In the case of PLN, to: PT PLN (Persero), Jl. Trunojoyo Blok M I/135. Jakarta Selatan.

(b)

Attention Facsimile Telephone In the case of

: President Director : (021) 7221330 : (021) 7251234 SELLER, to:

[PT. tba] [

Indonesia ]

Attention : President Director Facsimile : [ ] Telephone : [ ] or sent to such other person by registered mail, courier, or hand-delivery to such other address as any Party may designate for itself by notice given in accordance with this Section 21.2. Any such notice shall be deemed to have been received on the date of delivery.

21.3 Confidentiality (a)

Each Party agrees that it will, and will ensure that its employees, officers, commissioners and directors will, and will make reasonable efforts to ensure that its agents will, hold in confidence all information, documentation, data or knowhow disclosed to it by the other Party and designated in writing as “confidential” (the “Confidential Information”), and will not disclose to any third party or use Confidential Information or any part thereof without the other Party’s prior written approval, provided that Confidential Information may be disclosed to (i) a Governmental Instrumentality pursuant to Legal Requirements and (ii) to financial institutions, bonafide potential purchasers, and consultants and contractors whose duties reasonably require such disclosure, provided that, except for a bonafide disclosure to independent legal advisors, such other party shall first have agreed not to disclose the relevant Confidential Information to any other person for any purposes whatsoever.

(b)

The restrictions in this Section 21.3 shall not apply, or shall cease to apply, to any part of the Confidential Information that: (i)

is in the public domain other than by reason of a breach of (a) above;

(ii)

was in the rightful possession of the recipient Party or an employee, officer, commissioner or director of the recipient Party at or prior to the time of the disclosure; or

(iii)

was obtained by the recipient Party in good faith from a third party entitled to disclose it.


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(c)

The restrictions contained in this Section 21.3 shall survive the termination or expiry of this Agreement.

21.4 Severability of Provisions A holding of any court of competent jurisdiction or by an arbitral tribunal under Article 17 that any provision of this Agreement is invalid or unenforceable shall not result in invalidation of the entire Agreement. Instead, this Agreement shall be construed, if possible, in a manner to give effect by means of valid provisions to the intent of the Parties to the particular provision or provisions held to be invalid, and, in any event, all other terms shall remain in full force and effect. Following any such holding, the Parties shall negotiate in good faith new provisions to restore, as best as possible, the original intent and effect of this Agreement.

21.5 Waiver Neither Party shall be deemed to have waived any right under this Agreement, unless such Party shall have delivered to the other Party a written waiver signed by an authorized officer of such waiving Party. No delay or omission in the exercise of any power or remedy shall be construed to be a waiver of any default or an acquiescence therein.

21.6 Amendment This Agreement may only be amended or modified by a written instrument signed by each of the Parties.

21.7 Entire Agreement This Agreement constitutes the entire agreement between PLN and SELLER concerning the subject matter hereof. All previous documents, undertakings and agreements, whether verbal, written or otherwise, between the Parties concerning the subject matter hereof are hereby cancelled and shall not affect or modify any of the terms or obligations set forth in this Agreement, except as t he same may be made part of this Agreement in accordance with its terms, including the terms of any of the Appendices. The Appendices are hereby made an integral part of this Agreement and shall be fully binding upon the Parties. In the event of any inconsistency between the text of the Articles of this Agreement and the Appendices hereto, or in the event of any inconsistency between the provisions and particulars of one Appendix and those of any other Appendix, PLN and SELLER shall consult to resolve the inconsistency.

21.8 Further Acts and Assurances Each of the Parties agrees to execute and deliver all such further instruments, and to do and perform all such further acts and t hings, as shall be necessary or convenient to carry out the provisions of this Agreement.

21.9 Expenses Each Party shall pay its own costs and expenses (including, without limitation, the fees and expenses of its agents, representatives, advisors, counsel and accountants)


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necessary for the negotiation, preparation, execution, delivery, performance of and compliance with this Agreement.

21.10Indonesian Participation SELLER shall and shall cause each of the Contractors to: (a)to the maximum extent permitted by Financing Agreements, give preference to the use of construction equipment and other equipment, materials and product produced and manufactured in Indonesia; (b)to the maximum extent permitted by Financing Agreements, give preference to the use in the performance of its obligations under the Project Documents to Indonesian labor (both skilled and unskilled), Indonesian supervisory, professional and other personnel, Indonesian services and Indonesian contractors; (c)

use in respect of any insurance policies obtained in connection with the Project Indonesian insurances companies, brokers and agents; and

(d)

use Indonesian importers, agents and freight forwarders;

provided, in all cases, that such equipment, materials, products, personnel, services providers and contractors are at least as reasonably favorable to SELLER as other equipment, materials, products, personnel, services providers and contractors available, taking into account price, quality, reliability and schedule.

21.11Interpretation In the interpretation of this Agreement, unless the context otherwise requires: (a)

the singular includes the plural and vice versa and in particular (but without limiting the generality of the foregoing) any word or expression defined in the singular has the corresponding meaning used in the plural and vice versa;

(b)

a reference to persons includes bodies corporate and partnerships;

(c)

a reference to any gender includes the other genders;

(d)

a reference to an Article, Articles, Appendix, Section, paragraph, subparagraph, Schedule or Recital is a reference to an Article, Articles, Appendix, Section, paragraph, subparagraph, Schedule or Recital of this Agreement;

(e)

a reference to any agreement is a reference to that agreement as amended, varied, added to, substituted, replaced, renewed or extended;

(f)

a reference to statutes shall be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; and

(g)

a reference to “writing” includes printing, typing, lithography and other means of reproducing words in a visible form.


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Ppa Kalimantan Timur

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