On ratification of the Loan Agreement (Rehabilitation Project for the Uzen Oil Field) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development dated July 18, 1996

Home / RLA / On ratification of the Loan Agreement (Rehabilitation Project for the Uzen Oil Field) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development dated July 18, 1996

On ratification of the Loan Agreement (Rehabilitation Project for the Uzen Oil Field) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development dated July 18, 1996

The Law of the Republic of Kazakhstan dated October 16, 1996 N 38-1

To ratify the Loan Agreement (Rehabilitation Project of the Uzen Oil Field) between the Republic of Kazakhstan and the International Bank for Reconstruction and Development dated July 18, 1996, signed in the District of Columbia, United States of America.

President

Republic of Kazakhstan

LOAN N 4061 KZ

LOAN AGREEMENT

(Uzen Oil Field Rehabilitation Project)

between

BY THE REPUBLIC OF KAZAKHSTAN

and

BY AN INTERNATIONAL BANK

RECONSTRUCTION AND DEVELOPMENT

dated July 18, 1996

LOAN AGREEMENT

AGREEMENT dated July 18, 1996 between THE REPUBLIC OF KAZAKHSTAN (the Borrower) and the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (The Bank). BECAUSE: (A) The Borrower, having become convinced of the viability and priority of the Project described in Appendix 2 of this Agreement, has requested the Bank's assistance in financing the Project; (C) The Project will be implemented by Uzenmunaigas (UMG) with the help of the Borrower and as part of such assistance. The Borrower will provide UMG with the Loan funds provided under this Agreement; and SINCE the Bank has agreed, on the basis of, among other conditions, the above, to provide a Loan to the Borrower on the terms stipulated in this Agreement and the Project Agreement dated the same date and concluded between the Bank and UMG; THUS, the parties hereby agree on the following:

ARTICLE I General Terms and Conditions; Definitions Section 1.01. The General Terms and Conditions applicable to the Bank's Loan and Guarantee Agreements dated January 1, 1985, together with the amendments set out below (General Terms and Conditions), form an integral part of this Agreement: (a) The last sentence of Section 3.02 has been cancelled. (b) The second sentence of section 5.01 has been amended to read as follows: Unless the Bank and the Borrower agree otherwise, withdrawals should not be made: (a) for expenses in the territory of any country that is not a member of the Bank, or for payment for goods or services produced in such territories; or (b) for the purpose of making payments to persons or businesses for imported goods, if such payment or import, according to the information of the Bank, is prohibited by a decision of the UN Security Council adopted under Chapter VII of the UN Charter. 1. In Section 6.02, subsection (k) was renamed subsection (1), and the new subsection (k) added should read as follows: (k) An extraordinary situation has been created in which any further withdrawal of Loan funds will be at odds with the terms of Section 3 of Article III of the Bank's Agreement on Contract. Section 1.02. Unless the context requires otherwise, some of the terms defined in the General Terms and Conditions and in the Preamble of this Agreement will have their respective meanings, and the following additional terms listed below will have the following meanings: (a) Block ZA means the zone demarcated as Block ZA of the Uzen Oil Field. (b) Project Agreement means an agreement between the Bank and Uzenmunaigas (UMG) dated on the same date as this document, which may also be amended from time to time, and this term includes all schedules and agreements that are additional to the Project Agreement. (c) Project preparation advance means an advance for project preparation provided by the Bank to the Borrower in accordance with a Letter of Agreement dated November 8, 1995, between the Borrower and the Bank. (d) Short-term working capital financing plan means a short-term working capital financing plan for UMG dated May 31, 1996, which may be amended from time to time with the consent of the Bank. (e) Special Account means the account referred to in Section 2.02 (B) of this Agreement. (f) Ancillary Loan Agreement means an Agreement that is concluded between the Borrower and UMG in accordance with Section 3.01 (b) of this Agreement, which may also be amended from time to time, and this term includes all annexes to the Ancillary Loan Agreement. The term Auxiliary loan means a loan granted in accordance with this agreement. (g) Technical and managerial know-how services means technical and managerial know-how transfer services and includes other consulting services. (h) Maintenance means services for well testing, logging, perforation and deconservation of wells and maintenance of facilities for major repairs that must be provided in accordance with Parts B.1 and B.2 of this Project. (i) UMG or Uzenmunaigas means the Uzenmunaigas Company, a legal entity established and operating under the laws of the Borrower, and includes any legal successor or successors acceptable to the Bank. (j) The UMG Privatization Plan means the Borrower's plan for the privatization of UMG, in accordance with Section 3.05 of this Agreement, at the same time, the said plan may be amended from time to time with the consent of the Bank. (K) Uzen Oil Field means the Borrower's Uzen Oil field, which is such under the Borrower's license No. 254 dated September 5, 1995.

ARTICLE II Loan Section 2.01. The Bank agrees to provide the Borrower with a loan for the term and conditions specified or mentioned in the Loan Agreement in various currencies, the total amount of which will be equivalent to one hundred nine million dollars (109,000,000 dollars), which is the amount of funds withdrawn under this Loan, and the amount of each withdrawal will be be assessed by the Bank on the date of such withdrawal. Section 2.02. (a) The Loan amount may be withdrawn from the Loan account in accordance with the terms of Appendix 1 to this Agreement for expenses incurred (or, if the Bank agrees, to be incurred) based on the reasonable cost of the goods and services required for the Project described in Appendix 2 to this Agreement and financed from the funds of this Loan. (b) For the purpose of implementing the Project, the Borrower may open and hold a special current account in dollars with a commercial bank that is acceptable to the Bank and on terms that are acceptable to the Bank, including adequate protection against set-off, confiscation or seizure. Funds must be transferred to the account and funds must be paid from the Special Account in accordance with the terms of Appendix 4 to this Agreement. (c) Immediately after the Agreement enters into force, the Bank must, on behalf of the Borrower, withdraw from the Loan account and pay itself the amount necessary to repay the entire amount of the Project Preparation Advance withdrawn and payable on that date, as well as pay all interest accrued on that amount. The balance that has not been withdrawn from the approved amount of the Advance for the preparation of the project will then be canceled. Section 2.03. The closing date of the Loan will be December 31, 2000 or such later date as the Bank determines. The Bank will have to immediately inform the Borrower of such a later date. Section 2.04. The Borrower must pay a commission fee to the Bank at a rate of three-quarters of one percent (3/4 of 1%) per year, accrued on the principal amount of the loan, which periodically remains not withdrawn from the account. Section 2.05 (a) The borrower must pay interest on the principal amount of the loan that has been withdrawn and is not repaid from time to time, at a rate for each interest accrual period that is equal to the cost of qualified borrowings determined based on the previous six months, plus half a percentage (1/2 of 1%). On each date specified in Section 2.06 of this Agreement, the Borrower must pay the interest accrued on the principal amount of the outstanding debt during the previous period for which interest is accrued, calculated at the rate applicable during such period for which interest is accrued. (b) As soon as possible, after the end of each semester, the Bank will notify the Borrower of the cost of qualified loans determined for this semester. (c) For the purposes of this section: (i) The interest-bearing period means the six-month period ending on the day immediately preceding each date defined in Section 2.06 of this Agreement, beginning with the interest-bearing period during which this Agreement is signed. (ii) The cost of qualified borrowings means the cost reasonably determined by the Bank and expressed as a percentage per annum of the amount of outstanding borrowings of the Bank made after June 30, 1982, excluding such borrowings or parts thereof that the Bank has allocated to finance: (A) investments of the Bank; and (C) loans that could be issued By a Bank after July 1, 1989, the interest on which is determined on principles different from those specified in paragraph (a) of this Section. (iii) Half-year means the first six months or the second six months of a calendar year. (d) On a date to be determined by the Bank and notified to the Borrower no later than 6 months in advance, paragraphs (a), (b) and (c) (iii) of this Section should be amended to read as follows: (a) The Borrower must pay interest on the principal amount of the Loan that has been withdrawn and is not repaid at some time, at a rate for each quarter, which is equal to the cost of qualified borrowings determined based on the previous quarter, plus half a percent (1/2 of 1%). On each date specified in Section 2.06 of this Agreement, the Borrower must pay the interest accrued on the principal amount of the outstanding debt during the previous interest-bearing period calculated at the rate applicable during the interest-bearing period. (B) As soon as possible, after the end of each quarter, the Bank will notify the Borrower of the cost of qualified borrowings determined for that quarter (c) (iii) Quarter means a three-month period beginning on January 1, April 1, July 1, or October 1 of the calendar year Section 2.06. Interest and other fees must be paid once a year. The six months are May 15th and November 15th each year. Section 2.07. The Borrower must repay the principal amount of the Loan in accordance with the repayment schedule specified in Appendix 3 of this Agreement.  

ARTICLE III Project implementation Section 3.01. (a) The Borrower declares its commitment to the Project objectives set out in Appendix 2 of this Agreement and, in this regard, without any restrictions on its other obligations under the Loan Agreement, must ensure that the UMG fulfills all obligations stipulated in it in accordance with the terms of the Project Agreement and must undertake or ensure that all actions, including the provision of facilities, facilities, services, and other resources, are necessary and appropriate to enable UMG to fulfill such obligations., and also must not carry out or allow the implementation of any actions that will hinder or interfere with the fulfillment of such obligations. (B) The Borrower must re-lend the Loan funds to UMG on the basis of an Additional Loan Agreement concluded between the Borrower and UMG, on terms to be approved by the Bank, including the following: (i) the term of the Additional Loan Agreement must be 12 years, including a four-year grace period; (ii) The Borrower shall charge reservation fees at a rate equal to the reservation fees under Section 2.04 of this agreement; (iii) The Borrower shall charge interest on the principal amount of the additional loan withdrawn and outstanding from time to time at a rate of 200 basis points (2%) above the rate payable under the terms of Section 2.05 of this Agreement; and (iv) the principal amount of the additional loan must be equivalent in dollar terms (to be determined on the date or the corresponding repayment dates) to the amount in the currency or currencies withdrawn from the Loan account to cover the Project costs. (c) The Borrower must exercise its rights stipulated in the Supplementary Loan Agreement in such a way as to protect the interests of the Borrower and the Bank and ensure that the objectives of this loan are fulfilled, and unless otherwise agreed with the Bank. The Borrower must not assign, amend, cancel or cancel the Supplementary Loan Agreement or any of its provisions. Section 3.02. Except in cases where there is an agreement with the Bank to the contrary, purchases of goods and works (including maintenance) and consulting services necessary for the implementation of the Project and financed from the Loan funds must be carried out in accordance with the terms of Appendix 1 to the Project Agreement. Section 3.03. The Bank and the Borrower hereby agree that all obligations stipulated in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Terms and Conditions (related respectively to insurance, use of goods and services, plans and schedules, business management and reporting, maintenance and acquisition of land must be fulfilled by UMG in accordance with Section 2.03 of the Agreement on the project. Section 3.04. The Borrower must, together with UMG, implement a Short-term Working capital Financing Plan in a manner satisfactory to the Bank. Section 3.05. The Borrower must: (a) prepare a Plan for the privatization of UMG on the terms agreed with the Bank, and (b) implement this plan in a manner acceptable to the Bank. Section 3.06. The borrower must give permission to UMG to sell the crude oil produced by it on those commercial terms that UMG considers acceptable.

ARTICLE IV Financial obligations Section 4.01. (a) For all expenses for which, based on the expense statements, funds have been withdrawn from the Loan account, the Borrower must: (i) maintain or ensure that, in accordance with sound accounting practices, documents or reports reflecting such expenses, (ii) ensure that all documents (contrasts, orders, invoices, receipts, and other documents) attesting to such expenses were retained for at least a year after the Bank received the audit report for the financial year in which the funds were withdrawn from the Loan account.; and (iii) provide an opportunity for representatives of the Bank to study such documents. The Borrower must: (i) have the records and accounts referred to in paragraph (a) (i) of this Section, including those related to the Special Account (for each fiscal year), in accordance with appropriate and consistent auditing principles conducted by independent auditors that are acceptable to the Bank.; (ii) to submit to the Bank, immediately upon receipt, but in any case not later than six months after the end of each such year, a report on such audit performed by the said auditors to such extent and with such detail as may be justified by the Bank, including a separate opinion from the said auditors on whether The expense statements provided during such a financial year, as well as the procedures and internal controls used during their preparation, are reliable in supporting the validity of related withdrawals.; and (iii) provide the Bank with such other information as the Bank may reasonably request from time to time, which relates to the said documents and accounts, as well as their audit.

ARTICLE V Bank's Sanctions Section 5.01. In accordance with Section 6.02 (1) of the General Terms and Conditions, the following additional events are defined: (a) UMG will not be able to fulfill any of the obligations under the Project Agreement. (B) As a result of events that occurred after the date of the Loan Agreement, an extraordinary situation will arise that will result in UMG being unable to fulfill its obligations under the Project Agreement. (c) UMG's Charter dated November 25, 1994, or any other constituent documents replacing it agreed with the Bank, will be amended, cancelled, suspended, cancelled or revoked, which will significantly and negatively affect UMG's ability to fulfill its obligations under the Project Agreement. (d) The Borrower or any other authority with jurisdiction will take any action aimed at dissolving or abolishing UMG, or suspending its activities. Section 5.02 In accordance with Section 7.01 (h) of the General Terms and Conditions, the following additional events are defined: (a) any event specified in paragraph (a) of Section 5.01 of this Agreement will occur and will continue for sixty (60) days after notification thereof is transmitted by the Bank to the Borrower; (b) will occur any event defined in paragraphs (c) and (d) of section 5.01 of this Agreement.  

ARTICLE VI Date of entry into force of the Agreement; Termination of the Agreement Section 6.01. The following events are identified as additional conditions for the entry into force of the Loan Agreement within the meaning of Section 12.01 (c) of the General Terms and Conditions: (a) the Additional Loan Agreement was concluded on behalf of the Borrower and UMG; and (b) the Plan for the Privatization of UMG was prepared in accordance with section 3.05 of this Agreement. (C) Consultants have been hired by UMG on terms satisfactory to the Bank to provide technical and managerial support to UMG in the implementation of the Project and the management of the operation of the Uzen oil field. Section 6.02. The following is defined as additional aspects within the meaning of Section 12.02 (c) of the General Terms and Conditions, which must be included in the opinion or opinions provided to the Bank: (a) that the Project Agreement has been duly authorized or approved by UMG and is legally binding on UMG in accordance with its terms; and (B) that the Supplementary Loan Agreement has been duly approved or ratified by the Borrower and UMG and is legally binding on the Borrower and UMG in accordance with its terms.

Section 6.03. A period of ninety (90) days after the date of this Agreement is hereby determined in relation to Section 12.04 of the General Terms and Conditions

ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. The Borrower's Minister of Finance is appointed as the Borrower's representative in relation to Section 11.03 of the General Terms and Conditions.

Section 7.02. The following addresses are defined in relation to Section 11.01 of the General Terms and Conditions:

For the Borrower:

Republic of Kazakhstan,

Almaty, 480091,

97 Ablay Khan St.

Ministry of Finance Telex:

251245 FILIN

For the Bank:

International Bank for

Reconstruction and Development

1818 H Street, N.W.

Washington, D.S. 20433

United States of America

Telegraphic address:

INTBAFRAD

Washington, D.C. Telex:

248423 (RCA)

82987 (FTCC)

64145(WUI) or

197688 (TRT)

IN CONFIRMATION OF WHICH, its participants, acting through their duly authorized representatives, ordered the signing of this Agreement on their behalf in the District of Columbia., The United States of America on the day and year indicated above.

REPUBLIC OF KAZAKHSTAN

Authorized representative

INTERNATIONAL BANK

RECONSTRUCTION AND DEVELOPMENT

Regional Vice President

across Europe and Central Asia

ANNEX I

Disbursement of Loan funds

1. The table below identifies the categories of expenditures to be financed from the Loan, the amounts allocated from the Loan for each Category, and the percentage of expenditures for the items to be financed for each Category.:

The amount of appropriations from %

loan funds financed by

Category (in dollar terms of expenses

--------- equivalent) ---------

-------------

(I) 20,000,000 100% foreign goods

expenses,

100% local

expenses (by price

free-of-charge factory)

and 75% of the locals

expenses for other

positions, purchases by

which

produced by

within the country

(2) Works/ground 23,000,000 82%

facilities Part A.2 of the Project

(3) Technical 39,000,000 100% foreign

Expense services

(4) Technical and 17,500,000 100%*

management know-how services

(5) Personnel training 2,400,000 100%*

(6) Refund 1,500,000 Amount due

advance payment preparation in

in accordance with the

Section 2.02 (c)

this one

agreements

(7) 5,600,000 Not Distributed

_________________

total: 109,000,000

_________________

2. In relation to this Application:

(a) the term foreign expenses means expenses in the currency of any country other than the currency of the Borrower's country for goods and services supplied from the territory of any country other than the Borrower's country; and (b) the term local expenses means expenses in the Borrower's currency or costs of goods and services supplied from the territory of the Borrower. 3. Regardless of the conditions of the previous paragraph 1, withdrawals may not be made to pay for expenses: (a) incurred prior to the signing of this Agreement; and (b) within Category 5, until a staff training strategy is developed and adopted by UMG in accordance with paragraph 5 of Annex 2 of the Project Agreement. 4. The Bank may require that withdrawals from the Loan account be made based on expense statements when paying for: (a) goods and works under contracts valued at less than 50,000 dollars, and (b) contractual services for firms whose contracts are valued at less than 100,000 dollars, and, in the case of individuals whose contracts are worth less than 50,000 dollars, on terms that the Bank must notify the Borrower about.

APPENDIX 2 Project Description The objectives of the project are: (i) to reduce the rate of decline in production at the Uzen oil field and create resources for reinvestment in it; (ii) to facilitate the reorganization of Uzenmunaigas into viable corporate units and its/their privatization; (iii) to assess the impact of past production practices on the current state of productive formations, wells and the environment of the deposit; (iv) contributing to the elimination of the consequences of past environmental damage and strengthening environmental monitoring and management;

(v) training of Uzenmunaigas employees in modern methods of working in oil fields and improving their ability to manage the implementation of the oil field rehabilitation and operation program.

The Project consists of the following parts, which may be changed from time to time by mutual agreement of the Bank and the Borrower in order to achieve these goals:

PART A INVESTMENTS IN PHYSICAL OBJECTS

1 . Rehabilitation of mineral resources

-----------------

(a) Provision of equipment and spare parts for major repairs of about 400 oil producing and about 100 injection wells.

(b) Provision of chemicals for major repairs and oil production.

2. Rehabilitation of ground structures

--------------------------------

(a) Replacement of about 340 outlet pipelines, with a total estimated length of 205 kilometers (km) (about 135 km of 3-inch diameter pipes and about 70 km of 4-inch diameter pipes), which connect oil production wells with reservoir installations. (b) The relocation of satellites and the integration of existing collection facilities into approximately 8 facilities equipped with test and group separators, as well as appropriate flowmetric and monitoring equipment. (c) Replacement of oil/water transfer pipelines between the collection facilities and the existing central processing plant and installation of new pumping pipelines between the new collection facilities and the reservoir injection facility at the Block.

(d) Modification of the existing central oil refining unit to create a specialized processing chain for crude oil produced at the block.

(e) Installation of a complete water treatment system at the pumping station of the Pumping Unit.

(f) Replacement of existing water pumps and high-pressure water pipes connecting water pumping stations and injection wells with the necessary flowmetric and monitoring equipment.

3. Environmental protection and restoration

-------------------------------------------

Provision of equipment for laboratory analysis and environmental monitoring; cleaning and experimental restoration of vegetation cover of individual zones; creation of a database on the current ecological state of the Uzen oil field.

PART B SUPPORT FOR INVESTMENTS IN

PHYSICAL OBJECTS

1. Provision of services for testing, logging and perforation and deconservation of wells.

2. Provision of well capital repair facilities for the implementation of the overhaul program for about 400 wells. 3. Provision of technical and managerial know-how services for project planning and management, engineering design and construction, as well as supervision of well repairs; management of productive reservoir development and production; training of Uzenmunaigas personnel. PART C ORGANIZATIONAL DEVELOPMENT 1. Strengthening the management of the Uzenmunaigas company by improving its financial and production information systems through the provision of technical and management services, know-how and equipment. 2. Improving the financial management of the company

Uzenmunaigas, as well as accounting practices and systems through the provision of technical and management services, know-how and equipment.

The Project is expected to be completed by June 30, 2000.

APPENDIX 3

Repayment scheme

Payment term Repayment of the principal amount

(expressed in dollars)*

November 15, 2001 4,540,000

May 15, 2002 4,540,000

November 15, 2002 4,540,000

May 15, 2003 4,540,000

November 15, 2003 4,540,000

May 15, 2004 4,540,000

November 15, 2004 4,540,000

May 15, 2005 4,540,000

November 15, 2005 4,540,000

May 15, 2006 4,540,000

November 15, 2006 4,540,000

May 15, 2007 4,540,000

November 15, 2007 4,540,000

May 15, 2008 4,540,000

November 15, 2008 4,540,000

May 15, 2009 4,540,000

November 15, 2009 4,540,000

May 15, 2010 4,540,000

November 15, 2010 4,540,000

May 15, 2011 4,540,000

November 15, 2011 4,540,000

May 15, 2012 4,540,000

November 15, 2012 4,540,000

May 15, 2013 4,580,000

--------------------------------------------------------------------

109,000,000

* The numbers in this column represent the dollar amount as of the relevant withdrawal date.See the General Terms and Conditions. Section 3.04 and

4.03.

Early repayment premium

In accordance with Section 3.04. (b) of the General Terms and Conditions, the premium payable and accrued on the principal amount of a loan with any maturity that is repaid ahead of schedule will be equal to the interest rate determined below based on the time of early repayment:

Early release time Repayment Premium ------

---------

The interest rate (expressed as a percentage per annum) accrued on the loan amount on the day of early repayment, multiplied by:

No more than three years before

The maturity is 0.18

More than three years, but not more than

six years before maturity 0.35

More than six years, but not more than

11 years before maturity 0.65

For more than eleven years, but not

more than 15 years before the deadline

repayment 0.88

More than 15 years before the deadline

Repayment of 1.00

APPENDIX 4

Special account

1. In relation to this Application:

(a) the term Eligible Categories means categories (1), (2),

(3), (4) and (5) as defined in the table of paragraph 1 of Appendix 1

of this Agreement; for the avoidance of doubt, it is explained that the term

"Eligible" categories includes the categories mentioned above, only

to the extent that

Premium Interest rate

------  

(expressed as a percentage per annum) accrued on the loan amount on the day of early repayment, multiplied by: and to what extent the terms of expenditure, if any, in relation to paragraph 3 of Annex 1 to this Agreement have been fulfilled; (b) the term Eligible Costs means costs related to reasonable costs for the purchase of goods and services necessary for the implementation of the project and financed from Loan funds allocated periodically to Eligible Categories in accordance with the terms of Annex 1 of this Agreement; and (c) the term "Authorized Allocation"0 means an amount equivalent to $600,000, which subject to withdrawal from the Loan account and placement in a Special Account in accordance with paragraph 3 (a) of this Annex, provided, however, that unless otherwise agreed with the Bank. The authorized allocation will be limited to the amount equivalent to 100 thousand dollars, until the total amount of funds withdrawn from the Loan account plus the total amount of all existing obligations for reserving credit lines assumed by the Bank, in accordance with Section 5.02 of the General Terms and Conditions, equals or exceeds the equivalent of 3 million dollars. 2. Funds will be paid from the Special Account exclusively for eligible expenses in accordance with the terms of this Application. 3. After the Bank has received satisfactory confirmation that the Special Account has been properly opened, withdrawals of Authorized Funds and subsequent withdrawals to replenish the Special Account will be carried out as follows: (a) To withdraw funds from Authorized Funds. The Borrower must submit to the Bank a request or requirements for transfers or transfers that should not exceed the total amount of Authorized Allocations. Based on such a requirement or requirements, the Bank must, on behalf of the Borrower, withdraw from the Loan account and place in a Special Account such amount or amounts as the Borrower requests. (b) (i) In order to replenish the Special Account, the Borrower will provide the Bank with requests for funds to be transferred to the Special Account at such time intervals as the Bank determines. (ii) Prior to or at the time of such request, the Borrower must provide the Bank with the documents or other confirmations required in accordance with paragraph 4 of this Annex for the payment or payments in respect of which the request for replenishment of the Special Account has been received. Based on such a requirement, the Bank must, on behalf of the Borrower, withdraw from the Loan account and place in a Special Account such amount as the borrower requests and which must be used to pay from the Special Account the eligible costs indicated in the aforementioned documents and other confirmations. All such transfers must be withdrawn by the Bank from the Loan account in accordance with the relevant Eligible Categories and must amount to appropriate equivalent amounts, which are certified by the aforementioned documents and other confirmations. 4. For each payment made by the Borrower from a Special Account. The Borrower must, within the time period reasonably requested by the Bank, provide the Bank with such documents or other confirmations showing that this payment was made solely for Eligible Expenses. 5. Notwithstanding the terms of paragraph 3 of this Annex, the Bank will not be required to further deposit funds into a Special Account: (a) if at any time the Bank determines that all other withdrawals must be made by the Borrower directly from the Loan account in accordance with the provisions of Article V of the General Terms and Conditions and paragraph (a) of Section 2.02 of this Agreements; or (b) if the Borrower is unable to provide to the Bank, within the time specified in Section 4.01(b)(ii) of this Agreement, any of the audit reports required by the Bank in accordance with the said section in relation to audits of records and Special Account accounts; (c) if, at what time- at any time, the Bank will notify the Borrower of its intention to suspend, partially or completely, the Borrower's right to withdraw funds from the Loan account in accordance with Section 6.02 of the General Terms and Conditions; or (d) as soon as the amount of outstanding Loan funds allocated to Eligible Categories, less the amount of any existing special obligation that the Bank has entered into in accordance with Section 5.02 of the General Terms and Conditions for the Project, is equal to the equivalent of double the amount of Authorized Allocations. After that, the withdrawal of the remaining loan funds from the Loan account for allocation to Eligible Categories will be carried out in accordance with the procedures that the Bank will notify the Borrower about. Such further withdrawals will only have to be made to the extent and after the Bank is satisfied that all these amounts remaining in the Special Account on the date of such notification will be used to pay Eligible Expenses. 6. (a) if at any time the Bank discovers that any payment from the Special Account: (i) has been made at a cost or amount that is unacceptable in accordance with paragraph 2 of this Annex, or (ii) has not been justified by evidence provided to the Bank, the Borrower must, immediately upon receiving notification from the Bank, (A) provide such additional confirmation at the request of the Bank; or (C) to place in a Special Account (or, if the Bank requires, to return the funds to the Bank) an amount equal to the amount of such payment or that part of it which is unacceptable or unreasonable. Unless otherwise agreed with the Bank, the Bank will not make further transfers of funds to the Special Account until the Borrower provides such confirmations or makes such placement or return of funds, as may be the case in such a case. (b) If the Bank ever determines that any unused amount in the Special Account will not be needed to make further payments for eligible expenses. The Borrower is obliged to return such unspent amount to the Bank immediately after notifying the Bank. (c) The Borrower may, by notifying the Bank, return to the Bank all or part of the funds deposited in the Special Account. (d) The funds returned to the Bank in accordance with paragraphs 6 (a), (b) and (c) of this Annex will be transferred to the Loan account for subsequent withdrawal or cancellation in accordance with the relevant terms of this Agreement, including the General Terms and Conditions.

President

Republic of Kazakhstan

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