UNMIK INSTITUCIONET E PËRKOHSHME TË VETËQEVERISJES PRIVREMENE INSTITUCIJE SAMOUPRAVLJANJA PROVISIONAL INSTITUTIONS OF SELF-GOVERNMENT
QEVERIA E KOSOVËS
VLADA KOSOVA
PISG OF KOSOVO
Ministria e Energjisë dhe Minierave
Ministarstvo za Energiju i Rudarstva
Ministry of Energy and Mining
Provisional Institutions of Self Government of Kosovo Ministry of Energy and Mining Pursuant to the Authority Granted to it by the Project Steering Committee EXPRESSION OF INTEREST FOR THE DEVELOPMENT OF A NEW LIGNITE MINING FACILITY AND ASSOCIATED NEW ELECTRIC GENERATING AND ASSOCIATED TRANSMISSION CAPACITY AND REHABILITATION OF EXISTING GENERATORS
Pre-Qualification Memorandum
As Amended - October 26, 2006
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Table of Contents Page IMPORTANT NOTICES ..........................................................................................................3 DESCRIPTION OF THE PROJECT.........................................................................................5 Preface....................................................................................................................................5 Project Components ...............................................................................................................5 Project Support and Management..........................................................................................7 LPTAP Implementation Schedule .......................................................................................10 INVITATION TO REGISTER FOR DUE DILIGENCE .......................................................11 Commencement of Due Diligence. .....................................................................................11 Investors’ Conference. .........................................................................................................11 Information Memorandum...................................................................................................11 Pre-qualification of Bidders.................................................................................................11 Bidding Consortia ................................................................................................................11 Bidding Rules.......................................................................................................................12 Due Diligence Fee................................................................................................................12 PRE-QUALIFICATION PROCEDURES AND CRITERIA FOR BIDDING .......................13 ADDITIONAL INFORMATION AND QUESTIONS...........................................................15 GLOSSARY ............................................................................................................................16 ANNEX A - APPLICATION FOR PRE-QUALIFICATION FOR BIDDING......................18 ANNEX B - EXPERIENCE DECLARATION FORM ..........................................................20
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IMPORTANT NOTICES All capitalized terms used in this Memorandum and in its annexes are defined in the Glossary, unless otherwise noted. This Memorandum is issued by the Ministry of Energy and Mining (“MEM”) of the Provisional Institutions of Self-Government (the “PISG”) of Kosovo on behalf of the Project Steering Committee (“PSC”) pursuant to authority granted MEM under Executive Decision 2006/6 “On The Establishment Of A Project Steering Committee And A Project Office For Lignite Power Technical Assistance Project” by the Special Representative of the Secretary-General (“SRSG”) under United Nations Security Council resolution 1244 (1999) of 10 June 1999 and relevant Regulations of the United Nations Interim Administration Mission in Kosovo (“UNMIK”) for information purposes only and is being provided solely for use by Prospective Bidders to assist them in submitting applications for pre-qualification pursuant to the Annexes hereof. Neither the PISG, MEM, UNMIK nor any of their respective agents, representatives, advisers or consultants make, will make, or will be deemed to have made, any representation or warranty, express or implied, as to the accuracy, reliability or completeness of the information contained herein, in the Data Room, the Information Memorandum or any information otherwise provided, whether orally or in writing, other than such representations or warranties as may be contained in a definitive contractual agreement executed by MEM, on behalf of the PSC, and a selected bidder. Neither the receipt of this Memorandum, nor any information contained herein or supplied herewith or subsequently communicated to any Person, whether orally or in writing, in connection with a proposed transaction involving the PISG, MEM, UNMIK or Korporata Energjetike e Kosovės (“KEK”) (the “Entities”), consultants to the Entities or their subcontractors, shall constitute, or be interpreted as constituting, the giving of investment, legal, technical or other advice. None of the information set forth herein constitutes an offer or invitation to sell, or any form of commitment or recommendation or the solicitation of any offer to sell, any of the assets or securities of KEK or of the Generation, Distribution or Mine assets resulting or which may result from any future restructuring of KEK. The MEM, on behalf of the PSC, reserves the right, in its sole discretion, to modify any of the rules or procedures relating to this Memorandum and any subsequent Tender, including the right to refuse to accept offers or, without prior notice or assigning any reason therefore, to terminate the Tender. No Entity nor any agent, representative, advisor or consultant of an Entity, will be liable or responsible to any Person for any cost or expense incurred in responding to this Request or in any investigation, negotiation or transaction, whether or not consummated which may follow. Neither this Memorandum nor any other written or oral information made available to any potential bidder or any other Person or their respective representatives, agents or advisors will form the basis of any contract. A proposal regarding the Project or any part thereof will give rise to contractual obligations only if and to the extent provided for by a definitive contractual agreement executed by MEM, on behalf of the PSC, and a selected bidder.
Page 4 of 21 All prospective bidders or interested Persons are strongly advised to seek their own independent financial, legal, tax, technical and other advice. Recipients of these materials should inform themselves about and observe any applicable legal requirements in Kosovo and their own jurisdictions. In providing materials in connection with the proposed transactions, neither the MEM nor any of the other Entities undertake any obligation to correct, amend or update such materials.
Page 5 of 21 DESCRIPTION OF THE PROJECT Certain information concerning the Project and the project development process is summarized below. Arrangements for the dissemination of additional information will be forwarded to all Prospective Bidders in due course. Preface The principal objective of the PISG’s policy for attracting strategic investors in the energy sector of Kosovo is to ensure that the energy sector development process be accelerated as quickly as is reasonably feasible. After taking all advice into account, the PISG has adopted as policy a fast track approach with respect to attracting private sector investment for the commercial development of its abundant lignite resources and, thereby, assure that the needs of the Kosovo energy sector will be met, including the rehabilitation of existing energy resources in the near-term. PISG has been the recipient of multiple, preliminary expressions of interest from major private investors and developers, all of whom have expressed more than just a passing interest in the Kosovo energy sector. PISG has concluded that its best strategy is to seek investors for the Project without delay, since significant investment in the energy sector is one of the very few instruments available that will enable Kosovo to realize its growth potential, to increase its economic output, to stimulate other private investment and, thus, to provide increased job opportunities for its citizens. PISG takes the view that such potential benefits – benefits moreover that some other Balkan and EU accession countries have sought to advance very quickly – should be advanced for Kosovo. PISG’s strategic policy, therefore, is to work as expeditiously as possible towards an early engagement with a private sector investor to develop the Project (the “Project Developer”) who will be selected through a properly designed, transparent and competitive process in compliance with EU standards and that involves World Bank Technical Assistance as part of the Lignite Power TA project. Project Components In accordance with the PISG’s energy policy for Kosovo, MEM, on behalf of the PSC, is soliciting through this Pre-Qualification Memorandum expressions of interest from qualified private investors in an energy development project (the “Project”) that encompasses the following components: a) Construction of a new power plant ‘Kosovo C’ (“PPC”) with an estimated installed capacity of up to 2100 MW and associated transmission capacity; b) The development of a new coal mine for existing generation units (Sibovc SW); c) The development of a new mine (the Sibovc mine) for PPC; and d) Rehabilitation of certain units of the existing power plant ‘Kosovo A’ (“PPA”).
Page 6 of 21 Construction of a new power plant The pre-feasibility study for a new power plant in Kosovo financed by the European Agency for Reconstruction (“EAR”) and done by the consulting agency Elektrowatt Ekono – Finland (titled “Pre-feasibility studies for the new lignite fired power plant and for pollution mitigation measures at Kosovo B power plant”) concluded in favor of the construction of new generating capacities in Kosovo to supply both local and regional energy markets. According to that study, the economic feasibility of new electric generation in Kosovo is very high because of low production costs utilizing Kosovo’s large, economically-accessible deposits of high quality lignite. The study recommends the construction of a power plant, “Kosovo C” (“PPC”), with a capacity of 1800-2100 MW, composed of multiple units of 300 to 600 MW capacity constructed in separate stages. Some 900-1000 MW would be constructed in the first phase, and would be functional by 2012-2014, with completion of the additional units foreseen to take place in the period 2018-2020. PPC would be expected to fulfill all EU mandated environmental requirements by using advanced and commercially proven technology, either PF or CFB coal burning processes to achieve efficiencies in excess of 40%. The location for PPC is based on the exploitation of lignite reserves in Sibovc field (830 mt net) which will ensure a forty year, lifetime supply of coal for the new power plant. The recommended construction site is close to KEK’s power plant “Kosovo B” where the existing infrastructure (land, network utilities, water supply, infrastructure transport, etc.) can also be used to support the new plant. The cost of construction of PPC is estimated to be €1.1 to1.3 bn in the first phase and about 10 % lower in the second phase. Based on a lignite purchase price of €7/t, the study estimates operating costs, excluding costs of capital, to be approximately €13.4–13.9/MWh. After the completion of PPC at an installed capacity of 2000 MW, gross revenues from the sale of energy are estimated to be approximately €600 million based on a sales price of 40€ /MWh and annual energy production of about 15 TWh.
Rehabilitation of Existing Generators In 2005 the EAR completed its study of power plant “Kosovo A” (“PPA”) titled “Feasibility Study for the rehabilitation of PP-A”. PISG adopted as its approved strategy the recommendations of the study as follows: •
Capital overhaul of A1 unit (65 MW/1962), with an estimated cost of €9.45 million. This rehabilitation will extend the life of this unit for 3-4 years, and ensure an annual production of 165 GWh/a;
•
Rehabilitation of A2 unit (125 MW/1964) is not discussed in the study, but left for future economic evaluation by others;
•
Capital overhaul of A3 unit (200 MW/1970), with an estimated cost of €24.4 million. This overhaul will extend the life of this unit for 3-4 years, and ensure an annual production of 605 GWh/a;
•
Capital overhaul of A4 unit (200 MW/1971), with an estimated cost of €60.3 million. This overhaul will extend the life of this unit for 11-12 years and ensure an annual production of 990 GWh/a; and
Page 7 of 21 •
Capital overhaul of A5 unit (210 MW/1975), with an estimated cost of €60.3 million. This overhaul will extend the life of this unit for 11-13 years and ensure an annual production of 1023 GWh/a;
PISG Strategy calls for the rehabilitation of unit A4 first, being put in operation mid 2008, and then unit A5, being put into operation during the third quarter of year 2009. Development of Sibovc South-West In the very near-term the units of PPA will be supplied with lignite from the existing Mirash/Bardh mine, and then increasingly, as production from this mine declines and the mine is finally depleted, from the planned, new KEK mine in South-West Sibovc. Production from the Mirash/Bardh mine is sufficient to cover power plant needs until year 2009 only. KEK needs approximately 150 million tons of lignite for the supply of all units of existing power plants until the end of their lifetime (based on completing the planned rehabilitation work). Starting from the year 2010, 3.4 million tons of coal are due to be produced from the new KEK mine in Sibovc South-West, which could take place in close proximity to the existing mine Bardh. For this purpose, EAR has conducted the mine study “Complementary Mine Plan for the Sibovc South West Mine” which concluded in April 2006. This study concludes that an investment of €237.5 million is needed for the development of new Sibovc South-West mine in the period 2006 - 2012. Development of New Mining Facilities PISG energy strategy identifies Sibovc 1 field as the future lignite resource that will be developed to supply all existing KEK power plants as well as the new power plant PPC. Sibovc has a surface area of 19.7 km2, geological reserves of lignite of 990 million tones, of which 830 million tones are exploitable. The pre-feasibility study on the construction of PPC (EAR, 2006) estimates that 648-756 2 million tons of coal will be needed for energy production during the lifetime of the new power plant. PISG strategy is to expand the planned Sibovc South-West Mine to provide all coal production for both the existing KEK units and the units of the new PPC until year 2025.After year 2025, this mine will supply the units of PPC only, anticipating the retirement of all existing KEK units by that date. Project Support and Management The United Nations Interim Administration Mission in Kosovo (“UNMIK”) and the International Development Association (“IDA”) are in the process of concluding an International Development Association Grant for the Lignite Power Technical Assistance Project (“LPTAP”), which will provide technical assistance and other support for the conduct of the transaction process leading to the selection of the Project Developer. The LPTAP implementation schedule was agreed and is reproduced on page 10 hereof. Qualified advisors will be hired to assist with the bidding and negotiation process for the development of the Project. An inter-ministerial steering committee (the Project Steering Committee or “PSC”) was established by Executive Decision No. 2006/6 of the SRSG dated 1 2
Northern Part of the Coal Basin “Kosovo” Sibovc Main Mine Plan EAR 2005
Page 8 of 21 17 March 2006, with appropriate representation to review and approve the transaction process and facilitate key policy decisions and their implementation. In particular, the LPTAP provides for the hiring of Transaction Advisors who will then be responsible for short-listing bidders, conducting the tendering process, and providing all required legal assistance prior to and during negotiations and financial closing. Each of these steps is subject to IDA’s prior review and issuance of no-objection. The Transaction Advisors also will prepare or provide:
a diagnostic survey of the legal issues likely to be raised by potential private investors;
a diagnostic survey of the legal issues associated with the management of the social, economic and environmental impacts of such transactions in a manner consistent with international best practices;
any new primary or secondary legislation, or legislative amendments, necessary to facilitate the realization and implementation of the Project and related transactions, and necessary to manage the social, economic and environmental impacts of the Project and such transactions, including the drafting of a SESA Instrument, related regulations and institutional arrangements, as well as the preparation of a Resettlement Policy Framework consistent with World Bank policies on involuntary resettlement;
any regulatory instruments, such as for mining and power plant generation licenses, necessary to facilitate the realization and implementation of the Project and related transactions, and to manage the social, economic and environmental impacts of that transaction; and
complete drafts of all contractual agreements required for the realization and implementation of the Project and related transactions and for the management of the social, economic and environmental impact thereof; and
other recommendations for strengthening Kosovo’s legal, regulatory and institutional frameworks for the purpose of increasing private investment.
Other Project-related components of the LPTAP provide for:
Investment Options Review An EAR-funded Investment Options Review study has examined various alternatives and recommend feasible investment packages on the basis of a market test. Based on the presentation of the Options Review recommendations at a workshop held in Pristina at the end of September 2006, UNMIK, PISG and the donors will agree on the investment package to be offered for bidding. Appropriate environmental and social safeguards, acceptable to IDA, will be adopted for the agreed investment package. The Terms of Reference for the Investment Options Review is available on the MEM website and the final Investment Options Review study will be posted shortly.
New Power Plant Development and Technical Analysis This study will be conducted for the purpose of: (i) complementing prior studies on mine and power plants and compiling adequate information and analyses to facilitate
Page 9 of 21 bidders’ timely and efficient due diligence, as well as to assist the Transaction Advisors prepare bidding documents, and (ii) developing a knowledge base for decision-makers in Kosovo to enable them to economically and efficiently solicit, evaluate and negotiate proposals for private development of the Sibovc lignite field, examination of the domestic and regional (Energy Community) electricity markets, potential off-take opportunities, the adequacy of the transmission system and identification of preferred unit and plant size options. .
Safeguards Framework Advisor This advisor will prepare a strategic environmental and social assessment specific to energy sector development, including the identification of environmental and social issues of projected developments in the power generation and related lignite mining sectors. For the purposes of the Transaction, the advisor will develop terms of reference for an environmental impact assessment, a social assessment, and a resettlement action plan to be followed by the Project Developer for specific mitigation and other measures as well as preparing an environmental baseline monitoring toolkit, the collection of field data and the compilation of environmental baseline data.
Project Steering Committee and Project Office support The LPTAP supports the Project Steering Committee (“PSC”), which has been established to manage the effective implementation of this project, to define project milestones and to review and approve the project documents and the work of the Project Office (“PO”). The PO is located within MEM and is responsible for the dayto-day implementation and administration of the LPTAP. The PO reports and is accountable to the PSC.
Page 10 of 21 LPTAP Implementation Schedule The LPTAP is expected to be implemented as follows:
Page 11 of 21 INVITATION TO REGISTER FOR DUE DILIGENCE Commencement of Due Diligence. Interested parties are hereby requested to register their interest with MEM. Persons who have registered their interest and who wish to undertake due diligence must pay a non-refundable Due Diligence Fee of Five Thousand Euros (€5,000) to MEM on behalf of the PSC. Persons who pay the Due Diligence Fee will become “Prospective Bidders”. Only Prospective Bidders or consortia formed by one or more Prospective Bidders shall be eligible to apply for certification as a Pre-qualified Bidder in accordance with the procedures and criteria set forth in this Memorandum. Due diligence will commence with the opening of the Data Room on December 1, 2006, and will be proceeded by the issuance of a Due Diligence Procedures Memorandum. Upon confirmation of receipt of the Due Diligence Fee by MEM, Prospective Bidders will receive a copy of the Due Diligence Procedures Memorandum and may schedule their due diligence activities in accordance with the procedures outlined therein. Investors’ Conference. An investors’ conference was held on October 10, 2006, that gave interested parties the opportunity to seek such clarifications and further information as they deemed necessary, and this amended Pre-Qualification Memorandum has resulted from the written comments received, having been duly considered and as approved/rejected by the Project Steering Committee on October 26, 2006. Information Memorandum. An Information Memorandum will be prepared by the Transaction Advisors and distributed in the first half of 2007 to Prospective Bidders. The Information Memorandum will set out, among other things, the proposed transaction structure, a description of Kosovo’s energy sector and the current situation, a detailed description of the Project, the relevant legal and regulatory framework, and any applicable regulations of ICMM and ERO, including rules for the operation of the electricity market. Pre-qualification of Bidders. The procedures and criteria for pre-qualification of Persons to participate in the bidding for the Project are set out in this Memorandum. Prospective Bidders wishing to pre-qualify for bidding must submit their application and supporting credentials for pre-qualification no later than November 30, 2006 to MEM at the address set forth in this Memorandum in the section titled “Additional Information and Questions.” It is expected that the list of Pre-qualified Bidders will be released in the first quarter 2007. Bidding Consortia A Prospective Bidder (either directly or together with one or more of such Prospective Bidder’s Affiliates) must meet all of the minimum criteria described below to qualify as a “Pre-qualified Bidder.” In the event that all such minimum criteria are not met by a Prospective Bidder (either directly or together with such Prospective Bidder’s Affiliates), such Prospective Bidder may form, with other Persons, a Bidding Consortium that fulfills all
Page 12 of 21 such minimum criteria; provided, however, that each Person who is a member of such a Bidding Consortium must, directly or together with such Person’s Affiliates, meet at least one of such minimum criteria. Each Bidding Consortium may, pursuant to the terms of the Bidding Rules, be required to register as a business organization in Kosovo. In the event that a Bidding Consortium is awarded the Project, the Persons participating in the Bidding Consortium will be required to maintain their initial ownership stake in the consortium for a minimum of ten (10) years from the date of the Project award. Bidding Rules. It is anticipated that Pre-qualified Bidders will receive copies of the relevant Bidding Rules in a timely manner so as to give them sufficient time to review the documents and provide comments prior to finalization of the issuance of the Tender in accordance with the law applicable in Kosovo. The Bidding Rules will set out, among other things: (i) the methodology for structuring offers; (ii) the timing for submission; (iii) the procedures for opening and verification of the offers; (iv) the required guarantees; and (v) the methodology for selecting the winner of the Tender who will become the Project Developer. Due Diligence Fee. Upon payment of the Due Diligence Fee and confirmation of receipt by MEM, Prospective Bidders may schedule visits to the Data Room (including access to the electronic data room via the internet) and arrange site visits and meetings with senior management, according to the procedures set out in Due Diligence Procedures Memorandum. Transfers for the Due Diligence Fee should be made payable to the Ministry of Economy and Finance of Kosovo, which will accept the payment on behalf of MEM, and sent to MEM at the address indicated in this Memorandum in the section titled “Additional Information and Questions.”.
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PRE-QUALIFICATION PROCEDURES AND CRITERIA FOR BIDDING Prospective Bidders 3 , including Bidding Consortia meeting the requirements set forth above, will be required to satisfy certain specific operational and financial criteria in order to qualify to participate in the Tender for the Project. A Prospective Bidder who satisfies these criteria will be designated as a “Pre-qualified Bidder.” Only Prospective Bidders who have paid the Due Diligence Fee are eligible to be designated as pre-qualified. The main element of the Project is a true “green field” development and is also the first such private sector project of its kind in Kosovo. Thus, any Prospective Bidder who desires to become a Pre-Qualified Bidder must have direct experience with the development of such large scale energy projects as well as demonstrated expertise in operating electric power plants in an international setting. Also, the Project is estimated to cost approximately €2bn and may require debt of approximately €1.4bn to be raised. It is therefore necessary that any Person who desires to become a “Pre Qualified Bidder” demonstrate either direct experience raising such debt or internal balance sheet resources sufficient to self finance such an amount. Finally, the Project also requires the development of a major, new lignite mine and, therefore, any potential “Pre Qualified Bidder” must show direct experience in operating such mines. Therefore, a Prospective Bidder (either directly or together with one or more of such Prospective Bidder’s Affiliates) must meet the following minimum criteria to qualify as a “Pre-qualified Bidder”: 1. Has developed green field, coal or lignite fired electric generation projects, which are now either in construction or operation, totaling more than 2,500 MW; 2. Has raised more than € 2 billion of limited recourse project debt or through long term corporate financing as of November 30, 2006 in the energy and/or mining sector; or has a minimum of € 2 billion in free cash reserves, as stated in the year-end 2005 audited financial statements. 3. Has developed and is operating, as of November 30, 2006, mines producing more that 20 million tons per year of coal or lignite; and 4. Has control of or operates one or more generation companies and/or concessions with an aggregate capacity of at least 10,000MW as of November 30, 2006. In the event that all such minimum criteria are not met by a Prospective Bidder (either directly or together with such Prospective Bidder’s Affiliates), such Prospective Bidder may form, with other Persons, a Bidding Consortium that fulfills all such minimum criteria; provided, however, that each Person who is a member of such a Bidding Consortium must, directly or together with such Person’s Affiliates, meet at least one of such minimum criteria. Prospective Bidders must submit their credentials, in accordance with Annex A, “Application for Pre-qualification for Bidding,” as evidence of compliance with the pre-qualification criteria. 3
Requirements applicable to a Prospective Bidder in this section shall also apply to any Bidding Consortium established by a Prospective Bidder in accordance with the terms of this Memorandum.
Page 14 of 21 Compliance with the financial requirement specified above shall be demonstrated by submitting the most recent audited financial statements of the Prospective Bidder or the members of a Bidding Consortium, prepared in accordance with International Accounting Standards and audited to international standards of auditing by a recognized firm of auditors and containing the report of such auditors. A copy of the latest annual report of the applicant may be submitted, provided the financial statements contained therein have been audited as mentioned above and a copy of the auditor’s report is also contained therein. The financial statements shall be presented in the applicant’s local currency and (if different) converted by the applicant to Euro at the exchange rate effective on the closing day of such fiscal year. The converted statements need not have an additional audit opinion. If the 2005 audited financial statements are not available, then such Person could comply with the criteria by submitting the 2004 audited financial statements, accompanied by the non-audited financial statements for 2005, certified by the chief financial officer. If the closing date for the 2005 fiscal year is other than December 31, 2005, then the Person should submit interim financial statements as of December 31, 2005, certified by the chief financial officer. PSC will review the credentials submitted and reserves the right to request additional information if necessary to confirm compliance with the criteria established by PSC. MEM expects to announce Pre-qualified Bidders for the Project by no later than the end of the first quarter of 2007. The timetable for Pre-qualification is as follows: •
Prospective Bidders must submit their credentials for pre-qualification by November 30, 2006;
•
Announcement of Pre-qualified Bidders no later than in the first quarter of 2007.
All Prospective Bidders must appoint a single representative and an alternate prior to submission of the Application for Pre-qualification for Bidding, indicating an address and telephone and fax numbers, to receive notices and other communication in connection with the application. Such representatives may be changed by the Prospective Bidder by written notice to MEM.
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ADDITIONAL INFORMATION AND QUESTIONS Questions regarding this Memorandum or any aspect of the Project process should be directed in writing to: The Ministry of Energy and Mining – LPTAP Project Office 10000 Pristina – Kosovo Sejdi Kryeziu N. 5 Lagja Pejton Tel: +381-38-200-213-34 Fax: +381-38-200-213-02 Email: Ilir.G.Rama@ks-gov.net www. ks-gov.net/mem Payments of the non-refundable LPTAP Due Diligence Fee should be made by wire transfer to: Bank Address: Commerzbank AG Abeilung fur Firmenkunden D-60261 Frankfurt am Main Account Name Account Number German Bank Code Swift Code IBAN BIC
: : : : : :
Central Fiscal Authority 400 581 20 94 00 500 400 00 COBA DE FF XXX IBAN DE38 5004 0000 0581 2094 00 COBADEFFXXX
Please reference “LPTAP Due Diligence Fee” when depositing funds.
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GLOSSARY The following terms will have the meaning indicated, unless otherwise noted: “Affiliate” shall mean with respect to any Person, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. “Bidding Consortium” shall mean a consortium established by a Prospective Bidder, or an affiliate of a Prospective Bidder, for the purpose of participating, with or without third persons, in the Tender in accordance with the Bidding Rules. “Bidding Rules” shall mean the rules established by the PSC in consultation with the Transaction Advisors for the bidding in connection with the Project, including all annexes and circulars that modify or complement such rules from time to time. “Control” is established where a Person directly or indirectly holds a majority of the subscribed capital of another Person, controls a majority of the votes attaching to shares issued by another Person, or can appoint more than half of another Person’s administrative, management or supervisory body. “Data Room” shall mean the room or rooms located at a physical site in Kosovo to be specified, and the associated internet web site containing information pertaining to the Project. “Data Room Administrator” shall mean the individual designated by MEM to manage the Data Room. “Euros” or “€” shall mean the single currency of the European Economic and Monetary Union (“EMU”). “Due Diligence Fee” shall mean the sum of Five Thousand Euros (€ 5,000), which interested parties are invited to pay in order to become “Prospective Bidders.” “Kosovo” shall mean the UN administered territory of Kosovo. “Information Memorandum” shall mean the document prepared by MEM containing certain information on the Project. “MEM” shall mean the Ministry of Energy and Mining located at 10000 Pristina – Kosovo Str. Sejdi Kryeziu no. 5, Lagja Pejton. “Memorandum” shall mean this Pre-Qualification Memorandum dated August 15, 2006, as amended on October 26, 2006. “Person” shall mean any physical person or undertaking, including a partnership, legal person, company, association, joint venture, trust, or other entity or organization (including, without limitation, any limited liability entity). “PISG” shall mean the Provisional Institutions of Self Government of Kosovo.
Page 17 of 21 “Pre-qualified Bidders” shall mean those Prospective Bidders or Bidding Consortia who have been pre-qualified in accordance with the criteria established in this Memorandum. “Project” shall mean the project described in this document consisting of (a) the development of a new lignite mining facility; (b) the development of associated new electric generating capacity; and (c) the near-term rehabilitation of certain existing generators of KEK and support for related lignite mining resources needed to supply such generators. “Project Developer” shall mean the private sector investor who submits the winning bid in response to the Tender, as determined by the PSC. “Prospective Bidder” shall mean a Person who has registered its interest with MEM in the Project and has paid its Due Diligence Fee in accordance with this Memorandum. “Tender” shall mean the formal request for proposals to execute the Project issued to Prequalified Bidders by MEM. “Transaction Advisors” shall mean the LPTAP consultants responsible for short-listing of bidders, tendering, and all required legal assistance prior to and during negotiations and financial closing of the Project.
Page 18 of 21 ANNEX A - APPLICATION FOR PRE-QUALIFICATION FOR BIDDING Re:
Pre-qualification for Bidding
Ministry of Energy and Mining – LPTAP Project Office 10000 Pristina – Kosovo Str. Sejdi Kryeziu no. 5 Lagja Pejton Pursuant to the Pre-qualification Memorandum dated October 26, 2006, and the procedures and criteria for bidding included therein, [Name of applicant] (“Applicant”) hereby submits its Application for Pre-qualification for Bidding and requests to be considered for pre-qualification. All capitalized terms used in this Application are defined in the glossary of the Pre-Qualification Memorandum, unless otherwise indicated. Applicant hereby applies to become pre-qualified in the Tender for the Project. Applicant hereby confirms that it: (a)
agrees to comply with the pre-qualification criteria and all other rules, laws and regulations governing the Tender;
(b)
acknowledges that the PSC reserves the right to declare the Tender void or otherwise without effect for any reason or no reason or to reopen the pre-qualification or the Tender or to accept or reject any application for pre-qualification at any time, and that such action will not entitle any Applicant to any claim whatsoever against the PISG, the MEM, KEK or any of their respective agents, representatives, advisors or consultants;
(c)
accepts the right of the PSC to: (i) request additional information from Applicants; and (ii) clarify, extend or amend the schedule of the pre-qualification and the Tender;
(d)
accepts the exclusive application of the law applicable in Kosovo with respect to these pre-qualification rules and the Tender; and
(e)
accepts that each Applicant will be required to perform its own investigation and analysis to the extent it deems necessary with respect to the Project, including, without limitation, financial, technical, tax and legal aspects. Applicant hereby represents and warrants that as of the date of this letter:
(a)
all of the information submitted or to be submitted by the Applicant is accurate in all respects;
(b)
it has not been subject to any voluntary or involuntary bankruptcy or insolvency or similar proceeding during the last five years; and
(c)
it has paid all taxes due, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been established
Page 19 of 21 Attached herewith to this application for pre-qualification are the following documents, as appropriate: (a)
the properly completed Experience Declaration Forms as set forth in Annex B to the Pre-Qualification Memorandum;
(b)
copies of the current bylaws and articles of incorporation or articles of association of the Applicant or other equivalent constitutional documents;
(c)
the audited financial statements and other supporting documents of the Applicant as required by the pre-qualification rules; and
(d) the document or documents (such as powers of attorney or corporate minutes) evidencing the authority of the officer or director who shall execute this letter of application, and the Experience Declaration Forms.. As required by the pre-qualification rules, Applicant hereby designates________________ ___________ as its representative and _______________________ as its alternate to receive notices in respect of the pre-qualification and the Tender at the following address, telephone and facsimile numbers: [Representative’s and alternate’s address, telephone and facsimile numbers.] Very truly yours, [Name of Applicant] By: __________________________________ Name: __________________________________ Title: __________________________________
Date: _________________________
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ANNEX B - EXPERIENCE DECLARATION FORM THE APPLICANT [Insert Name] Applicant is/are local / international investors or a consortium of investors with a proven track record in ownership, financial capability and technical competence to construct, own and manage the lignite open cast mining operations and coal preparation facilities and associated power plant. Accordingly, the Applicant submits the attached documentation as verifiable evidence of its Technical, Managerial and Financial capability. The pre-qualification criteria that the Applicant meets and for which Applicant has supplied evidence herewith includes but is not limited to the following: 1. Has developed green field, coal or lignite fired electric generation projects, which are now either in construction or operation, totaling more than 2,500 MW; 2. Has raised more than € 2 billion of limited recourse project debt or through long term corporate financing as of November 30, 2006 in the energy and/or mining sector; or has a minimum of € 2 billion in free cash reserves, as stated in the year-end 2005 audited financial statements. 3. Has developed and is operating, as of November 30, 2006, mines producing more that 20 million tons per year of coal or lignite; and 4. Has control of or operates one or more generation companies and/or concessions with an aggregate capacity of at least 10,000MW as of November 30, 2006. To meet the objectives set by the Kosovo Government for the development of its lignite resources, the Applicant also attests that it has, at a minimum: -
The capability and commitment to develop/rehabilitate lignite based power generation, in view of Kosovo’s short to medium term supply gap in the power sector;
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The capability and commitment to develop the new open cast lignite mine with minimum production of 9,000,000 tons annually to fuel the exiting lignite fired power plants;
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The demonstrated commitment to increased exploration to significantly increase the level of lignite resource that can be classified as proven;
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The ability to promote the development of a local skills base in coal exploration and mining; and
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The commitment to comply with Kosovo’s legal framework and with international mining best practice.
METHOD OF APPLICATION The Applicant has supplied the following documentation and information:
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Full name of company and contact person, postal address, telephone / fax numbers and e-mail address.
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Ownership structure of the company; - Name(s) of major shareholders, and - Percentage shareholdings.
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Audited financial statements and such other documentation of a financial nature as specified in the minimum criteria.
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Technical and operational capabilities per the above criteria
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Composition and profile of management team showing qualification and years of relevant experience.
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Evidence of ample financial resources per the above criteria
Very truly yours, [Name of Applicant] By: __________________________________ Name: __________________________________ Title: __________________________________
Date: _________________________