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Guarantee of the state of Maharashtra

Information compiled by Enron Action group

This Guarantee is made at Bombay on 10th day of February 1994, by The Governor of Maharashtra on behalf of the state of Maharashtra (hereinafter referred to as the "Guarantor").

In consideration of the Dabhol Power Company, a company organized and existing under the laws of India (the "company"), undertaking to develop, procure finance for, construct, own, operate, and maintain an electric power generating facility of 2015 MW capacity (approximately) at Dabhol in the State of Maharashtra, India (hereinafter referred to as the "Project") and to make sales of capacity and net electrical output from the Project to Maharashtra State Electricity Board (hereinafter referred to as "MSEB") under a Power Purchase Agreement (hereinafter referred to as the "PPA") dated as of 8th December 1993 and made between the Company (1) and MSEB (2), and in order to induce financial institutions to finance the Project, the Guarantor hereby convenants and agrees as follows:

1. Government of Maharashtra guarantee:

• a) Guarantee of MSEB Payment Obligations : The Guarantor hereby irrevocably and unconditionally Guarantee to the Company (as a secondary obligor) to pay to the Company, within 7 calendar days following submission by the Company of a demand in accordance with Clause 1 (B), any and every sum of money which MSEB is liable to pay to the Company under or pursuant to the PPA and shall fail to pay in accordance with the terms of the PPA.
• b) Conditions relating to demand : The Company shall be entitled to make a demand for payment upon the Guarantor pursuant to this Guarantee if MSEB has failed to pay, within 7 days of the due date for payment thereof, any sum of money which it is liable to pay to the Company under or pursuant to the PPA.

2. Payments: All payments made by the Guarantor hereunder shall be made without set off or counterclaim and without any deduction or withholding for any reason except as required by law. If, in compliance with the laws of India, and deduction or withholding on account of any tax, impost or levy of whatever nature and by whomsoever imposed is required to be made from any sum paid or payable by the Guarantor to the Company, the Guarantor shall pay any such amount as shall be necessary to ensure that the Company receives on the due date and retains a net sum equal to what it would have received and so retained had no deduction or withholding been required or made.

3. Other provisions of the guarantee:

• a) Waiver: No obligation of the Guarantor hereunder shall be in any way discharged or impaired by reason of any time or other indulgence granted by the Company to MSEB, by any variation of the PPA or by any other act or thing (except the fulfillment by MSEB of the obligations Guaranteed hereunder or thereunder) whereby, but for the provisions of this Clause 3(A), the Guarantor's obligation would be discharged.
• b) Continuing Guarantee : This Guarantee shall be a continuing security and accordingly:

• 1) it shall extend to cover the balance due at any time from MSEB to the Company under the PPA; and
• 2) it shall not be discharged by an intermediate discharge or repayment by or for the account of MSEB or any settlement of accounts between MSEB and the company.

• c) Additional Security : This Guarantee shall be in addition to, and not in substitution for, or derogation of, any other security which the Company may at any time hold in respect of the obligations of MSEB under the PPA.
• d) Immediate Recourse : Subject to Clause 1 (B), the Company shall not be obliged before taking steps to enforce this Guarantee to :

• 1) take action or obtain judgment against MSEB in any court; or
• 2) make or file any claim in bankruptcy of MSEB; or
• 3) exercise diligence against MSEB; or
• 4) exercise any legal remedies which may be available to it under or in respect of the PPA.

• e) Indemnity : The Guarantor undertakes, as primary obligor, to indemnify and keep indemnified the Company against any loss sustained or incurred by the Company by reason of the invalidity, illegality or unenforceability or any of this Guarantee or the provisions of this Guarantee or the PPA and the amount of such loss shall be the amount which, but for such invalidity, illegality or unenforceability, the Company would otherwise have been entitled to recover hereunder or thereunder.

4. Guarantor's representations and warranties: The Guarantor hereby represents, warrants and undertakes to the Company as follows:

• a) Power and Authority : The Guarantor has full power authority and legal right to incur the obligations provided for in this Guarantee, to execute and deliver this Guarantee and to perform and observe the terms and provisions hereof.
• b) legal validity : This Guarantee constitutes legal, valid, binding and enforceable obligations of the Guarantor in accordance with its terms.
• c) Approval : All necessary action has been taken under the laws of India to authorise the execution, delivery and performance of this Guarantee.
• d) Direct Obligations : All of the obligation and the covenants of the Guarantor contained herein constitute unconditional direct obligations of the Guarantor.

5. Notices: All notices, demands or other communications required to be given shall in writing in English language and shall be addressed to the Guarantor or the Company as the case may be, at the following address (or to any other address as provided by either party to the other in writing) :

Guarantor: Secretary of Finance, Government of Maharashtra, Bombay, India.

Company: Dabhol Power Company; "Nirmal" - 17th Floor, Nariman Point, Bombay, India.

6. Miscellaneous provisions:

• a) Waiver, remedies cumulative : No failure on the part of the Company to exercise, and no delay on the part of the Company in exercising, any right or remedy hereunder shall operate as a waiver thereof. No single or partial exercise of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver by the Company shall be effective unless it is in writing. The rights and remedies of the Company herein provided are cumulative and not exclusive of any rights or remedies provided by law.
• b) Assignment by the Company : The Company shall not assign or transfer all or any part of its rights or obligations hereunder without the prior written consent of the Guarantor in its sole discretion exercised reasonably.
• c) Governing Law: The rights and obligations of the parties under or pursuant to this Guarantee shall be governed by and construed according to English Law.
• d) Arbitration: Reference to arbitration:

• 1) Any dispute or difference arising out of or in connection with this Guarantee shall (regardless of the nature of this dispute or difference) be referred to arbitration under a specified system of international arbitration rules to be agreed (the Rules) by one or more arbitrators appointed in accordance with the Rules.
• 2) As from the date on which no amount is owed for capable of being owed to the Lenders under the relevant Financing Agreements, then the dispute shall be finally settled by arbitration under the Arbitration Acts of India.
• 3) Arbitration proceedings pursuant to paragraph (1) shall be held in Singapore. Arbitration proceedings conducted pursuant to paragraph (2) shall be held in New Delhi, India.
• 4) No arbitrator appointed pursuant to this clause 6(D) shall be a national of India or of the United States.
• 5) The language of any arbitration under this Clause 6(D) shall be English.

• e) Sovereign immunity : The Guarantor unconditionally and irrevocable:

• 1) agrees that the execution, delivery and performance by it of this Guarantee constitute private and commercial act rather than public or governmental acts;
• 2) agrees that, should any proceedings be brought against it or its assets in any jurisdiction in relation to this Guarantee or any transaction contemplated by this Guarantee, no immunity from such proceedings shall, to the extent that it would otherwise be entitled to do so under the laws of India, be claimed by or on behalf of itself or with respect to its assets:
• 3) waives any right of immunity which it or any of its assets now has or may acquire in the future in any jurisdiction; and
• 4) consents generally in respect of the enforcement of any judgment against it in any such proceedings in any jurisdiction to the giving of any relief or the issue of any process in connection with such proceedings (including, without limitation, the making, enforcement or execution against or in respect of any property whatsoever irrespective of its use or intended use).

As witness whereof, this Guarantee has been executed the day and year first before written.

Signed, sealed and delivered:

by U. K. Mukhopadhyaya, Secretary, Energy (Name & Designation) for and on behalf of the Government of Maharashtra in the presence of: 1) D G Ratnaparkhe, joint secretary, energy; 2) P B Patil , under-secretary, energy

Accepted and Agreed

By Joseph Sutton, director. (Name & Designation)

being the authorised officer for and on behalf of the Dabhol Power Company.

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