OFFICIAL OAN NUMBER 2079 IND

Loan Agreement

(Bukit Asam Coal Mining Developmentand Transportation Project)

between

REPUBLIC OF INDONESIA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

Dated January Q , 1982

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LOAN NUMBER 2079 IND

LOAN AGREEMENT

AGREEMENT, dated January , 1982, between REPUBLIC OFINDONESIA (hereinafter called the Borrower) and INTERNATIONAL BANKFOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank).

(A) WHEREAS the Borrower has requested the Bank to assistin the financing of the Project described in Schedule 2 to thisAgreement by making the Loan as hereinafter provided;

(B) WHEREAS to assist in financing the Project the Borrowerhas requested (i) from the Federal Republic of Germany throughKreditanstalt fur Wiederaufbau a loan (hereinafter called the KfWLoan); (ii) from Canadian International Development Associationa loan (hereinafter called the CIDA Loan); (iii) from ExportDevelopment Corporation, Canada a loan (hereinafter called the EDCLoan); and (iv) external loans from other sources;

(C) WHEREAS the Project will be carried out by POKKORLAK,PTBA, PJKA and PANN (as hereinafter defined) with the Borrower'sassistance and, as part of such assistance, the Borrower will makeavailable to POKKORLAK, PTBA, PJKA and PANN the proceeds of theLoan as hereinafter provided;

(D) WHEREAS the Bank has agreed, on the basis, inter alia,of the foregoing, to make the Loan available to the Borrower uponthe terms and conditions set forth hereinafter and in ProjectAgreements of even date herewith between the Bank and PTBA, PJKAand PANN;

(E) WHEREAS by a Loan.Agreement dated May 19, 1978 (here-inafter called the S-9 Loan Agreement) between the Borrower andthe Bank, the Bank granted to the Borrower a loan (hereinaftercalled the S-9 Loan) in various currencies equivalent to tenmillion dollars ($10,000,000) to assist in financing technicaland economic feasibility studies for the Bukit Asam coal mine;and

(F) WHEREAS the Bank will refund the S-9 Loan out of theproceeds of the Loan provided for herein;

NOW THEREFORE the parties hereto hereby agree as follows:

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ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all theprovisions of the General Conditions Applicable to Loan andGuarantee Agreements of the Bank, dated October 27, 1980, with thesame force and effect as if they were fully set forth herein (saidGeneral Conditions Applicable to Loan and Guarantee Agreements ofthe Bank being hereinafter called the General Conditions).

Section 1.02. Wherever used in this Agreement, unless thecontext otherwise requires, the several terms defined in theGeneral Conditions and in the Preamble to this Agreement havethe respective meanings therein set forth and the followingadditional terms have the following meanings:

(a) "ESS" means Eksplotasi Sumatera Selatan the southernSumatra operational unit of PJKA;

(b) "PJKA" means Perusahaan Jawatan Kereta Api, theBorrower's state railway established and operating under the lawsof the Borrower;

(c) "PJKA Project Agreement" means the agreement between theBank and PJKA of even date herewith as the same may be amendedfrom time to time, and such term includes all schedules to suchProject Agreement and all agreements supplemental to such ProjectAgreement;

(d) "PLN" means Perusahaan Umum Listrik Negara the stateelectric power company;

(e) "POKKORLAK" means Kelompok Koordinasi Pelaksana ProyekPengembangan Pertambangan Dan Pengangkutan Batubara Bukit Asam,the Borrower's coordination organization for implementation of theProject;

(f) "PTBA" means P.T. (Persero) Tambang Batubara Bukit Asam,established by Goverment Regulation No. 42 of 1980 the enterprisemanaging the Project coal concession (Bukit Asam) and relatedfacilities;

(g) "PTBA Project Agreement" means the agreement between theBank and PTBA of even date herewith as the same may be amended

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from time to time, and such term includes all schedules to suchProject Agreement and all agreements supplemental to such ProjectAgreement;

(h) "PTBA Subsidiary Loan Agreement" means the agreementto be entered into between the Borrower and PTBA pursuant toSection 3.01 (b) of this Agreement, as the same may be amendedfrom time to time, and such term includes all schedules to suchSubsidiary Loan Agreement;

(i) "PANN" means P.T. (Persero) Pengembangan Armada NiagaNasional, established by Government Regulation No. 18 of 1974, thenational fleet development corporation;

(j) "PANN Project Agreement" means the agreement betweenthe Bank and PANN of even date herewith as the same may beamended from time to time, and such term includes all schedules tosuch Project Agreement and all agreements supplemental to suchProject Agreement;

(k) "PANN Subsidiary Loan Agreement" means the agreementto be entered into between the Borrower and PANN pursuant toSection 3.01 (b) of this Agreement as the same may be amended fromtime to time, and such term includes all schedules to suchSubsidiary Loan Agreement;

(1) "Project Agreement" means any of the PTBA ProjectAgreement, the PJKA Project Agreement and the PANN ProjectAgreement;

(m) "PANN Charter" means the articles of incorporation ofPANN authenticated by notarial deed of May 16, 1974, as amendedfrom time to time;

(n) "PANN Policy Statement" means PANN's Policy StatementMemorandum approved by PANN's Dewan Komisaris on April 12, 1976,as amended from time to time;

(0) "PTBA Charter" means the articles of incorporation ofPTBA authenticated by notarial deed of March 2, 1981, asamended from time to time; and

(p) "Completion Date" means, except as the Bank shallotherwise agree, the completion date of the Project which shall bethe date as of which the Bank is satisfied with evidence provided

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the Borrower that all of the following conditions have been met:(i) physical construction of all of the facilities included in theProject has been completed; (ii) for a continuous period of twelvemonths, the mine included in the Project has produced at least2.4 million tons per year of coal meeting the specifications setforth in the coal sales agreement, and the transport systemincluded in the Project has carried at least 2.0 million tonsper year; and (iii) PTBA has a long-term debt:equity ratio of atleast 60:40.

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrower, onthe terms and conditions in the Loan Agreement set forth orreferred to, an amount in various currencies equivalent toone hundred eighty-five million dollars ($185,000,000).

Section 2.02. (a) The amount of the Loan may be withdrawnfrom the Loan Account in accordance with the provisions ofSchedule 1 to this Agreement, as such Schedule may be amended fromtime to time by agreement between the Borrower and the Bank, forexpenditures made (or, if the Bank shall so agree, to be made) inrespect of the reasonable cost of goods and services required forthe Project and to be financed out of the proceeds of the Loan.

(b) Promptly after the Effective Date, the Bank shall onbehalf of the Borrower, withdraw from the Loan Account and payto itself the amount required to pay the principal amount of theS-9 Loan then withdrawn and outstanding and to pay all unpaidinterest and other charges thereon.

Section 2.03. Except as the Bank shall otherwise agree:

(a) with respect to Parts A through G of the Project procure-ment of the goods to be financed out of the proceeds of the Loanshall be governed by the provisions of the Schedule to the PTBAProject Agreement; and

(b) with respect to Part H of the Project procurement ofthe goods to be financed out of the proceeds of the Loan shallbe governed by the provisions of Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be September 30, 1987or such later date as the Bank shall establish. The Bank shallpromptly notify the Borrower of such later date.

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Section 2.05. The Borrower shall pay to the Bank a commit-ment charge at the rate of three-fourths of one per cent (3/4 of1%) per annum on the principal amount of the Loan not withdrawnfrom time to time.

Section 2.06. The Borrower shall pay interest at the rateof eleven and three-fifths per cent (11-3/5%) per annum on theprincipal amount of the Loan withdrawn and outstanding from timeto time.

Section 2.07. Interest and other charges shall be payablesemiannually on June 1 and December 1 in each year.

Section 2.08. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule setforth in Schedule 3 to this Agreement.

ARTICLE III

Execution of the Project

Section 3.01. (a) (i) The Borrower shall carry out Part H ofthe Project with due diligence and efficiency and in conformitywith appropriate administrative, engineering and financial prac-tices, and shall provide, promptly as needed, the funds, facili-ties, sevices and other resources required for the purpose; and(ii) without any limitation or restriction upon any of its otherobligations under the Loan Agreement, the Borrower shall causePTBA, PJKA and PANN to perform in accordance with the provisionsof the respective Project Agreements all the obligations thereinset forth, shall take or cause to be taken all action, includingthe provision of funds, facilities, services and other resources,necessary or appropriate to enable PTBA, PJKA and PANN to performsuch obligations, and shall not take or permit to be taken anyaction which would prevent or interfere with such performance. Tothis end, the Borrower shall ensure that sufficient funds to coverthe expenditures required for the Project shall be made availableto PTBA, PJKA, PANN and POKKORLAK in a timely manner.

(b) The Borrower shall make the proceeds of the Loan avail-able to PTBA and PANN under Subsidiary Loan Agreements to beentered into between the Borrower and PTBA and PANN, respectively,under terms and conditions which are satisfactory to the Bank.

(c) The Borrower shall exercise its rights under eachSubsidiary Loan Agreement in such manner as to protect theinterests of the Borrower and the Bank and to accomplish the

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purposes of the Loan, and except as the Bank shall otherwise

agree, the Borrower shall not assign, nor amend, abrogate or

waive any Subsidiary Loan Agreement or any provision thereof.

(d) The Borrower shall make the proceeds of the Loan avail-able to PJKA and to POKKORLAK in accordance with its budgetary

procedures, and shall ensure that POKKORLAK has the necessary

facilities, services and staff to carry out its role under the

Project. 0

Section 3.02. The Borrower shall cause the terms and condi-tions of the sale and delivery of the coal from the Bukit Asam

Mine to the Suralaya Power Plant and the mine mouth power plant

to be contained in a contract, satisfactory to the Bank, betweenPTBA and PLN. Such contract shall include, inter alia, the

following provisions: the cost of steam coal delivered to Suralaya

will be set at a price which will cover all production costs in-cluding overhead and administration costs, handling costs, land

and sea transportion costs and insurance and produce an annualreturn to PTBA on revalued net assets acquired for the Projectof not less than thirteen per cent (13%), subject to the con-

dition that such price would not be (1) higher than the long-term

contract price for steam coal in the world market adjusted for

coal quality and accounting for transportation and handling costs

to Suralaya, or (2) lower than 80% of such contract price.

Section 3.03. The Borrower shall carry out its plan to ensure

a firm and steady interim power supply for mining operations.

Section 3.04. The Borrower shall take or cause to be taken

all such action as shall be necessary to acquire as and whenneeded all such land and rights in respect of land as shall be

required for carrying out the Project and shall inform the Bank,

in a timely manner, that such land and rights in respect of land

are available for purposes related to the Project.

Section 3.05. In order to assist the Borrower in carrying out

Part H of the Project, the Borrower shall employ consultants

whose selection, qualifications, experience and terms and

conditions of employment shall be satisfactory to the Bank in

accordance with principles and procedures described in the

"Guidelines for the Use of Consultants by World Bank Borrowers

and by the World Bank as Executing Agency" published by the Bank

in August 1981.

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Section 3.06. (a) The Borrower undertakes to insure, or make

adequate provision for the insurance of, the imported goods to be

financed out of the proceeds of the Loan for its respective Part

of the Project against hazards incident to the acquisition, trans-

portation and delivery thereof to the place of use or installation,

and for such insurance any indemnity shall be payable in a currency

freely usable by the Borrower to replace or repair such goods.

(b) Except as the Bank may otherwise agree, the Borrower

shall cause all goods and services financed out of the proceeds

of the Loan for its respective Part of the Project to be used

exclusively for the purposes of the Project.

Section 3.07. (a) The Borrower shall furnish to the Bank,

upon their preparation, the plans, specifications, reports,

contract documents and construction and procurement schedules

for its respective part of the Project, and any material

modifications thereof or additions thereto, in such detail as

the Bank shall reasonably request.

(b) The Borrower: (i) shall maintain records and procedures

adequate to record and monitor the progress of its respective

Part of the Project (including its cost and the benefits to be

derived from it), to identify the goods and services financed

out of the proceeds of the Loan, and to disclose their use in

the Project; (ii) shall enable the Bank's representatives to

visit the facilities and construction sites included in its

respective Part of the Project and to examine the goods financed

out of the proceeds of the Loan and any relevant records and

documents; and (iii) shall furnish to the Bank at regular inter-

vals all such information as the Bank shall reasonably request

concerning its respective Part of the Project, its cost and, where

appropriate, the benefits to be derived from it, the expenditure

of the proceeds of the Loan and the goods and services financed

out of such proceeds.

(c) Upon the award by the Borrower of any contract for

goods or services to be financed out of the proceeds of the

Loan, the Bank may publish a description thereof, the name

and nationality of the party to whom the contract was awarded

and the contract price.

(d) Promptly after completion of the Project, but in any

event not later than six months after the Closing Date or such

later date as may be agreed for this purpose between the Borrower

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and the Bank, the Borrower shall prepare and furnish to the Banka report, of such scope and in such detail as the Bank shallreasonably request, on the execution and initial operation ofits respective Part of the Project, its cost and the benefitsderived and to be derived from it, the performance by theBorrower and the Bank of their respective obligations underthe Loan Agreement and the accomplishment of the purposes ofthe Loan.

Section 3.08. The Borrower shall maintain or cause to bemaintained records adequate to reflect in accordance with con-sistently maintained sound accounting practices the operations,resources and expenditures, in respect of its respective Partof the Project, of the departments or agencies of the Borrowerresponsible for carrying out the Project or any part thereof.

ARTICLE IV

Other Covenants

Section 4.01. (a) It is the policy of the Bank, in makingloans to, or with the guarantee of, its members not to seek, innormal circumstances, special security from the member concernedbut to ensure that no other external debt shall have priorityover its loans in the allocation, realization or distribution offoreign exchange held under the control or for the benefit ofsuch member. To that end, if any lien shall be created on anypublic assets (as hereinafter defined), as security for anyexternal debt, which will or might result in a priority for thebenefit of the creditor of such external debt in the allocation,realization or distribution of foreign exchange, such lien shall,unless the Bank shall otherwise agree, ipso facto and at no costto the Bank, equally and ratably secure the principal of, andinterest and other charges on, the 'Loan, and the Borrower, increating or permitting the creation of such lien, shall make

express provision to that effect; provided, however, that, if forany constitutional or other legal reason such provision cannot bemade with respect to any lien created on assets of any of its

administrative subdivisions, the Borrower shall promptly and at nocost to the Bank secure the principal of, and interest and other

charges on, the Loan by an equivalent lien on other public assetssatisfactory to the Bank.

(b) The foregoing undertaking shall not apply to: (i) anylien created on property, at the time of purchase thereof, solelyas security for payment of the purchase price of such property;

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and (ii) any lien arising in the ordinary course of bankingtransactions and securing a debt maturing not more than one yearafter its date.

(c) As used in this Section, the term "public assets" meansassets of the Borrower, of any administrative subdivision thereofand of any entity owned or controlled by, or operating for theaccount or benefit of, the Borrower or any such subdivision,including gold and foreign exchange assets held by any institutionperforming the functions of a central bank or exchange stabiliza-tion fund, or similar functions, for the Borrower.

ARTICLE V

Remedies of the Bank

Section 5.01. For the purposes of Section 6.02 of theGeneral Conditions, the following additional events are specifiedpursuant to paragraph (k) thereof:

(a) PTBA, PJKA or PANN shall have failed to perform anycovenant, agreement or obligation of such entity under therespective Project Agreement;

(b) the Borrower shall have taken any action for the dis-solution or disestablishment of PTBA, PJKA or PANN or for thesuspension of the operations of any of them, without havingobtained the prior concurrence of the Bank;

(c) PTBA or PANN shall have become unable to pay its debtsas they mature or any action or proceeding shall have been taken byany of them or by others whereby any of the property of any of themshall or may be distributed among the respective creditors;

(d) an extraordinary situation shall have arisen whichshall make it improbable that PTBA, PJKA or PANN will be able toperform its obligations under its respective Project Agreement;

(e) the PANN Charter or the PANN Policy Statement shallhave been amended, suspended, abrogated, repealed or waived soas to materially and adversely affect the financial conditionor the operations of PANN;

Cf) the PTBA Charter shall have been amended, suspended,abrogated, repealed or waived so as to materially and adverselyaffect the financial conditions or the operations of PTBA; and

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(g) (i) Subject co subparagraph (ii) of this paragraph:

(A) the right of the Borrower to with%raw theproceeds of any loan made to the Borrower forthe financing of the Project shall have beensuspended, cancelled or terminated in wholeor in part, pursuant to the terms of theagreement providing therefor, or

(B) any such loan shall have become due andpayable prior to the agreed maturity therefor.

(ii) Subparagraph (i) of this paragraph shall notapply if: (A) such suspension, cancellation,termination or prematuring is not caused by thefailure of the Borrower to perform any of itsobligations under such agreement; and (B) adequatefunds for the Project are available to the Borrowerfrom other sources on terms and conditions consis-tent with the obligations of the Borrower underthis Agreement.

Section 5.02. For the purposes of Section 7.01 of the GeneralConditions, the following events are specified pursuant to para-graph (h) thereof:

(a) any event specified in paragraph (a) of Section 5.01 ofthis Agreement shall occur and shall continue for a period ofsixty days after notice thereof shall have been given by the Bankto the Borrower and PTBA, PJKA or PANN as the case may be; and

(b) any event specified in paragraphs (b), (c), (d) and(g) (i) (B) of Section 5.01 of this Agreement shall occur.

ARTICLE VI

Effective Date; Termination

Section 6.01. The following events are specified as addi-tional conditions to the effectiveness of the Loan Agreementwithin the meaning of Section 12.01 (c) of the General Conditions:

(a) each Subsidiary Loan Agreement has been executed onbehalf of the Borrower and PTBA and PANN respectively; and

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(b) a Letter of Intent satisfactory to the Bank for the coalsales contract referred to in Section 3.02 shall have been signedby PTBA and PLN.

Section 6.02. The following are specified as additionalmatters, within the meaning of Sectior, 12.02 (c) of the GeneralConditions, to be included in the opinion or opinions to befurnished to the Bank:

(a) that each Project Agreement has been duly authorizedor ratified by PTBA, PJKA and PANN, respectively, and is legallybinding upon PTBA, PJKA and PANN, respectively, in accordancewith its terms; and

(b) that each Subsidiary Loan Agreement has been dulyauthorized or ratified by the Borrower and PTBA and PANN, respec-tively, and is legally binding upon the Borrower and PTBA andPANN, respectively, in accordance with its terms.

Section 6.03. The date Aprilo2R, 1982, is hereby specifiedfor the purposes of Section 12.04 of the General Conditions.

ARTICLE VII

Representatives of the Borrower; Addresses

Section 7.01. The Minister of Finance of the Borrower isdesignated as representative of the Borrower for the purposesof Section 11.03 of the General Conditions.

Section 7.02. The following a,dresses are specified forthe purposes of Section 11.01 of the General Conditions:

For the Borrower:

Ministry of Financec/o Director General for

International Monetary AffairsJalan Lapangan Banteng Timur 4Jakarta, Indonesia

Cable address: Telex:

MINISTRY FINANCE DJMLN JKT 45799Jakarta DITJMON JKT 46415

DEPKEU JKT 44319

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For the Bank:

International Bank for

Reconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433

United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)

Washington, D.C. 248423 (RCA) or64145 (WUI)

IN WITNESS WHEREOF, the parties hereto, acting through

their representatives thereunto duly authorized, have caused

this Agreement to be signed in their respective names in the

District of Columbia, United States of America, as of the day and

year first above written.

REPUBLIC OF INDONESIA

ByAuthorized Representative

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

ByisRegional Vice President

East Asia and Pacific

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SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to be

financed out of the proceeds of the Loan, the allocation of the

amounts of the Loan to each Category and the percentage of

expenditures for items so to be financed in each Category:

Amount of theLoan Allocated % of

(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Equipment 51,100,000 100% of foreignexpenditures

(2) Consultants' 75,700,000

services andtraining

(a) locally 100%

hired

(b) other 100% of foreignexpenditures

(3) Coal explora- 5,000,000 100% of foreign

tion and expenditures

engineering

(4) Refinancing of 10,000,000 100%

S-9 Loan

(5) Unallocated 43,200,000

TOTAL 185,000,000

2. For the purposes of this Schedule the term "foreign expendi-

tures" means expenditures in the currency of any country other

than the Borrower and for goods or services supplied from the

territory of any country other than the Borrower.

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3. The disbursement percentages have been calculated in com-pliance with the policy of the Bank that no proceeds of theLoan shall be disbursed on account of payments for taxes leviedby, or in the territory of, the Borrower on goods or services,or on the importation, manufacture, procurement or supply thereof;to that end, if the amount of any such taxes levied on or inrespect of any item to be financed out of the proceeds of the Loandecreases or increases, the Bank may, by notice to the Borrower,increase or decrease the disbursement percentage then applicableto such item as required to be consistent with the aforementionedpolicy of the Bank.

4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made in respect of payments made for expendi-tures prior to the date of this Agreement, except that with-drawals, in an aggregate amount not exceeding the equivalent of$9,000,000 may be made in respect of Category (2) on account ofpayments made for such expenditures before that date but afterOctober 1, 1981.

5. Notwithstanding the allocation of an amount of the Loan orthe disbursement percentages set forth in the table in paragraph1 above, if the Bank has reasonably estimated that the amountof the Loan then allocated to any Category will be insufficientto finance the agreed percentage of all expenditures in thatCategory, the Bank may, by notice to the Borrower: (i) reallocateto such Category, to the extent required to meet the estimatedshortfall, proceeds of the Loan which are then allocated toanother Category and which in the opinion of the Bank are notneeded to meet other expenditures; and 'ii) if such reallocationcannot fully meet the estimated shortfall, reduce the disbursementpercentage then applicable to such expenditures in order thatfurther withdrawals under such Category may continue until allexpenditures therev-ider shall have been made.

6. If the Bank shall have reasonably determined that theprocurement of any item in any Category is inconsistent withthe procedures set forth or referred to in this Agreement, noexpenditures for such item shall be financed out of the proceedsof the Loan and the Bank may, without in any way restricting

or limiting any other right, power or remedy of the Bank underthe Loan Agreement, by notice to the Borrower, cancel such amountof the Loan as, in the Bank's reasonable opinion, representsthe amount of such expenditures which would otherwise have beeneligible for financing out of the proceeds of the Loan.

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SCHEDULE 2

Description of the Project

The Project will provide indigenous coal as fuel for the

dual-fired power plant being built at Suralaya on the west coastof Java and assistance and training. The Project consists of thefollowing Parts:

Part A:

1. Expansion of the existing coal mine at Bukit Asam, anopen pit mine employing a bucket wheel excavator system,to provide for an output of approximately three milliontons of coal per year; including, inter alia, construc-tion of related roads, workshops, warehouses, office

buildings and power lines, installation of a communica-tions system and provision of equipment, materials andvehicles.

2. Development of a coal mine at Muara Tiga, including,inter alia, construction of related roads, workshops,office buildings, power line and provision of equip-ment, materials and vehicles.

Part B: Expansion of the existing mining community under PartA.1 and its facilities, including, inter alia, construc-tion of new houses, roads and water supply and electri-cal distribution systems.

Part C:

1. Upgrading existing railroad track and bridges on theTanjung Enim - Muara Enim - Prabumulih-Panjang sectionto allow 18-ton axle loads, and upgrading of the MuaraEnim - Lahat section.

2. Construction of a new approximately 800 m rail line

to the mine site under Part A.1 and a new approximately6.5 km rail line from the existing line at Panjang

to the terminal site at Tarahan, both including new

bridges.

3. Upgrading the existing railroad system on the southernnetwork to Panjang by extending and improving the motive

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power and rolling stock repair facilities at Lahat andTanjung Karang, by improving the signalling system,by establishing a telecommunications link, and byproviding, inter alia, new sidings and extensions ofexisting sidings, about 15 new 1500 hp diesel locomo-tives, about 265 coal wagons, two auxiliary cranes andrehabilitating about 135 existing coal wagons.

Part D: Construction of a new coal loading terminal at Tarahan(6.5 km south of Panjang on Lampung Bay) to handle aninitial volume of about 2.4 million tons of coal per

year, including, inter alia, a railway car dumper,conveyor facilities, a fixed stacker and a ship loaderand marine works.

Part E: Construction, equipping and outfitting a self unloadingspecial-purpose ship of about 9,200 dwt to carry about2.4 million tons of coal per year from the Tarahanterminal (Part D above) across the Sunda Strait to theSuralaya power plant.

Part F: Rehabilitation of the coal terminal at Kertapati on the

Musi River upstream from Palembang.

Part G: Strengthening POKKORLAK, PTBA, PJKA and the operation of

the ship referred to in Part E above by, inter alia,providing consultants' services and training.

Part H: Studies and prefeasibility work with respect to coal

exploration.

The Project is expected to be completed by December 31, 1986.

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SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each June 1 and December 1

beginning June 1, 1987through June 1, 2001 6,165,000

On December 1, 2001 6,215,000

* The figures in this column represent dollar equivalentsdetermined as of the respective dates of withdrawal; seeGeneral Conditions Section 3.04.

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Premiums on Prepayment

The following percentages are specified as the premiums

payable on lepayment in advance of maturity of any portion of

the principal amount of the Loan pursuant to Section 3.04 (b)of the General Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 1.75%

More than three years but notmore than six yearsbefore maturity 3.50%

More than six years but notmore than eleven yearsbefore maturity 6.40%

More than eleven years but

not more than sixteenyears before maturity 9.30%

More than sixteen years butnot more than eighteenyears before maturity 10.45%

More than eighteen yearsbefore maturity 11.60%

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SCHEDULE 4

Procurement

A. International Competitive Bidding

1. Except as provided in Part C of this Schedule, goods shall beprocured under contracts awarded in accordance with proceduresconsistent with those set forth in the current edition of the"Guidelines for Procurement under World Bank Loans and IDA Cre-dits" published by the Bank in March 1977 (hereinafter called theGuidelines), on the basis of international competitive bidding asdescribed in Part A of the Guidelines.

2. For goods to be procured on the basis of internationalcompetitive bidding, in addition to the requirements of paragraph1.2 of the Guidelines, the Borrower shall prepare and forward tothe Bank as soon as possible, and in any event not later than 60days prior to the date of availability to the public of the firsttender or prequalification documents relating thereto, as the casemay be, a general procurement notice, in such form and detail andcontaining such information as the Bank shall reasonably request;the Bank will arrange for the publication of such notice in orderto provide timely notification to prospective bidders of theopportunity to bid for the goods in question. The Borrower shallprovide the necessary information to update such notice annuallyso long as any goods remain to be procured on the basis of inter-national competitive bidding.

3. For the purpose of evaluation and comparison of bids forthe supply of goods to be procured on the basis of internationalcompetitive bidding: (i) bidders shall be required to statein their bid the c.i.f. (port of entry) price for the importedgoods, or the ex-factory price or off-the-shelf price of othergoods, offered in such bid; (ii) customs duties and other importtaxes levied in connection with the importation, or the sales andsimilar taxes levied in connection with the sale or delivery,pursuant to the bid, of the goods shall not be taken into accountin the evaluation of the bids; and (iii) the cost of inlandfreight and other expenditures incidental to the delivery ofthe goods to the place of their use or installation shall beincluded.

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B. Preference for Domestic Manufacturers

In the procurement of goods in accordance with the procedures

described in Part A of this Schedule, goods manufactured in

Indonesia may be granted a margin of preference in accordance

with, and subject to, the following provisions:

1. All bidding documents for the procurement of goods

shall clearly indicate any preference which will be granted,

the information required to establish the eligibility of a bid

for such preference and the following methods and stages that will

be followed in the evaluation and comparison of bids.

2. After evaluation, responsive bids will be classified

in one of the following three groups:.

(1) Group A: bids offering goods manufactured in

Indonesia if the bidder shall have established to

the satisfaction of the Borrower and the Bank that

the manufacturing cost of such goods includes a

value added in Indonesia equal to at least 20%

of the ex-factory bid price of such goods.

(2) Group B: all other domestic bids.

(3) Group C: bids offering any other goods.

3. In order to determine the lowest evaluated bid of each

group, all evaluated bids in each group shall first be compared

among themselves, without taking into account customs duties and

other import taxes levied in connection with the importation, and

sales and similar taxes levied in connection with the sale or

delivery, pursuant to the bids, of the goods. Such lowest eva-

luated bids shall then be compared with each other, and if, as a

result of this comparison, a bid from group A or group B is the

lowest, it shall be selected for the award.

4. If, as a result of the comparison under paragraph

3 above, the lowest bid is a bid from group C, all group C bids

shall be further compared with the lowest evaluated bid from

group A after adding to the evaluated bid price of the imported

goods offered in each group C bid, for the purpose of this further

comparison only, an amount equal to: (i) the amount of customs

duties and other import taxes which a non-exempt importer would

have to pay for the importation of the goods offered in such

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group C bid; or (ii) 15% of the c.i.f. bid price of such goodsif said customs duties and taxes exceed 15% of such price. Ifthe group A bid in such further comparison is the lowest, itshall be selected for the award; if not, the bid from groupC which as a result of the comparison under paragraph 3 is thelowest evaluated bid shall be selected.

C. Other Procurement Procedures

Contracts for goods estimated to cost (a) $50,000 equiva-lent or less may be awarded on the basis of prudent shopping,and (b) more than $50,000 equivalent but less than $300,000equivalent may be awarded on the basis of limited internationaltendering; provided that the aggregate amount of such contractsdoes not exceed $750,000 equivalent.

D. Review of Procurement Decisions by the Bank

1. Review of invitations to bid and of proposed awards andfinal contracts:

With respect to all contracts estimated to cost the equiva-lent of $300,000 or more:

(a) Before bids are invited, the Borrower shall furnishto the Bank, for its comments, the text of the invitations tobid and the specifications and other bidding documents, togetherwith a description of the advertising procedures to be followedfor the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request.Any further modification to the bidding documents shall requirethe Bank's concurrence before it is issued to the prospectivebidders.

(b) After bids have been received and evaluated, the Bor-rower shall, before a final decision on the award is made, informthe Bank of the name of the bidder to which it intends to awardthe contract and shall furnish to the Bank, in sufficient time forits review, a detailed report on the evaluation and comparisonof the bids received, together with the recommendations foraward and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the intended awardwould be inconsistent with the Guidelines or this Schedule,promptly inform the Borrower and state the reasons for suchdetermination.

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(c) The terms and conditions of the contract shall not,

without the Bank's concurrence, materially differ from those

on which bids were asked or prequalification was invited.

(d) Two conformed copies of the contract shall be furnished

to the Bank promptly after its execution and prior to the submis-

sion to the Bank of the first application for withdrawal of

funds from the Loan Account in respect of such contract.

2. With respect to each contract not governed by the preceding

paragraph, the Borrower shall furnish to the Bank, promptly after

its execution and prior to the submission to the Bank of the

first application for withdrawal of funds from the Loan Account

in respect of such contract, two conformed copies of such con-

tract, together with the analysis of the respective bids, recom-

mendations for award and such other information as the Bank shall

reasonably request. The Bank shall, if it determines that the

award of the contract was not consistent with the Guidelines or

this Schedule, promptly inform the Borrower and state the reasons

for such determination.

3. Before agreeing to any material modification or waiver of

the terms and conditions of a contract, or granting an extension

of the stipulated time for performance of such contract, or

issuing any change order under such contract (except in cases of

extreme urgency) which would increase the cost of the contract by

more than 15% of the original price, the Borrower shall inform

the Bank of the proposed modification, waiver, extension or

change order and the reasons therefor. The Bank, if it determines

that the proposal would be inconsistent with the provisions of

this Agreement, shall promptly inform the Borrower and state

the reasons for its determination.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

CERTIFICATE

I hereby certify that the foregoing is a true

copy of the original in the archives of the Interna-

tional Bank for Reconstruction and Develop-

ment.

In witness whereof I have signed this Certifi-

cate and affixed the Seal of the Bank thereunto

this 2 day of M , 198 ..

FOR SECRETARY