It is further agreed between TA and the Grantee that:

1. Terms of Reference

The terms of reference for the study are attached as Annex I to thisGrant Agreement. The study will examine the technical, financial, and environmentalaspects of the proposed project.

2. U.S. Dollar/Local Currency Funding

The funding to be provided under this Grant Agreement shall be usedto fund U.S. dollar and local currency costs forprofessional and technical services as required by the terms of reference,and performed by a competitively selected U.S. firm (the contractor) inpreparing the study. The funds provided under this Grant Agreement arethe only funds that will be made available to Grantee by TA for the study,unless otherwise agreed in writing.

3. Additional Funding

TA shall not provide any funds in addition to those provided under thisGrant Agreement which may be required to fundcomponents of the study other than those specified in the terms ofreference.

The Grantee shall provide necessary administrative support, includingoffice space, consulting expertise, and secretarial support for the contractorperforming the study.

4. Most Favorable Conversion Rate

The funds provided under this Grant Agreement for the purposes of carryingout the obligations hereunder shall be convertible into local currencyat the highest rate which is lawful in the Russian Federation at the timethe conversion is made.

5. Effective Date and Completion Date

This Agreement shall take effect upon signature by both parties. Thecompletion date for the study, which is eighteen months from the effectivedate of this Grant Agreement, is the date by which the parties estimatethat all services funded under this Grant Agreement will have been furnished.

6. Prohibition Against Funding Before Effective Date and After

Completion Date

No funds may be disbursed under this Grant Agreement for services whichare provided under orders and contracts entered into prior to the effectivedate of this Grant Agreement, except as the parties may otherwise agreein writing. TA will not issue or approve documentation which would authorizedisbursement of grant funds for services performed subsequent to the completiondate of this Grant Agreement, except as TA may otherwise agree in writing.

7. Taxes

Funds provided under this Grant Agreement shall not be used to pay anytaxes, tariffs, duties, or other levies imposed under laws in effect inthe territory of Grantee. To the extent that any contractor funded by thisGrant Agreement, including any consulting firm or any personnel of suchcontractor, and any property or transaction relating to such contract fundedunder this Grant Agreement are not exempt from taxes, tariffs, duties orother levies imposed under laws in effect in the territory of Grantee,the contractor funded by this Grant Agreement will pay the same with fundsother than those provided under this Grant Agreement. Neither the Granteenor the contractor will seek reimbursement from TA for such taxes, tariffs,duties, or other levies.

8. Disbursement Procedures

The Grantee may obtain disbursement of funds under this Grant Agreementfor the costs of services required under the terms of this Grant Agreementby submitting to TA requests for disbursement for such services. Such requestsshall consist of the following:

(1) A contractor's invoice. The invoice shall include a signed statementby the contractor that the amounts involved do not include taxes or feesimposed under the laws of the Russian Federation; and

(2) Grantee's approval of the contractor's invoice, certifying thatthe services for which disbursement is requested have been performed satisfactorily,and are in compliance with the terms of this Grant Agreement.

A photocopy of the signed TA­approved contract outlining the servicesfor which payment is requested must accompany the initial request for disbursementof funds.

Requests for payment shall be submitted by courier or mail to:

U.S. Trade and Development Agency
FM/CMP/DCB
Room 700, SA­2
515 22nd Street, N.W
Washington, D.C. 20522­0209

Final disbursement of funds provided under this Grant Agreement forservices performed will be made within six months after the completiondate or such other period as TA agrees to in writing.

10. Use of U.S. Air Carriers

Transportation by air of persons or property funded under this GrantAgreement shall be on U.S. flag carriers in accordance with the Fly AmericaAct, 49 U.S.C. 1517, to the extent service by such carriers is available,as provided under U.S. Government regulations.

11. Nationality, Source and Origin

All goods and services provided under this Grant Agreement shall havetheir nationality, source, and origin in the United States or in the RussianFederation. In no case shall goods and services having their nationality,source, and origin in the Russian Federation exceed 20 percent of the amountof the funding provided by TA.

12. Selection of Contractor

Contracting for professional and technical services shall be carriedout by the Grantee according to acceptable procedures for the competitiveselection of Contractors, subject to prior approval of those proceduresby TA. Pursuant to these procedures, the Grantee shall have the authorityto carry out all aspects of the procurement, including the ranking andselection of firms based on technical qualifications; price shall not bea factor in evaluation or selection.

At TA's request, the Grantee shall furnish to TA for its approval anyspecifications, terms or reference or documents related to the prequalificationof Contractors, and to the solicitation of bids or proposals for servicesto be funded under this Agreement.

13. TA Prior Approval of Contracts and Contractors

It is understood by the parties that TA has reserved certain rightssuch as, but not limited to, the right to approve the terms of the contractand any subcontracts thereunder or amendments thereto, the selection ofall contractors and subcontractors, the terms of reference, and any orall documents related to any contract funded under this Grant Agreement.The parties hereto further understand and agree that TA, in reserving anyor all of the foregoing approval rights, has acted solely as a financingentity to assure the proper use of United States Government funds, andthat any decision by TA to exercise or refrain from exercising these approvalrights shall be made as a financier in the course of financing this effortand shall not be construed as making TA a party to the contract. The partiesto this Grant Agreement understand and agree that TA may, from time totime, exercise the foregoing approval rights, or discuss matters relatedto these rights and the project with the parties to the contract, jointlyor separately, without thereby incurring any responsibility or liabilityto the parties to the contract or to any one of them. Any approval or failureto approve byTA shall not bar the Grantee or TA from asserting any right, or relievethe contractor of any liability which the contractor might otherwise haveto the Grantee.

14. Mandatory Contract Clauses

Contracts, subcontracts, contractors, and subcontractors funded underthe Grant Agreement for the provision of professional and technical services,and any amendments thereto, including any changes in the terms of reference,must be agreed to by TA in writing before execution or amendment of thecontracts or subcontracts. All such contracts and subcontracts shall includethe following mandatory clauses:
 

"A. It is understood by the parties that TA has reserved certainrights such as, but not limited to, the right to approve the terms of thecontract and any subcontracts thereunder or amendments thereto, the selectionof all contractors and subcontractors, theterms of reference, and any andall documents related to this contract or any subcontracts funded underthe Grant Agreement dated 1994. The parties hereto further understand andagree that TA, in reserving any or all of the foregoing approval rights,has acted solely as a financing entity to assure the proper use of UnitedStates Government funds and that any decision by TA to exercise or refrainfrom exercising these approval rights shall be made as a financier in thecourse of financing this effort and shall not be construed as making TAa party to the contract. The parties hereto understand and agree that TAmay, from time to time, exercise the foregoing approval rights, or discussmatters related to these rights and the project with the parties to thecontract or related subcontracts, jointly or separately,~without therebyincurring any responsibility or liability to the parties to the contractor related subcontracts or to any one of them. Any approval or failureto approve by TA shall not bar the Grantee or TA from asserting any right,or relieve the contractor of any liability which the contractor might otherwisehave to the Grantee. A copy of the TA­approved contract and any subcontractsthereunder must be provided to TA before any payments will be releasedby TA.

"B. All goods and services provided by the contractor or any subcontractorshall have their nationality, source and origin in the United States orthe Russian Federation. In no case shall goods and services having theirnationality, source, and origin in the Russian Federation exceed 20 percentof the amount of the funding provided by TA.

"C. The feasibility study report, while aiming at optimum specificationsand characteristics for the project, shall identify the availability ofU.S. sources of supply so as to maximize their use in implementation ofthe project.

"D. The contractors funded under the Grant Agreement shall maintainbooks, records, documents, and other evidence, and shall apply generallyaccepted accounting principles and practices sufficient to reflect properlyall transactions under or in connection with the contract. The foregoingconstitutes "records" for purposes of this clause.

(1) Such records shall be maintained during the contract termand for a period of three years after final disbursement by TA.
(2) All records maintained by the contractor shall be subject to inspectionand audit by TA, or its authorized agents, at all reasonable times. Thecontractor shall afford TA proper facilities for such inspection and audit.

"E. Transportation by air of persons or property funded underthis Grant Agreement shall be on U.S. flag carriers in accordance withthe Fly America Act, 49 U.S.C. 1517, to the extent service by such carriersis available, as provided under U.S. Government regulations.

"F. The contractor shall provide adequate Workman's Compensation Insurancecoverage under service contracts funded by TA.

"G. After completion of the contract, the contractor shall advise TAby letter at six month intervals, for a period of two years, as to thedisposition of the follow on work resulting from the TA­funded feasibilitystudy. If, at any time, the contractor receives follow­on project workfrom the Grantee, the contractor shall so notify TA, and

1 ) designate the contractor's contact point including name,telephone, and fax number; and
2) agree with TA upon a method for TA to receive from the contractortimely and accurate procurement information about the project, which TAmay make publicly available.

"H. The contractor shall provide 3 copies of the final report,in English, to TA for its use and public distribution. The final reportmust be paginated."

15. Cooperation Between Parties and Follow­Up

The parties shall cooperate to assure that the purpose of this GrantAgreement will be accomplished. To this end, the parties, at the requestof either, will exchange views on the progress of the study, the performanceof obligations under this Grant Agreement, the performance of any consultantor contractor engaged in the study, and other matters relating to the study.Furthermore, for five years following completion of the final report, theGrantee or its representative agrees to respond to an annual questionnairefrom TA about the status of the project. In accordance with this Agreement,both parties will take all possible measures, while the feasibility studyis under way, to attract financial institutions to finance constructionof the Krasnoyarsk­26 replacement power and steam project.

16. Implementation Letters

To assist the Grantee in the implementation of this Grant Agreement,TA may, from time to time, issue implementation letters that will provideadditional information about matters covered in this Grant Agreement. Bothparties may also use jointly agreed upon implementation letters to confirmand record their mutual understanding of the implementation of this GrantAgreement.

17. Books and Records

The Grantee agrees to maintain, in accordance with consistently appliedaccounting principles and practices, books, records, and documents relatingto the study and this Grant Agreement adequate to show, without limitation,the receipt and use of services acquired under this Grant Agreement. Suchbooks and records shall be maintained for three years after the date ofthe final disbursement by TA. The Grantee shall afford TA or its authorizedrepresentatives the opportunity at reasonable times to review books, records,and other documentation relating to the feasibility study and this GrantAgreement.

18. Representation of Parties

For all purposes relevant to the Grant Agreement, the Grantee will berepresented by its Mayor and TA will be represented by the United StatesAmbassador in Moscow, each of whom may, by written notice, designate additionalrepresentatives for all purposes under this Grant Agreement.

19. Addresses of Record for Parties

Any notice, request, document, or other communication submitted by eitherparty to the other under this Grant Agreement shall be in writing or througha wire or electronic medium which produces a tangible record of the transmission,such as a telegram, cable or facsimile, and shall be deemed duly givenor sent when delivered to such party at the following:

To: Krasnoyarsk­26
Russian Federation

To: U.S. Trade and Development Agency
SA­16, Room 309
Washington, D.C. 20523­1602
Telephone: (703) 875­4357
Fax: (703) 875­4009

Any communication relating to this Grant Agreement shall include thefollowing fiscal data:

Appropriation No.: 11X1001
Budget Plan: 2TDX­95­71004­DG71
Project No.: 95­807B
Obligation No.: 5713111
TA No.: TA­5807­G­00­5184­00

Either party may terminate this Grant Agreement by giving the otherparty 30 days advance written notice. The termination of the Grant Agreementwill end any obligations of the parties to provide financial or other resourcesfor the study, except for payments which they are committed to make pursuantto noncancellable commitments entered into with third parties prior tothe written notice to terminate.

21. Non­waiver of Rights and Remedies

No delay in exercising any right or remedy accruing to either partyin connection with this Grant Agreement shall be construed as a waiverof such right or remedy.

22. Statement by Grantee

In recognition of TA's efforts in funding the feasibility study, theGrantee shall, under otherwise equal conditions, give priority to U.S.suppliers in procuring the technology and equipment needed for the project.

IN WITNESS WHEREOF, the U.S. Trade and Development Agency and the Municipalityof Krasnoyarsk­26, each acting through its duly authorized representative,have caused this Grant Agreement to be signed in the English language intheir names and delivered as of the day and year written below.

For the U.S. Trade and For the Municipality

Development Agency of Krasnoyarsk­26

For the Ministry of Atomic

Energy

Dated:

ANNEX I
KRASNOYRSK­26 FEASIBILITY STUDY

OBJECTIVE OF STUDY:

The objective of this project is the generation of a "Feasibility Study"consistent with the requirements of (Western) financial institutions toobtain financing of replacement power for the Krasnoyarsk­26 reactorscheduled for shut­down by the year 2000. A phased approach has beenadopted. IN ADDITION TO THE MAJOR OBJECTIVE, A DETERMINATION WILL BE MADETO IDENTIFY WHICH OF THE TWO SOLUTIONS; 1) COMPLETION OF THE SOSNOVOBORSKPOWER PLANT, OR 2) CONSTRUCTION OF DISTRIBUTED BOILERS WITHIN THE CITYOF K­26, IS OPTIMAL.

BACKGROUND:

The closed city of Krasnoyarsk­26 (K­26) has approximately 100,000inhabitants and is located in the south central section of the KrasnoyarskKRIE. K­26 reactor provides thermal and electrical power to the cityof K­26 and associated high tech industry. KRIE has under constructiona coal fueled power plant called Sosnovoborsk which is approximately 10percent completed.

SCOPE:

This project is segmented into four phases:

PHASE I: Characterization of the Energy Supply and Demand
PHASE II: Identification of Energy Production/Efficiency Options andFinancing
PHASE III: Draft Document Assembly and Review by Financial Institutionwith Interest in Financing the Project
PHASE IV: Revision and Production of the Final Document

Proposed Start Date: February 15, 1995
Proposed End Date: March 31, 1995

Scope:

1. Data collection, fact finding, and verification
2. Identify fuel resources
3. Scope potential energy efficiency options
4. Identify time lines and deliverables

A) Review of existing reports, facilities, and other presently availableinformation WITH SPECIAL EMPHASIS ONCOMPLETION OF THE SOSNOVOBORSK PLANT OR CONSTRUCTION OF DISTRIBUTEDBOILERS WITHIN K­26. Focus should be on: ­Needs assessment ­Informationon costs, labor, consumption, pricing, etc.

B) Characterization of present energy supply system

• ­Energy generation (electrical and thermal)
• ­Energy distribution (thermal)
• ­Electric (energy management) distribution

• ­Coal, including alternative sources (present/future)
• -Oil and/or other fossil fuels

• ­Roads/Rail lines
• ­River/Barge delivery
• ­Other

• ­Boiler emissions
• ­Waste discharge/disposal
• ­Regulations (present/trends)

• ­residential
• ­industrial /commercial

• ­Thermal energy distribution system
• ­Lighting improvement ­Advanced power generation technologies
• ­Insulation for residences and commercial buildings
• ­Heat exchangers and heaters
• ­Others

PHASE II: Identification of Energy Production/Efficiency Options& Financing

Proposed Start Date: April 1, 1995
Proposed End Date: June 30, 1995

Scope: PHASE II(a) Energy Production (Power Plant) Options:

• ­ Evaluation and Recommendation
• ­ Justification of Recommendation

Scope: PHASE II(b) Financial Analysis:
[Note: This activity is to be done in parallel, where possible, withPhase II(a)].

• ­Identify Revenue
• ­Mechanism for repayment and returning profit to investors

PHASE II(a) Energy Production/Efficiency

A) Pulverized coal­fueled power generation

B) Other types of coal­fueled power generation

• ­Fluidized bed combustion
• ­Other

• ­Supplemental boilers for thermal energy

PHASE II(b) Financial Analysis

A) Identify and characterize costs (present/expected future)

• ­Fuels

• ­Waste disposal
• -Operating and maintenance costs
• ­Capital cost
• ­Project risk insurance

• ­Taxes

• ­Energy sales (residential)
• ­Energy sales (commercial)
• ­By­products (e.g. sale of ash)
• ­Subsidies (?)
• ­Other sources of income

• ­Capitalization schedule
• ­Income and cash flow models
• ­Introduction of energy efficiency
• ­Debt service schedule
• ­Assumptions regarding effect of inflation
• ­Assumptions regarding effect of imposed pricing

• ­Financial
• ­Other

Institution with Interest in Financing the Project
Proposed Start Date: III(a) Draft Document Assembled­ July 1, 1995
Proposed End Date: III(a) July 15, 1995
Proposed Start Date: III(b) Review by Financial Institution July 16,1995
Proposed End Date: III(b) Receive Comment from Financial InstitutionAugust 31, 1995.

Outline:

A) Identify least cost option from work done in Phases I and II consistentwith the earliest shutdown of the K­26 reactor

B) Prepare a "bankable" document reflecting input from at least onemajor international financial institution

C) Review by financial institution(s)

PHASE IV: Revision and Production of the Final Document:

Proposed Start Date: September 1, 1995
Fixed End Date: September 15, 1995

Outline:

A) Revise based on comments received from financial institutions andother interested parties

B) Produce final documents which are submittable/acceptable to financialinstitutions

   1.Submit document to selected financial institutions.