FIRST VERSION CONCESSION CONTRACT … 1 of 189 republic of peru first version concession contract...

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REPUBLIC OF PERU

FIRST VERSION

CONCESSION CONTRACT

COMPREHENSIVE PROJECT BID FOR THE CONCESSION OF THE "PROVISION OF SANITATION SERVICES FOR THE SOUTHERN

DISTRICTS OF LIMA" PROJECT

MARCH 2013

Page 2 of 189

CHAPTER I: BACKGROUND AND DEFINITIONS ............................................................ 9

BACKGROUND ................................................................ ¡Error! Marcador no definido. 9

DEFINITIONS .............................................................................................................. 1110

1.1. Authorized Creditor ....................................................................................... 1110

1.2. Certificate of Delivery of the Concession Assets¡Error! Marcador no definido. 10

1.3. Certificate of Network Delivery ...................................................................... 1110

1.4. Certificate of Reversion of the Concession Assets¡Error! Marcador no definido. 11

1.5. Certificate of Termination .................................................................................. 11

1.6. Certificate of Completion of Works ................... ¡Error! Marcador no definido. 11

1.7. Successful Bidder ............................................. ¡Error! Marcador no definido. 11

1.8. Private Investment Promotion Agency – PROINVERSIÓN ............................ 1211

1.9. Desalinated Water ............................................ ¡Error! Marcador no definido. 11

1.10. Calendar Year ............................................... ¡Error! Marcador no definido. 11

1.11. Concession Year .......................................... ¡Error! Marcador no definido. 11

1.12. Concession Area .......................................... ¡Error! Marcador no definido. 11

1.13. Competent Governmental Authority .............. ¡Error! Marcador no definido. 12

1.14. Bidding Terms ............................................... ¡Error! Marcador no definido. 12

1.15. Concession Assets ....................................... ¡Error! Marcador no definido. 12

1.16. CONCESSIONAIRE’s Assets ....................... ¡Error! Marcador no definido. 12

1.17. Expiry of the Concession .............................. ¡Error! Marcador no definido. 12

1.18. Works Implementation Schedule................... ¡Error! Marcador no definido. 12

1.19. WPC ............................................................. ¡Error! Marcador no definido. 12

1.20. Commissioning Certificate ............................ ¡Error! Marcador no definido. 12

1.21. Committee .................................................... ¡Error! Marcador no definido. 12

1.22. GRANTOR ..................................................................................................... 13

1.23. Concession .................................................................................................... 13

1.24. CONCESSIONAIRE ..................................... ¡Error! Marcador no definido. 13

1.25. Comprehensive Project Bid or Public Bid ...... ¡Error! Marcador no definido. 13

1.26. Construction Company .............................................................................. 1413

1.27. Concession Contract or Contract ............................................................... 1413

1.28. Service Agreement ....................................... ¡Error! Marcador no definido. 13

1.29. Effective Control ........................................................................................ 1413

1.30. Technical Dispute ......................................... ¡Error! Marcador no definido. 14

1.31. Non-Technical Dispute .................................. ¡Error! Marcador no definido. 14

1.32. Design and Construction Logbook ................ ¡Error! Marcador no definido. 14

1.33. Days .......................................................................................................... 1514

1.34. Calendar Days ........................................................................................... 1514

1.35. Final. Disposal ........................................................................................... 1514

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1.36. Dollar or US$ ................................................................................................. 15

1.37. Submarine Outfall ......................................... ¡Error! Marcador no definido. 15

1.38. Affiliated Company ......................................................................................... 15

1.39. Auditing Company.......................................................................................... 15

1.40. Parent Company ........................................... ¡Error! Marcador no definido. 15

1.41. Subsidiary Company ..................................... ¡Error! Marcador no definido. 15

1.42. Related Company ......................................... ¡Error! Marcador no definido. 15

1.43. Minimum Technical Specifications ................ ¡Error! Marcador no definido. 16

1.44. Environmental Quality Standards for Water (ECA- Water) ............................. 16

1.45. Environmental Impact Assessment (EIA) ....................................................... 16

1.46. Stage or Stages ............................................ ¡Error! Marcador no definido. 16

1.47. Production Scales ......................................... ¡Error! Marcador no definido. 16

1.48. Technical File ............................................................................................. 1716

1.49. Closing Date .............................................................................................. 1716

1.50. Effective Date of Obligations ......................... ¡Error! Marcador no definido. 17

1.51. Collection Trust .............................................................................................. 17

1.52. Performance Bond of the Concession Agreement¡Error! Marcador no definido. 17

1.53. Works Performance Bond ............................. ¡Error! Marcador no definido. 17

1.54. Economic Group ........................................... ¡Error! Marcador no definido. 17

1.55. Construction Milestone or Milestone .......................................................... 1817

1.56. IGV ............................................................................................................ 1817

1.57. Environmental Impact ................................................................................ 1817

1.58. Rate Increase ............................................... ¡Error! Marcador no definido. 17

1.59. Sanitary Infrastructure ................................... ¡Error! Marcador no definido. 18

1.60. Sanitary Infrastructure by the CONCESSIONAIRE ........................................ 18

1.61. Start of Operations ......................................................................................... 18

1.62. Inventory ....................................................... ¡Error! Marcador no definido. 18

1.63. Investment ..................................................................................................... 18

1.64. Investment in Works ...................................................................................... 19

1.65. Referential Investment in Works ................... ¡Error! Marcador no definido. 19

1.66. Applicable Laws and Regulations ................. ¡Error! Marcador no definido. 19

1.67. LIBOR ........................................................... ¡Error! Marcador no definido. 19

1.68. Environmental Baseline ............................................................................. 2019

1.69. Maintenance ................................................. ¡Error! Marcador no definido. 20

1.70. Operating and Maintenance Manual .............................................................. 20

1.71. Works ........................................................... ¡Error! Marcador no definido. 20

1.72. Quick Impact Works ...................................... ¡Error! Marcador no definido. 20

1.73. Comprehensive Works .................................. ¡Error! Marcador no definido. 20

1.74. Operation ...................................................... ¡Error! Marcador no definido. 20

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1.75. Operator .................................................................................................... 2120

1.76. Party ............................................................. ¡Error! Marcador no definido. 20

1.77. Parties ....................................................................................................... 2120

1.78. Minimum Participation .................................................................................... 21

1.79. Environmental Liabilities ............................... ¡Error! Marcador no definido. 21

1.80. Construction Period ...................................... ¡Error! Marcador no definido. 21

1.81. Operation Period ........................................... ¡Error! Marcador no definido. 21

1.82. Pre-operating Period ..................................... ¡Error! Marcador no definido. 21

1.83. Commissioning Period .................................. ¡Error! Marcador no definido. 21

1.84. Desalination Plant ......................................... ¡Error! Marcador no definido. 21

1.85. Wastewater Treatment Plant or WWTP ..................................................... 2221

1.86. Operational Tests ......................................... ¡Error! Marcador no definido. 21

1.87. Project or PROVISUR ................................... ¡Error! Marcador no definido. 22

1.88. Point of Delivery ............................................................................................. 22

1.89. Measuring Points .......................................... ¡Error! Marcador no definido. 22

1.90. Sampling Points or Sampling Station ............ ¡Error! Marcador no definido. 22

1.91. Point of Receipt ............................................ ¡Error! Marcador no definido. 22

1.92. Basic Unit Remuneration (RUB).................... ¡Error! Marcador no definido. 22

1.93. Annual Remuneration per Services (RAS) ..................................................... 22

1.94. Compensation for Investment (RPI) ............................................................... 22

1.95. Compensation for Maintenance and Operation (RPMO) ................................ 22

1.96. Work Progress report ................................................................................. 2322

1.97. Sewage Network ........................................... ¡Error! Marcador no definido. 23

1.98. Distribution Network ...................................... ¡Error! Marcador no definido. 23

1.99. Minimum Requirements of the Project ........................................................... 23

1.100. RPICAO ........................................................ ¡Error! Marcador no definido. 23

1.101. Brine .............................................................................................................. 23

1.102. SEDAPAL ..................................................... ¡Error! Marcador no definido. 23

1.103. Service........................................................................................................... 23

1.104. Easements ..................................................................................................... 23

1.105. Strategic Partner ........................................... ¡Error! Marcador no definido. 23

1.106. Soles or Nuevos Soles .................................. ¡Error! Marcador no definido. 24

1.107. SUNASS ........................................................................................................ 24

1.108. Design and Construction Supervisor .............................................................. 24

1.109. Suspension ................................................... ¡Error! Marcador no definido. 24

1.110. Exchange Rate .............................................................................................. 24

1.111. Taking of Possession .................................... ¡Error! Marcador no definido. 24

1.112. Concession’s TUO ......................................................................................... 24

1.113. Coastal Zone ................................................................................................ 24

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1.114. Mixing Zone .................................................. ¡Error! Marcador no definido. 24

CHAPTER II: LEGAL STATUS, PURPOSE, MODALITY, POWERS OF REPRESENTATION AND CHARACTERISTICS ................................................................ 25

LEGAL STATUS .............................................................................................................. 25

PURPOSE ...................................................................... ¡Error! Marcador no definido. 25

MODALITY ...................................................................................................................... 26

POWERS OF REPRESENTATION FOR SEDAPAL ...... ¡Error! Marcador no definido. 26

CHARACTERISTICS ....................................................................................................... 27

CHAPTER III: EVENTS AS OF THE CLOSING DATE . ¡Error! Marcador no definido. 27

STATEMENTS OF THE PARTIES .................................................................................. 27

FINDINGS ON THE CLOSING DATE............................. ¡Error! Marcador no definido. 29

CHAPTER IV: VALIDITY OF THE CONCESSION ......................................................... 33

TERM ............................................................................. ¡Error! Marcador no definido. 33

EXTENSION TO THE TERM OF THE CONCESSION ... ¡Error! Marcador no definido. 33

MAXIMUM TERM ........................................................... ¡Error! Marcador no definido. 34

TERM SUSPENSION ..................................................... ¡Error! Marcador no definido. 34

CHAPTER V: PROPERTY REGIME ............................ ¡Error! Marcador no definido. 35

CHAPTER VI: THE WORKS ......................................... ¡Error! Marcador no definido. 43

DESIGN AND SITE SUPERVISION .............................. ¡Error! Marcador no definido. 43

APPROVAL OF THE TECHNICAL FILES ...................... ¡Error! Marcador no definido. 45

THE WORKS.................................................................. ¡Error! Marcador no definido. 46

DESIGN AND CONSTRUCTION LOGBOOK ................. ¡Error! Marcador no definido. 46

WORK IMPLEMENTATION SCHEDULE AND TERM .... ¡Error! Marcador no definido. 47

EFFECTIVE DATE OF OBLIGATIONS FOR QUICK IMPACT WORKS¡Error! Marcador no definido. 47

EFFECTIVE DATE OF OBLIGATIONS FOR COMPREHENSIVE WORKS .............. ¡Error! Marcador no definido. 48

START OF CONSTRUCTION ........................................ ¡Error! Marcador no definido. 50

WORK PROGRESS REPORTS ..................................... ¡Error! Marcador no definido. 50

TERM EXTENSION FOR IMPLEMENTATION OF WORKS¡Error! Marcador no definido. 50

APPROVAL OF WORKS ................................................ ¡Error! Marcador no definido. 51

INFORMATION ........................................................................................................... 5153

FINANCIAL CLOSURE ............................................................................................... 5253

CHAPTER VII: MAINTENANCE .................................... ¡Error! Marcador no definido. 54

MAINTENANCE AND OPERATION MANUAL .............. ¡Error! Marcador no definido. 54

CHAPTER VIII: OPERATION ........................................ ¡Error! Marcador no definido. 55

RIGHTS AND DUTIES OF THE CONCESSIONAIRE .... ¡Error! Marcador no definido. 55

COMMISSIONING PERIOD ........................................................................................ 5557

START OF OPERATIONS ............................................. ¡Error! Marcador no definido. 57

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MAINTENANCE AND OPERATION SUPERVISION ...... ¡Error! Marcador no definido. 58

CHAPTER IX: ECONOMIC-FINANCIAL REGIME ........ ¡Error! Marcador no definido. 59

FOR THE WATER COMPONENT ............................................................................... 5759

BASIC UNIT REMUNERATION – RUB ....................................................................... 5759

ABOUT THE RPIAD COMPONENTE OF THE RUB ..................................................... 5859

SETTLEMENT MECHANISM OF RPIAD ...................................................................... 5960

RUB ADJUSTMENT PROCEDURE ............................... ¡Error! Marcador no definido. 62

ABOUT THE RPMOAD COMPONENT ......................................................................... 6163

ANNUAL COMPENSATION FOR SERVICE (RAS) ..................................................... 6163

ABOUT THE RPIAR COMPONENT OF THE RAS ........................................................ 6264

SETTLEMENT MECHANISM OF RPIAR ...................................................................... 6264

RPIAR ADJUSTMENT PROCEDURE ........................................................................... 6364

ADJUSTMENT DUE TO PRICE VARIATION .............................................................. 6365

WHOLE PRICE INDEX (WPI) ADJUSTMENT ............................................................. 6365

ABOUT THE RPMOAR COMPONENT ......................................................................... 6466

PROCEDURE FOR RECOGNITION OF RPIAD and RPIAR .......................................... 6567

CHAPTER X: PERFORMANCE BONDS OF CONTRACTUAL OBLIGATIONS ...... 6668

AGREEMENT PERFORMANCE BOND ......................... ¡Error! Marcador no definido. 68

MODIFICATION OR REPLACEMENT OF GUARANTEES¡Error! Marcador no definido. 69

ENFORCEMENT OF GUARANTEES............................. ¡Error! Marcador no definido. 69

OPPORTUNITY TO RETURN GUARANTEES ............... ¡Error! Marcador no definido. 70

GUARANTEES FOR AUTHORIZED CREDITORS ......... ¡Error! Marcador no definido. 70

CHAPTER XI: INSURANCE SCHEME ......................... ¡Error! Marcador no definido. 71

APPROVAL ................................................................................................................. 6971

TYPES OF INSURANCE POLICIES............................... ¡Error! Marcador no definido. 72

CONCESSIONAIRE’S RESPONSIBILITY ................................................................... 7679

CHAPTER XII: SOCIO ENVIRONMENTAL CONSIDERATIONS¡Error! Marcador no definido. 80

ENVIRONMENTAL RESPONSIBILITY ........................... ¡Error! Marcador no definido. 80

ENVIRONMENTAL LIABILITIES .................................... ¡Error! Marcador no definido. 80

ENVIRONMENTAL IMPACT STUDY ............................. ¡Error! Marcador no definido. 81

SOCIO ENVIRONMENTAL MANAGEMENT .................. ¡Error! Marcador no definido. 81

ENVIRONMENTAL REPORTS....................................... ¡Error! Marcador no definido. 82

CHAPTER XIII: RELATIONSHIP WITH THE STRATEGIC PARTNER, THIRD PARTIES AND STAFF .................................................................................................... 8083

RELATIONSHIP WITH THE STRATEGIC PARTNER .... ¡Error! Marcador no definido. 83

RELATIONSHIP WITH THE CONSTRUCTION COMPANY¡Error! Marcador no definido. 83

RELATIONSHIP WITH THE OPERATOR ...................... ¡Error! Marcador no definido. 84

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RELATIONSHIP WITH THIRD PARTIES .................................................................... 8284

CLAUSES IN CONTRACTS ........................................... ¡Error! Marcador no definido. 85

RELATIONSHIP WITH STAFF ....................................... ¡Error! Marcador no definido. 86

CHAPTER XIV: ADMINISTRATIVE COMPETENCIES ............................................... 8486

COMMON PROVISIONS................................................ ¡Error! Marcador no definido. 86

CHAPTER XV: EXPIRY OF THE CONCESSION .......... ¡Error! Marcador no definido. 87

GROUNDS FOR EXPIRY............................................... ¡Error! Marcador no definido. 87

PROCEDURE FOR REMEDIES .................................................................................. 8790

EFFECTS OF EXPIRY OF THE CONCESSION ............ ¡Error! Marcador no definido. 90

PROCEDURES FOR TERMINATION ............................ ¡Error! Marcador no definido. 91

CONTRACT SETTLEMENT ........................................... ¡Error! Marcador no definido. 91

GENERAL PROCEDURE FOR SETTLEMENT .............. ¡Error! Marcador no definido. 91

SETTLEMENT FOR MATURITY OF THE CONCESSION TERM ................................ 9092

SETTLEMENT BY MUTUAL CONTRACT ...................... ¡Error! Marcador no definido. 93

SETTLEMENT FOR BREACH BY THE CONCESSIONAIRE¡Error! Marcador no definido. 93

SETTLEMENT FOR BREACH BY THE GRANTOR ....... ¡Error! Marcador no definido. 93

SETTLEMENT FOR UNILATERAL DECISION BY THE GRANTOR ........................... 9194

SETTLEMENT FOR BREACH BY SEDAPAL ................. ¡Error! Marcador no definido. 95

SETTLEMENT FOR NOT APPLYING THE RATE INCREASE¡Error! Marcador no definido. 96

SETTLEMENT FOR FORCE MAJEURE, ACTS OF GOD OR OTHER REASONS NOT ATTRIBUTABLE TO THE PARTIES ............................... ¡Error! Marcador no definido. 96

CHAPTER XVI: DISPUTE SETTLEMENT ..................... ¡Error! Marcador no definido. 97

APPLICABLE LAW ...................................................................................................... 9497

SCOPE OF APPLICATION ......................................................................................... 9497

INTERPRETATION CRITERIA ....................................... ¡Error! Marcador no definido. 98

WAIVER OF DIPLOMATIC CLAIMS............................... ¡Error! Marcador no definido. 98

DIRECT NEGOTIATION................................................. ¡Error! Marcador no definido. 98

ARBITRATION ............................................................................................................ 9799

COMMON PROCEDURAL RULES ...............................¡Error! Marcador no definido. 101

CHAPTER XVII: CHANGES TO THE CONTRACT ..................................................... 100103

CHAPTER XVIII: FORCE MAJEURE OR ACTS OF GOD ¡Error! Marcador no definido. 104

EVENTS OF FORCE MAJEURE OR ACTS OF GOD ............................................. 101104

CHAPTER XIX: PENALTIES .................................................................................. 102105

CHAPTER XX: ADDRESS ...................................................................................... 103106

DETERMINATION .........................................................¡Error! Marcador no definido. 106

ANNEX 1: SERVICE AGREEMENT..............................¡Error! Marcador no definido. 107

SERVICE AGREEMENT ...................................................¡Error! Marcador no definido. 107

ANNEX 2: PROJECT LOCATION ........................................................................... 141143

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ANNEX 3: ASSETS TO BE DELIVERED BY THE GRANTOR................................ 142144

ANNEX 4: MINIMUM TECHNICAL SPECIFICATIONS ........................................... 143145

ANNEX 5: MINIMUM PROJECT REQUIREMENTS ......¡Error! Marcador no definido. 147

ANEXO 6: MINIMUM CONTENT OF THE ENVIRONMENTAL IMPACT STUDY .... 162164

ANNEX 7: ENVIRONMENTAL IMPACT STUDY ..................................................... 163165

ANEXO 8: MINIMUM CONTENT OF MAINTENANCE AND OPERATION MANUAL 164166

ANNEX 8 – A: MAINTENANCE AND OPERATION MANUAL¡Error! Marcador no definido. 167

ANNEX 9: EMERGENCY AND OPERATIONAL CONTINGENCY PLAN ................ 166168

ANNEX 10: WORK PROGRESS CONTROL AND CERTIFICATION MECHANISM . 169172

SECCIÓN I: CONSTRUCTION MILESTONE REFERENTIAL VALUE¡Error! Marcador no definido. 172

SECCIÓN II: IMPLEMENTATION SCHEDULE BY CONSTRUCTION MILESTONE ¡Error! Marcador no definido. 172

SECCIÓN III: WPC ........................................................¡Error! Marcador no definido. 173

ANNEX 10- APPENDIX 1: Work Progress Certificate (WPC) ..................................... 174177

ANNEX 11: GUARANTEE TEMPLATES ..........................¡Error! Marcador no definido. 178

ANNEX 12: TEMPLATE OF AUTHORIZED CREDITOR STATEMENT ..................... 177180

ANNEX 13: TABLE OF PENALTIES APPLICABLE TO THE CONTRACT ................. 178181

ANNEX 14: ECONOMIC PROPOSAL ..............................¡Error! Marcador no definido. 182

ANNEX 15: NOTARIAL DEED OF THE CONCESSIONAIRE’S ARTICLES OF INCORPORATION ...................................................................................................... 180183

ANNEX 16: APPLICABLE GUIDELINES TO THE ANNEX REGARDING THE COLLECTION TRUST AGREEMENT ......................................................................... 181184

ANNEX 17: COLLECTION TRUST AGREEMENT AND PROVISUR ANNEX ....... 187190

ANNEX 18: TECHNICAL PROPOSAL ........................¡Error! Marcador no definido. 191

ANNEX 19: POLYNOMIAL FORMULA FOR PRICE VARIATION ADJUSTMENT . 189192

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CONCESSION CONTRACT To the Notary: Please include on your Register of Public Deeds one stating the Concession Contract for the design, financing, construction, operation and maintenance of the Provision of Sanitation Services Project for the southern districts of Lima (hereinafter the Contract), signed by and between the State of the Republic of Peru (hereinafter, the GRANTOR), represented by the Ministry of Housing, Construction and Sanitation, represented by __________________, identified with National ID No. _______, authorized by Ministerial Resolution No. ________________, with address at Paseo de la República 3361, 3 floor, San Isidro, department of Lima, Peru, and _________________, (hereinafter, the CONCESSIONAIRE), with address at _________________ Peru, duly represented by _____________________, identified with _________________, domiciled for this purpose at _______________________ Peru, duly authorized by power of attorney registered under Entry No. ________________ of the Registry of Legal Entities of the Registry Office of Lima, National Superintendency of Public Registries. With the participation of: The Drinking Water and Sewage Services company of Lima - SEDAPAL (hereinafter SEDAPAL) with Taxpayer Registration RUC No. 20100152356 and legal domicile on Autopista Ramiro Prialé No. 210, La Atarjea, District of El Augustino, Province and Department of Lima, duly represented by its General Manager, Miss Rossina Manche Mantero, identified with National ID No. 40341002, who proceeds in accordance with the powers granted under Contract No. 035-006-2012 adopted at Board Meeting No. 006-2012 dated March 14, 2012 properly registered under Item C00091 of Electronic Entry No. 02005409 of the Companies Register in the Registry of Legal Entities of the Registry Office of Lima and Callao, Registry Zone No. IX - Lima, hereinafter SEDAPAL, which takes part in this Contract in order to assume the rights and obligations resulting therefrom.

CHAPTER I: BACKGROUND AND DEFINITIONS

BACKGROUND

1. By Supreme Resolution No. 045-2012-EF published on 07.07.2012, the Contract to incorporate the "Provision of Sanitation Services for the southern districts of Lima" Project (hereinafter PROVISUR) to the Private Investment Promotion Process was ratified by the Steering Committee of PROINVERSIÓN.

2. By Supreme Resolution No. 058-2012-EF published on 16.09.2012, the Contracts of the Steering Committee of PROINVERSIÓN were ratified approving the Private Investment Promotion Plan of PROVISUR and its amendment.

3. In session dated 20.12.2012, the Steering Committee of PROINVERSIÓN approved the Bidding Terms for the Comprehensive Project Bid of PROVISUR.

4. By Resolution of the Steering Committee of PROINVERSIÓN adopted in session dated _____ 2013 the Concession Contract was approved to be signed between the State of the Republic of Peru, represented by the Ministry of Housing, Construction and Sanitation and the CONCESSIONAIRE, with the participation of SEDAPAL.

5. On _____, 2013, PROINVERSION’s Committee for Infrastructure Projects and Public Social Services, Mining, Sanitation, Irrigation and Agricultural Affairs – PRO

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DESARROLLO, granted the Concession of the Comprehensive Project Bid Project to PROVISUR, which has constituted as CONCESSIONAIRE, and has demonstrated compliance with the conditions set forth in the Bidding Terms to proceed with the signing of this Contract.

6. On _______ 2013, a Supreme Decree was issued granting assurances and guarantees of the State of the Republic of Peru in support of the statements, assurances and obligations contained in the Concession Contract with PROVISUR.

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DEFINITIONS

In this Contract the following terms shall have the meanings set out below:

1.1. Authorized Creditor

The concept of Authorized Creditor (s) is only applicable to the provisions of this Contract. For this purpose, an Authorized Creditor shall be:

• Any multilateral credit institution of which the State of the Republic of Peru is a member;

• Any institution or any government agency of any country with which the State of the Republic of Peru has diplomatic relations,

• Any financial institution approved by the State of the Republic of Peru and designated as a First Category Foreign Bank pursuant to the circular letter in effect issued by the Central Reserve Bank of Peru;

• Any national or international financial institution approved by the GRANTOR, with a risk rating of not less than [“A”];

• All institutional investors considered as such by current legal regulations that directly or indirectly acquire any security issued by the CONCESSIONAIRE, such as Pension Fund Administrators (AFP);

• Any trust estate or securitization company incorporated in Peru or abroad; and,

• Any natural/legal entity that directly or indirectly acquires any security issued by the CONCESSIONAIRE through public offering.

Authorized creditors must not be in any way affiliated with the CONCESSIONAIRE, pursuant to provisions set forth by CONASEV Resolution No. 090-2005-EF-94.10, or regulation replacing it.

1.2. Certificate of Delivery of the Concession Asse ts

This is the document and its annexes, signed by the GRANTOR and the CONCESSIONAIRE in the Taking of Possession, stating that the CONCESSIONAIRE has received all goods that make up the Concession Assets pursuant to the provisions of Clauses 5.7 and 5.12 of the Contract.

1.3. Certificate of Network Delivery

It is the document and its annexes signed by the GRANTOR, SEDAPAL and the CONCESSIONAIRE whereby the latter delivers the drinking water distribution network of and/or sewerage network to SEDAPAL, subject to the CONCESSIONAIRE’s approval.

1.4. Certificate of Reversion of the Concession Ass ets

It is the document and its annexes signed by the GRANTOR and the CONCESSIONAIRE, stating the delivery of the Concession Assets to the GRANTOR, upon Expiry of the Concession.

1.5. Certificate of Termination

It is the document issued by the GRANTOR and signed jointly with the CONCESSIONAIRE, stating that the CONCESSIONAIRE has completed the Works and Operational Tests for the respective Stage, if applicable, in accordance with the approved Technical File.

1.6. Certificate of Completion of Works

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It is the document issued by the GRANTOR and signed jointly with the CONCESSIONAIRE, stating that the CONCESSIONAIRE has completed all the Works and Operational Tests, having previously issued Completion Certificates of each Stage, if applicable, in accordance with the approved Technical File.

1.7. Successful Bidder

It refers to the Short-listed Bidder, who has been granted the Project.

1.8. Private Investment Promotion Agency – PROINVER SIÓN

It is the body referred to by Law No. 28660, and PROINVERSIÓN’s Rules of Organization and Functions approved by Ministerial Resolution No. 225-2011-EF-10, responsible, among other functions, to promote the incorporation of private investment in public infrastructure and services works that can be granted in concession to the private sector in accordance with applicable Laws and Regulations.

1.9. Desalinated water

Sea water that is treated for drinking purposes which will be delivered to SEDAPAL in the quality and quantity established in Annexes 1.2 and 1.3 of the Service Agreement, which is part of this Contract.

1.10. Calendar year

It is the period from January 1 to December 31 every year.

1.11. Concession Year

It is the period of twelve (12) months computed from the Closing Date, ending the day before the date on which the period began to run.

1.12. Concession Area

It is the geographical area described in Annex 2 of this Contract, within which the rights and obligations of the Concession apply.

1.13. Competent Government Authority

It is the national, regional, departmental, provincial or municipal body or institution that by law exercises executive, legislative or judicial powers or that belongs to any of the governments, authorities or institutions mentioned above, with jurisdiction over persons or subjects in question.

1.14. Bidding Terms

It is the document, including its forms, annexes, appendices and circular letters issued by the Committee, setting the terms under which the bid was carried out.

1.15. Concession Assets

They are i) the immovable and moveable property, easements and infrastructure works provided by the GRANTOR, including the Concession Area, and ii) the constructed Works, the immovable and moveable property acquired or implemented and easements acquired during the term of the Concession. These assets will be used in the execution of the Concession, which are owned by the GRANTOR and will be returned and/or delivered by the CONCESSIONAIRE, upon completion of the Concession.

Page 13 of 189

1.16. CONCESSIONAIRE’s Assets

It refers to those moveable and immovable property built, purchased or implemented by the CONCESSIONAIRE, other than the Concession Assets, which are intended for the execution of the Contract and are owned by the CONCESSIONAIRE.

1.17. Expiry of the Concession

It consists of the expiry of the concession, for the reasons specified in this Contract or in the Applicable Laws and Regulations.

1.18. Works Implementation Schedule

It is the document that contains the schedule of Works Implementation on one or more stages, Commissioning and other activities prior to the Start of Operation, which will be an integral part of the Technical File and should be submitted as stated in Clauses 6.20 and 6.21.

1.19. WPC

Is the Certificate of Work Progress through which SEDAPAL grants conformity to Work progress, according to the monthly evaluation and certification of Works progress, after verification of Construction Milestone completion, following the template set out in Appendix 1 of Annex 10.

1.20. Commissioning Certificate

Document issued by the GRANTOR certifying that the Commissioning Period was successful and therefore the correct operation has been verified in accordance with the Technical File of the sanitation infrastructure, authorizing the Start of Operations.

1.21. Committee

It refers to the PROINVERSION Committee for Infrastructure Projects and Public Social Services, Mining, Sanitation, Irrigation and Agricultural Affairs – PRO DESARROLLO, constituted by Supreme Resolution No. 010-2012-EF and corresponding Errata.

1.22. GRANTOR

It is the State of the Republic of Peru, represented by the Ministry of Housing, Construction and Sanitation, under the provisions of the Third Supplementary Provision, Transitory and Final Supreme Decree No. 016-2005-HOUSING.

1.23. Concession

It is the public law legal relationship established between the GRANTOR and the CONCESSIONAIRE from the Closing Date, in which the GRANTOR grants the CONCESSIONAIRE the right to design, finance and build the Sanitation Infrastructure of the Project, the right to economic exploitation of the desalinated water treatment plant, its associated facilities and conveyance works to the point of delivery of drinking water to SEDAPAL, of the Wastewater Treatment Plants, the conveyance of treated wastewater and wastewater final disposal works.

1.24. CONCESSIONAIRE

The legal entity created by the Successful Bidder of the Project, that signs the Concession Contract with the GRANTOR and that will be responsible for the design, financing, Construction, Operation and Maintenance of the Project.

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1.25. Comprehensive Project Bid or Public Bid

It is the selection process conducted by PROINVERSIÓN and regulated by the Bidding Terms for the Project Award.

1.26. Construction Company

It is the CONCESSIONAIRE’s shareholder or the construction company hired by the CONCESSIONAIRE, specializing in the execution of the Works to be performed in the Concession, which met the technical construction requirements necessary for short-listing in the Contest.

1.27. Concession Contract or Contract

It refers to this Contract, including its Annexes and Appendices, entered into between the GRANTOR and the CONCESSIONAIRE, which shall govern relations between the Parties and SEDAPAL during the corresponding term of the Concession.

1.28. Service Agreement

It is the voluntary Contract to be entered into by the CONCESSIONAIRE and SEDAPAL on the Closing Date, whereby the CONCESSIONAIRE agrees to provide the Service in exchange for a financial compensation. The Service Contract is part of the Concession Contract.

1.29. Effective Control

It is understood that a natural or legal entity effectively controls another, when: − The first one, directly or indirectly controls more than fifty percent (50%) of its

share capital with voting rights; − The first one has the power to appoint more than fifty percent (50%) of the

members of the board of directors or equivalent governing body, or − Through any legal and/or contractual mechanism, the first one holds the

power of decision over the second.

1.30. Technical Dispute

The dispute concerning a particular event or act, whose resolution depends on the exclusive application of standards, rules, criteria, concepts and/or parameters strictly technical, environmental impact study plans or occupational safety and health.

1.31. Nontechnical Dispute

Any dispute not considered a Technical Dispute.

1.32. Design and Construction Logbook

This is the document in which the most important events will be recorded during the development of Design and Construction Proposals, including among others: List of source materials that are being used; relationship of suppliers and subcontractors; copies of test results or Operational Tests, copy of communications between the CONCESSIONAIRE and SEDAPAL and/or between the CONCESSIONAIRE and the GRANTOR; copy of Progress Reports including measures and list of quantities; copy of compliance with Implementation Schedule, list of events affecting compliance with the Implementation Schedule, and any other useful information to document the process of Construction. Finally, the conditions under which the Sanitation Infrastructure is commissioned shall be recorded.

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1.33. Days

These are working days, i.e. other than Saturday, Sunday or non-working holiday in the provinces of Lima and/or Callao.

1.34. Calendar Days

These are working days, non-working days and holidays.

1.35. Final Disposal

It involves the discharge of elements and sub-products generated by the operation of the sanitation infrastructure, being the following the most significant:

a) Brine: It refers to the discharge of effluent form the Desalination Plant in the aquatic receiving body through a Submarine Outfall complying with regulations established in Annex 4 and any other applicable regulations.

b) Treated wastewater: It refers to the discharge of effluent form the Wastewater Treatment Plants in the aquatic receiving body through a Submarine Outfall complying with regulations established in Annex 4 and any other applicable regulations.

c) Sludge: It refers to the placement of sludge generated by the Wastewater

Treatment Plants through: i) sanitary landfill, provided sludge has been previously subjected to proper handling and treatment; ii) al alternative option compatible with the technical requirements of the proposed treatment modality, or iii) the use of sludge for other economic activities. All cases mentioned must have the approval of the GRANTOR and the Competent Government Authority, complying with the rules set out in Annex 4 and others that apply.

Solid Waste: The placement of solid residues generated by the Desalination Plant and Wastewater Treatment Plants in a landfill, complying with the rules set out in Annex 4 and others that apply.

1.36. Dollar or US$

It is the currency or currency sign in legal tender in the United States of America.

1.37. Submarine Outfall

It includes pipes, fittings and related facilities for the Final Disposal of items and sub-products generated by the operation of the sanitation infrastructure in the sea, which comply with applicable technical and environmental standards.

1.38. Affiliated Company

A company will be considered affiliated with another company when Effective Control of such companies is held by the same Parent Company.

1.39. Auditing Company

It refers to the company hired by the Party invoking the imbalance or rupture of the economic and financial balance, with the Contract of the other Party. The opinion of the latter can only be referred to compliance with the minimum requirements established in the following paragraph.

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The auditing company must show at least the following requirements: (i) have ten (10) or more years of representation and or affiliation with an international auditing firm, (ii) have experience in auditing firms, and (iii) be duly registered in the register of qualified companies for appointment and hiring by the Comptroller General of the Republic of Peru.

1.40. Parent Company

It is an enterprise that has Effective Control of one or more companies. This definition also includes those enterprises that have Effective Control of a Parent Company, and so on.

1.41. Subsidiary Company

That company whose Effective Control is exercised by the Parent Company.

1.42. Related Company

Those companies linked by a relationship of Parent Company - Subsidiary Company (or vice versa) or Affiliate Company - Affiliate Company according to descriptions in the relevant definitions. Also special rules apply on relationship and economic groups approved by SBS Resolution No. 445-2000-SBS, modified by Resolution SBS No. 472-2006, CONASEV Resolution No. 090-2005-EF/94.10, CONASEV Resolution No. 005-2006 - EF-94.10 and CONASEV Resolution No. 016-2007-EF-94.10

1.43. Minimum Technical Specifications

These are the national and international technical standards associated with the minimum criteria of design quality and Construction of the Works, Final Disposal, Operation and Maintenance provided in Annex 4.

1.44. Environmental Quality Standards for Water (EC A-Water)

These are measures that set the level of concentration or degree of elements, substances or physical, chemical and biological agents present in the water in its condition as receiving body, which does not represent a significant health risk to people or the environment. These standards are defined in Supreme Decree No. 002-2008-MINAM, supplementary regulations and standards or regulations that replace them.

1.45. Environmental Impact Assessment (EIA)

It is the management document referred to in Article 25 of Law No. 28611, General Environmental Law, Article 4 of the Law of the National System of Environmental Impact Assessment and Subchapter I of the Environmental Protection Regulations for projects linked to activities of Housing, Spatial Planning, Construction and Sanitation, approved by Supreme Decree No. 015-2012-HOUSING. The EIA must be approved by the Competent Government Authority before the start of execution of the Works, and will be an integral part of this Contract as Annex 8.

1.46. Stage or Stages

It refers to the period or construction periods described in the Technical File which corresponds to a partial execution of the Works, provided that such works can be operated independently.

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1.47. Production Scales

Including: Production Scale I.- Scale in which drinking water is produced up to a maximum daily flow of 250 liters/sec treating wastewater collected from each of the existing WWTP and the new WWTP projected for an average flow of 100 liters/sec. This scale is developed, at least during the first 8 years from the Start of Operation. Production Scale II.- Scale in which drinking water is produced up to a maximum daily flow of 400 liters/sec treating wastewater collected from each of the existing WWTP and the new WWTP projected for an average flow of 170 liters/sec. This scale runs from the end of the Production Scale I period until the end of the Concession.

1.48. Technical File

This is the document that contains the information necessary to allow the execution and supervision of the Works, to be developed by the CONCESSIONAIRE containing the detailed engineering of the Works to be performed by it in accordance with the Minimum Technical Specifications, the Minimum Project Requirements and its Technical Proposal in order to comply with the provisions of this Contract. This document is binding for the execution of the Works.

1.49. Closing Date

It is the day and time when the contract is signed by the GRANTOR and the CONCESSIONAIRE, in the venue provided for it.

1.50. Effective Date of Obligations

It is the date when the CONCESSIONAIRE’s obligations become effective in relation to the start of Construction of the Works, among others. The Effective Dates of Obligations will be set to the date when conditions set out in clauses 6.24, 6.25 and 6.26, have been fully met.

1.51. Collection Trust

It is the trust fund constituted by SEDAPAL on April 16, 2010, as settler of a trust, in order to ensure proper and timely compliance with the obligations assumed as a result of the private investment promotion processes granted or to be granted, within its scope of services in the form of a concession, as provided in Chapter IX and Annex 17 of this Contract.

1.52. Performance Bond of the Concession Contract

These includes bank letters of guarantee or alternately stand-by letters of credit granted to ensure the CONCESSIONAIRE’s fulfillment of obligations including payment of penalties as provided in the Contract.

1.53. Works Performance Bond

These are bank letters of guarantee or alternatively standby letters of credit granted to guarantee the proper execution of the Works including payment of penalties as provided in the Contract.

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1.54. Economic Group

The group of legal persons, whatever their activity or corporate purposes, which are subject to the control of the same natural person or same group of natural persons, in accordance with definitions in CONASEV Resolution No. 090-2005-EF / 94.10, as amended by CONASEV Resolution No. 005-2006-EF/94.10, or regulation replacing it.

1.55. Construction Milestone or Milestone

It refers to the specific work progress or key fact within the construction process, set out in Annex 10 of this Contract.

1.56. IGV

It refers to the General Sales Tax described in Supreme Decree No. 055-99-EF, Consolidated Text of the Law on General Sales Tax and Excise Tax and the Municipal Promotion Tax referred to in Supreme Decree No. 156-2004-EF, Consolidated Text of the Municipal Tax Law, or rules that replace them.

1.57. Environmental Impact

These refer to any significant changes (favorable or unfavorable) in the environmental or some of its components as a result of human actions. The following can be listed: cumulative, direct, indirect and synergistic impacts.

1.58. Rate increase

It is the percentage increase in the rate of sanitation services, which the National Superintendence of Sanitation Services (SUNASS) approves at SEDAPAL‘s request in accordance with the Applicable Laws and Regulations, which includes the respective increase for the Provision of Sanitation Services for the southern districts of Lima Project.

1.59. Sanitary Infrastructure

The set of structures, equipment, fixtures and fittings that comprise the drinking water production, storage and distribution systems and wastewater collection, treatment and final disposal systems.

1.60. Sanitary Infrastructure by the CONCESSIONAIRE

It is the sanitary infrastructure that will be operated and maintained by the CONCESSIONAIRE, which includes capturing of seawater and the Desalination Plant to the Point of Delivery defined in the Service Agreement and final disposal infrastructure of by-products by this plant. Similarly, the operation and maintenance of the existing WWTP in the districts of San Bartolo and Santa Maria del Mar, as well as the new WWTP and wastewater final disposal as provided in Annex 5 of this Contract.

1.61. Start of Operation

It will be the date on which the CONCESSIONAIRE receives a Certificate of Commissioning of the corresponding Stage. The Start of Operation of one stage shall not prevent the other stages from being in a Pre Operating Period.

1.62. Inventory

These are the Initial, Work, Annual and Final Inventories prepared and submitted in accordance with the following terms:

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Assets that the GRANTOR will effectively deliver on the Closing Date and which shall be part of the Certificate of the Concession Assets Delivery. This list shall also specify movable and/or immovable property to be written off or demolished, for the proper execution of the Works. Work Inventory. - The list of assets for the Works to be executed during the Concession to be submitted by the CONCESSIONAIRE to the GRANTOR at the time of completion, with the request for Work approval referred to in Clause 6.33.

Annual Inventory. - The list of Concession Assets that the CONCESSIONAIRE shall submit to the GRANTOR within the first fifteen (15) Calendar Days of April of each calendar year until the Expiry of the Concession. This list will include the existing Concession Assets at the closing date of such list.

Final Inventory. - The list of Concession Assets the CONCESSIONAIRE declares to have at the Expiry date of the Concession. It will be submitted by the CONCESSIONAIRE to the GRANTOR when, for any cause, the Expiry of the Concession occurs.

1.63. Investment

Concept that includes costs incurred due to: (i) the development and supervision of the Technical File, (ii) the development, approval and implementation of the EIA, obtaining of the CIRA and other authorizations, permits and licenses, (iii) the execution of the Works and Commissioning Period, including overhead and profit, (iv) equipment and its replacement, (v) the cost of Works supervision, and (vi) financial and financing costs. This concept is attributed to project execution via one or more Phases. Investment must be entered in the Technical File and will be paid as provided in Chapter IX, and such investment is deemed to be made up of the following components: Water Component Investment. - Investment associated with Quick Impact Works and subsections A, B, C, D, E and I described in Annex 5 for Comprehensive Works. Sewerage Component Investment. - Investment associated with subsections F, G and H described in Annex 5 for Comprehensive Works.

1.64. Investment in Works

Concept that includes costs incurred due to: (i) the development of the Technical File excluding supervision thereof, (ii) the development and approval of the EIA, obtaining of CIRA and other authorizations, permits and licenses, (iii) the execution of the Works and Commissioning Period, including overhead and profit, and equipment.

Investment in Works must be entered in the Technical File.

1.65. Referential Investment in Works

It refers to the referential cost of the Investment in the Project’s Works, in every respect, including among others, its design, construction and commissioning, amounting S/. (______________ and 00/100 Nuevos Soles), excluding the General Sales Tax (IGV). This referential amount is non-binding for the execution of the Works and will be used only when specifically instructed by the Contract.

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The referential cost of the Investment in Works mentioned in the preceding paragraph does not include the cost of design and works supervision which shall amount to ___% of the value of such Referential Cost.

1.66. Applicable Laws and Regulations

This refers to the set of laws governing the Contract. It includes the Political Constitution of Peru, rules with force of law, supreme decrees, regulations, directives and resolutions that any Competent Governmental Authority may dictate, in accordance with its founding law, which shall be binding on the Parties.

1.67. LIBOR

This refers to the London Interbank Offered Rate for six (6) months reported by Reuters at the closing time in London.

1.68. Environmental Baseline

It refers to the physical, chemical and biological aspects and oceanographic conditions of the receiving body, which includes an inventory of Environmental Liabilities, and is part of the Environmental Impact Study to be approved by the Competent Government Authority.

1.69. Maintenance

The set of activities carried out in order to preserve (preventive maintenance) or recover (corrective maintenance) structural and operational conditions under which the Sanitary Infrastructure was designed or built.

1.70. Operating and Maintenance Manual

Document prepared by the CONCESSIONAIRE, which contains instructions for operating and maintaining the sanitary infrastructure works.

1.71. Works

Property, infrastructure, equipment and other assets resulting from the Execution of Works of the Sanitary Infrastructure Project, which will be implemented during the term of the Concession. It includes all necessary aspects for those assets to be used, implemented, operated and/or maintained by the CONCESSIONAIRE under the terms of this Contract and the Service Agreement.

1.72. Quick Impact Works

It refers to those Works that will partially improve drinking water supply in the districts of Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar. Quick Impact Works are governed by the provisions of Chapter VI and Annex 5 of this Contract.

1.73. Comprehensive Works

It refers to all those Works that will expand, improve and/or supplement the drinking water supply systems, sewerage, treatment and final disposal of wastewater from the districts of San Bartolo, Punta Hermosa, Punta Negra and Santa Maria del Mar. Comprehensive Works are governed by the provisions of Chapter VI and Annex 5 of this Contract.

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1.74. Operation

It includes the management and operation of the Concession Assets as provided in Chapter VIII and exclusively for the purposes specified in this Contract and the Service Agreement.

1.75. Operator

These is/are the CONCESSIONAIRE’s shareholder(s) or specialized company(s) in the operation and management of the activities to be carried out in the Concession, which have met the technical operation requirements necessary for short-listing in the Bid.

1.76. Party

It refers, as applicable, to the GRANTOR or the CONCESSIONAIRE.

1.77. Parties

It refers, jointly, to the GRANTOR or the CONCESSIONAIRE.

1.78. Minimum Participation

It refers to the shareholding equal to twenty-five percent (25%) of the share capital subscribed and paid by the CONCESSIONAIRE that the Strategic Partner shall have and maintain as a minimum in the Concession for the duration of the Concession. If the Successful Bidder is a single legal entity, it must have the Minimum Participation in the CONCESSIONAIRE.

1.79. Environmental Liabilities

This refers to the source of negative environmental impacts caused by one or several investment projects or past or present activities unrelated to the PROVISUR project.

1.80. Construction Period

This is the period that must begin no later than thirty (30) Calendar Days after the Effective Date of Obligations as provided in the Technical File.

1.81. Operation Period

It is the period between the Start of Operations and the date of completion of this Contract. If the Technical File contemplates the project implementation by Phases, this period will be between the Start of Operations of the First Phase and the date of completion of this Contract.

1.82. Pre-operating Period

It is the period between the Closing Date and the Start of Operations. If the Technical File contemplates the project implementation by Phases, for the First Phase this period will be between the Closing Date and the Start of Operations of the First Phase. This period ends with the receipt by the CONCESSIONAIRE of the Commissioning Certificate of the First Phase.

1.83. Commissioning Period

It is the period between the date of issuance of the Completion Certificate of the corresponding Phase, if applicable, or the Completion Certificate of the Works and the issuance of the corresponding Commissioning Certificate.

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1.84. Desalination Plant

It is the infrastructure required for sea water desalination treatment processes to be carried out by the CONCESSIONAIRE, which will enable to achieve water quality suitable for human consumption, in compliance with applicable laws and regulations.

1.85. Wastewater Treatment Plant or WWTP

It refers to the infrastructure for treatment processes to be carried out by the CONCESSIONAIRE, which allow the purification of waste water, complying with applicable laws and regulations.

1.86. Operational Tests

These are procedures that are necessary to verify the correct operation of machinery, equipment and facilities that make up the Project, in each of its Stages. These procedures shall be proposed by the CONCESSIONAIRE in the Technical File.

1.87. Project or PROVISUR

It consists of the design, financing and construction of the sanitary infrastructure for the expansion and improvement of water supply, sewerage, treatment and disposal of wastewater services, under the responsibility of SEDAPAL in the districts of Punta Hermosa, Punta Negra, San Bartolo, Santa María del Mar, as well as the operation and maintenance of components detailed in Chapters VII and VIII.

1.88. Point of Delivery

Venue where the CONCESSIONAIRE will deliver drinking water to SEDAPAL.

1.89. Measuring Points

Physical location where volumes of drinking water and wastewater will be measured, as appropriate.

1.90. Sampling Point or Sampling Station

Physical location where sampling of drinking water, wastewater and receiving body will be carried out, as appropriate.

1.91. Point of Receipt

Physical location where the CONCESSIONAIRE will receive wastewater collected by the sewage network.

1.92. Basic Unit Remuneration (RUB)

It is the consideration per cubic meter of drinking water delivered to SEDAPAL at the Points of Delivery.

1.93. Annual Remuneration per Services (RAS)

It is composed by the sum of Compensation for Investment (RPI), which pays the Investment and Compensation for Maintenance and Operation (PROM), which pays the costs of operating and maintaining the Treatment System and wastewater final disposal.

1.94. Compensation for Investment (RPI)

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It is the annual compensation in Nuevos Soles that SEDAPAL will pay to the CONCESSIONAIRE, to compensate the investment, through the Collection Trust.

1.95. Compensation for Maintenance and Operation (P ROM)

It is the annual compensation in Nuevos Soles that SEDAPAL will pay to the CONCESSIONAIRE, through the Collection Trust, for the Operation and Maintenance activities incurred by the latter in the Service under the Service Contract.

1.96. Work Progress Report

It is the monthly document drawn up by the CONCESSIONAIRE from the Start of Construction, according to the procedure developed in Annex 10 of this Contract.

1.97. Sewage Network

Set of pipes, fittings, drainage pumping chambers and complementary facilities that collect wastewater and lead wastewater to the corresponding WWTP.

1.98. Distribution Network

Set of pipes, fittings and ancillary facilities that supply the population with drinking water through house connections and/or standpipes.

1.99. Minimum Requirements of the Project

It is the description of components, technical specifications and scope to be considered by the CONCESSIONAIRE for the preparation of the Technical File, execution of Works, installation of equipment thereof and the Commissioning Period, as detailed in Annex 5 of the Contract.

1.100. RPICAO

It refers to the amount proportional to the CONCESSIONAIRE’s RPI, equivalent to the right of collection for each WPC issued by SEDAPAL.

1.101. Brine

Wastewater rejects or concentrate of salts generated as by-product in the seawater desalination process.

1.102. SEDAPAL

It is the abbreviated designation of the provider of Sanitation Services of Lima “Servicio de Agua Potable y Alcantarillado de Lima Sociedad Anónima”, which shall sign the Service Agreement with the CONCESSIONAIRE.

1.103. Service

It includes capturing and desalination of seawater, conveyance of drinking water to the Points of Delivery, including Final Disposal of the by-products generated by treatment processes. Likewise, treatment and final disposal of wastewater received at the Points of Reception. Services must be provided in accordance with the provisions of the Service Agreement and Applicable Laws and Regulations.

1.104. Easements

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Lots of land located in land categorized as property easement as they are encumbered by easement, where the Works (dominant land) will be carried out and will be delivered to the CONCESSIONAIRE to enable it to fulfill the obligations under this Contract.

1.105. Strategic Partner

This is the CONCESSIONAIRE’s shareholder(s) who demonstrated during the prequalification process, experience in construction or operation, or both, and who hold ownership of the Minimum Participation. If the Strategic Partner has proven experience in construction, the CONCESSIONAIRE must hire an operator that meets the requirements set out in the Bidding Terms. If the Strategic Partner has proven experience in operation, the CONCESSIONAIRE must hire an Operator that meets the requirements set out in the Bidding Terms. In either of the above cases, if the experience was accredited by more than one company, all these, together, shall bear the Minimum Participation. On the other hand, if there is more than one Strategic Partner, each of these must hold, individually, the Minimum Participation.

1.106. Soles or Nuevos Soles

This is the currency in legal tender of the State of the Republic of Peru.

1.107. SUNASS

It is the National Superintendency of Sanitation Services.

1.108. Design and Construction Supervisor

It is the independent consulting firm selected by the GRANTOR for supervising the preparation of the Technical File, the execution of Works and supervision of the Commissioning Period.

1.109. Suspension

It is the temporary cessation of activities related to the implementation of the Contract, as a result of the occurrence of any grounds for suspension, according to the provisions of this Contract or to Applicable Laws and Regulations.

1.110. Exchange Rate

Is the financial system’s average buying and selling exchange rate for US Dollars periodically published by the Superintendency of Banking and Insurance (SBS) and published in the official gazette "El Peruano" for the conversion of Nuevos Soles to US Dollars and vice versa.

1.111. Taking of Possession

It is the act whereby the GRANTOR transfers ownership of the Concession Assets to the CONCESSIONAIRE, recording such act in the Delivery of the Concession Assets minute.

1.112. Concession’s TUO

It is the Consolidated Text (TUO) of the Regulations with force of law governing the delivery of the Concession of infrastructure Public Works and Public Services to the private sector, approved by Supreme Decree No. 059-96-PCM.

1.113. Coastal Zone

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It is the stretch of the coastline, beach and seabed adjacent to the mainland coast measured from the low tide line to _______ meters offshore, parallel to the coast of Peru

1.114. Mixing Zone

It is the area where the initial dilution of dumping-at-sea activities is achieved and compliance of environmental standards is not enforceable in accordance with Article 22° of Administrative Resolution No. 218-2012-ANA.

CHAPTER II: LEGAL STATUS, PURPOSE, MODALITY, POWERS OF REPRESENTATION AND CHARACTERISTICS

LEGAL STATUS

2.1. The Concession subject of the Contract is granted for the design, financing and

construction of the Sanitary Infrastructure as well as the operation and maintenance of the components of such infrastructure, as defined in the scope of this Contract, within the private investment promotion process undertaken by the State of the Republic of Peru.

2.2. The private investment promotion process mentioned above does not involve the transfer of ownership of the Concession Assets, which maintain at all times their status as State property.

PURPOSE

2.3. By this Contract, the GRANTOR grants the CONCESSIONAIRE the Concession for

the design, financing and construction of Sanitary Infrastructure works aimed at expanding and improving services for drinking water supply, sewerage, treatment and final disposal of wastewater. It also includes the operation and maintenance of the collection infrastructure, Seawater Desalination Plant, to the Point of Delivery as set out in Annex 1 - Service Contract and operation and maintenance of final disposal infrastructure of the by-products generated by this plant. Moreover, by this Contract, the GRANTOR grants the CONCESSIONAIRE the Concession to operate and maintain the wastewater bypass infrastructure from the Point of Reception as set out in Annex 1 - Service Agreement, of the Wastewater Treatment Plants and infrastructure for effluent final disposal and by-products generated by them.

2.4. The main activities or benefits of the concession, which are the rights and obligations subject of the Contract are, at least, the following: a) Preparation of the Technical File b) Construction of Sanitary Infrastructure works c) Operation of Wastewater Treatment Plants and Desalination Plant.

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d) Maintenance of Wastewater Treatment Plants and Seawater Desalination Plant

MODALITY

2.5. The Concession is provided within the framework on Self-sustainable Public - Private Partnerships, referred to in subsection a), Article 4 of Legislative Decree No. 1012, consistent with Article 6 of its Regulations approved by Supreme Decree No. 146-2008 -EF.

2.6. The Concession modality is free, according to provisions in subsection b), Article 14 of the Concessions’ TUO.

POWERS OF REPRESENTATION FOR SEDAPAL

2.7. The GRANTOR, in this act and by virtue only of this Clause, empowers SEDAPAL to represent the GRANTOR and exercise all the powers and rights granted under this Contract, including among other powers the prerogative of monitoring compliance with the obligations under this Contract, except for the following powers which correspond to the GRANTOR:

a) Modify the Concession Contract when necessary, previous Contract with the

CONCESSIONAIRE, observing the nature, economic and technical conditions contractually agreed and economic - financial balance of benefits by the Parties.

b) Declare the Suspension of the Concession or Expiry of the Concession, where

one of the grounds set out in the applicable laws and regulations or in the Contract arise.

c) Impose compulsory easements.

d) Extend the term of the Contract.

e) Authorize the transfer of the Concession’s rights or assignment of the CONCESSIONAIRE’s contractual position.

f) Deal directly and appear in person in arbitration proceedings referred to in Chapter XVI.

g) Enforce letters of guarantee corresponding to Guarantees.

h) Approve the transfer of the Minimum Participation, under the terms of Clause 3.3 h)(i)

i) Request for information, changes to the CONCESSIONAIRE’s statutes, under the terms of Clause 3.3 ¡Error! No se encuentra el origen de la referencia. h)(iii) and Clause 13.213.2.

j) Authorize the creation of security in favor of the Authorized Creditors.

Con formato: Español (Perú)


Código de campo cambiado



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CHARACTERISTICS

2.8. Notwithstanding the multiplicity of activities and services that make up the purpose

of this Contract, as described in the preceding sections, the Contract is unitary in nature and responds to a single cause.

2.9. The Contract is principal, of reciprocal benefits, of continuing performance and

ongoing implementation.

CHAPTER III: EVENTS AS OF THE CLOSING DATE

STATEMENTS OF THE PARTIES

3.1. The CONCESSIONAIRE guarantees in the Closing Date the accuracy of the

following statements: a) That the Strategic Partner's Minimum Participation, the CONCESSIONAIRE’s

Articles of association and incorporation documents complies with the requirements of the Bidding Terms.

b) That the CONCESSIONAIRE is duly authorized and able to assume the

obligations set forth in the Contract, and has complied with all necessary the requirements to enter into such Contract and to meet the commitments set out therein.

No other acts or proceedings by the CONCESSIONAIRE are necessary to authorize the signing and fulfillment of its obligations under the Contract.

c) That it has no impediments to sign contracts pursuant to the provisions

contained in Article 1366 of the Civil Code, Article 27 of the Concessions’ TUO and has not been administratively sanctioned with temporary or permanent disqualification from exercising its rights to contract with the State.

In the event that after signing the Contract, the statements aforementioned are found to be false this Contract will terminate automatically, being necessary to proceed in accordance with the provisions of Chapter XV, enforcing the Performance Bond of the Contract under Clause 10.1 of the Concession Contract.

d) The CONCESSIONAIRE and its shareholders hereby expressly waive,

unconditionally and irrevocably any diplomatic claim by conflicts or disputes that may arise from the Contract.

e) That to the Closing Date, all information, statements, and certifications and in

general all documents submitted in Envelopes No. 1 and No. 2 during the Bidding process, remains in force.

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In the event that after signing the Contract, the statements aforementioned are found to be false this Contract will terminate automatically, being necessary to proceed in accordance with the provisions of Chapter XV, enforcing the Performance Bond of the Contract under Clause 10.1 of the Concession Contract, in effect at that time.

f) That the CONCESSIONAIRE declares that it is an essential condition for the

signing of this contract that the CONCESSIONAIRE is in a situation of economic and financial balance.

3.2. The GRANTOR guarantees the CONCESSIONAIRE, on the Closing Date, the

accuracy of the following statements: a) That any contingencies or liabilities incurred before the date of signing the

Certificate of Delivery of the Concession Assets shall be borne by the GRANTOR in accordance with the provisions of Applicable Laws and Regulations; from the date of signing the Certificate of Delivery of the Concession Assets. The GRANTOR shall only assume the obligations that are expressly under its responsibility, in accordance with this Contract.

b) That the GRANTOR is duly authorized under the Applicable Laws and

Regulations to act as such in the Contract. The signing, delivery and performance by the GRANTOR of the commitments contained in the Contract are within its powers, according to Applicable Laws and Regulations.

No other action or proceeding by the GRANTOR or any other governmental entity is required to authorize the signing of the Contract or for the fulfillment of the GRANTOR’s obligations contemplated thereby.

c) That all administrative acts, conditions, requirements and obligations under the

GRANTOR’s responsibility have been met in order to enter into this Contract and to duly comply with its terms.

d) That there are no laws in force that prevent the GRANTOR from fulfilling its

obligations under this Contract. Also, that there are no actions, lawsuits, investigations, litigations or proceedings before court, arbitral tribunal or Competent Governmental Authority, non-executed judgment or award or decision of any kind, prohibiting, opposing or in any way impeding the fulfillment or subscription of the terms in the Agreement by the GRANTOR.

e) That the provisions in the Contract have been made on the basis of Applicable

Laws and Regulations. f) That the Concession Assets are not subject to taxes or charges of any kind and

there is no legal or facto impediment that in any way may disturb, affect or impede its effective delivery to the CONCESSIONAIRE or use thereof by the latter.

g) That there are no administrative, labor, tax, judicial, legal or otherwise liabilities,

obligations or contingencies of any nature that somehow affect or may affect the Concession, the Concession Assets, the right to Build or the right to Operation and Maintenance works in the future.

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h) That as long as the CONCESSIONAIRE and its investors comply with the

provisions of the Applicable Laws and Regulations, the legal stability agreement referred to in Legislative Decrees No. 662 will be granted, which confer a stable legal status to foreign investment by recognition of certain guaranties and No. 757, which dictates the Framework Law for Private Investment growth, and Law No. 27342, Law Governing Legal Stability Agreements under Legislative Decrees No. 662 and 757.

i) That for contractual purposes, the GRANTOR’s representations, guaranties and

obligations in this Contract shall not be affected by changes in Applicable Laws and Regulations. The GRANTOR commits before the CONCESSIONAIRE to grant legal formalities necessary to give proper effect to the statements contained in this Contract, within the framework established in Decree Law No. 25570 and its amendments and complementary regulations.

j) That the GRANTOR ensures the CONCESSIONAIRE that it will not grant, during the term of the Concession, any assignment or license affecting the rights acquired by the CONCESSIONAIRE under this Contract.

k) That the GRANTOR will not perform acts that prevent or impair the performance

of the services by the CONCESSIONAIRE, contained in this Contract and the Service Contract.

l) That the GRANTOR declares that it is an essential condition for the signing of

this contract that the GRANTOR is in a situation of economic and financial balance.

FINDINGS ON THE CLOSING DATE

3.3. The CONCESSIONAIRE must have complied with the following at the Closing Date:

a) Deliver the CONCESSIONAIRE’s notarial deed of incorporation, with proof of

registration, in order to establish: (i) that it is a new legal person validly incorporated in accordance with Applicable Laws and Regulations, and (ii) that it has the same partners, shareholders, or members and in the same proportions as members of the Successful Bidder. The requirement referred to in subsection (ii) shall not apply where the Successful Bidder is a single legal entity, in which case, it should only have at least the Minimum Participation within the CONCESSIONAIRE.

b) Demonstrate a minimum share capital of US$ _______ (Million and 00/100

American Dollars) or its equivalent in Nuevos Soles subscribed as follows:

• An initial capital of not less than US$ (_________________y 00/100 American Dollars) or its equivalent in Nuevos Soles on the Closing Date;

• ___ percent (_____%), on the Effective Date of Obligations for Quick Impact Works.

• One hundred percent (100%) on the Effective Date of Obligations.

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The minimum capital specified above shall be paid in cash as follows:

• ___________ percent (___%) of the subscribed capital on the Closing

Date; • One hundred percent (100%) of the subscribed capital maximum at six (6)

months from the Effective Date of Obligations for Quick Impact Works. • One hundred percent (100%) of the subscribed capital maximum at

twenty-four (24) months from the Effective Date of Obligations.

In case of suspension, and only for reasons not attributable to the CONCESSIONAIRE, as stated from Clauses 4.7 to ¡Error! No se encuentra el origen de la referencia. 4.14 of this Contract, the CONCESSIONAIRE may request the GRANTOR an extension of the deadline for the establishment of the minimum share capital mentioned above, for a period similar to the duration of the suspension.

c) Proof of registration in the registry office of the CONCESSIONAIRE’s legal

representative powers who will sign the contract in its behalf.

d) Deliver notary copy of documentation indicating that their internal competent organs have approved the Contract.

e) Deliver notary copy of entries in the shares ledger or equivalent document evidencing the conformation of shareholding or the CONCESSIONAIRE’s shares.

f) Provide the record or record evidence of not being disqualified to participate in

selection processes or to contract with the State, issued by the Supervisory Body of Government Procurement (OSCE) regarding the company and/or Members of the Consortium chosen as the Successful Bidder, as appropriate.

g) Submit insurance policies proposals of companies that will cover insurance and

the list of companies that will potentially perform risk analysis for All Construction and Assembly Risk insurance, in accordance with Chapter XI, for approval in accordance with the provisions of the said Chapter.

h) The statute referred to in subsection a) above should contain at least the

following provisions:

(i) A restriction on free transfer, regulation or encumbrance of the shares representing twenty-five percent (25%) for the Strategic Partner’s Minimum Participation, in favor of third parties until the expiry of the tenth year from the Start of Operations date, except as provided in Chapter X on the possibility of taxing the Minimum Participation from the Closing Date, in order to obtain financing.

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From the eleventh year from the Start of Operations, the Strategic Partner may transfer, regulate or encumber such shares or interests in favor of a new strategic partner, subject to the CONCESSIONAIRE’s approval. This new strategic partner must meet the same operation or construction technical requirements that were established for the Strategic Partner in the Bidding Terms. The approval by the GRANTOR will be based on the fulfillment of the operation or construction technical requirements of, as appropriate. The restriction referred to above does not include the transfer of the Strategic Partner’s Minimum Participation to a company of the same Economic Group, to the extent that effective control is exercised for both by the same Parent Company, with the GRANTOR’s prior written approval which shall be issued within a period not exceeding thirty (30) calendar days, provided that the new strategic partner meets the same operation or construction technical requirements set for the initial Strategic Partner.

(ii) A restriction on free transfer, regulation or encumbrance of the shares, other

than the Minimum Participation, in favor of other Bidders or members of other Bidders who submitted bids economic proposals during the Bid, until the tenth year expires from the Start of Operations. From the eleventh year since the Start of Operations, shareholders may transfer, regulate or encumber such shares in a free manner.

The above limitation also includes the transfer, regulation or encumbrance of the shares in favor of companies that may have direct or indirect relation or that are part of an Economic Group, as defined in CONASEV Resolution No. 090-2005-EF/94.10, as amended by CONASEV Resolution No. 005-2006-EF/94.10, or legislation replacing, as appropriate, regarding legal persons who were Participants in the Bidding Process, or with members of consortiums that submitted economic proposals during the Bidding Process, other than the Successful Bidder who was awarded the Project.

(iii) Any change to the articles of incorporation involving a change in the regime

of majorities, types of shares and percentages that shareholders must hold, their management bodies as well as any capital increase, capital reduction, merger, division, transformation or liquidation of the CONCESSIONAIRE, from the Closing Date until the expiry of the tenth year from the Start of Operations must be approved by the CONCESSIONAIRE’s shareholders who jointly represent, at least two-thirds (2/3) of its share capital, both in first and second call.

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The CONCESSIONAIRE shall deliver to the GRANTOR, for information purposes, a copy of the minute stating the general meeting’s Contract approving any of the processes mentioned above.

In any case may capital reductions or increases affect the minimum capital or Minimum Participation, according to provisions in this Chapter. The Strategic Partner shall oppose any motion submitted by a CONCESSIONAIRE’s shareholder or proposing an increase in share capital by which the Strategic Partner will be unable to exercise its preferential subscription rights enabling to, at least, maintain the Minimum Participation in the Concession.

(iv) The CONCESSIONAIRE is a partnership whose corporate purpose is solely limited to the implementation of activities under the Concession Contract and the Service Agreement.

(v) For purposes of the CONCESSIONAIRE’s incorporation, operations and

performance, it must comply with the mandatory provisions of Applicable Laws and Regulations.

(vi) The term of the CONCESSIONAIRE’s incorporation must be of two (2) years minimum after the effective date of the Concession Contract. In case of renewal or extension of the Concession Period referred to from Clauses 4.2 to 4.5, the term of the CONCESSIONAIRE’s incorporation shall extend this new term plus two additional years.

i) Deliver the Performance Bond of the Concession Contract set forth in Chapter X. j) Make the deposit in the account specified by PROINVERSIÓN corresponding to

the reimbursement of proceedings expenses. k) Make the deposit in the account specified by PROINVERSIÓN corresponding to

the FONCEPRI contribution. l) Subscribe the Concession Contract and the Service Agreement.

3.4. The GRANTOR, meanwhile, shall comply with the following on the Closing Date:

a) Return to the CONCESSIONAIRE the Guarantee of Validity, Validity Term and Seriousness of the Proposal submitted by the Successful Bidder.

b) Provide copy of Supreme Decree, and have signed the respective Security and

Guarantee Contract, granting the State’s guarantees in support of the statements, assurances and obligations assumed by the GRANTOR under this Contract, as provided in the Article 2 of Decree Law No. 25570, as amended by Article 6 of Law No. 26438, which define the scope and modify various items of D. Leg. No. 674, in relation to the private investment promotion process.

c) Deliver the List of Concession Assets which the CONCESSIONAIRE may take possession, as provided in Clause 5.7.

d) Deliver the Concession Contract and the Service Agreement duly subscribed.

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CHAPTER IV: VALIDITY OF THE CONCESSION

TERM

4.1. The term of the concession is twenty-five (25) years from the Closing Date.

EXTENSION TO THE TERM OF THE CONCESSION

4.2. The term of the concession may be extended at the GRANTOR’s option, upon the CONCESSIONAIRE’s request. The request must be made by written communication, with an anticipation of not less than two (2) years prior to expiry of the Concession, and the GRANTOR must define whether the extension is granted with an anticipation of not less than one (1) year as of the expiry of the Concession.

In case there is an extension to the Concession Contract, SEDAPAL agrees to extend the term of the Service Agreement, on the same terms as the Concession Contract.

4.3. After the first extension, the concession may be extended at the GRANTOR’s

discretion, upon written request by the CONCESSIONAIRE with an anticipation of not less than one (1) year prior to the expiry of the first extension, and the GRANTOR must determine whether to grant the extension with an anticipation of not less than six (6) months prior to the expiry of the first extension.

4.4. In the event that the term of the concession is extended, new conditions governing

the Concession Contract must be set under the responsibility of the Parties, observing among other things, provisions in the Service Contract and maintenance of the economic financial balance for the duration of the extension. If the parties fail to reach an Contract on the new conditions governing the Concession Contract, the extension will be deemed ineffective.

4.5. In cases for reasons not attributable to the CONCESSIONAIRE, there is a lag or delay in the performance of the services under the Contract or the Service Agreement, and this delay causes economic and financial losses to the CONCESSIONAIRE, the latter may request the extension of the concession term to recoup from that loss. The prejudice in this case, must be accredited and described in a report prepared by an independent consulting firm of recognized standing and experience, selected and hired by the CONCESSIONAIRE, with the GRANTOR’s prior approval. For this purpose, the CONCESSIONAIRE shall submit to the GRANTOR the company's proposal to be hired for the latter to authorize its engagement, within a period not exceeding fifteen (15) Days after receiving the proposal. Considering that report, the GRANTOR shall determine the term and conditions of the extension.

MAXIMUM TERM

4.6. In any case will the Concession term plus the term of any extension or extensions exceed a maximum of sixty years (60).

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TERM SUSPENSION

4.7. The Concession term may be suspended at the request of either Party, in the following cases: a) Force Majeure, according to provisions in Chapter XVIII. b) Written Contract between the Parties, arising from circumstances other than

those referred to in the preceding paragraph. c) Other cases expressly provided in this Concession Contract.

4.8. The CONCESSIONAIRE may invoke the Suspension based on one of the grounds

mentioned by requesting such suspension addressed to the GRANTOR, within five (5) Days after the fact has been known. Notwithstanding the above, within seven (7) Days following the filing of the said request, the support for the suspension request must be submitted informing the development of events. The estimated period of suspension will also be supported as well as the expected impact degree.

4.9. The GRANTOR shall act within thirty (30) Calendar Days after receiving support for the suspension request or failing that, at the expiry of seven (7) Days provided for its submission. In the absence of the GRANTOR’s response, the request for suspension will be considered accepted for a period designated by the applicant. If the CONCESSIONAIRE disagrees with the GRANTOR’s decision, it may resort to dispute settlement mechanisms provided for in this Contract, as applicable.

4.10. The GRANTOR may invoke the Suspension for one of the reasons indicated, through a suspension notice addressed to the CONCESSIONAIRE suspension, within five (5) Days after the fact has been known. Notwithstanding the above, within seven (7) Days following the filing of the aforementioned communication, support of the suspension must be submitted, informing the development of events. The estimated period of suspension will also be supported as well as the expected impact degree.

4.11. The CONCESSIONAIRE shall act within thirty (30) Calendar Days after receiving support for the suspension request or failing that, at the expiry of seven (7) Days provided for its submission to issue a response. In the absence of the GRANTOR’s response, the request for suspension will be considered accepted for the period designated by the requestor. If the GRANTOR disagrees with the CONCESSIONAIRE’s decision, it may resort to dispute settlement mechanisms provided for in this Contract, as applicable.

4.12. The suspension, according to the causes mentioned above, will result in the extension of the Concession term for a period equivalent to the Suspension, and the Parties must agree on a new schedule in meeting obligations when that proves necessary.

4.13. While the GRANTOR does not rule on that request, the CONCESSIONAIRE, the GRANTOR and SEDAPAL must comply with their obligations under this Contract. In particular, if the Concession is in the operation phase, the CONCESSIONAIRE shall providing the Services, unless this is materially and technically impossible, and if it does not imply an imminent risk to the environment, health, safety of persons or the integrity of the Work. In such a case, SEDAPAL is bound to assume the corresponding payment in consideration for the Service provided, as long as the CONCESSIONAIRE continues proving it.

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4.14. In any case will the suspension limit SEDAPAL’s obligations in relation to the

payment of the corresponding RPI recognized in the WPC certificates already issued, which shall be in accordance with provisions in this Contract.

CHAPTER V: PROPERTY REGIME

PROPERTY REGIME

5.1. All the Concession Assets which the GRANTOR is bound to deliver to the CONCESSIONAIRE under this Contract, shall be delivered free of liens, encumbrances and third party occupations in order to comply with the CONCESSIONAIRE’s obligations.

5.2. During the term of the Concession, the GRANTOR will retain the right of ownership over the Concession Assets. Notwithstanding the foregoing, this Concession is sufficient basis for the CONCESSIONAIRE to exercise possession, use and benefit rights as well as exclusive Operation rights of the Concession Assets and to assert its rights against third parties. Also, the concession is sufficient basis to ensure the CONCESSIONAIRE’s economic operations and any other similar, directly linked to the Concession, in the banking and financial system, within the provisions of Clause 10.8 of this Contract.

5.3. Effluent and waste generated by the Operation are property of the State of the Republic of Peru, through the GRANTOR.

5.4. After signing the Concession Assets Certificate of Delivery, the CONCESSIONAIRE will be responsible, during the Concession term, for maintaining the Concession Assets free of liens and encumbrances and free of physical occupations by third parties not authorized by the CONCESSIONAIRE for purposes of the Concession.

5.5. The CONCESSIONAIRE may exercise the rights that are necessary to fulfill its obligations set out in this Contract, the Service Agreement and the Applicable Laws and Regulations.

5.6. The CONCESSIONAIRE shall have the exclusive Operation of seawater intake,

seawater pumping stations, seawater driveline with associated facilities, Desalination Plant including associated facilities, drinking water pumping station, drainage facilities and final disposal of waste brine resulting from the treatment, drinking water pumping stations and drinking water driveline and/or conduction. Also the Wastewater Treatment Plants of San Bartolo, Santa María and the one built under the project, wastewater reception, measurement and conditioning facilities, treated wastewater pumping stations, drive lines, boxes and related facilities downstream from treatment plants and final disposal facilities, including those intended for the release of treated wastewater for authorized uses. TAKING OF POSSESSION OF CONCESSION ASSETS

5.7. The Taking of Possession of the Concession Assets that the GRANTOR will deliver to the CONCESSIONAIRE shall be carried out on the Closing Date, event in which the Certificate of Delivery of the Concession Assets must be signed, as long as provisions of Clause 5.1 of the Contract have been verified. The initial inventory and any other element that helps to identify and interpret the delivered object, condition and status shall be part of the Certificate of Delivery of the Concession Assets.

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5.8. The signing of the Certificate of Delivery of the Concession Assets will be carried out

in the presence of a Notary Public certifying delivery, noting the Concession Assets taken over by the CONCESSIONAIRE, specifying its characteristics, location, condition and maintenance, useful life of machinery and equipment, operation and performance, and their specific relation with compliance subject of the Concession, as well as other matters of interest.

5.9. The Concession Assets to be delivered at the Taking of Possession will be received

by the CONCESSIONAIRE at the place and with their current state of conservation.

5.10. The Certificate of Delivery of the Concession Assets shall be signed in three (3) copies, one for the GRANTOR, one for the CONCESSIONAIRE and one for SEDAPAL.

5.11. The GRANTOR shall be liable to the CONCESSIONAIRE for latent defects that the Concession Assets delivered by the former may present, provided they have generated before the date of signing the Certificate of Delivery of the Concession Assets.

5.12. The GRANTOR shall be liable to the CONCESSIONAIRE for any claim, demand or action that third parties may bring in relation to the Concession Assets, which claim occurred prior to the Taking of Possession. LAND INTENDED FOR PLANT CONSTRUCTION

5.13. At the Taking of Possession, the GRANTOR shall deliver to the CONCESSIONAIRE as part of the Concession Assets, available land to be allocated for the construction of the Wastewater Treatment Plant and Desalination Plant.

5.14. In case the CONCESSIONAIRE identifies land for the construction of the Wastewater Treatment Plant and/or Desalination plant other than those the GRANTOR has made available, it shall perform all actions related to the acquisition of new land (s), which will become part of the Concession Assets, prior approval from the GRANTOR. The proposed and acquired land by the CONCESSIONAIRE shall be delivered free of liens, encumbrances and third party occupations.

5.15. The CONCESSIONAIRE must register in the respective Public Records on the name of the GRANTOR the new land (s) outlined above, within a maximum of one hundred twenty (120) Calendar Days from the date of their acquisition. If such deadline is not met for reasons attributable to GRANTOR, the deadline must be extended for a maximum of sixty (60) additional Calendar Days.

5.16. If the CONCESSIONAIRE makes land (s) available to the Concession, prior to the signing of the Certificate of Delivery of the Concession Assets, these should be incorporated into the Initial Inventory.

5.17. If the CONCESSIONAIRE makes land(s) available to the Concession, after to the

signing of the Certificate of Delivery of the Concession Assets, land(s) received must be replaced by the new land(s) acquired. The CONCESSIONAIRE shall return the GRANTOR the land(s) in the same condition as received in the Taking of Possession and withdraw it from the Concession Assets.

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INVENTORY

5.18. The CONCESSIONAIRE is required to conduct and submit to the GRANTOR the Concession Assets Inventories. There are four (4) types of inventories required in the Contract according to the definition contained in section 1.62 of this Contract. a) Initial Inventory. b) Inventory of Works. c) Annual Inventory. d) Final Inventory. Inventories shall have features specifically provided in the Contract. The GRANTOR may make observations to these inventories, in writing and with the corresponding explanation, giving the CONCESSIONAIRE a period of up to twenty (20) days to remedy such observations.

5.19. Inventories should contain at least a brief description of the Concession Assets, features, location, condition, annotations on the functioning or performance as appropriate and, if applicable, brand, model and year of manufacture, as well as registration data if they were registered in Public Records. Interpretative elements such as photographs, drawings, diagrams and reports of third parties may be included, according to the formats to be provided by the GRANTOR.

5.20. With respect to the Initial Inventory, during the period of forty-five (45) Calendar Days after the Taking of Possession, the CONCESSIONAIRE may return to the GRANTOR, under the conditions they were received, this one time, those Concession Assets received and not deemed necessary for the execution of the Concession. To return the land received by the CONCESSIONAIRE at the Taking of Possession, the regulations in section 5.15 of the Contract will apply. For this purpose, a communication will be sent to the GRANTOR identifying each and every one of the Assets to be returned; also indicating the date the return act will take place and which may not be established before thirty (30) Calendar Days from such communication. If the return of Assets mentioned above is physically impossible, the CONCESSIONAIRE shall be entitled to remove or proceed to demolish them, prior approval by the GRANTOR, which shall be issued within thirty (30) Calendar Days from the date of notice receipt by the CONCESSIONAIRE. This does not entail the obligation to replace the demolished or removed property. If the GRANTOR does not approve such actions, it shall send a communication to the CONCESSIONAIRE with the respective support, in which case the property may not be removed or demolished and its maintenance shall be borne by the GRANTOR. ASSETS FOR THE IMPLEMENTATION OF THE CONTRACT

5.21. Concession Assets will only be used for the implementation of this Contract.

5.22. During the term of the Concession, the CONCESSIONAIRE is required to make

efforts to preserve in good condition either the Concession Assets or the

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CONCESSIONAIRE’s Assets, taking into account the ordinary use and the nature of the assets for the implementation of the Contract. The CONCESSIONAIRE is also required to perform preventive and corrective maintenance and, in general, all those works required to maintain the operation of such assets and to avoid negative environmental impact according to the scope defined in the EIA. The CONCESSIONAIRE is required to make the necessary improvements required by the aforesaid assets, for the proper provision of the Service. In all these tasks the CONCESSIONAIRE will make efforts to use known effective technologies and to introduce new technologies, in order to comply with the provisions of the Bidding Terms, this Contract and the Service Agreement. It shall be SEDAPAL’s responsibility to verify compliance with the provisions of this Clause, as part of their supervisory actions during Operation and Maintenance of the Concession.

5.23. The CONCESSIONAIRE has the primary duty to replenish or replace, at its cost, the Concession Assets that may be lost, and those which condition do not comply with provisions of this Contract or the Service Agreement.

5.24. Concession Assets intended for the implementation of the Contract may not be transferred outside the Concession Area, unless prior authorization from the GRANTOR. To that end, the GRANTOR shall respond in writing to the request made by the CONCESSIONAIRE in writing, within a period not exceeding ten (10) Days after receiving such request. If the GRANTOR does not respond within the time limit set, the request shall be deemed denied. Furthermore, such assets may not be mortgaged or transferred separately from the Concession, a guarantee on moveable property may not be constituted or they may not be subject to liens of any kind.

5.25. The Concession Assets shall be entered in the respective Public Records on behalf of the GRANTOR, within six (6) months after construction, acquisition, execution or implementation have concluded, with the CONCESSIONAIRE’s Contract, except for duly accredited delay by the public administration. For purposes of the foregoing provisions, the GRANTOR expressly authorizes the CONCESSIONAIRE to perform all required administrative tasks and agrees to cooperate with and provide its best efforts, when necessary.

5.26. The CONCESSIONAIRE shall automatically acquire the right to use the built, acquired, executed or implemented Concession Assets, from the time they are available.

5.27. It should be noted that for purposes of this Contract, assets repaired and acquired under finance lease will be classified under the Concession Asset Regime, from the acquisition or exercise of the purchase option, as appropriate.

5.28. The CONCESSIONAIRE shall be liable for damages or losses caused to the Concession Assets from the Taking of Possession until its delivery to the GRANTOR. Consequently, the CONCESSIONAIRE shall have security measures to ensure the integrity of the Concession Assets before damages that may be incurred by third parties.

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5.29. The CONCESSIONAIRE shall hold the GRANTOR harmless from and against any

action or exception of legal, administrative, arbitration or contractual nature, or claim of any kind in respect of the Concession Assets, as long as this situation was incurred for acts or omissions occurring during the period from the date of the Certificate of Delivery of the Concession Assets and until the date of signing of the Certificate of Reversion of the Concession Assets, unless there is a reason attributable to the GRANTOR.

The CONCESSIONAIRE shall be responsible to the GRANTOR, SEDAPAL and third parties, as appropriate, for the proper administration and use of the Concession Assets, as well as the inherent risk thereof, and liability resulting from their use. Meanwhile, the GRANTOR acknowledges that any claim, action or act initiated by third parties in relation to the Concession Assets delivered by the former, by events or situations arising before the date of Certificate of Delivery of the Concession Assets shall not be the CONCESSIONAIRE’s responsibility, being responsible any other in accordance with Applicable Laws and Regulations. The GRANTOR agrees to hold the CONCESSIONAIRE harmless for any claims, actions or acts mentioned above.

5.30. The CONCESSIONAIRE is bound to hire an insurance policy on the assets intended for the enforcement and implementation of the Contract and the Service Agreement, under the terms set forth in Chapter XI of the Contract.

5.31. The CONCESSIONAIRE shall be responsible and liable to pay taxes, rates and

contributions that apply in relation to the Concession Assets in accordance with Applicable Laws and Regulations. EASEMENTS

5.32. The CONCESSIONAIRE shall take the necessary steps for the establishment of conventional easements to fulfill its obligations under the Contract. If after three (3) months of having initiated the proceedings to establish easements, efforts have been unsuccessful, the GRANTOR shall establish compulsory easements required by the CONCESSIONAIRE, in accordance with the procedure and meeting the requirements under Title VII of Law No. 26338, General Law of Sanitation Services and Title VI of its Regulations, approved by Supreme Decree No. 023-2005-HOUSING, or the rules which modify or replace it, automatically authorizing the Suspension of the Concession Term, according to clause 4.7 until easements are established. Provisions of Clause 4.12 shall apply during the suspension period. The GRANTOR shall grant free easements on publicly owned property.

5.33. The CONCESSIONAIRE shall register in the corresponding Public Registry the

necessary easements that have been incorporated for the execution of the Contract and which have been imposed on property owned by third parties.

5.34. Easements for the occupation of property shall be, among others, the following:

a) Incidental, for the passage of pipes necessary for the design, Construction, Operation and Maintenance of the Project.

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b) In transit, for the custody, Maintenance and repair of Works, equipment and facilities and the provision of the Service.

Additionally, easements may be required for power supply, water supply, among others.

Once imposed, easements shall be considered as Concession rights.

5.35. Easements entitle the owner of the servient estate to receive payment for damages

and compensation provided by Applicable Laws and Regulations, unless such easements are free of charge. Payment of compensation that might arise as a result of the Contract or imposition of such easements shall be the CONCESSIONAIRE’s responsibility.

5.36. The GRANTOR acknowledges the CONCESSIONAIRE’s right to avoid or oppose any repairs or modifications that any public or private entity may attempt to carry out, favored or not with an easement, and which exercise is incompatible with the Works to be executed. The CONCESSIONAIRE may request the GRANTOR’s intervention for the proper protection of its rights.

5.37. If an easement is extinguished because of the CONCESSIONAIRE’s fault and therefore a new easement would be needed, it shall be the CONCESSIONAIRE’s responsibility to obtain it at its own cost. If for any reason not attributable to the CONCESSIONAIRE, it would lose the right to any easement already constituted, the GRANTOR and SEDAPAL shall carry out the proceedings to obtain a new easement replacing the previous one. In the latter case, if the loss of easement prevents the normal continuity of activities under the Contract, the Suspension period of the Concession may be determined, at the CONCESSIONAIRE’s request, in accordance with Clauses 4.7 to 4.14 of this Contract. PROTECTION OF POSSESSION

5.38. After the Certificate of Delivery of the Concession Assets has been signed, the CONCESSIONAIRE is bound to exercise any of the following types of protection of possession: a) Extrajudicial protection of possession used to repel the force used against it and

to regain the assets, without time interval, if dispossessed, but always refraining from the use of methods unjustified by the circumstances.

b) Legal protection of possession, such as injunctions and other legal actions that

the CONCESSIONAIRE must, if the Concession is affected by any affectation, dispossession, occupation, usurpation, among others, communicate the GRANTOR those facts and make use of legal resources and mechanisms in order to hold the GRANTOR and the CONCESSIONAIRE’s rights harmless in respect to the Concession Assets.

Without prejudice to the exercise of the protections described above, in the event of the assumptions mentioned above, the CONCESSIONAIRE shall immediately communicate and coordinate with the GRANTOR any legal actions brought or to be brought, in which case the GRANTOR shall be entitled to start legal actions deemed

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appropriate in order to keep its right over the Concession Assets. The GRANTOR shall use its best efforts to assist the CONCESSIONAIRE in such purposes. DELIVERY OF THE CONCESSION ASSETS

5.39. Upon the Expiry of the Concession for any of the reasons described in Chapter XV, the CONCESSIONAIRE is required to deliver to the GRANTOR the Concession Assets, within the following thirty (30) days, as a first act. If Expiry occurs in the Construction phase, the Concession Assets must be in good condition, considering the ordinary use and the nature of the assets and for the case of Construction Milestones that have WPC certificates issued whose equipment is installed in its entirety, they should be in working condition. If Expiry occurs in the Operation phase, the Concession Assets must be in good condition, in working and operation condition, except as provided in Clause 15.1.715.2.7 of this Contract. If the Concession Assets cannot be delivered in this act, the CONCESSIONAIRE shall deliver the missing Assets in a second act, thirty (30) days after the first act, under the same conditions described above, without the latter case involving the application of penalties for late delivery of the Concession Assets.

5.40. During the return process, the CONCESSIONAIRE and the GRANTOR will sign the Certificate of Reversion of the Concession Assets. Such certificate will provide the representatives’ information and description of the property subject to return, specifying in general, or for each of its components, features, location, condition, operation or performance annotations and other elements of interest, as appropriate.

5.41. The Final Inventory will be part of the Certificate of Reversion of the Concession Assets, and any other element that may help to identify the object delivered and its condition, including drawings, photographs or diagrams.

5.42. All assets contained in the Initial Inventory are considered the Concession Assets except for those the CONCESSIONAIRE demolished or removed prior authorization by the GRANTOR. REPLACEMENT OF CONCESSION ASSETS

5.43. During the first quarter of each Calendar Year, the CONCESSIONAIRE shall submit to the GRANTOR for approval, a report called Schedule for Replacement of Concession Assets indicating the need for changes and/or replacements during the Calendar Year. If after the period of fifteen (15) Calendar Days of receipt of such report, the GRANTOR does not issue a response, it shall be deemed accepted. If the Schedule for Replacement of Concession Assets is approved, such changes and/or replacements will not require additional approval by the GRANTOR, provided they are carried out as indicated in the said schedule.

5.44. If the CONCESSIONAIRE deems it necessary to change and/or replace one or more of the Concession Assets intended for the implementation of the Contract in accordance with the provisions of Clause 5.22, and it is not provided in the Schedule for Replacement of Concession Assets, the CONCESSIONAIRE shall submit for the GRANTOR’s approval, the request for the corresponding reconsideration and/or replacement. If after the period of fifteen (15) Calendar Days of receipt of such report, the GRANTOR does not issue a response, it shall be deemed irrevocably accepted.

5.45. In any of the cases provided for in Clauses 5.40 and 5.41 when replenishment is needed before an emergency event, the CONCESSIONAIRE shall replace the asset

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immediately and notify the GRANTOR of such replacement within a period not exceeding five (5) Calendar Days of performed.

5.46. The asset replaced must be delivered to the GRANTOR in the place and time indicated, except if it is demolished or integrated into the new asset, prior authorization by the GRANTOR. If the GRANTOR does not issue a response in this regard, the CONCESSIONAIRE agrees to keep such property in custody. The CONCESSIONAIRE shall maintain these assets for a maximum of six (6) months from the date the CONCESSIONAIRE requests the GRANTOR to set a location and time for delivery of the assets to be replaced. If after the deadline indicated above, the GRANTOR has not made a decision about the destination of such assets, the CONCESSIONAIRE may dispose of the replaced Assets.

CHAPTER VI: THE WORKS

DESIGN AND SITE SUPERVISION

6.1. Within a maximum of ___________ Calendar Days from the Closing Date, the GRANTOR shall select and hire a specialized company to carry out Design and Construction Supervisor functions to oversee the development of the Technical Files, execution of Works and Commissioning Period by the CONCESSIONAIRE.

6.2. During the selection and recruitment period of the Design and Construction Supervisor, the CONCESSIONAIRE may, prior authorization by the GRANTOR, start the preparation of the respective Technical File, being SEDAPAL’s responsibility the Design and Construction Supervisor functions.

6.3. The CONCESSIONAIRE shall bear the Design and Construction Supervisor costs, including IGV. The amount the CONCESSIONAIRE shall allocate to supervision costs, without including IGV, shall not be more than S/.______________ (Million and 00/100 Nuevos Soles), equivalent to 3% of the Referential Investment in Works, which shall be deposited in the Collection Trust of the Supervision Account according to procedure laid down in Annex 16. The GRANTOR shall notify the CONCESSIONAIRE, when hiring the Design and Construction Supervisor, the schedule and payment amounts established in the Supervision Contract for the CONCESSIONAIRE to pay in a timely manner the respective amounts in the Supervision Account. Exceptionally, only if Annex 17 has not been subscribed, the CONCESSIONAIRE may make payments directly to the Supervisor, subject to approval by SEDAPAL. Once obligations have been canceled to the Design and Construction Supervisor, the amount remaining in the Supervision Account must be transferred to the RPI Sub Account of the Collection Account, if applicable.

6.4. During the preparation of Technical Files, the CONCESSIONAIRE shall provide the Design and Construction Supervisor all information requested as well as access to activities and studies that the CONCESSIONAIRE may carry out for this purpose.

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The Design and Construction Supervisor may request additional information to the CONCESSIONAIRE related to documents required under this Chapter, which shall be filed no later than ten (10) Days after the date on which the request in writing was made. The request for information made by the Design and Construction Supervisor to the CONCESSIONAIRE shall be limited to that which is necessary for the performance of his duties, in accordance with the provisions of this Contract. Also during the performance of his duties, the Design and Construction Supervisor shall not obstruct the fulfillment of the CONCESSIONAIRE’s obligations.

6.5. The following functions shall be carried out by the Design and Construction Supervisor: a) Review of Technical Files, even during their preparation referred to in Clause

¡Error! No se encuentra el origen de la referencia. 6.7 of this Contract. b) Monitor compliance with the minimum Technical Specifications of Annex 4 of this

Contract, during the preparation of Technical Files and their implementation. c) Record in the Design and Construction Logbook incidents relating to design and

construction, as applicable. d) Verify compliance with the Implementation Schedule referred to in Clauses 6.20

and 6.21. e) Review of Work Progress Reports, according to the provisions of Section 2.3,

Annex 10. f) Monitor the proper execution of Operational Tests. g) Monitor the proper implementation of the Commissioning Period, referred to in

Clause 8.7 of this Contract. h) Review Investment amounts executed and attested by the CONCESSIONAIRE

in its Technical Files. i) Monitor compliance with the provisions of the Environmental Impact Assessment

as set out in Clause 12.10 of the Contract, during the construction period. j) Verify the replacement or redesign of the access roads and any infrastructure

that is affected as a result of the execution of the works. k) Meet the information or technical reports requirements requested by the

GRANTOR In the case referred to in Subsection a) above, the Design and Construction Supervisor shall prepare a report and submit it for the GRANTOR’s consideration and the CONCESSIONAIRE’s knowledge. In the case referred to in Subsection b) above, the Design and Construction Supervisor shall prepare a report for each Milestone that is submitted for approval and submit them for the GRANTOR’s consideration and the CONCESSIONAIRE’s knowledge. In the cases referred to in Subsections d) and f) above, the Design and Construction Supervisor shall prepare a report quarterly and submitted it CONCEDENTE for the GRANTOR’s consideration and the CONCESSIONAIRE’s knowledge.

6.6. The CONCESSIONAIRE must provide the Design and Construction Supervisor free access to the area where the sanitary infrastructure will be built to carry out unimpeded supervision work and provide an office with communication services (telephone, fax, Internet, etc.), furniture and utilities.

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APPROVAL OF THE TECHNICAL FILES

6.7. Within eight (08) months from the Closing Date the CONCESSIONAIRE shall submit

to the GRANTOR for approval, with a copy to the Design and Construction Supervisor, the Comprehensive Technical File under the Minimum Technical Specifications laid down in Annex 4 and the minimum requirements of the project provided in Annex 5 of this Contract. For the case of the Quick Impact Works Technical File, the aforementioned term shall be four (04) months.

6.8. The GRANTOR may extend the deadline for submission of Technical Files in case the Certificate of Delivery of the Assets has not been signed as provided in Clauses 5.7 and 5.8 of the Contract. In such case, the term of the Concession shall be extended for a period equivalent to the extension granted.

6.9. The CONCESSIONAIRE shall submit to the GRANTOR with a copy to the Design and Construction Supervisor the corresponding Technical File for its approval.

6.10. The GRANTOR shall have a maximum of twenty (25) Calendar Days from the date of filing of the corresponding Technical File for approval, or if applicable, issue related comments. In the latter case, the GRANTOR shall accompany the relevant explanation and/or technical justification, so as to enable the CONCESSIONAIRE to respond to the comments made.

6.11. If there are observations made by the GRANTOR, the CONCESSIONAIRE shall have a maximum of fifteen (15) Calendar Days to rectify them, from the date of receipt of such observations. The GRANTOR may grant a longer period to the CONCESSIONAIRE to remedy such observations, according to the magnitude and nature of comments made. The GRANTOR shall have fifteen (15) Calendar Days to evaluate the corrections made by the CONCESSIONAIRE, from the date of receipt thereof.

6.12. Approval of the Technical File shall mean that the CONCESSIONAIRE has the GRANTOR’s authorization for the execution of the Works, without prejudice to any other licenses, permits and/or authorizations that the CONCESSIONAIRE may require for the Effective Date of Obligations, in accordance with Applicable Laws and Regulations. The GRANTOR shall apply its best efforts for the CONCESSIONAIRE to obtain such licenses, permits and/or corresponding authorizations, according to its competencies. The CONCESSIONAIRE will assume the risk of executing the works by Phases and the obligation to remedy any failure or consequence that may affect the final approval of the Comprehensive Technical File and term of the works.

THE WORKS

6.13. The CONCESSIONAIRE agrees to perform the Works of the Project pursuant to the respective Technical File approved by the GRANTOR.

6.14. The project will include at least the Works as described in Annex 5.

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6.15. The Works shall comply with all standards and technical parameters of design and

construction, as indicated in the Minimum Technical Specifications referred to in Annex 4. During the execution of the Works, the CONCESSIONAIRE must meet safety standards according to Applicable Laws and Regulations.

6.16. The execution of the works shall be carried out as planned in the Implementation Schedule of the respective Technical File.

6.17. The investment amount arising as a result of the execution of the Works shall be determined at the CONCESSIONAIRE’s own risk, aiming at fulfilling the obligations of the Contract and the Service Contract.

DESIGN AND CONSTRUCTION LOGBOOK

6.18. From the beginning of the respective Technical File development and during Construction and Commissioning Period, the CONCESSIONAIRE agrees to open and keep a Design and Construction Logbook, which must be in original. Additionally, two sets of copies must be available to be distributed according to the provisions of the following clause. Pages should be legalized by a notary, consecutively numbered and the separate sheets system can be adopted.

6.19. Both the GRANTOR and the Design and Construction Supervisor will have free access to the Design and Construction Logbook during the preparation of the Technical File, Construction and Commissioning Period. The original copy will be delivered to the GRANTOR, within thirty (30) Calendar Days from the date of delivery of the Commissioning Certificate; a set of copies will be delivered to the CONCESSIONAIRE and another copy to the Design and Construction Supervisor.

WORK IMPLEMENTATION SCHEDULE AND TERM

6.20. The CONCESSIONAIRE shall submit a valued Implementation Schedule including implementation periods of all components and items relating to the Works until their completion. The Implementation Schedule should clearly define the activities of the critical path and determine the maximum deadlines for each activity. To this end, the critical path will be comprised by those activities that may cause delay in its implementation; therefore, may require the maximum term stated in Clause 6.22.

6.21. The Implementation Schedule must observe the maximum deadline set out in this Contract. It shall be submitted in magnetic and printed media formats as part of the respective Technical File.

6.22. The maximum deadline for the completion of the Comprehensive Works is twenty-four (24) months and six (06) months for the Quick Impact Works, including in both cases the Commissioning Period. These limits shall be considered from the Effective Date of the respective Obligations. Unless a suspension is determined, in accordance with Clause 4.8 or an extension in the term is approved pursuant to Clauses 6.30, 6.31 and 6.32, subject to the provisions of Annex 5.

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The maximum deadline for completion may not exceed the aforementioned, including the Commissioning Period, from the Effective Date of the Obligations.

6.23. When the CONCESSIONAIRE fails to comply with the maximum deadline for reasons strictly attributable to the CONCESSIONAIRE, and not having requested the extension of time, penalties shall be applicable accrued from the date the breach occurred to the date of completion of the Works, its Operational Tests and Commissioning Period.

EFFECTIVE DATE OF OBLIGATIONS FOR QUICK IMPACT WORK S

6.24. It shall be established once all and each of the following conditions are met by the Parties, as appropriate: a) The GRANTOR has delivered the land where the Quick Impact Works of the

Project will be carried out. b) The Certificate of Delivery of the Concession Assets has been signed. c) The CONCESSIONAIRE has acquired for the GRANTOR the land required for

the Quick Impact Works. d) The CONCESSIONAIRE or the GRANTOR at SEDAPAL’s request has obtained

easements required for Quick Impact Works, in the manner provided in Section V.

e) The GRANTOR has approved the Technical File of Quick Impact Works upon timely and complete request by the CONCESSIONAIRE.

f) The CONCESSIONAIRE has obtained discharging permits by the Competent Governmental Authority, if applicable.

g) The CONCESSIONAIRE has obtained licenses for water use by the Competent Governmental Authority, if applicable.

h) The CONCESSIONAIRE has obtained approval of the corresponding Environmental Study from the Competent Governmental Authority.

i) The CONCESSIONAIRE has obtained authorization for the installation or construction of temporary or permanent water areas, by the Competent Governmental Authority, if applicable.

j) The CONCESSIONAIRE has obtained from the Competent Governmental Authority, the Certificate of Absence of Archaeological Remains (CIRA), if applicable.

k) If the Construction Company is a company hired by the CONCESSIONAIRE, it shall have delivered to the GRANTOR a certified copy of the relevant construction contract.

l) If the Operator is a company hired by the CONCESSIONAIRE, shall have delivered to the GRANTOR a certified copy of the relevant operation contract.

m) The CONCESSIONAIRE has managed to obtain authorizations and licenses required by the Competent Governmental Authority for the construction of Quick Impact Works.

n) The CONCESSIONAIRE has credited the cash payment of the share capital, according to Subsection b) of Clause 3.3 of this Contract.

Upon fulfillment of the conditions set out in this clause, the Parties shall write a report stating compliance with the above conditions and the exact date from which the Effective Date of Obligations is determined for Quick Impact Works. In the event that the conditions set out in this clause have not been met by the Parties within six (06) months calculated from the Closing Date and the Parties by mutual Contract have not extended that period with respect to any condition, or the

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Suspension of the Concession has not been determined, the Expiry of the Concession may be invoked, unless either party makes use of the dispute settlement mechanisms under Chapter XVI of this Contract.

EFFECTIVE DATE OF OBLIGATIONS FOR COMPREHENSIVE WOR KS

6.25. The Effective Date of Obligations will be set once all and each of the following conditions are met by the Parties, as appropriate: a) The GRANTOR has delivered the land where the Comprehensive Works of the

Project will be carried out, pursuant to conditions established in the Concession Contract.

b) The CONCESSIONAIRE has acquired for the GRANTOR the land required for the Comprehensive Works that are part of its Technical Proposal.

c) The GRANTOR at SEDAPAL’s request, has obtained the required easements, pursuant to conditions set forth in the Concession Contract.

d) The GRANTOR has approved the Comprehensive Technical File upon timely and complete request by the CONCESSIONAIRE.

e) The CONCESSIONAIRE has obtained permits for discharge by the Competent Governmental Authority.

f) The CONCESSIONAIRE has obtained licenses for water use by the Competent Governmental Authority.

g) The CONCESSIONAIRE has obtained approval of the corresponding EIA from the Competent Environmental Authority.

h) The CONCESSIONAIRE has obtained authorization for the installation or construction of temporary or permanent water areas, by the Competent Governmental Authority.

i) The CONCESSIONAIRE has obtained from the Competent Governmental Authority, the Certificate of Absence of Archaeological Remains (CIRA).

j) If the Construction Company is a company hired by the CONCESSIONAIRE, it shall have delivered to the GRANTOR a certified copy of the relevant construction contract.

k) If the Operator is a company hired by the CONCESSIONAIRE, it shall have delivered to the GRANTOR a certified copy of the relevant operation contract.

l) The CONCESSIONAIRE has managed to obtain authorizations and licenses required by the Competent Governmental Authority for the construction of Works under the Project.

m) The CONCESSIONAIRE must show proof of the Financial Closure, which will involve the signing of financing contracts and compliance by the GRANTOR, SEDAPAL and/or the CONCESSIONAIRE of the conditions required for the latter to have available funds.

n) The CONCESSIONAIRE has a pre-agreement or contract with a concessionaire or owner of a landfill to ensure the final disposal of sludge and/or solid waste generated by the Seawater Desalination Plant and the Wastewater Treatment Plants.

o) The CONCESSIONAIRE has credited the cash payment of the share capital, according to Subsection b) of Clause 3.3 of this Contract.

Upon fulfillment of the conditions set out in this clause, the Parties shall write a report stating compliance with the above conditions and the exact date from which the Effective Date of Obligations is determined. In the event that the conditions set out in this clause have not been met by the Parties within twelve (12) months calculated from the Closing Date and the Parties by

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mutual Contract have not extended that period with respect to any condition, or the Suspension of the Concession has not been determined, the Expiry of the Concession may be invoked, unless either party makes use of the dispute settlement mechanisms under Chapter XVI of this Contract.

6.26. The contracts referred to in Subsections k) and l) of Clause 6.24 and j) and k) of Clause 6.25, shall comply with the following formalities: a) The construction contract(s) must comply with the terms and conditions set forth

in the Bidding Terms and this Contract.

The amendments to the construction contract involving changes by the Construction Company that credited compliance with short-listing requirements during the Bidding process, will require prior approval of the GRANTOR, the same that will be referred to the fulfillment of the construction technical requirements, and that must be communicated within a maximum period of thirty (30) Days after receiving the CONCESSIONAIRE’s request. In case of changes by the Construction Company that credited compliance with the short-listing requirements during the Bidding process, compliance with the technical requirements set out in the Bidding Terms that led to the short-listing of the Successful Bidder will be required, so that during the Work Implementation Phase such requirements are complied with at all times under penalty of Expiry of the Concession.

b) The operation contract(s) shall comply with the terms and conditions set forth in

the Bidding Terms and this Contract.

The amendments to the operation contract involving changes by the Operator that credited compliance with short-listing requirements during the Bidding process will require prior approval of the GRANTOR, the same that will be referred to the fulfillment of the operation technical requirements, and that must be communicated within a maximum period of thirty (30) Days after receiving the CONCESSIONAIRE’s request. In case of changes by the Operator that credited compliance with the short-listing requirements during the Bidding process, compliance with the technical requirements set out in the Bidding Terms that led to the short-listing of the Successful Bidder will be required, so that during Operations such requirements are complied with at all times under penalty of Expiry of the Concession.

START OF CONSTRUCTION

6.27. Construction of Works should start no later than thirty (30) Calendar Days from the Effective Date of Obligations, as provided in the Implementation Schedule.

WORK PROGRESS REPORTS

6.28. The CONCESSIONAIRE shall submit to SEDAPAL, with a copy to the Design and Construction Supervisor, the Work Progress Reports corresponding to the development of the Implementation of Works, as indicated in Section 2.3 of Annex 10. The cost of preparing the Work Progress Reports shall be borne by the CONCESSIONAIRE who shall propose the format to be used to SEDAPAL and the Design and Construction Supervisor, at least observing the provisions of Section 2.2, Annex 10 of this Contract.

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The Works Progress Reports will support the implementation of the progress of Works, which shall be certified by SEDAPAL, based on terms and conditions as described in Annex 10.

6.29. El Progress control and WPC issuing procedures by SEDAPAL are regulated in Annex 10.

TERM EXTENSION FOR IMPLEMENTATION OF WORKS

6.30. The CONCESSIONAIRE may request the GRANTOR the extension of the deadline for execution of the Works. If the GRANTOR rejects the request for extension of the deadline for the execution of the Works, it shall deliver to the CONCESSIONAIRE the respective explanation and/or justification for such rejection. When the CONCESSIONAIRE requests such extension and the GRANTOR authorizes it, and the CONCESSIONAIRE fails to comply with the terms granted for reasons strictly attributable to him, the respective penalties shall be applicable, according to Chapter XIX. In case the non-compliance with the deadline for reasons attributable to the CONCESSIONAIRE generates a delay longer than six (6) months in the execution of the Works, from the date of expiry of the deadline for the execution of the Works or the period of the extension approved by the GRANTOR, as appropriate, and/or payment of penalties in excess of ten percent (10%) of the investment, in addition to the application of appropriate penalties, the GRANTOR may proceed to terminate Contract.

6.31. Requests for extension of the deadline referred to in the preceding Clause shall be subject to the following procedure: a) The CONCESSIONAIRE shall record in the Design and Construction Logbook

the circumstances, at its discretion, that justify and extension of the deadline for completion of all Works. The request for extension shall be addressed to the GRANTOR and must be properly supported, including the new proposed Implementation Schedule.

b) The GRANTOR shall rule on such extension not later than thirty (30) Calendar Days from receipt of the request. In the absence of any statement by the GRANTOR, within the period mentioned above, the request shall be deemed approved.

c) Once the extension of the deadline has been approved, the CONCESSIONAIRE

must submit an updated Implementation Schedule, within a period not exceeding ten (10) Calendar Days after approval of the extension.

6.32. In the event that the start or progress of the Works is delayed by an act attributable to

the GRANTOR, SEDAPAL or third parties beyond its control, the CONCESSIONAIRE, upon request, shall be entitled to a Suspension of the Concession deadline, in accordance with provisions set out in Clauses 4.74.7 to ¡Error! No se encuentra el origen de la referencia. 4.14, for a period lasting not less than the delay.

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APPROVAL OF WORKS

6.33. Once Works are completed, in whole or in stages, the CONCESSIONAIRE shall

request the GRANTOR’s approval, attaching the relevant report establishing the completion thereof, in accordance with the relevant approved Technical File.

6.34. Within thirty (30) Calendar Days from the notification of the completion of the Works, the GRANTOR shall determine its acceptance or make comments with the relevant explanation and/or technical justification, as appropriate. Through the Certificate of Completion of Works, the GRANTOR shall issue the approval that execution of the Works complies with the corresponding Technical File and authorization shall be granted to proceed with the respective Commissioning Period, according to provisions of Clause 8.7.

6.35. If the GRANTOR makes observations to the Works duly justifying them in the corresponding Technical File, the CONCESSIONAIRE must remedy the comments made, no later than sixty (60) Calendar Days from the date of receipt of such comments.

6.36. The Certificate of Completion of Works may be issued provided that the observations made do not affect the operation of the Project. Otherwise, the GRANTOR shall set a new deadline for the issuance of the Certificate of Completion of Works, which shall not exceed sixty (60) Calendar Days unless the CONCESSIONAIRE requests a longer period and that this request is approved by the GRANTOR, depending on the nature of the observations. In either case, the remaining observations must be remedied within a period not exceeding the Commissioning Period.

6.37. If the deadline to carry out the corresponding remedies expires, without the Works having been accepted for reasons attributable to the CONCESSIONAIRE, provided that the remaining observations affect the proper operation of the Project in accordance with provisions in the corresponding Technical File, the GRANTOR may reject the Works and, consequently, may terminate the Contract as provided in Chapter XV and may demand compensation for direct damages to the GRANTOR generated by breach of the CONCESSIONAIRE’s obligations and duties, without prejudice to the penalties that have been collected or have been previously accrued.

6.38. If the CONCESSIONAIRE does not agree with the GRANTOR’s decision, regarding the comments made in accordance with the provisions of Clauses 6.35 and 6.36 the CONCESSIONAIRE may request that the dispute be settled by a technical assessment carried out by an expert chosen by Contract between the GRANTOR and the CONCESSIONAIRE. The Parties shall support their position within fifteen (15) days after its appointment.

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After fifteen (15) days from the date of installation, if the parties have not jointly appointed the expert, the dispute will be considered a Technical Dispute and will be resolved according to the respective procedure provided in Subsection a) of Clause 16.12.

6.39. The decision of the expert shall be issued no later than thirty (30) Calendar Days from the date on which the parties supported their position, and this decision shall be binding on the Parties. The costs of the expert shall be borne by the Party that was not favored with the expert’s decision.

6.40. The period to carry out remedies shall be suspended until the expert issues a statement. However, this suspension does not relieve the Parties from compliance of obligations that are not connected with the observations made.

6.41. Subject to provisions under Clause 6.39 any of the Parties that do not agree with the expert’s statement may request that the dispute be settled under the respective procedure laid down in the Chapter XVI of the Contract.

6.42. When for reasons attributable to the GRANTOR, the CONCESSIONAIRE is unable to complete and/or deliver the Works in accordance with the Implementation Schedule, the GRANTOR shall have a period not to exceed three (3) months from the date after the date of completion of the Works in the Implementation Schedule, to overcome the limitations that had prevented the completion and/or delivery of those Works. In the case mentioned above, the CONCESSIONAIRE will have the same deadline for completing and/or submitting the said Works. In case the deadline referred to in the preceding paragraph expires and the CONCESSIONAIRE’s inability persists to complete and/or deliver the Works for reasons attributable to the GRANTOR, it shall be SEDAPAL’s responsibility, through the Collection Trust, to recognize payments for the WPC certificates that were issued on the date, as provided in Clause 8.11 of this Contract.

6.43. Notwithstanding the foregoing, the GRANTOR shall have a further period not exceeding three (3) months to overcome the limitations referred to in the preceding paragraphs. If those limitations are overcome, the CONCESSIONAIRE will have a term not exceeding three (3) months, from the time the GRANTOR resolved and/or overcame the limitations indicated above, to complete and/or deliver the said works, issuing the respective WPC certificates and resulting in the Start of Operations. Otherwise, if the deadline for the remedy of all the limitations expires and the GRANTOR has not solved such limitations, the CONCESSIONAIRE may invoke the Expiry of Concession as stated in Clause 15.1.4 of the Contract.

INFORMATION

6.44. It is the CONCESSIONAIRE’s obligation to provide at the GRANTOR’s request,

directly or through the Design and Construction Supervisor, as applicable, reports on the development of the execution of the Works.

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The cost of preparing reports shall be borne by the CONCESSIONAIRE who will decide on the most appropriate format to use in joint Contract with the GRANTOR.

FINANCIAL CLOSURE

6.45. Within a period of nine (9) months from the Closing Date, the CONCESSIONAIRE must certify to the GRANTOR that it has all the funds necessary for the fulfillment of Implementation Schedule for the Works, except as indicated in Section 6.47.

6.46. To substantiate the financial closure for the funds required to execute investments and other contractual obligations, the CONCESSIONAIRE shall submit for the GRANTOR’s approval the notarial certified copy of financing contracts, guarantees, trusts, in general any relevant contractual text that the CONCESSIONAIRE has agreed with the Authorized Creditor(s) who will participate in the financing of this Concession. The GRANTOR shall evaluate the principal terms and conditions of the financing contracts, guarantees, trusts and others, and within a period not exceeding thirty (30) Calendar Days of receipt of such document, it may make observations in case they contravene provisions expressly stated in the Concession Contract.

6.47. If the deadline set forth in Section 6.45, expires and the CONCESSIONAIRE proves before the GRANTOR that it at least has sixty-five percent (65%) of the amount of Investment in Works, the GRANTOR may grant an additional period of up to three (3) months for the CONCESSIONAIRE to submit the financing contract with third parties for the corresponding difference.

6.48. Upon expiry of the period specified in Clause 6.45 or the additional period provided in Clause 6.47, as applicable, and not having credited the Financial Closure, the Expiry of the Concession may be invoked as attributable to the CONCESSIONAIRE, in which case the GRANTOR will enforce the Performance Bond of the Concession Contract as sole compensation for damages, in effect at the time, for an amount equal to one hundred percent (100%) thereof.

CHAPTER VII: MAINTENANCE

7.1. The CONCESSIONAIRE agrees to carry out, at its cost, Maintenance of the Sanitary infrastructure under its responsibility until the Expiry of the Concession.

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Maintenance includes preventive and scheduled maintenance and emergency or corrective maintenance. Preventive or scheduled maintenance is the set of activities carried out on a periodic and permanent basis by the CONCESSIONAIRE in order to predict early deterioration of civil works, electromechanical equipment, hydraulic, plumbing, electrical, and/or automation systems installations that constitute the Sanitary infrastructure under its responsibility, and enable its recovery and/or restoration. Emergency or corrective maintenance is the set of activities that the CONCESSIONAIRE must carry out when there is a malfunction or damage to civil works, electromechanical equipment, hydraulic, plumbing, electrical, and/or automation systems installations, in an incidental or unexpected manner but with probability of occurrence, so that the Sanitary Infrastructure under its responsibility operates normally. To this end, the CONCESSIONAIRE should have the tools and/or spare parts necessary to reverse the event.

MAINTENANCE AND OPERATION MANUAL

7.2. The obligation undertaken by the CONCESSIONAIRE includes the responsibility to define the methodologies, procedures and timing of maintenance works.

7.3. The CONCESSIONAIRE shall submit for approval by the GRANTOR an Operation and Maintenance Manual, within forty-five (45) Calendar Days from the signing of the Certificate of Completion of Works. Such period may not exceed the deadline provided for the completion of the Commissioning Period of Works. Within fifteen (15) Calendar Days from the date of submission of the Operation and Maintenance Manual, the GRANTOR shall approve or provide observations with the respective explanation and/or technical justification which will refer to compliance of the requirements specified in the Concession Contract and its Annex 8. In case of observations made by the GRANTOR, the CONCESSIONAIRE shall remedy or correct the observations within a period not exceeding ten (10) Calendar Days from the date of receipt thereof. Once approved, the Operation and Maintenance Manual will be incorporated into this Contract as Annex 8-A.

7.4. The Operation and Maintenance Manual contains the description and justification of policies to be applied, schedule of activities to be carried out, measurements of indices based on the Operation and Maintenance Manual and overall technical justification, all in accordance with the provisions set out in Annex 8 of the Contract.

7.5. Updates to the Operating and Maintenance Manual must be performed every two years from the Start of Operations and shall have the GRANTOR’s approval.

7.6. It is the GRANTOR’s responsibility to perform technical and operational actions deemed necessary to oversee the development of maintenance tasks specified in this Chapter of the Contract.

7.7. If deficiencies are found in the Operation and Maintenance Manual, for not conforming to the provisions of the Concession Contract, it shall be the GRANTOR’s responsibility to make relevant observations, which shall be accompanied by the

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relevant explanation and/or technical justification so that the CONCESSIONAIRE is allowed to respond to the comments made. It shall be the CONCESSIONAIRE’s responsibility to remedy those observations within the period prescribed by the GRANTOR, which shall be consistent with the nature of the observations; otherwise, penalties established in Chapter XIX shall apply.

CHAPTER VIII: OPERATION

RIGHTS AND DUTIES OF THE CONCESSIONAIRE

8.1. Operation of the Sanitary Infrastructure by the CONCESSIONAIRE is a right, to the extent that it allows its exploitation and implies duties, to the extent that the CONCESSIONAIRE is required to maintain its operation and provide the Service to SEDAPAL, according to provision established in the Service Agreement.

It is the CONCESSIONAIRE’s duty, pursuant to the provisions of the Contract, to

respond for the acts or omissions of its staff or the contractors that the CONCESSIONAIRE decides to hire for the infrastructure operation referred to above,

8.2. The CONCESSIONAIRE shall operate and maintain the Sanitary infrastructure under

its responsibility pursuant to the Service Agreement and the Operating and Maintenance Manual.

8.3. From the start of the operation and until the end of the Concession term, the CONCESSIONAIRE, according to the specifications and conditions set in the Service Agreement, shall carry out the following: i) desalination of seawater delivering it on quality and amount established in such Contract, taking responsibility from the seawater intake to the Point of Delivery ii) treatment of one hundred percent (100%) of the wastewater volumes received at the Point of Reception, taking responsibility until its final disposal.

8.4. From the start of the Operations until the end of the Concession term, the CONCESSIONAIRE shall ensure adequate Final Disposal of one hundred percent (100%) of wastewater and other generated by-products, if applicable, according to the specifications and conditions of the Applicable Laws and Regulations and the Service Agreement.

8.5. The CONCESSIONAIRE shall bear all costs associated with the Service and renewal of permits and licenses, certificates of maritime inspection, taxes, insurance and other expenses that apply, in accordance with Applicable Laws and Regulations.

8.6. The CONCESSIONAIRE shall prepare and submit to the GRANTOR, within sixty (60) Calendar Days from the date of Start of Operations, the Emergency and Operation Plan in case of Losses in the Sanitary Infrastructure under its responsibility, which must observe the minimum criteria set out in Annex 9. The GRANTOR shall have maximum thirty (30) Calendar Days following its submission to issue the appropriate comments or approve it. After this deadline without comment by the GRANTOR, the plan shall be deemed adopted.

If observations are made by the GRANTOR, they shall have the respective explanation and/or technical justification. The CONCESSIONAIRE shall have fifteen (15) Calendar Days to correct the observations, from the date of receipt of such observations.

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The GRANTOR shall have ten (10) Calendar Days to evaluate the corrections made by the CONCESSIONAIRE, calculated from the date of receipt thereof. If the GRANTOR does not act within the prescribed period, observations made shall be deemed rectified and therefore, the submitted Emergency and Operation Plan in case of Losses should be deemed adopted.

Upgrades to the Emergency and Operation Plan in case of Losses should be carried out biannually from the Start of Operations until the completion of the concession, with the corresponding approval by the GRANTOR.

COMMISSIONING PERIOD

8.7. During the Commissioning Period, procedures to verify the proper functioning of civil works, piping, machinery, equipment, electrical and electromechanical installations, controlling and automation systems, among others should be carried out, in accordance with the relevant Technical File. This period shall not exceed sixty (60) Calendar Days from the Certificate of Completion of the Works. It shall be the CONCESSIONAIRE’s responsibility to assume the costs incurred during the Commissioning Period. During the Commissioning Period, the quality and volume requirements established in the Service Agreement shall not be required.

8.8. The CONCESSIONAIRE shall provide written notice to the GRANTOR with a copy to the Design and Construction Supervisor of the Commissioning Period Start date, in accordance with the relevant Technical File. Commissioning will take place with the participation the Design and Construction Supervisor. In the event that the Commissioning Period is delayed by an act not attributable to the CONCESSIONAIRE the Concession term may be suspended, at the CONCESSIONAIRE’s request, in accordance with Clauses 4.7 to ¡Error! No se encuentra el origen de la referencia. 4.14 of this Contract.

8.9. Once the Commissioning Period has expired, if the Works are correctly operating in

accordance with the corresponding Technical File, and quality and volume requirements established in the Service Agreement are verified, as applicable, the GRANTOR shall deliver the Certificate of Commissioning to the CONCESSIONAIRE.

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Otherwise, the GRANTOR shall grant the CONCESSIONAIRE a period to be determined by the GRANTOR in accordance with the nature of the observations, which shall have the respective explanation and/or technical justification for the CONCESSIONAIRE to remedy the corresponding observations. Upon expiration of the additional period, if observations have not been corrected in accordance with the relevant Technical File, and consequently, the operation and functioning of the Sanitary Infrastructure responsibility of the CONCESSIONAIRE are affected, the GRANTOR may terminate the Contract in accordance with the provisions of Chapter XV and demand compensation for direct damages to the GRANTOR generated by breach of the CONCESSIONAIRE’s obligations and duties, without prejudice to penalties that have been previously collected or accrued.

START OF OPERATIONS

8.10. The Start of Operations of the Sanitary Infrastructure by the CONCESSIONAIRE, shall take place on the date of delivery of the Certificate of Commissioning and it may only be initiated if the CONCESSIONAIRE keeps the Performance Bond of the Concession Contract in force as well as insurance policies required in the Contract. If applicable, the Commissioning Certificate shall be delivered in each of the Phases described in the Comprehensive Technical File approved by the GRANTOR. The start of operations of each Phase shall take place only in such opportunities.

8.11. In cases of delay in the Start of Operations of each stage for reasons attributable to the GRANTOR, the CONCESSIONAIRE, at the GRANTOR’s request will be entitled to a Suspension, in accordance with the provisions of Clauses 4.7 to ¡Error! No se encuentra el origen de la referencia. 4.14, for a period lasting no less than the delay. In cases of delay in the Start of Operations of each Phase for reasons not attributable to the Parties, the GRANTOR may approve an extension at the CONCESSIONAIRE’s request to the deadlines set out in this Contract.

MAINTENANCE AND OPERATION SUPERVISION

8.12. It is SEDAPAL’s direct or indirect responsibility to carry out supervision actions during Operation and Maintenance of the Sanitary Infrastructure under the CONCESSIONAIRE’s responsibility, assuming costs arising thereof.

8.13. Maintenance and Operation Supervision will include verification of compliance of the CONCESSIONAIRE's obligation to provide the Service in accordance with the standards and quality levels, under this Contract and the Service Agreement.

8.14. During Operation and Maintenance, the CONCESSIONAIRE shall provide all information that SEDAPAL may request as well as access to the activities and studies performed by the CONCESSIONAIRE for this purpose.

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SEDAPAL may request the CONCESSIONAIRE additional information related to documents required under this Chapter, which shall be submitted no later than ten (10) Days calculated after the date on which the request in writing was made. This period may be extended at SEDAPAL’s discretion, depending on the type of information requested.

8.15. The CONCESSIONAIRE must grant SEDAPAL free access to the Sanitary Infrastructure under the CONCESSIONAIRE’s responsibility to perform its work without any obstacles. Similarly, SEDAPAL shall conduct its work without hindering the CONCESSIONAIRE’s activities.

8.16. It shall be the Competent Governmental Authority’s responsibility to determine the location of the points where the supervision and water quality control activities in the receiving body will be carried out, as well as the frequency of sampling, at the CONCESSIONAIRE’s request and based on the corresponding Technical File. Notwithstanding the foregoing, during Operations, the CONCESSIONAIRE may bring to the attention of the Competent Governmental Authority other alternative measurement points, which may or not be accepted.

8.17. It is SEDAPAL’s responsibility to take further actions aimed at fulfilling the rules regarding the characteristics of non-domestic discharges to be disposed in the sewer system in order not to alter or affect the characteristics of wastewater to be received by the CONCESSIONAIRE.

CHAPTER IX: ECONOMIC-FINANCIAL REGIME

FOR THE WATER COMPONENT

BASIC UNIT REMUNERATION– RUB

9.1. The CONCESSIONAIRE will be entitled to receive and SEDAPAL is required to make a payment per cubic meter of water delivered to SEDAPAL in the Points of Delivery in the terms and conditions set out in the Economic Proposal contained in Annex 14 of this Contract and the Service Agreement.

The payment per cubic meter referred to in the previous paragraph is called Basic Unit Remuneration (RUB) which comprises the following:

i. Compensation for Investment, which remunerates the executed Water Component Investment (RPIAD); and

ii. Compensation for Maintenance and Operation, which compensates the costs incurred by the CONCESSIONAIRE to operate and maintain the Desalination Plant and related facilities (RPMOAD).

The CONCESSIONAIRE may not market the by-products generated by the PROJECT, being the RUB the only compensation for the service. These by-products should be disposed of in accordance with the provisions of Annex 4 to this Contract.

9.2. The RUB is payable in Nuevos soles. For purposes of paying the CONCESSIONAIRE, the latter shall issue invoices adding the corresponding General Sales Tax (IGV).

9.3. The source of funding of the Collection Trust shall come from the collection of invoiced amounts perform by SEDAPAL through Active Collection Agencies. The

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collection of these resources will aim to cover the payment of the RUB plus the corresponding General Sales Tax (IGV).

ABOUT THE RPI AD COMPONENTE OF THE RUB

9.4. The CONCESSIONAIRE will be entitled to receive a payment from SEDAPAL, regarding the RPIAD component, through the Collection Trust by resources referred to in Clause 9.3. The RPIAD is the CONCESSIONAIRE’s acquired right to receive, irrevocably and unrestrictedly from SEDAPAL through the Collection Trust regulated in Annex 16, and expressly provided in the Trust Contract of Annex 17, the value represented by the RPIAD, regardless of the validity or expiry of the Concession.

The CONCESSIONAIRE acquires the right referred to in the preceding paragraph by obtaining each CAOAD accumulated as set in the section "CONCESSIONAIRE’s Collection Rights generated by the WPC" under Section III - WPC, Annex 10 of the Contract.

9.5. The RPIAD value shall depend on the Production Scale under operation and will be determined as follows:

RPIAD_EPI = RUBOferta_EPI * VRPI_EPI* FA

RPIAD_EPII = RUBOferta_EPII * VRPI_EPII* FA

Where:

VRPI_EPI: Is the proportional part of VRRE in Production Scale I (VRRE_EPI) corresponding to RPIAD_EPI, which will be calculated as detailed in Clause 9.7.

VRPI_EPII: Is the proportional part of VRRE in Production Scale II (VRRE_EPII) corresponding to RPIAD_EPII, which will be calculated as detailed in Clause 9.7.

RUBOferta_EPI: The RUB indicated in the Economic Proposal corresponding to Production Scale I.

RUBOferta_EPII: The RUB indicated in the Economic Proposal corresponding to Production Scale II.

FA: Adjustment factor applied to RPIAD due to price variations.

9.6. Payment of the RPIAD_EPI or RPIAD_EPII proportional part for WPC certificates issued (RPICAOAD_EPI o RPICAOAD_EPII) shall be made after the trimester expires, for _____ (____) years in the opportunities provided and detailed in the following paragraph and in Clause 9.7.

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The corresponding payment for RPIAD_ EPI or RPIAD_EPII must be made on the last business day of March, June, September or December.

Also, the first payment for RPIAD_EPI shall be made _________ Calendar Days after the Closing Date. While the first payment for RPIAD_EPII shall be made __________

SETTLEMENT MECHANISM OF RPI AD

9.7. To make the calculation and payment of the RPI, the following definitions and calculation procedures will be considered as well as provisions in Annex 16. The volume associated to compensate the Investment made, according to Clause 9.1 of this Contract, is defined by the following expression:

EPIRREEPIRPI VXV __ %×=

EPIIRREEPIIRPI VXV __ %×=

Where:

VRPI_EPI: Is the annual volume in cubic meters of Desalinated Water during Production Scale I related to the payment of RPIAD_EPI.

VRPI_EPII: Is the annual volume in cubic meters of Desalinated Water during Production Scale II related to the payment of RPIAD_EPII

VRRE_EPI: Is the annual volume of Desalinated Water corresponding to PROVISUR’s design capacity during Production Scale I, equivalent to XX million cubic meters annually.

VRRE_EPII: Is the annual volume of Desalinated Water corresponding to PROVISUR’s design capacity during Production Scale II, equivalent to XX million cubic meters annually.

X%: VRRE proportionality factor which determines VRPI. The value of X% is __________%.

9.8. The last business day of March, June, September and December of each Calendar Year, the quarterly Compensation for Investments or RPITrim shall be paid, according to the following formula:

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4_

__EPIAD

EPIADTRIM

RPIRPI =

4_

__EPIIAD

EPIIADTRIM

RPIRPI =

Also, the payment for RPIAD_EPI shall be made until operations begin with Production Scale II. The total term for RPIAD_EPI and RPIAD_EPII payments jointly shall not exceed _______ years.

9.9. If the situation under Clause 6.42 occurs for reasons attributable to the GRANTOR, the first payment of the proportional part of RPIAD_EPI for CAOAD_EPI issued shall be the last working day of March, June, September or December immediately after any of the following circumstances:

i. Once the first quarter expires calculating from the day after completion of the term referred to in the first paragraph of Clause 6.43; or

ii. At the end of month thirty-six (36) calculated from the Effective Date of Obligations.

9.10. As a consequence of provisions set in Clause 6.43, the following month after the Start of Operations or, if the situation described in the second paragraph of Clause 6.43, occurs, as of the date specified in Clause 15.915.10, SEDAPAL through the Collection Trust shall pay in a lump sum the amount equal to the proportional part of the RPIAD_EPI for CAOAD_EPI issued under the provisions of Clause 6.42 the number of times equal to the amount of payments for RPIAD_EPI according to the provisions of Clause 9.9 recorded on that date.

Payments for post RPIAD_EPI at the Start of Operations or, if the situation described in the second paragraph of Clause 6.42, occurs, after the date specified in Clause 15.915.10, shall correspond to the proportional part of RPIAD_EPI for all CAOAD_EPI that have been issued and shall be made in the payment opportunities that Clause 9.9 originated.

9.11. For lack of timely payment of the RPIAD_EPII or RPIAD_EPII, through the Collection Trust SEDAPAL shall pay the CONCESSIONAIRE a default interest rate equal to the Sovereign Bond coupon rate plus ____ percent (__%) per annum from the beginning of the delay period until the end thereof, without prejudice to the provisions of subsection c) of Clause 9.31 of the Contract.

RUB ADJUSTMENT PROCEDURE

9.12. The value of RUB will be adjusted on the basis of Wholesale Price Index (WPI) variation published by the National Institute of Statistics and Informatics (INEI) when it is greater than or equal to three percent (3%) accumulated from the time and opportunity it corresponded to apply the previous adjustment.

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For this purpose, the CONCESSIONAIRE shall determine the adjustment factor, which should be expressed with five (5) decimal places, using the following expression:

Adjustment Factor = IPM1 / IPM0

Where:

IPM0 : For the first adjustment, IPM should be applied on the date The Certificate of Completion of Works is issued. For further adjustments, the value of IPM1 will correspond to the previous adjustment.

IPM1 : IPM of the previous months on the date on which the

previous adjustment took place.

In case of Expiry during the Construction phase, for any grounds, the adjustment shall be calculated from the date of completion of the Works.

9.13. The adjustment in the value of RUB shall be determined by multiplying the current value of RUB by the adjustment factor and it should be implemented within a period not exceeding ninety (90) Calendar Days after the expiry of the month in which IPM variation accumulated provided under Clause 9.129.12 of this Contract. It shall be SEDAPAL’s responsibility, after verifying the adjustment factor calculation, to assume the payment of the adjustment made to RUB in favor of the CONCESSIONAIRE.

ABOUT THE RPMO AD COMPONENT

9.14. The CONCESSIONAIRE will be entitled to a payment for RPMOAD component. This payment, by SEDAPAL, will be made monthly through the Collection Trust, from the Start of Operations until the completion of the Concession.

9.15. The RPMOAD component will be calculated according to the procedure laid down in Clause Five of the Service Agreement, relating to the settlement and payment for the Service.

9.16. The method of RPMOAD payment will be carried out according to provisions under the Service Agreement.

FOR THE SEWERAGE COMPONENT

ANNUAL COMPENSATION FOR SERVICE (RAS)

9.17. The CONCESSIONAIRE will be entitled to receive and SEDAPAL is required to pay the Annual Compensation for Service (RAS), on the terms and conditions set forth in the Economic Proposal contained in Annex 14 of this Contract and the Service Agreement.

The RAS comprises Compensation for Investment (RPIAR), which pays the Investment for the Sewerage Component and Compensation for Maintenance and

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Operation (RPMOAR), which pays the costs of Operation and Maintenance of the Wastewater Treatment and Final Disposal systems.

The CONCESSIONAIRE may not market the by-products generated by the Treatment System, and the RAS is the only compensation for the Service. These by-products should be made available to the GRANTOR in the place established, in compliance with Applicable Laws and Regulations.

9.18. The RAS is payable in Nuevos Soles. For purposes of paying the CONCESSIONAIRE, the latter shall issue an invoice adding the corresponding General Sales Tax (IGV).

9.19. The source of funding of the Collection Trust shall come from the collection of invoiced amounts perform by SEDAPAL through Collection Agencies. The collection of these resources will aim to cover the payment of the RAS plus the corresponding General Sales Tax (IGV).

ABOUT THE RPI AR COMPONENT OF THE RAS

9.20. The CONCESSIONAIRE shall be entitled to receive a payment from SEDAPAL for the RPIAR, component, through the Collection Trust, by resources referred to in Clause 9.19.

9.21. The RPIAR is the CONCESSIONAIRE’s acquired right to receive, irrevocably and unrestrictedly from SEDAPAL through the Collection Trust regulated in Annex 16, and expressly provided in the Trust Agreement of Annex 17, the value represented by the RPIAR, regardless of the validity or expiry of the Concession. The CONCESSIONAIRE acquires the right referred to in the preceding paragraph by obtaining each CAOAR accumulated as set in the section "CONCESSIONAIRE’s Collection Rights generated by the WPC " under Section III - WPC, Annex 10 of the Agreement.

9.22. Payment of the RPIAR proportional part for CAOAR certificates issued (RPICAOAR) shall be made after the trimester expires, for ___________ years in the opportunities provided and detailed in the following paragraph and in Clause 9.23 The corresponding payment for RPIAR must be made on the last business day of March, June, September or December.

Also, the first payment for RPIAR_EPI shall be made _________ Calendar Days after the Closing Date. While the first payment for RPIAR_EPII shall be made __________

SETTLEMENT MECHANISM OF RPI AR

9.23. From the date provided for the first payment of the AR_EPI RPI, according to Clause 9.22 above, on a quarterly basis, the last business day of the months of March, June, September and December of each Calendar Year and up to the commencement of Production Scale II operations, the Quarterly Compensation for Investment of Production Scale I or RPITrim_AR_EPI. equivalent to __________________ an/100 Nuevos Soles (S/. _____________________) will be paid. From the start of operations with Production Scale II, the Quarterly Compensation for Investment of Production Scale II or RPITrim_AR_EPII. equivalent to __________________ and/100 Nuevos Soles (S/. _____________________) will be paid. Both amounts will

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correspond to the Economic Proposal submitted by the Successful Bidder and as set out in Annexes 10 and 16 of this Contract.

For lack of timely payment of the RPI, through the Collection Trust SEDAPAL shall pay the CONCESSIONAIRE a default interest rate equal to the Sovereign Bond coupon rate plus ____ percent (___%) per annum from the beginning of the delay period until the end thereof, without prejudice to the provisions of subsection c) of Clause 9.31 0 of the Contract.

RPIAR ADJUSTMENT PROCEDURE

9.24. The value of RPIAR will be adjusted on the basis of the following: (i) Price variations and (ii) Wholesale Price Index (WPI) variation, according to provisions in the following clauses.

ADJUSTMENT DUE TO PRICE VARIATION

9.25. The RPIAR value will be adjusted due to price variations, from the date of submission

of the Economic Proposal to the issuance of the corresponding CAOAR. The RPIAR value associated to CAOAR issued (RPICAOAR) will be adjusted according to the mathematical expression described in Annex 19.

9.26. The RPIAR adjustment due to price variation shall apply to the issuance of CAOAR of the corresponding Construction Milestone.

WHOLE PRICE INDEX (WPI) ADJUSTMENT

9.27. The value of RPIAR will be adjusted on the basis of Wholesale Price Index (WPI) variation published by the National Institute of Statistics and Informatics (INEI) when it is greater than or equal to three percent (3%) accumulated from the time and opportunity it corresponded to apply the previous adjustment. It shall be SEDAPAL’s responsibility to pay the adjustment to RPIAR, in favor of the CONCESSIONAIRE.

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In the case of the first adjustment, the IPM accumulated variation referred to above shall be calculated from the date of issuance of the Certificate of Completion of the corresponding Phase or the Certificate of Completion of the Works, if applicable. For this purpose, the CONCESSIONAIRE shall apply the following ratio:


Where:

IPM0 : IPM to the date of Certificate of Completion of the corresponding Phase of Certificate of Completion of the Works, if applicable.

IPM1 : IPM to date the cumulative index variation is equal to or greater than three percent (3%), from the time and opportunity it corresponded to apply the previous adjustment.

Adjustment Factor : The adjustment factor should be expressed with five (5) decimal places.

For further adjustments, IPM recorded on the date the last adjustment was granted will be taken as the basis.

In case of Expiry for any grounds, the adjustment is calculated from the date of issuance of the Certificate of Completion of the completed Phases, and/or dates provided for completion of uncompleted phases, if applicable.

9.28. The adjustment in the value of the RPIAR should be implemented within a period not exceeding ninety (90) Calendar Days after the expiry of the month in which IPM variation accumulated in accordance with Clause 9.12 of this Contract. It shall be SEDAPAL’s responsibility, after verifying the adjustment factor calculation, to assume payment for adjustment of RPIAR in favor of the CONCESSIONAIRE.

ABOUT THE RPMO AR COMPONENT

9.29. The CONCESSIONAIRE will be entitled to a payment for the RPMOAR component. This payment, by SEDAPAL, will be made monthly through the Investment Trust, from the Start of Operations of each Production Scale until completion of the Concession.

9.30. The method of RPMOAR payment will be carried out according to provisions established under the Service Agreement.

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PROCEDURE FOR RECOGNITION OF RPIAD and RPI AR

9.31. The general procedure for RPIAD and RPIAR recognition will be made according to the provisions of this Section and as provided in Annex 18. In this regard, the following terms and conditions will be considered:

a. In general, the RPI_Trim payment, whether it corresponds to RPITRIM_AD_EPI, RPITRIM_AD_EPII, RPITRIM_AR_EPI or RPITRIM_AR_EPII will be made through the Collection Trust, with RPI subaccount resources of PROVISUR Account and IGV PROVISUR Account.

b. If the resources available in the Collection Trust accounts, as provided in

Annex 16, are not sufficient to meet the obligations arising from the recognition of RPITRIM, it shall be SEDAPAL’s responsibility to perform all actions that are relevant in order to comply with the effective transfer of the necessary resources from the Collection Trust for the payment of RPI shares, within a period not exceeding five (5) Calendar Days after receiving notification from the Collection Trust.

c. In the case set out in the first paragraph of section b) above, the Collection

Trust Trustee must notify the GRANTOR, CONCESSIONAIRE and SEDAPAL of that fact, for information purposes within a maximum of three (3) Days after the twenty (20) days of the month in which the payment of the RPITrim is due. Procedures provided in the following paragraph will also be carried out.

d. If the balance of the RPI subaccount of the PROVISUR Collection Account is

less than nine twelfths (9/12) of the total annual RPI, the Trustees of the Collection Trust must notify the GRANTOR, CONCESSIONAIRE and SEDAPAL within a maximum period of three (3) Days, so that the GRANTOR may calculate an amount equal to the difference between one (01) annual total RPI and the balance in the RPI subaccount of the PROVISUR Collection Account, so the said amount is available in the GRANTOR’s budget before the end of the first half of the fiscal year following the occurrence of the deficit. This operation will not generate interest payment obligations by the GRANTOR. When resources are available in its budget statement, the GRANTOR will transfer these resources to the RPI subaccount of the PROVISUR Collection Account.

e. Similarly, if the balance of the PROVISUR IGV subaccount is less than the VAT rate in respect of RPI, for the funds available in the PROVISUR Collection Account, the Trustee of the Collection Trust must notify the GRANTOR, the CONCESSIONAIRE and SEDAPAL of this fact, within three (3) days of verified, being the GRANTOR’s obligation to budget and replenish the respective balance according to the procedure described in the previous paragraphs.

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Without limiting the foregoing, SEDAPAL must take appropriate action to cash the deposit of the total outstanding balance and restore the flow of the resources mentioned above. The GRANTOR's obligation to budget possible RPI deficit, according to the procedure described in this clause will be in effect from the commencement of RPI payment.

f. The Parties recognize that the process of budget formulation of the State of the

Republic of Peru is governed by public provisions, disseminated through the official gazette El Peruano.

g. SEDAPAL shall not make any withholdings, deductions or compensations regarding invoices, if as of the payment date the CONCESSIONAIRE owes its contractors any amount for purchase of goods and/or services, fines or compensation for damages. In case of a final decision by the Competent Governmental Authority in accordance with Applicable Laws and Regulations ordering such withholdings, deductions or compensations, SEDAPAL will comply with that decision for amounts corresponding to the RPOM invoices.

CHAPTER X: PERFORMANCE BONDS OF CONTRACTUAL OBLIGATIONS

CONTRACT PERFORMANCE BOND

10.1. To ensure the proper and timely compliance of each and every one of the obligations

under the Contract, including Operation and Maintenance of the Works and payment of penalties and allowances as may be appropriate, the CONCESSIONAIRE will deliver a Concession Contract Performance Bond to the GRANTOR with solidarity, unconditional, irrevocable, without benefit of discussion or division and automatic enforcement attributes according to the following: • From the Closing Date until the Effective Date of Obligations: Issued for the sum

of S/. ___________________(______________________ and 00/100 Nuevos Soles), equivalent to 1% of the benchmark investment.

• From the Effective Date of Obligations until the Start of Operations: Issued for the sum of S/. _____________ (__________________and 00/100 Nuevos Soles), equivalent to 10% of the benchmark investment.

• From the Start of Operations until Production Scale II operations start: Issued for

the sum of S/. ______________ (_________________and 00/100 Nuevos Soles, equivalent to 10% of the benchmark investment.

• From the beginning of Production Scale II operations up to two (2) years after the

end of the Concession Contract term: Issued for the sum of S/. ______________ (_________________and 00/100 Nuevos Soles, equivalent to 10% of the benchmark investment..

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These guarantees shall consist of letters of guarantees issued in the form, terms and conditions set out in this Chapter. The letters of guarantee that comprise this guarantee will be returned to the CONCESSIONAIRE at the end of their term. The guarantees referred to in this Chapter shall be issued to the GRANTOR to be executed only at their request, in whole or in part, and must be renewed annually, thirty (30) days prior to maturity, for which the CONCESSIONAIRE shall renew the existing letter of guarantee or submit a new one, with the same characteristics, covering all outstanding obligations. Failure of timely renewal of any of the said letters of guarantee, will entitle the execution of the corresponding original letter of guarantee, without prejudice to the right of Contract termination, provided in Subsection l) of Clause ¡Error! No se encuentra el origen de la referencia. 15.2.3 of this Contract.

MODIFICATION OR REPLACEMENT OF GUARANTEES

10.2. Any modification or replacement of the Guarantees, and everything related to the

release or execution thereof, shall be in accordance with the provisions of the Bidding Terms and this Chapter.

ENFORCEMENT OF GUARANTEES

10.3. Guarantees provided in Clauses 10.1 and 10.2 may be enforced by the GRANTOR in

whole or in part, for the following reasons: a) Serious breach of the CONCESSIONAIRE’s obligations established in the

Concession Contract, in accordance with the provisions of Clause ¡Error! No se encuentra el origen de la referencia. 15.2.3.

b) Failure to pay compensation to the GRANTOR for damages caused by the CONCESSIONAIRE’s breach, enforceable by a final decision.

c) Failure to pay compensation for termination of the Concession Contract attributable to the CONCESSIONAIRE, enforceable by a final decision.

d) Non-payment of penalties referred to in Chapter XIX, without prejudice to the provisions of Subsection ¡Error! No se encuentra el origen de la referencia. n) of Clause ¡Error! No se encuentra el origen de la referencia. 15.2.3.

10.4. The GRANTOR shall notify the bank issuing such Guarantees, observing its

provisions in accordance with the description thereof. Enforcement shall be carried out on the value of compensation determined by the GRANTOR, which will be calculated based on the failure by the CONCESSIONAIRE referred to in Clause 10.3, any remnant must be delivered to the CONCESSIONAIRE.

10.5. The enforcement of the Guarantees does not prevent from invoking Expiry of the Concession, should there be grounds according to the provisions of this Contract.

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10.6. The partial or total enforcement of Guarantees shall not relieve the

CONCESSIONAIRE from its obligation to ensure the proper and timely performance of each and every one of its obligations under the Contract; therefore, the CONCESSIONAIRE must replace the executed Guarantee by one of the same characteristics, within a period not exceeding ten (10) Days of its execution, except for the case when such guarantee has been executed under the provisions of Clause 15.1415.15 of this Contract.

OPPORTUNITY TO RETURN GUARANTEES

10.7. Guarantees will be returned to the CONCESSIONAIRE at the end of the term

thereof.

GUARANTEES FOR AUTHORIZED CREDITORS

10.8. In order to finance investments and Works as may be appropriate, and without

prejudice to any other guarantee subsequently constituted, the CONCESSIONAIRE may, with the authorization granted by the GRANTOR, provide the following guarantees to Authorized Creditors:

a) Mortgage on the Concession right as provided in Article 3° of Law No. 26885.

b) Guarantees on income to secure operations derived from financing of the Works.

c) Real estate guarantee on the CONCESSIONAIRE’s shares, including the

Minimum Participation.

10.9. The CONCESSIONAIRE agrees and acknowledges that any such guarantees shall not relieve it from its contractual obligations.

10.10. The GRANTOR agrees and acknowledges that neither Authorized Creditors nor other person acting on their behalf shall be responsible for Contract compliance by the CONCESSIONAIRE, unless Authorized Creditors favorably exercise the rights referred to in Clause 10.14.

10.11. For purposes of guarantee constitution authorization referred to in Clause 10.8, the CONCESSIONAIRE shall deliver to the GRANTOR a copy of the draft contracts and other documents relating to the operation, as well as a statement of the potential Authorized Creditor in terms substantially similar to those contained in Annex 12 of this Contract.

10.12. Once these documents have been delivered, the GRANTOR shall have twenty (20) Days to make observations with the respective explanation. If there are no observations after this period, the authorization shall be deemed granted without any possibility of subsequent claim by the GRANTOR. If the GRANTOR makes observations, the CONCESSIONAIRE will have a term of ten (10) Days to correct them. Once remedies have been performed, the GRANTOR shall have a period of

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ten (10) days to approve the request. In the absence of a response, it shall be deemed granted.

10.13. The denial of the authorization referred to the preceding paragraph shall be duly justified.

10.14. Authorized Creditors may seek enforcement of the guarantees established in their favor. For the case referred to in paragraph a) of Clause 10.8, it shall follow the procedure set forth in Article 3 of Law No. 26885, as agreed by the Parties in the act establishing the guarantee.

10.15. The collection rights corresponding to the WPC are freely transferable, so that they may be assigned and/or transferred in favor of Authorized Creditor(s) subject to the GRANTOR’s assessment regarding the main terms of the financing contracts, as provided in Clause 6.46 of this Contract.

CHAPTER XI: INSURANCE SCHEME

APPROVAL

11.1. For purposes of the Contract, the CONCESSIONAIRE must have insurance policies

required by this Chapter, including but not limited to, minimum requirements that can be extended and improved by the CONCESSIONAIRE, and whose final proposal has been duly approved by the GRANTOR, pursuant to the terms set out in the following clauses.

11.2. Once the proposed policies referred to in Subsection g)g) of Clause 3.33.3, have been submitted, the GRANTOR has a period of twenty (20) Calendar Days for approval calculated from the date of approval of the Technical File. This situation is equally applicable to cases in which the CONCESSIONAIRE is required to file renewals according to the provisions of Clause 11.1211.12. After the period specified in this paragraph has expired and in the absence of a ruling by the CONCESSIONAIRE, policies shall be deemed approved. If applicable, within the time specified above, the GRANTOR shall make observations to the proposed policies submitted, and the CONCESSIONAIRE shall have ten (10) Calendar Days to address those comments. Once the corrections have been submitted by the CONCESSIONAIRE, the GRANTOR shall have a term of five (5) Calendar Days for approval. After this period and in the absence of the GRANTOR’s response, policies shall be deemed approved.

11.3. As for policies indicated in Clauses 11.9 and ¡Error! No se encuentra el origen de la referencia. 11.10, the CONCESSIONAIRE may hire the services of an internationally re-known specialized company, to carry out the risk analysis to determine as the sum insured, the probable maximum loss risk caused by nature including earthquakes and tsunamis, political risks, operational risks and other risks required by this Chapter. This analysis should be presented in a report to the GRANTOR at least sixty (60) days before the Start of Operations.

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The company that shall perform the risk analysis referred to in the preceding paragraph shall be proposed jointly with the proposed policies as set out in subsection g)g) of Clause 3.33.3.

11.4. Copies of the final hired policies shall be delivered to the GRANTOR according to the following terms and conditions:

a) Policies of Clause 11.7: within a period not to exceed thirty (30) Days after proposed policies have been approved.

b) Policies of Clauses 11.8 and 11.11: at least thirty (30) Calendar Days before commencement of construction.

c) Policies of Clauses 11.9 and ¡Error! No se encuentra el origen de la referencia. 11.10: at least thirty (30) Calendar Days before the Start of Operations.

TYPES OF INSURANCE POLICIES

11.5. During the term of this Contract, the CONCESSIONAIRE shall hire and thereafter

keep in force the following insurance, covering the Project, its workers, contractors and sub-contractors, naming the GRANTOR, and/or its nominee, as additional insured in the respective policies taken out in order to allocate, if necessary, insurance indemnity in refund, replacement or repair of damaged property. The policies will insure the CONCESSIONAIRE who must allocate the amounts, due compensation for any loss, and necessarily the repair of damage caused by such loss.

11.6. Only if it is physically impossible to refund, replace or repair damaged property, the compensation shall be delivered to the GRANTOR and/or additional insured, not being obligated to refund any monies to the CONCESSIONAIRE.

The coverage ratio set forth below is illustrative, as the only minimum requirements are:

11.7. Personal Insurance for Workers.

The CONCESSIONAIRE must comply with hiring and submitting all policies required by the laws and regulations of the Peruvian government in force and/or to be decreed, for workers in Peru, covering and protecting the life and health of all employees directly or indirectly related with the subject matter of the Contract, such as Life Insurance Law (Legislative Decree No. 688) and Supplementary Labor Risk Insurance (Health and Pensions). Such insurance shall be hired considering at least the coverage and requirements required by Applicable Laws and Regulations.

11.8. Insurance against All Construction and Assembly Risks

Con formato: Fuente: Sin Negrita

Con formato: Fuente: Sin Negrita

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The CONCESSIONAIRE must comply with hiring the aforementioned policy, protecting the construction and assembly risk of civil, electromechanical works and all property that may suffer material damages of any kind and description, as well as equipment and machinery for construction, in any place and condition including owned and/or third parties premises, permanent and/or temporary camps, outdoors or underground, water and underwater areas.

The risks covered by this policy shall include the following: Basic Coverage (A); Coverage (B) covering earthquake, tremor, tsunamis damage; Coverage (C) covering rain, flooding and landslides; Coverage (D) covering material damages until the end of the Commissioning Period and Coverage (G) for debris removal. They must also include political risks, such as strikes, civil commotion, malicious damage, vandalism and terrorism. They should also cover extensive maintenance, other adjacent properties, weakening of foundations and underground and design errors in the Technical File and latent defect associated with it. This coverage must be in force for the duration of construction and assembly period, including the Commissioning Period except coverage (D) that starts when the work ends and remains in force during the maintenance period. Additionally, it should include coverage for "E and F Liability", which shall protect any direct, indirect or consequential damage, throughout the period of construction and assembly, including the Testing/Commissioning period. The insured value for this policy shall be equal to the amount of investment in Works and equipment. The effectiveness of this policy will be from the start of Construction until the issue of the Certificate of Commissioning of the corresponding Phase or Certificate of Proper Execution, if applicable. In case Construction and assembly can be perfectly determined by Phases that may enter into operation, these Works may be withdrawn from the Construction and assembly policy after the Commissioning Period, provided they are simultaneously included in the All Risk policy for Completed Civil Works.

11.9. All Risk Insurance for Completed Civil Works The CONCESSIONAIRE must comply with hiring the aforementioned policy, protecting equipment and all water facilities, submarine outfalls, diffusers and underwater installations from damages. The CONCESSIONAIRE must comply with hiring the aforementioned policy, protecting the equity risk of completed works and in operation, which starts at the end of the All Construction and Assembly Risks coverage, remaining in effect throughout the Concession period. Coverage should cover all Completed Works (civil works, equipment, including all facilities of every kind and description, aquatic, submarine outfall infrastructure, diffusers, underwater facilities, equipment and inventory), for all material damage that any property of any kind and description may suffer, which will be consistent with the actual executed budget, except for preliminary or preparatory work that will not be part of the insured value, such as dredging, cleaning and debris removal costs, among others.

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The risks covered by this policy must include risks associated with physical and/or structural integrity of the Submarine Outfall infrastructure due to maritime traffic and/or anchoring structures of vessels in the area of maritime influence of the Concession, political risks such as strikes, civil commotion, malicious damage, vandalism and terrorism, and natural hazards such as earthquakes, tsunamis, flooding, landslides, heavy rain and risk due to environmental damage. And also, risks of machinery breakdown, electronic equipment, contractor all risk, misfortune, mobile and/or portable equipment and automatic coverage for new acquisitions, own and/or third parties vehicles within the insured premises, ground subsidence, landslides and earth movements. This coverage must also include the risks of direct losses for any loss including costs of demolition, cleaning, debris removal, extra expenses and extraordinary expenses. The CONCESSIONAIRE shall declare to the insurance company the full replacement value of the works referred to in this clause, including all facilities, equipment and stock, as total value of risk exposure. However, the sums insured must be at least the maximum probable loss for each risk. The insured value must at all times include the clause related to replacement value of new items. The GRANTOR may suspend the CONCESSIONAIRE's obligation to hire and maintain in force the policy that covers damages to the Completed Works only with respect to acts of terrorism, if such insurance ceases to be offered in the domestic and international markets, and so is determined by a specialized international renowned company, other than the CONCESSIONAIRE’s broker or insurance broker. The suspension of this obligation will be applied from the time the alternative treatment to be agreed between the CONCESSIONAIRE and the GRANTOR in writing enters into effect to regulate the event that completed civil works may suffer damage by acts of terrorism. If during the suspension referred to in this paragraph, national or international markets offer again new policies to cover damage caused by acts of terrorism, the CONCESSIONAIRE's obligation to hire and keep the policy in force covering such damages will recover validity and the CONCESSIONAIRE must hire such policy within ten (10) Days of having been requested in writing by the GRANTOR. This obligation will resume in effect at the time the CONCESSIONAIRE hires the policy to cover damages for Completed Works by acts of terrorism, or, after the twenty (20) Days provided expire, whichever comes first. Simultaneously with the entry into force of this obligation, the alternative treatment agreed by the Parties shall terminate, and the possibility to suspend it again on the same terms referred to in this paragraph will remain, should the assumption described herein arises again.

11.10. All Risk Property Insurance

The CONCESSIONAIRE must comply with hiring the aforementioned policy, covering damages that equipment and all facilities, above and below ground, and underground pipes and facilities may suffer. The CONCESSIONAIRE must comply with hiring the aforementioned policy, protecting equity risk of completed works and in operation from any risk, which comes into effect when the All Risk Construction and Assembly coverage expires, remaining in effect throughout the Concession period.

Coverage should include protection of all Completed works (civil works, equipment, including all facilities of every kind and description, above and below ground, pipes, and underground facilities, equipment and inventory) from all material damages that

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any property of every kind and description may suffer, which will be consistent with the actual executed budget, except for preliminary or preparatory work that will not be part of the insured value, such as demolition costs of buildings, pavement removal, cleaning and disposal of debris, among others. The risks covered by this policy must include political risks such as strikes, civil commotion, malicious damage, vandalism and terrorism. And also risks of machinery breakdown, electronic equipment, contractor all risk, misfortune, mobile and/or portable equipment and automatic coverage for new acquisitions, own and/or third parties vehicles within the insured premises, ground subsidence, landslides and earth movements. This coverage must also include the risks of direct losses for any loss including costs of demolition, cleaning, debris removal, extra expenses and extraordinary expenses. The CONCESSIONAIRE shall declare to the insurance company the full replacement value of the works referred to in this clause, including all facilities, equipment and stock, as total value of risk exposure. However, the sums insured must be at least the maximum probable loss for each risk. The insured value must at all times include the clause related to replacement value of new items. The GRANTOR may suspend the CONCESSIONAIRE's obligation to hire and maintain in force the policy that covers damages to the Completed Works only with respect to acts of terrorism, if such insurance ceases to be offered in the domestic and international markets, and so is determined by a specialized international renowned company, other than the CONCESSIONAIRE’s broker or insurance broker. The suspension of this obligation will be applied from the time the alternative treatment to be agreed between the CONCESSIONAIRE and the GRANTOR in writing enters into effect to regulate the event that completed civil works may suffer damage by acts of terrorism. If during the suspension referred to in this paragraph, national or international markets offer again new policies to cover damage caused by acts of terrorism, the CONCESSIONAIRE's obligation to hire and keep the policy in force covering such damages will recover validity and the CONCESSIONAIRE must hire such policy within twenty (20) Days of having been requested in writing by the GRANTOR. This obligation will resume in effect at the time the CONCESSIONAIRE hires the policy to cover damages for Completed Works by acts of terrorism, or, after the twenty (20) Days provided expire, whichever comes first. Simultaneously with the entry into force of this obligation, the alternative treatment agreed by the Parties shall terminate, and the possibility to suspend it again on the same terms referred to in this paragraph will remain, should the assumption described herein occurs again.

11.11. General, Contractual, Extra-contractual, Employer Liability Insurance during the operation period The CONCESSIONAIRE must comply with hiring liability coverage taking into account the following clauses, throughout the term of this Contract: a) General Extra-Contractual Liability b) Employers Liability c) Contractual Liability d) Cross Liability between the CONCESSIONAIRE, Contractors and Sub-

contractors. e) Pollution and Contamination Liability

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Although the liability coverage risk is different for the Construction and Operation periods, the characteristics of such coverage are similar and must meet the following specifications: For all purposes, the State institutions, particularly SEDAPAL, except for the GRANTOR or its nominee, will be considered third parties for any claims they may make for direct damages and other economic losses they may suffer as a result of the Construction of the Works and subsequent operation of the Sanitary Infrastructure by the CONCESSIONAIRE; therefore, any State agency shall be forthwith entitled to make their legal claim as third party for any direct damage to the Works and operations subject matter of this Contract and that are legally attributable to the CONCESSIONAIRE, its contractors, sub-contractors and/or any other company, linked, related or designated by the CONCESSIONAIRE. The sum insured for liability coverage for personal, environmental and material damages, both during Construction and Operation will be determined by the CONCESSIONAIRE in a level sufficient to cover these damages. The CONCESSIONAIRE will be responsible for the balance not covered by the insurance hired, in case any loss attributable to it exceeds the insured amount, relieving the GRANTOR and SEDAPAL’s liability. Failure to assume this responsibility in a diligent and timely manner will be considered grounds for Contract termination.

11.12. Communications The policies hired in accordance with the provisions of this Contract shall contain a provision requiring the respective insurance company to give written notice to the GRANTOR of any breach by the CONCESSIONAIRE in the payment of premiums, with at least twenty-five (25) Calendar Days prior to the date on which such breach may result in suspension of coverage and/or partial or total cancellation of the policy. The notification requirement in this Chapter will also be required in the event of cancellation or non-renewal of any insurance, in which case the pre-notification must be made within thirty (30) Calendar Days in advance. The corresponding policy must simultaneously establish that maturity will only occur if the insurer has complied with the obligation described in the first part of this clause. The CONCESSIONAIRE shall notify the GRANTOR, with twenty-five (25) Calendar Days prior to the expiration of the related policies, the dates of renewal thereof, delivering them to the GRANTOR for review and comment on the conditions these will be issued. When renewals of insurance policies do not involve a change in their terms and conditions, it will only be necessary to report such fact to the GRANTOR, without requiring its opinion.

11.13. Possibility of revising the terms of the obligation to take out insurance

In order to contribute to the hiring and/or renewal of insurance specified in Clauses 11.9 and ¡Error! No se encuentra el origen de la referencia. 11.10, this obligation may be exceptionally reviewed by the GRANTOR, if the high cost of their premiums involve a real impediment to hire them. In order to determine the situation described above, the following rules shall apply: a) A real impediment to the take out insurance required in this Chapter will be if the

price of the lowest premiums in the domestic and international markets increased

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in value by more than fifty percent (50%) compared to the premium paid by the CONCESSIONAIRE for the same or similar insurance the previous year or the previous period if the insurance was taken out for a term exceeding one year. In any case may the CONCESSIONAIRE invoke this circumstance, or fail to have available insurance, for the case of Insurance against All Construction and Assembly Risks, indicated in Clause 11.8. A similar insurance will be understood as one with similar characteristics to that provided by the Contract or that hired by the CONCESSIONAIRE in compliance with this Clause, if applicable.

b) The CONCESSIONAIRE shall notify the GRANTOR about this situation at least

sixty (60) Calendar Days before the date on which the coverage or renewal certificates must be submitted, enclosing a report by a specialized international renowned company, other than the CONCESSIONAIRE’s broker or insurance broker, containing: i) a justified description based on how the form and amount of insurance market conditions have changed in the sense invoked by the CONCESSIONAIRE and ii) a justified and reasonable proposal on new policies and/or amounts that the CONCESSIONAIRE, given the changes in the market, should take in order to obtain the greatest possible protection without incurring in overstated expenses making the Contract unsustainable in the medium term.

c) The GRANTOR shall analyze the CONCESSIONAIRE’s communication and the

aforementioned report from the perspective that insurance hiring costs may make the Contract unsustainable in the medium term and, if deemed appropriate, it will accept the proposed amendments to the insurance policy(s), within a maximum term of thirty (30) Calendar Days after receiving the report, also expressly stating that the amendment to the insurance plan that the GRANTOR establishes for a given period will be valid only for the period of one year, after which time the requirements contained in Clauses 11.9 and ¡Error! No se encuentra el origen de la referencia. 11.10. In case the CONCESSIONAIRE requests to accept the provisions of this clause and this request is accepted by the GRANTOR, the CONCESSIONAIRE shall be solely liable to the GRANTOR for any loss and/or damage not covered by the corresponding insurance.

11.14. Hiring of policies by the CONCESSIONAIRE

If the CONCESSIONAIRE fails to maintain the policies in force, as is required in accordance with this Chapter, the GRANTOR shall notify the CONCESSIONAIRE about the hiring and payment of premiums at the CONCESSIONAIRE’s expense. The amount of such premiums plus interest, from their payment by the GRANTOR until repayment to it, at an annual interest rate (based on a three hundred sixty (360) Calendar Days and ___ Calendar Days actually elapsed) equal to the highest interest rate that governs the Peruvian financial system during that period, for credit transactions in the relevant currency, shall be reimbursed by the CONCESSIONAIRE to the GRANTOR within a maximum of five (5) Days after notification by the GRANTOR, without prejudice to the execution of the Contract Performance Bond and application of appropriate penalties.

11.15. Unaffected Obligations

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The hiring of insurance does not reduce or alter in any way other obligations assumed by the CONCESSIONAIRE according to this Contract.

11.16. Compliance with policies The CONCESSIONAIRE is liable to the GRANTOR to comply with the terms and conditions of all insurance policies taken out in accordance with the provisions of this Contract. In case of loss, the CONCESSIONAIRE shall report without delay to the insurance company and also notify the GRANTOR at the same time. If insurance coverage is canceled for lack of timely notice of a claim, liability incurred will be borne by the CONCESSIONAIRE releasing the GRANTOR from any responsibility, for the equivalent of the amount that the insured should have been indemnify in case of timely notification of the loss. The amounts for deductibles shall be borne by the CONCESSIONAIRE.

11.17. Coverage Report Within the first sixty (60) Calendar Days of each Concession Year and during the term of this, the CONCESSIONAIRE shall submit the following to the GRANTOR: a) A list of insurance policies to be taken out and/or maintained by the

CONCESSIONAIRE during the year in question, indicating at least the coverage, the insurance company, the claims made in the previous year and their current situation; and

b) From the second Year of the Concession, a certificate issued by the authorized representative of the insurance company indicating the policies and coverage that the CONCESSIONAIRE has hired during the previous year, in order to demonstrate compliance with the terms of this Chapter.

11.18. Notwithstanding the above, during the course of the Contract and whenever the

GRANTOR requires it, the CONCESSIONAIRE shall provide satisfactory proof to the GRANTOR that all insurance policies are still in force and paid.

The GRANTOR may at any time request the CONCESSIONAIRE the delivery of original documents of hired insurance policies, or certified copies thereof, as well as receipts or proof of being current on payment of the respective premiums.

11.19. If breach of the obligation to maintain current policies is verified, the GRANTOR may

enforce the valid Guarantee, prior notice to the CONCESSIONAIRE, without prejudice to the penalties or Expiry of this Contract that would result from such breach, in accordance with the provisions of Clause ¡Error! No se encuentra el origen de la referencia. 15.2.3 in this Contract.

11.20. Events Not Covered. The CONCESSIONAIRE will not be responsible for losses, damages and liabilities not covered by such insurance policies, or lack of coverage, except in the case of damage caused by the CONCESSIONAIRE.

CONCESSIONAIRE’S RESPONSIBILITY

11.21. The hiring of insurance policies by the CONCESSIONAIRE does not diminish its responsibility for reasons attributable to it; therefore the CONCESSIONAIRE will be

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directly responsible for all obligations under the Contract above any insurance liability, except for reasons not attributable to the CONCESSIONAIRE. In those terms the CONCESSIONAIRE agrees to indemnify the GRANTOR and SEDAPAL against all claims, delays or claims related to its Operation, accepting liability by subrogation instead of the GRANTOR and/or SEDAPAL, should there be any third party claim for this reason, in any way.

11.22. Notwithstanding the provisions of this Chapter and the obligations contained therein, the CONCESSIONAIRE shall pay all sums due to any person in accordance with Applicable Laws and Regulations. This implies that, in case of loss due to fraud or negligence on its part, not covered by such insurance policies, the CONCESSIONAIRE shall be solely responsible for any damage whatsoever caused. In any case will the CONCESSIONAIRE be responsible for acts or facts committed by the GRANTOR, SEDAPAL or third parties, who shall answer for damages attributable to them. This disclaimer includes provisions relating to Environmental Liabilities referred to in Clause 12.512.5 of the Contract.

CHAPTER XII: SOCIO ENVIRONMENTAL CONSIDERATIONS

ENVIRONMENTAL RESPONSIBILITY

12.1 The CONCESSIONAIRE acknowledges the Applicable Laws and Regulations,

including international standards referred to in the Second Transitional Provision, the Supplemental and Final Provision of the General Environmental Law, and the obligations under this Contract in environmental matters, to the extent they are applicable to activities covered by this Contract. The CONCESSIONAIRE agrees to comply with these standards as an indispensable component of its environmental management, implementing the necessary measures to ensure appropriate Service, and mechanisms for adequate participation and communication with citizens.

12.2 In order to minimize the negative environmental impacts that may occur to the

environment due to the activities of the Concession, the CONCESSIONAIRE is required to comply, during Construction and Operation processes, with the terms assumed in the EIA approved by Competent Governmental Authorities in accordance with their competence in environmental matters. These instruments shall be part of the Contract as part of Annex 7. Notwithstanding the foregoing, the CONCESSIONAIRE shall have sole responsibility to third parties for negative environmental impacts not identified in the EIA, as applicable, taking into consideration the provisions of Clause 12.5.

12.3 The implementation of the conditions and/or measures imposed by the EIA will be the

CONCESSIONAIRE’s sole responsibility as well as its costs.

12.4 The CONCESSIONAIRE shall be jointly liable with subcontractors for any environmental damage caused by the effect of the Concession activities, provided such environmental damage is directly attributable to either of them. The hiring of insurance does not relieve the CONCESSIONAIRE from responsibilities.

Con formato: Énfasis, Español(España - alfab. tradicional)

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ENVIRONMENTAL LIABILITIES

12.5 In any case will the CONCESSIONAIRE be responsible for the negative

Environmental Impacts that could be generated prior to the date of Taking of Possession of the Concession Assets, even if the effects occur after that date. If the negative Environmental Impacts are generated from the date of Taking of Possession of the Concession Assets, the CONCESSIONAIRE shall be liable only in cases where it is established that the cause of the damage is attributable to him.

12.6 During the preparation of the corresponding EIA, which must be submitted to the Competent Governmental Authority, the CONCESSIONAIRE will perform the identification and evaluation of Environmental Liabilities, which will be part of the Environmental Baseline study. In all cases where it is not possible to identify the perpetrators of Environmental Liabilities at the date of Taking of Possession of the Concession Assets, the State of the Republic of Peru will gradually assume its remediation.

12.7 Without prejudice to what is stated in the preceding section, the GRANTOR shall not be liable for Environmental Liabilities, unless this is provided in the Applicable Laws and Regulations.

ENVIRONMENTAL IMPACT STUDY

12.8 In compliance with the General Environmental Law, Law of the National System of Environmental Impact Assessment and Environmental Protection Regulations for Projects related to the activities of Housing, Spatial Planning, Construction and Sanitation, the CONCESSIONAIRE shall submit to the National Sanitation Ministry of Housing, Construction and Sanitation, for approval, an Environmental Impact Study for the Construction and Operation activities of the Sanitary Infrastructure.

12.9 Prior to the approval of the Technical File as provided in Clauses 6.10 and 6.11, the CONCESSIONAIRE shall have the approved Environmental Impact Study. During the preparation of the Environmental Impact Study, the CONCESSIONAIRE will provide synergy and complementarity of the scope thereof as well as obtain licenses and permits issued by the Competent Governmental Authorities.

12.10 The Environmental Impact Assessment must include environmental assessments required by other Competent Governmental Authorities, relating to: i) the effects that the evacuation of treated wastewater into the sea could cause ii) construction projects for docks, vessels and other similar and iii) the projects related to dredging operations in water areas, if applicable.

12.11 The content of the Environmental Impact Assessment is established by the Applicable Laws and Regulations and those that the Competent Governmental Authority may have approved at the time of development by the CONCESSIONAIRE.

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Without prejudice to the provisions of the Applicable Laws and Regulations, the Environmental Impact Assessment should include, at least, the content indicated in Annex 6.

SOCIO ENVIRONMENTAL MANAGEMENT

12.12 The CONCESSIONAIRE must comply, as part of its social and environmental management, with legal standards relating to the management of solid waste, sludge, wastewater, emissions and other by-products generated by the Desalination Plant and Wastewater Treatment Plant, as well as with odor control, noise, water quality, air quality, oil consumption, zoning, protection and conservation of natural resources in areas adjacent to the activities being carried out, including other environmental aspects governed by the Applicable Laws and Regulations.

12.13 In addition to the statement in the preceding clause, with respect to the protection of the National Cultural Heritage, the CONCESSIONAIRE shall comply with the following provisions: a. Any new building work, extension, demolition, restoration, renovation or other

involving a real estate that is part of National Cultural Heritage, requires the authorization of the Ministry of Culture before its execution through the issuance of the Certificate of Absence of Archaeological Remains (CIRA).

b. If during the Construction process, any archaeological or historical remains are found, the CONCESSIONAIRE is responsible for suspending all activity in the area of the discovery and immediately notifying the Ministry of Culture.

c. In any case may the CONCESSIONAIRE acquire title or any rights or on materials or archaeological or historical remains found.

d. For archaeological remains identified in the surrounding areas of activities, the CONCESSIONAIRE shall establish protective barriers until the Ministry of Culture takes over.

Compliance with the obligations described in this clause may be invoked as grounds for Suspension by the CONCESSIONAIRE of the term allotted to conclude the execution of the Works, provided the circumstances described above are duly accredited by the CONCESSIONAIRE.

12.14 The CONCESSIONAIRE may incorporate additional measures to those provided in the Environmental Impact Assessment, which it deems will contribute to the fulfillment of the Construction and Operation conditions provided in this Contract with respect to environmental protection.

12.15 The start of Construction and the subsequent Start of Operations must adhere strictly to the provisions of the plans and programs included in the approved Environmental Impact Assessment. Amendments in plans and programs included therein must follow the administrative procedure established by the Competent Governmental Authority.

ENVIRONMENTAL REPORTS

12.16 During construction, within the first fifteen (15) Calendar Days following the end of each quarter, the CONCESSIONAIRE will deliver to the GRANTOR an environmental report stating compliance with environmental commitments. These reports by the CONCESSIONAIRE shall provide information on activities carried out, account for the implementation of the environmental specifications referred to in plans and

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programs contained in the approved Environmental Impact Assessment, note environmental problems encountered, and propose additional measures necessary to overcome and correct them. It must also indicate the effectiveness of the implementation of each of the measures taken.

12.17 During the first year of Operation, the CONCESSIONAIRE must prepare an environmental report quarterly to account for the effectiveness of the implementation of each of the measures defined in this Chapter, which will be delivered to the GRANTOR during the first fifteen (15) Calendar Days after the end of each quarter.

12.18 From the second year of Operations until the compliance of the maximum deadline of the Concession, the Environmental Report will be delivered to the GRANTOR annually. This Environmental Report will be submitted during the first fifteen (15) Calendar Days from the second year of Operations.

12.19 Without prejudice to provisions in the preceding sections, the CONCESSIONAIRE must submit a copy to the GRANTOR of each of the reports, environmental reports or controls required by the Competent Governmental Authorities with environmental responsibilities, within the term and conditions set by them.

CHAPTER XIII: RELATIONSHIP WITH THE STRATEGIC PART NER, THIRD PARTIES AND STAFF

RELATIONSHIP WITH THE STRATEGIC PARTNER

13.1 The Strategic Partner shall own and maintain a Minimum Participation that may not

be under any circumstances less than twenty-five percent (25%). The Strategic Partner shall oppose any motion submitted by the CONCESSIONAIRE’s shareholder proposing a capital increase disabling the Strategic Partner to exercise its preemptive subscription rights allowing him to at least maintain the Minimum Participation in the Concession. From the eleventh year since the Start of Operations, a new Strategic Partner may take over only with the GRANTOR’s approval, taking a decision within a maximum of thirty (30) Days of receipt of request by the CONCESSIONAIRE. This new strategic partner must meet the same operation or construction technical requirements set for the first Strategic Partner.

13.2 All acts, business, contracts and Contracts which may affect the percentage of the Strategic Partner’s Minimum Participation, from the eleventh year since the Start of Operations such as the issuance of shares, mergers, capital increases and others by the CONCESSIONAIRE must be made known to the GRANTOR, in order to verify that the percentage mentioned in the preceding clause is maintained at all times.

13.3 If there is more than one Strategic Partner, each shall comply with the provisions of Clauses 13.1 and 13.2 above.

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RELATIONSHIP WITH THE CONSTRUCTION COMPANY

These provisions are applicable in case the Construction Company is a company hired by the CONCESSIONAIRE.

13.4 On the Effective Date of Obligations, the CONCESSIONAIRE shall have fulfilled the signing of the construction contract(s) in the terms and conditions set forth in the Bidding Terms, having taken on the responsibility with the Construction Company before the GRANTOR for Construction of Works, even after two (2) years from the date of delivery of the Commissioning Certificate.

13.5 If the CONCESSIONAIRE hires more than one Construction Company, liability referred to in the preceding paragraph shall apply to each Construction Company for Works each of them performs.

13.6 Joint and several liabilities shall apply in the event that the implementation of the insurance policies taken out by the CONCESSIONAIRE and the Guarantees in place are not sufficient to cover the damages.

13.7 The construction contract for any cause or reason and under any circumstances shall give the Operator any rights against the GRANTOR or SEDAPAL, as the contractual relationship has been established between the CONCESSIONAIRE and the Construction Company.

13.8 The minimum term of the construction contract shall include the deadline for

Construction plus two (2) additional years, calculated from the Effective Date of relevant Obligations.

RELATIONSHIP WITH THE OPERATOR

These provisions apply if the Operator is an operating company hired by the CONCESSIONAIRE.

13.9 the Effective Date of Obligations, the CONCESSIONAIRE shall have fulfilled the signing of operating contracts in the terms and conditions set forth in the Bidding Terms, having taken on the responsibility with the Operator before the GRANTOR for the Operation and Maintenance of the Sanitary Infrastructure under its responsibility from the Start of Operations up to two (2) years after the end of the Concession Contract term.

13.10 If the CONCESSIONAIRE hires more than one Operator, the liability referred to in the preceding paragraph shall apply to each Operator for the Operation and Maintenance activities that each of them perform.

13.11 Joint and several liabilities apply in the event that the execution of the insurance policies taken out by the CONCESSIONAIRE and the Guarantees in place are not sufficient to cover damages caused.

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13.12 The operating Contract for any cause or reason and under any circumstances shall give

the operator any rights against the GRANTOR or SEDAPAL, as the contractual relationship has been established between the CONCESSIONAIRE and the Operator.

13.13 The minimum term of the Operating Contract shall be five (5) years from the Start of Operations.

RELATIONSHIP WITH THIRD PARTIES

13.14 The CONCESSIONAIRE may not transfer its right to the Concession or assign its

contractual position without the GRANTOR’s consent, prior technical opinion by SEDAPAL. For purposes of the authorization, the CONCESSIONAIRE shall notify its intention to transfer its rights under this Contract or assign its contractual position to the GRANTOR, submitting the following: a) Preliminary Contract or letter of intent to transfer or assign, duly signed by the

purchaser or assignee.

b) Documents proving the legal capacity of the purchaser or assignee.

c) Documentation proving that the purchaser or assignee meets the prequalification requirements that were eventually required in the Bidding Terms for the qualification of the Bidders.

d) Contract by which the purchaser or assignee agrees to assume any damage and

pay any amount due and payable by the CONCESSIONAIRE. e) Contract by which the Strategic Partner is replaced by one of the shareholders of

the purchaser or assignee in the contractual position that the former occupied in the Concession and with the same Minimum Participation percentage.

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The CONCESSIONAIRE shall submit its request to the GRANTOR, with a copy to SEDAPAL. The latter shall decide on the operation within a maximum of twenty (20) Calendar Days from receipt of the request and submit its views to the GRANTOR, who shall have a period of twenty (20) Calendar Days to make its decision. The approval by the GRANTOR does not release the transferor from any liability for transferring its right to the Concession or assigning its contractual position up to a maximum term of one (1) year from the date of transfer approval. This means that during this period, the transferor shall be jointly liable with the assignee for acts committed prior to the transfer or assignment. The negative statement or no statement implies the rejection of the operation. The GRANTOR shall not deny the request for transfer or assignment of the contractual position, to the extent that the transferee provides evidence of compliance with the minimum construction or operation requirements under the Bidding Terms, as applicable.

CLAUSES IN CONTRACTS

13.15 In all contracts the CONCESSIONAIRE signs with partners, third parties and

personnel, except those which by their nature do not affect the purpose of the Concession, the GRANTOR, SEDAPAL, or the Concession Assets, should include clauses that provide for the following:

a) Include a section specifying that the Expiry of the Concession shall result in the

termination of the respective contracts as these are accessories to the main Contract.

b) Limit the validity term so that in no case they exceed the term of the Concession.

c) The waiver to bring legal liability against the GRANTOR, SEDAPAL and its

officers, except for acts attributable to them. In no event will the CONCESSIONAIRE be exempt of any liability to the GRANTOR, for acts arising from the execution of contracts subscribed with third parties, which may affect the Concession.

RELATIONSHIP WITH STAFF

13.16 The CONCESSIONAIRE shall comply with the labor laws in force in the State of the

Republic of Peru regarding its relationship with staff.

13.17 The CONCESSIONAIRE’s employment contracts with national or foreign staff, execution and termination of such contracts are subject to the rules governing labor relations of workers in the private sector. Also, work special schemes shall apply in cases that may arise. The CONCESSIONAIRE must strictly comply with Applicable Laws and Regulations concerning labor regarding the employer’s formal obligations (payroll books, pay slips and others), payment and retention of social security contributions, as well as contractual and legal obligations relating to occupational safety and health.

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Particularly, the CONCESSIONAIRE shall observe the provisions of Law 29783, Health and Safety Act at Work, its rules and amendments and complementary regulations.

13.18 In case of Expiry of the Concession, the CONCESSIONAIRE is solely responsible for payment of all employee benefits, such as wages, working conditions and other conventional or unilateral benefits, owed to its workers to the date of Expiry of the Concession. According to the provisions of Chapter XV, the GRANTOR will not be responsible, in any case, for those debts. In the event that the courts order the GRANTOR and/or SEDAPAL to pay any debt related to work to one or more of the CONCESSIONAIRE’s employees, generated within the term of the concession, they may repeal against the CONCESSIONAIRE.

CHAPTER XIV: ADMINISTRATIVE COMPETENCIES

COMMON PROVISIONS

14.1 The performance of duties that the GRANTOR and SEDAPAL must meet under this

Contract and the relevant legal standards, in no case shall be subject to authorization, permit or any expression of will by the CONCESSIONAIRE. The latter should provide full cooperation to facilitate the fulfillment of those duties. The GRANTOR and SEDAPAL shall carry out inspections, reviews, and similar actions under this Contract and the Applicable Laws and Regulations, and the CONCESSIONAIRE will facilitate the necessary conditions.

14.2 The CONCESSIONAIRE will comply with all reporting requirements and procedures set forth in this Contract or to be established by the GRANTOR, in matters within their competence, in accordance with the provisions of Applicable Laws and Regulations. The CONCESSIONAIRE shall submit periodic reports, statistics and other data regarding its activities and operations, in the manner and time agreed in the Contract. In cases where there is no time limit set in the Contract, the GRANTOR shall request the reports according to a criterion of reasonableness. The CONCESSIONAIRE will facilitate the review of documentation, files and other data required by the GRANTOR and SEDAPAL, in order to monitor and enforce the terms of this Contract, pursuant thereto, and the Applicable Laws and Regulations.

CHAPTER XV: EXPIRY OF THE CONCESSION

GROUNDS FOR EXPIRY

15.1 This Contract shall be declared terminated if any of the following grounds occur:

15.1.1 Termination for Maturity of the Term

The Concession will expire on maturity of the term laid down in Chapter IV, except as provided in Clause 4.2 of the Contract. Once the term of the Concession expires, the

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ownership of the Concession Assets shall be transferred to the GRANTOR, or its designee.

15.1.2 Termination by Mutual Contract The contract will expire at any time, by written Contract between the CONCESSIONAIRE and the GRANTOR. The Parties shall notify this to Authorized Creditors at least sixty (60) Days prior to the adoption of the Contract.

15.1.3 Termination by the CONCESSIONAIRE’s default The Contract will terminate early if the CONCESSIONAIRE incurs in serious breach of its contractual obligations. Without prejudice to the penalties that apply, the following shall be considered as grounds of serious breach of obligations by the CONCESSIONAIRE:

a) Early termination of the Service Agreement, in the event referred to in Clause 12.2 thereof.

b) Failure to comply with provisions for the participation of the Strategic Partner, established in Chapter III of the Contract.

c) The non-attendance to the Taking of Possession of the Concession Assets within the term and manner provided for that purpose, for reasons attributable to the CONCESSIONAIRE.

d) The transfer of the CONCESSIONAIRE's rights under this Contract and the transfer of its contractual position without the GRANTOR’s prior written approval.

e) The start, at the request of the CONCESSIONAIRE, of a corporate, administrative or judicial process for dissolution or liquidation.

f) The direct use of the Concession Assets differently to the provisions of this Contract and the Service Agreement, without the GRANTOR’s prior written approval.

g) The issuance of a final settlement attributable to the CONCESSIONAIRE prevent the performance of a substantial part of its business or imposing a lien, levy or seizure affecting all or a substantial part of the Concession Assets, provided that any of these measures remain in effect for more than sixty (60) Calendar Days.

h) Failure to remedy the observations referred to in Clause 6.37 of this Contract in due time, provided they affect the proper functioning of the Sanitary Infrastructure.

i) Failure to settle the Financial Closure for reasons attributable to the CONCESSIONAIRE, according to the provisions from Clauses 6.45 to 6.48 of this Contract.

j) Failure to start the Construction of the Works, for reasons attributable to the CONCESSIONAIRE, within the period specified in this Contract.

k) Failure to verify the Start of Operations, for reasons attributable to the CONCESSIONAIRE, within the period specified in this Contract.

l) Failure by the CONCESSIONAIRE to grant or renew the Guarantees, or to renew or pay the cost of the insurance policies required by this Contract, or if any of them were issued on terms and conditions other than those agreed in the Contract.

m) The severe alteration of the environment according to the Environmental Impact Assessment established in the EIA, the historical and/or natural resources patrimony, resulting from the intentional or negligent breach by the CONCESSIONAIRE of the recommendations in the EIA, and verified by the Competent Governmental Authority as appropriate.

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n) Non-compliances that generate cumulative payments of penalties that exceed ____ percent (___%) of_______, as provided in Clause ______

o) In case the CONCESSIONAIRE fails to address the observations referred to in Clause _______, as specified under the Contract. Or new cumulative penalties are generated in an amount equal to ______ percent (___%) of ______.

In the cases mentioned above, the GRANTOR shall communicate the CONCESSIONAIRE the verified non-compliances by notarized letter, as provided in Clause 15.215.3 of the Contract, in order for the CONCESSIONAIRE to provide remedy to the grounds that may cause termination of the Contract. In case the CONCESSIONAIRE fails to remedy the breach within the prescribed period, according to the provisions of this Contract and to the satisfaction of the GRANTOR, the Expiry of the Concession shall apply, without prejudice to the possibility that the Parties may recourse to the dispute settlement mechanism under Chapter XVI.

15.1.4 Termination by the GRANTOR’s default The CONCESSIONAIRE may invoke early termination of the Contract if the GRANTOR incurs in serious breach of the commitments under its responsibility, as detailed below: a) Failure to carry out the procedure for restoring economic and financial balance

established in Chapter IX of this Contract. b) Unjustified failure in the delivery of land that is part of the Concession Area,

within the period specified in the Contract. c) Breach of the obligation to budget, deposit in the Collection Trust and/or replace

the amount referred to in subsection c) of Clause of this Contract. d) Delay in the start of execution of Works according to the Implementation

Schedule for a period longer than six (6) months, resulting from the unjustified lack of approval of the Technical File, the EIA and the absence of subscription of the Certificate of Delivery of the Concession Assets or issuance of Certificates of Work Progress by SEDAPAL, as indicated in Clauses 6.42 and 6.43.

15.1.5 Termination by SEDAPAL’s default

The CONCESSIONAIRE may invoke early termination of the Contract in case SEDAPAL fails to comply with payment of three (3) consecutive monthly invoices or six (6) monthly invoices accumulated for RPMO in the course of a Concession Year, as set out in Clause Six of the Service Agreement. The aforesaid also applies to the case in which there are partial payments of the RPMO amounts.

15.1.6 GRANTOR’s Unilateral Decision

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For well-founded reasons of public interest, the GRANTOR has the right to terminate the Concession Contract previously notifying the CONCESSIONAIRE in writing giving not less than six (6) months prior to the deadline for completion of the Contract. The GRANTOR has the same period to notify its decision to Authorized Creditors. This notification must be signed by the competent agency of the State of the Republic of Peru.

The exercise of this power by the GRANTOR shall be without prejudice to the provisions from Clauses 15.2215.23 to 15.2515.26 of this Contract. During these six (6) months, the CONCESSIONAIRE shall not be bound to comply with those obligations under this Contract involving additional investments, except for scheduled maintenance and emergencies.

15.1.7 Force majeure or Acts of God

As provided for in Chapter XVIII, if an event of force majeure or Acts of God results in inability to meet obligations under this Contract and the Service Agreement for more than six (6) consecutive months, any Party may invoke the Expiry of this Contract.

15.1.8 Other reasons Not attributable to the Parties The non-performance of obligations or partial, late or defective performance for reasons not attributable to the Parties, other than Force Majeure, will result in the termination of the Contract only if it is impossible to be carried out. Or if the aggrieved Party loses interest or it is no longer useful, and after exhausting direct negotiations referred to in Clause ¡Error! No se encuentra el origen de la referencia. 16.11.

PROCEDURE FOR REMEDIES

15.2 Serious failures for reasons attributable to either Party shall entitle the affected party

to terminate the Contract and demand compensation for damages under the settlement procedure described in this Chapter. The offending party shall have a period of thirty (30) Calendar Days, renewable for thirty (30) Calendar Days, calculated from the date of receipt of the notarial request to rectify such situation of default, unless different term specified in the Contract or greater term expressly granted in writing by the Party asserting its right of termination. If the CONCESSIONAIRE is the offending Party and fails to remedy the breach within the time limit, with the Contract of the GRANTOR as the Party aggrieved, and in accordance with the provisions of the Contract, the latter may invoke the Expiry of the Concession and enforce the current Guarantees.

EFFECTS OF EXPIRY OF THE CONCESSION

15.3 The Expiry of the Concession implies the CONCESSIONAIRE's obligation to return

the GRANTOR all areas within the Concession Area, and to deliver Concession

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Assets thereto, pursuant to the terms set forth from Clause 5.39 to 5.42, except in cases of force majeure or Acts of God.

15.4 Upon the Expiry of the Concession, the CONCESSIONAIRE’s activity ceases and extinguishes its right to exploit the Sanitary Infrastructure under its responsibility, a right that is resumed by the GRANTOR, without prejudice to the recognition of the rights pertaining Authorized Creditors, according to provisions of Chapter X in this Contract. Also, all contracts referred to in Chapter XIII of this Contract cease to be in effect, except for those the GRANTOR has expressly decided to maintain in force and for which it has assumed the CONCESSIONAIRE’s contractual position.

15.5 Upon the Expiry of the Concession, the GRANTOR or the auditor appointed by the GRANTOR will take over the Operation, carrying out the final settlement under the terms of this Chapter.

PROCEDURES FOR TERMINATION

15.6 The Contract shall be terminated and the Concession will expire without further

formality provided the Parties, as appropriate in each case, have previously complied with all obligations and procedures under this Contract for purposes of termination of the Contract or Expiry of the Concession.

15.7 Any warning, requirement and/or decision of termination of the Contract that the Parties issue must be simultaneously brought to SEDAPAL and Authorized Creditors, in order that they take measures deemed necessary to protect their interests and/or continue the Concession. This notification shall be made prior to the termination of the Contract, with sixty (60) Calendar Days prior to the date set for early termination, except as provided in Clause ¡Error! No se encuentra el origen de la referencia. 15.2.6.

15.8 The Final Inventory of the Assets will begin sixty (60) Calendar Days before the expiry of the concession with the intervention of SEDAPAL and must be completed ten (10) Calendar Days before the date of Expiry of the Concession. In the event of expiry by mutual Contract, the Final Inventory will be part of this Contract as an annex to the Contract signed for the purpose. For cases of termination by default, the Final Inventory of assets to be carried out with SEDAPAL’s intervention must be completed ten (10) Calendar Days after the deadline for remedying the breach by the CONCESSIONAIRE. In cases of unilateral revocation by the GRANTOR, the Final Inventory of assets to be carried out with SEDAPAL’s intervention shall be concluded within ten (10) Calendar Days after issuing the notification of the GRANTOR’s decision. In the event of expiry due to Force Majeure or Acts of God or any other causes not attributable to the parties, the Final Inventory of the Concession Assets to be carried out with SEDAPAL’s intervention, must be completed within twenty (20) Calendar Days from the time the grounds for termination is notified to the other Party.

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CONTRACT SETTLEMENT

GENERAL PROCEDURE FOR SETTLEMENT

15.9 If the termination of the Contract takes place between the Effective Date of

Obligations and the Start of Operations, the CONCESSIONAIRE and the GRANTOR shall establish by mutual Contract within a period not exceeding two (2) months from the Expiry date, the settlement mechanism for the progress of the Construction Milestone not yet accepted through the CAO certificates. The mechanism referred to in the preceding paragraph shall consider at least the time elapsed from the signing of the Contract, the valuation of work progress not yet approved by an independent appraiser hired by the GRANTOR, elected from a list proposed by the CONCESSIONAIRE, in order to evaluate work progress amounts outstanding to be recognized, the value of the Concession Assets and the existing circumstances at the date on which the Parties make that decision as a criterion to determine the settlement mechanism. After the period of two (2) months without Contract between the Parties with respect to the said settlement mechanism, the Parties must recourse to the dispute settlement provisions of Chapter XVI of this Contract. The termination of the Concession Contract during the Construction period shall not limit, condition or affect under any circumstances SEDAPAL’s obligation to pay for the WPC certificates that may have been issued, as well as other conditions in the Contract necessary to make such payment, Therefore, the Collection Trust, the provisions of the Contract and its applicable Annexes will be in force in order to ensure this payment. The amounts corresponding to the WPC certificates issued will be paid under the conditions and opportunities provided in Clause 9.6, with reference to the planned Start of Operations in the Implementation Schedule. For purposes of payment of the corresponding RPI, the Collection Trust shall remain valid until the full payment of the amount recognized is accomplished.

15.10 If the termination of the Contract occurs during Operations, the outstanding payment on account of RPMO will be calculated according to the procedure laid down in Clause Five of the Service Agreement.

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The CAO certificates issued and the rights these originate recognize the investment made, and under no circumstances, including that referred in this clause, they lose the privileges on this content. If the Contract and/or Service Agreement are terminated, it will be understood that completed Works were duly certified through WPC certificates recognizing collection rights on the RPI. No additional payments will be recognized for Investment. In the case referred to in the preceding paragraph, both the Collection Trust and the provisions of the Contract and its applicable Annexes will be in effect in order to ensure payment of the RPI and corresponding PROM.

SETTLEMENT FOR MATURITY OF THE CONCESSION TERM

15.11 In the event of Expiry of the Concession for maturity of the agreed term, the

settlement shall not contemplate any payment or compensation for investments and works and installations in the areas of land within the Concession Area, as well as the Concession Assets or any amount of compensation for damages that the Expiry of the Concession may generate for any Party.

SETTLEMENT BY MUTUAL CONTRACT

15.12 If the Contract is terminated by mutual Contract between the Parties, this Contract shall contain the settlement mechanism established in Clauses 15.915.10 and 15.1015.11 of this Concession Contract

15.13 This procedure shall have the opinion of Authorized Creditors that are actually financing the Concession at the time of the Contract expiry.

SETTLEMENT FOR BREACH BY THE CONCESSIONAIRE

15.14 If the termination of the Contract or the Expiry of the Concession is caused by the CONCESSIONAIRE's responsibility, the GRANTOR shall execute the Guarantees in effect on the date of the expiry, meaning that the GRANTOR is expressly authorized to collect and retain the amount of the guarantee and the CONCESSIONAIRE is not entitled to any reimbursement, without prejudice to the penalties that may be applicable on that date.

15.15 Notwithstanding the above, the general settlement procedure shall apply as established in Clauses 15.915.10 and 15.1015.11 of this Contract.

SETTLEMENT FOR BREACH BY THE GRANTOR

15.16 If the termination of the Contract or the Expiry of the Concession is caused by the GRANTOR’s responsibility, the settlement procedure will be carried out as provided in Clauses 15.915.10 and 15.1015.11 of this Concession Contract.

15.17 Subject to comply with the provisions of Clause 15.1615.17, in all cases of termination for breach by the GRANTOR under Clause 15.1.4 of the Concession Contract, the GRANTOR shall reimburse the Guarantees to the CONCESSIONAIRE.

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15.18 If Expiry stands before the Effective Date of Obligations, the CONCESSIONAIRE will

be entitled to reimbursement of expenses incurred in the performance of its obligations set forth in Clause 6.25, provided they are properly supported and approved by the GRANTOR with favorable opinion of the Design and Construction Supervisor, for which purpose the parties shall agree on a schedule for reimbursement of expenses.

15.19 Additionally, if Expiry stands during the implementation phase of Works, the CONCESSIONAIRE will be entitled to a compensatory amount expressed in Nuevos Soles and equal to one hundred percent (100%) of the Construction Performance Bond value in effect on the date of Expiry. This amount covers all expenses incurred by the CONCESSIONAIRE for demobilization and other overheads.

15.20 Also, if Expiry occurs during the Operation Phase, the CONCESSIONAIRE will receive from the GRANTOR a one-time compensation amount, which shall result from applying a percentage factor to the corresponding annual RPMO at the time of Expiry, as indicated below:

Elapsed time Compensation Amount

From the Start of Operations until a day before the fifth year of Operation.

RPMO x 100%

From the fifth year of Operation until a day before the ninth year of Operation

RPMO x 80%

From the ninth year of Operation until the day before the thirteenth year of Operation

RPMO x 60%

From the thirteenth year of Operation until the day before the seventeenth year of the Concession.

RPMO x 40%

From the seventeenth year of Operation until the Expiry of the Concession.

RPMO x 20%

Where:

RPMO: Is the annual Compensation for Maintenance and Operation offered by the Successful Bidder, which will consider adjustments as of the expiry date. This is the Water Component RPMO and Sewerage Component RPMO sum.

15.21 The compensation referred to in Clauses 15.1915.20 and 15.2015.21 will be duly scheduled by the GRANTOR in the Annual Budget of the next budgetary period, as applicable at the date of Expiry, without generating an obligation to pay interests by the GRANTOR. The respective payment must be made on the last working day of February in the year in which resources are available in the budget statement. If on the scheduled payment date, the GRANTOR does not make the payment, a default interest will generate equal to an effective annual rate equal to the Sovereign Bond coupon plus two percent (2%).

SETTLEMENT FOR UNILATERAL DECISION BY THE GRANTOR

15.22 Unilateral termination of the Concession Contract by the GRANTOR shall entitle the CONCESSIONAIRE to receive the amounts determined in accordance with the

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procedure laid down in Clauses 15.915.10, 15.1015.11 to 15.1815.19 of this chapter, as applicable.

15.23 Additionally, the CONCESSIONAIRE will be entitled to receive from the GRANTOR, a compensatory amount equal to the amount of the Guarantee in effect on the date of Expiry. This right will operate for the duration of the Concession Contract and it will cover all expenses incurred by the CONCESSIONAIRE for demobilization and other overheads.

15.24 The GRANTOR shall reimburse the CONCESSIONAIRE’s Guarantee.

15.25 The compensation referred to in Clauses 15.2315.24, will be duly scheduled by the GRANTOR in the Annual Budget of the next budgetary period, as applicable at the date of Expiry, without generating an obligation to pay interests by the GRANTOR. The respective payment must be made on the last working day of February in the year in which resources are available in the budget statement. If on the scheduled payment date, the GRANTOR does not make the payment, a default interest will generate equal to an effective annual rate equal to the Sovereign Bond coupon plus two percent (2%).

SETTLEMENT FOR BREACH BY SEDAPAL

15.26 If the termination of the Contract or the Expiry of the Concession is caused by SEDAPA’s responsibility, the settlement procedure will be carried out as set out in Clause 15.1015.11 of this Concession Contract.

15.27 In the event of Contract termination for default by SEDAPAL, the Guarantees in force shall be returned.

15.28 Also, the CONCESSIONAIRE shall receive from SEDAPAL a one-time compensation amount, which shall result from applying a percentage factor to the corresponding annual RPMO at the time of Expiry, as indicated below:

Elapsed time Compensation Amount

From the Start of Operations until a day before the fifth year of Operation.

RPMO x 100%

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From the fifth year of Operation until a day before the ninth year of Operation

RPMO x 80%

From the ninth year of Operation until the day before the thirteenth year of Operation

RPMO x 60%

From the thirteenth year of Operation until the day before the seventeenth year of the Concession.

RPMO x 40%

From the seventeenth year of Operation until the Expiry of the Concession. RPMO x 20%

Where:

RPMO: Is the annual Compensation for Maintenance and Operation offered by the Successful Bidder, which will consider adjustments as of the expiry date. This is the Water Component RPMO and Sewerage Component RPMO sum.

15.29 The compensation referred to in the preceding Clauses, as well as unpaid amounts

to date, will be duly scheduled by SEDAPAL in the annual budget of the next budgetary period, as applicable at the date of Expiry, without generating an obligation to pay interests by SEDAPAL. The respective payment must be made on the last working day of January in the year in which resources are available in the budget statement. If on the scheduled payment date, SEDAPAL does not make the payment, a default interest will generate equal to an effective annual rate equal to the Sovereign Bond coupon plus two percent (2%).

SETTLEMENT FOR NOT APPLYING THE RATE INCREASE

15.30 Termination of the Contract on these grounds shall entitle the CONCESSIONAIRE to receive the amounts to offset costs incurred in the pre-operation phase that are properly supported.

15.31 It shall correspond to the CONCESSIONAIRE to submit to SEDAPAL information on the costs incurred, duly supported, so that SEDAPAL determines the amount to be paid as compensation. Such compensation may not exceed five percent (5%) of the Referential Investment in Works.

15.32 The compensation referred to in the preceding Clauses will be duly scheduled by SEDAPAL in the annual budget of the next budgetary period, as applicable at the date of Expiry, without generating an obligation to pay interests by SEDAPAL. The respective payment must be made on the last working day of January in the year in which resources are available in the budget statement. If on the scheduled payment date, SEDAPAL does not make the payment, a default interest will generate equal to an effective annual rate equal to the Sovereign Bond coupon plus two percent (2%).

15.33 If the CONCESSIONAIRE does not agree with some or all of the costs determined by SEDAPAL, it may recourse to the procedure under Chapter XVI to resolve the discrepancy.

15.34 Subject to complying with the provisions of Clause 15.3015.31, Guarantees shall be returned to the CONCESSIONAIRE.

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SETTLEMENT FOR FORCE MAJEURE, ACTS OF GOD OR OTHER REASONS NOT ATTRIBUTABLE TO THE PARTIES

15.35 To exercise the powers under this clause, the CONCESSIONAIRE shall observe the

following procedure: a) The CONCESSIONAIRE shall communicate to the GRANTOR and SEDAPAL the

occurrence(s) of any of the circumstances described in Clause 18.1, by means of a report, within thirty (30) Calendar Days from the occurrence thereof. The report must contain: o A supported description of the grounds invoked and economic or legal effects

thereof. o A proposal of the procedure to follow for Contract completion.

b) Such proposal shall be delivered to the GRANTOR, to SEDAPAL and Authorized Creditors that are effectively financing the concession at the time of the communication by the CONCESSIONAIRE referred to in Subsection a) above, who shall have a period of twenty (20) days to make comments.

c) In case of any discrepancy with the GRANTOR or SEDAPAL in relation to the

procedure proposed by the CONCESSIONAIRE, they should be subject to the provisions of Chapter XVI of this Contract.

15.36 In the event that the CONCESSIONAIRE applies the option established, the general settlement procedure established in Clauses 15.915.10, 15.1015.11 or 15.1815.19 of this Contract will apply, as applicable.

CHAPTER XVI: DISPUTE SETTLEMENT

APPLICABLE LAW

16.1 The Contract shall be governed by and construed in accordance with Applicable

Laws and Regulations. Therefore, the Parties state that the content, execution, conflicts and other consequences arising from it are governed by that law, which the parties and the intervener acknowledge.

SCOPE OF APPLICATION

16.2 This chapter covers the settlement of all disputes that may arise between the Parties

during the Concession and those related to the termination of the Contract and the Expiry of the Concession. In accordance with the provisions by the Parties, any dispute shall be initially dealt with through direct negotiation between the Parties, and only then will the provisions of Section 16.3 of this Contract apply.

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In accordance with Article 62 of the Political Constitution of Peru, it is acknowledged that disputes arising from this contractual relationship will only be resolved by arbitration, according to the protection mechanisms provided for in the Contract. The award issued will be integrated into the contractual rules laid down in this Concession Contract. Without prejudice to the above, the Parties recognize that the challenge to SUNASS decisions concerning the application of tariffs to end users and other decisions issued by SUNASS in the exercise of its administrative functions are SEDAPAL’s responsibilities as regulated company and shall be subject to the Applicable Laws and Regulations. In light of the above, according to the provisions of Article 1° of Decree-Law No. 1071 the provisions governing the arbitration process set forth in this legal device shall apply, consistent with those contained in Law No. 28933 which sets the Coordination and Response System of the State in relation to International Investment Disputes.

INTERPRETATION CRITERIA

16.3 In case of divergence of interpretation of this Contract, the following order of

precedence shall be followed to resolve such situation: a) The Contract; b) Circular Letters referred to in the Bidding Terms; c) The Bidding Terms, and d) Applicable Laws and Regulations.

16.4 The Concession Contract is signed only in Spanish. If there is any difference between any translation of the Contract and Spanish, the text in Spanish shall prevail. Translations of this Contract shall not be considered for purposes of interpretation.

16.5 The deadlines established will be calculated in days, months or years as appropriate. The titles contained in the Contract are for identification purposes only and should not be considered as part of the Contract, to limit or expand its content or to determine rights and obligations of the Parties. The terms "Annex", "Chapter", "Clause" and "Section" relate to this Concession Contract, unless the context indicates unequivocally and without doubt that it refers to another document.

16.6 The words in the singular shall include the plural of the same words and vice versa. Words in the masculine include the feminine and vice versa.

16.7 The use of the disjunction "or" in a list should be understood as excluding another element of such enumeration.

16.8 The use of the conjunction "and" in a list should be understood to include all the

elements of that list or enumeration.

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16.9 Those revenues, costs, expenses and similar to which the CONCESSIONAIRE is

entitled for the provision of the Services shall be collected in the relevant currency in accordance with the Applicable Laws and Regulations and the terms of the Concession Contract and Service Agreement.

WAIVER OF DIPLOMATIC CLAIMS

16.10 The CONCESSIONAIRE and its partners and shareholders expressly,

unconditionally and irrevocably waive any diplomatic claim by disputes or conflicts that may arise from the Contract.

DIRECT NEGOTIATION

16.11 The Parties declare that it is their will that all conflicts or uncertainties with legal

significance to be settled by arbitration that may arise concerning the interpretation, performance, compliance, and any matter concerning the existence, validity or enforceability of the Contract or Expiry of the Concession will be resolved by direct negotiation between the Parties, within fifteen (15) Days calculated from the date a notice in writing to the other Party of the existence of conflict or uncertainty with legal significance. Tariffs regulated by SUNASS and other decisions taken by this body may not be subject to direct negotiation between the Parties, whose challenge shall be SEDAPAL’s responsibility as a regulated company and which should be subject to Applicable Laws and Regulations. In case of international arbitration, as provided in Subsection b) of Clause 16.12, the negotiation period or direct negotiation will be of six (6) months. That period shall run from the date on which the Party invoking the clause notifies in writing its request to initiate direct negotiation, including detailed information (background, facts, points of controversy, claims and proposals for alternative dispute settlement) to the Ministry of Economy and Finance in his capacity as Coordinator of the Coordination and Response System of the State regarding International Investment Disputes, under the provisions of Law No. 28933 and its regulations approved by Supreme Decree No. 125-2008 - EF and amendments. The periods referred to in the preceding paragraphs may be extended by joint decision of the parties; this Contract must be in writing. If the Parties within direct negotiation cannot not resolve the conflict or uncertainty raised it should be defined as a conflict or uncertainty of a technical or non-technical nature, as applicable. Where the parties fail to reach Contract with respect to the nature of the dispute, both parties should support their position through a written communication that will be delivered to its counterpart, explaining the reasons why they consider that the dispute is of technical or non-technical nature. Conflicts or technical uncertainties (each, a Technical Dispute) will be resolved according to the procedure stipulated in Subsection a) of Clause 16.12. Conflicts or uncertainties that are not technical in nature (each, a Non-Technical Dispute) will be resolved in the manner provided in Subsection b) of Clause 16.12. If the Parties are unable to agree within direct negotiation on whether the dispute or controversy is a Technical or Non-Technical Dispute, or if the conflict has components of Technical and Non-Technical Dispute, then such dispute or uncertainty shall be considered a

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Non-Technical Dispute which will be resolved under the respective procedure provided for in Subsection b) of Clause 16.12.

ARBITRATION

16.12 Methods of arbitration proceedings:

a) Equity and good conscience Arbitration. - Each and every Technical Dispute that

cannot be resolved directly by the Parties within the period of direct negotiation should be submitted directly to equity and good conscience arbitration in accordance with the provisions of Section 3, Article 57° of Legislative Decree No. 1071, by which arbitrators shall decide according to their skills, knowledge and understanding. Arbitrators may be domestic or foreign experts, but in all cases they must have extensive experience in the field of Technical Disputes respectively, and shall be in no conflict of interest with any of the Parties before, during and after the time of their appointment as such. The Arbitral Tribunal may request the Parties the information it deems necessary to resolve the Technical Dispute, and as a result they may suggest the Parties a settlement proposal, which may or may not be accepted by them. The Arbitral Tribunal may present all the evidence and request the parties or third parties the evidence it deems necessary to resolve the claims raised. The Arbitral Tribunal shall prepare a draft decision to notify the Parties within thirty (30) Calendar Days after its setting up, and the Parties shall have five (5) Days to prepare and submit to the Tribunal its comments on such preliminary decision. The Arbitral Tribunal shall issue its final decision on the Technical Dispute raised within ten (10) Days after receipt of comments from the Parties, in its preliminary decision or upon the expiration of the deadline for submitting such comments, whichever occurs first. The procedure for the settlement of a Technical Dispute should be performed in Lima, Peru. The members of the Tribunal shall maintain absolute secrecy and confidentiality of all information known as participants in the resolution of a Technical Dispute.

b) Arbitration in Law. - Non-Technical Disputes shall be settled by arbitration in law, in accordance with the provisions of Sections 1 and 2, Article 57° of Legislative Decree No. 1071, procedure in which the arbitrators shall resolve in accordance with the applicable Peruvian law. The arbitration in law may be local or international, according to the following:

(i) When Non-Technical Disputes amount to more than Ten million and 00/100 Dollars (US$ 10,000,000.00) or its equivalent in national currency, the Parties will try to resolve disputes through direct negotiation within a term of six (6) months as provided in Clause ¡Error! No se encuentra el origen de la referencia. 16.11, term that may be extended by joint decision of the Parties. If the parties do not reach an Contract within the direct negotiation period referred to in the preceding paragraph, disputes shall be resolved through international arbitration in law through a procedure conducted in accordance with the Rules of Conciliation and Arbitration of the International Centre for Settlement of Investment Disputes ("ICSID"), established under the Convention on the Settlement of Investment Disputes between States and

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Nationals of other States, approved by Peru through Legislative Resolution No. 26210, which rules the parties submit unconditionally. For purposes of processing international arbitration in law proceedings, in accordance with the arbitration rules of ICSID, the GRANTOR, representing the State of the Republic of Peru, declares that the CONCESSIONAIRE is considered as "national of another Contracting State", being under foreign control as provided in subsection b) of Section 2 of Article 25 of the Convention on the Settlement of Investment Disputes between States and Nationals of other States, and the CONCESSIONAIRE agrees to be considered as such. Arbitration will take place in Washington DC, USA, and will be conducted in Spanish, and the arbitration award shall be issued under the provisions of the arbitration rules of the institutions governing arbitrations, accordingly. If for any reason the ICSID decided not to be competent or declines the arbitration initiated under this clause, the Parties agree to submit in advance, on the same terms outlined above, Non-technical Disputes that (a) amount to more than Five million and 00/100 US Dollars (US$ 5,000,000.00) or its equivalent in national currency, or (b) the Parties do not agree on the amount of the matter in dispute, to UNCITRAL Arbitration Rules. In that case, arbitration shall be held in Lima, Peru. Alternatively the Parties may agree to submit the dispute to another jurisdiction other than ICSID if they consider it appropriate. The Parties express their irrevocable and advance consent so any dispute of this nature may be submitted to any of the arbitral tribunals indicated in the preceding paragraphs.

(ii) Non-Technical Disputes where the amount involved is equal to or less than Ten million and 00/100 Dollars (US$ 10 000000.00) or the equivalent in national currency, and those purely legal disputes that are not quantifiable in money, shall be settled by arbitration, through a procedure conducted in accordance with the Rules of the Arbitration Center of the Chamber of Commerce of Lima, whose rules the Parties submit to unconditionally, as well as the supplemental application of Legislative Decree No. 1071 which regulates the Arbitration and after that the Civil Procedural Code of Peru. The arbitration will take place in Lima, Peru, and will be conducted in Spanish. The arbitration award must be issued within one hundred twenty (120) Calendar Days from the date of installation of the Arbitral Tribunal. Exceptionally, the award may be issued after this date when the Arbitral Tribunal considers it essential to include evidence such as expert opinions or visual inspections outside the city where the arbitration is being carried out, within a period not exceeding thirty (30) Calendar Days.

COMMON PROCEDURAL RULES

16.13 Both for equity and good conscience arbitration referred to in Subsection a) of Clause

16.12 and for legal arbitration referred to in Subsection b) of Clause 16.12, either in international or domestic mode, the following general provisions shall apply equally:

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a) The Arbitral Tribunal shall consist of three (03) members. Each Party shall appoint

one arbitrator and the third appointed by Contract of the two arbitrators appointed by the Parties, who in turn will act as Presiding Arbitrator. If the two arbitrators fail to reach Contract on the appointment of the third arbitrator within ten (10) Calendar Days from the date of appointment of the second arbitrator, the third arbitrator shall be appointed, at the request of either Party by the Lima Chamber of Commerce, in the case of equity and good conscience arbitration and national legal arbitration, and for the ICSID arbitration in the case of international law. If one of the Parties fails to appoint an arbitrator within ten (10) Calendar Days from the date of receipt of the respective request for appointment, the Party shall be deemed to have waived its right and the arbitrator will be appointed at the request of the other Party by the Lima Chamber of Commerce or the ICSID, as the case may be.

b) In cases where the CONCESSIONAIRE’s conflict happens simultaneously with

the GRANTOR and SEDAPAL, being that the matter in dispute involves both the Concession Contract and the Service Agreement, there shall be a single arbitration proceeding and for purposes of appointing the arbitrator, both the GRANTOR and SEDAPAL shall be considered a single party, applying the rules laid down in subsection a) above.

c) Notwithstanding the preceding paragraph, SEDAPAL may request to participate in

the proceedings or be called to participate, at the request of either Party or by the Arbitral Tribunal. In either case, the Arbitral Tribunal shall approve SEDAPAL’s participation and define its duties and rights in the arbitral proceedings.

d) Arbitrators can replace, at their option, any existing difference or gap in the

legislation or in the Contract by applying the general principles of law. e) The Parties agree that the award of the arbitral tribunal shall be final and

unappealable. In this regard, the Parties should consider it as a final instance judgment, with status of res judicata. Accordingly, the Parties waive their rights of reconsideration, appeal, cassation or other means of challenge against the award stating that it is an obligation of definitive fulfillment and immediate execution, except on grounds specifically provided for in Articles 62 and 63 of Legislative Decree No. 1071 or in Articles 51 and 52 of the ICSID Convention, as applicable.

f) During the arbitration, the Parties shall continue with the performance of their

contractual obligations, to the extent possible, even regarding those matters of arbitration. If the subject of arbitration was the fulfillment of the obligations secured by the Concession Contract Performance Bond or the Works Performance Bond, as appropriate, the respective deadline shall be suspended and such guarantees may not be executed for the reason that prompted the arbitration and shall be maintained in force during the arbitration proceedings.

g) All expenses incurred in the settlement of a Technical or Non-Technical dispute,

including the fees of the arbitrators involved in the resolution of a dispute, shall be borne by the unsuccessful Party. The same rule applies if the defendant or counterclaimant agrees to or recognizes the claim of the plaintiff or counterclaimant. The plaintiff or counterclaimant who withdraws the claim shall also bear the costs. In the event that the procedure concludes without a ruling on the merits of the claims because of settlement or compromise, such expenses will be borne equally by the plaintiff and the defendant. Also, in case the award

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partially favored the opinions of the Parties, the Arbitral Tribunal shall decide on the distribution of these expenditures.

Costs and expenses such as advisory fees, or other internal costs that are attributable to a Party individually shall be excluded from the provisions of this Chapter.

CHAPTER XVII: CHANGES TO THE CONTRACT

17.1 Any request for amendment, addition or modification of this Contract that the

CONCESSIONAIRE submits to the GRANTOR, shall have the appropriate technical, economic and financial support documents. The GRANTOR shall decide on the request relying on the favorable opinion of SEDAPAL. Furthermore, an opinion should be required from the Ministry of Economy and Finance on matters within its competence. The modification Contract is binding on the Parties only if it is in writing and signed by the duly authorized representatives of each of the Parties.

17.2 In accordance with Article No. 30 of the TUO of Concessions, the GRANTOR may modify this Contract, subject to Contract with the CONCESSIONAIRE, for properly grounded reasons and when it is deemed necessary to public interest, respecting its nature, with technical and economic conditions contractually agreed and economic – financial balance of the services rendered by the Parties.

Taking into consideration the provisions of the above paragraph, the Parties expressly agree that the GRANTOR may amend this Contract, without affecting the economic – financial balance, subject to Contract with the CONCESSIONAIRE and SEDAPAL’s previous opinion to:

i) Facilitate the provision of guarantees to be granted to the Authorized Creditors, according to the provisions of Chapter X of this Contract, or

ii) Adapt the Contract to technological changes or new circumstances arising during the term of the Concession or its extensions and that parties could not reasonably be expected to know or foresee as of the Closing Date or,

iii) Restore economic balance - financial, as provided from Clauses (the second version will include this information).

17.3 It shall de the CONCESSIONAIRE’s responsibility to submit a written notice to the

Authorized Creditors in order to inform them about the signing of any amendment to the Contract, to the extent that this affects or could affect the position of Authorized Creditors in respect of the Contract.

17.4 Notwithstanding the provisions of this Chapter, the provisions of Article 9 of Supreme Decree No. 144-2009-EF amending Supreme Decree No. 146-2008-EF-Regulation, Legislative Decree No. 1012 approving the Framework Law of Public - Private Partnerships for the generation of productive employment and establishing rules for streamlining private investment promotion processes, or legislation replacing it applies to this Contract. That article states that during the first three (3) years from the date of signing the Contract, the competent sectors may not subscribe addendums, except in the case of: a) the correction of material errors, b) supported requirements of authorized creditors related to the stage of financial closure of the Contract, or c) specifying operational aspects for the best performance of the contract, or substantiating the need to advance the investment program and not

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implying such amendment a change of contract, from self-sustained to co-financed or payments by the State not increasing, as provided in the Contract.

CHAPTER XVIII: FORCE MAJEURE OR ACTS OF GOD

EVENTS OF FORCE MAJEURE OR ACTS OF GOD

18.1 For purposes of this Contract, there will be a situation of Acts of God or Force

Majeure whenever there is an event, condition or circumstance not attributable to the Parties, of an extraordinary nature, unforeseeable and irresistible, that prevents them from performing any of their obligations under their responsibility or cause partial, late or defective compliance thereof. The event must beyond the Parties’ reasonable control, which despite all reasonable efforts carried out to prevent or mitigate their effects cannot avoid the non-compliance situation. Force majeure or Acts of God include, but are not limited to the following: (i) Any external, internal or civil act of war (declared or undeclared), invasion,

armed conflict, revolution, blockade, riot, insurrection, civil commotion, acts of terrorism and any approval, site occupation or any substantial part of Area Concession, which prevents performance of the Concession Contract or the Service Contract, as a result of this.

(ii) Any stoppage or strike by workers who do not maintain a working relationship

with the CONCESSIONAIRE, directly affecting the CONCESSIONAIRE by causes beyond its reasonable control, or by unpredictable causes.

(iii) Any archaeological discoveries that are of a magnitude that would prevent the

CONCESSIONAIRE from complying with the commitments assumed. (iv) Any earthquake, tsunami, flood, fire, explosion or atmospheric phenomena

provided it directly affects all or part of the Concession Assets and/or the Work or its elements.

(v) Any epidemic, pollution, pest or any similar event that results in the complete

absence or substantial reduction of seawater entering to the Desalination Plant, as appropriate, to the extent that such an event prevents or limits the performance of services by the Concessionaire.

(vi) The eventual total or partial destruction of the Works or its elements, or

property damage causing total destruction and the impossibility of recovery, o causing a significant reduction of the Service, for reasons not attributable to the CONCESSIONAIRE.

18.2 The concessionaire may not invoke the approval or effects of Applicable Laws and

Regulations in Peru as an event of Force Majeure of Acts of God in relation to compliance with obligations contained in this Contract, unless the said Applicable Laws and Regulations prevent the CONCESSIONAIRE from continuing compliance with the commitments assumed.

18.3 Force majeure or Acts of God shall not relieve the Parties from compliance with obligations that are not suspended by these events.

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18.4 The Party affected by an event of Force majeure or Acts of God shall inform the other

Party of: i) The facts constituting the events of Force Majeure or Acts of God, within the

next seventy two (72) hours of its occurrence or when it was known, as applicable, and

ii) The estimated period of total or partial restriction of their activities and the degree of expected impact. Additionally, the other Party must be kept informed of the development of such events.

18.5 The Parties shall make every effort to ensure the resumption of the performance of

its obligations as soon as possible after the occurrence of such events.

18.6 In the event of termination of this Contract by an event of Force Majeure or Acts of God, the settlement of the Contract shall be governed by the rules of Chapter |XV.

18.7 For a Force Majeure or Acts of God to be considered grounds for termination, it will be necessary to observe the provisions of Clause 15.1.715.2.7 of the Contract.

CHAPTER XIX: PENALTIES

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CHAPTER XX: ADDRESS

DETERMINATION

20.1 Unless expressly agreed to the contrary and included in the Contract, all notices,

citations, requests, demands and other communications relating to the Contract shall be in writing and shall be deemed to have been validly made when receiving the respective proof of receipt or when they are sent by courier or fax, upon verification of receipt, to the following addresses: If addressed to the GRANTOR: Name: Ministerio de Vivienda Construcción y Saneamiento Address: Av. Paseo de la República 3361 Piso 3, Lima 27. Lima - Perú To: Ministro de Vivienda, Construcción y Saneamiento If addressed to the CONCESSIONAIRE: Name: Address: To: If addressed to SEDAPAL: Name: Servicio de Agua Potable y Alcantarillado de Lima Address: Autopista Ramiro Prialé N° 210 – Lima 10 To: Gerente General CHANGE OF ADDRESS

20.2 Any change of address must be notified in writing to the other Party of the Contract and SEDAPAL with fifteen (15) Calendar Days in advance. Any new address must be located within Lima and Callao and be set to meet the requirements of the preceding chapter. In witness whereof, this Contract is duly executed in four (4) copies of the same content, in the city of Lima on _____________ , _________________, 2013.

GRANTOR CONCESSIONAIRE

SEDAPAL

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ANNEX 1: SERVICE CONTRACT

SERVICE AGREEMENT

This document certifies the Service Agreement by and between ____________________________, hereinafter the "Service Provider" with address at ______________________________________, duly represented by Mr. / Ms. ________________________, identified with ______________________, duly empowered and Servicio de Agua Potable y Alcantarillado de Lima S.A. (SEDAPAL), with address at Av. Ramiro Prialé No. 210, El Agustino - Lima, duly represented by ________________ with National ID No. ______________, duly empowered by proxy registered under Registry Item No. ____________, entry ____________, Registry of Legal Entities of the Registry Office of Lima and authorization granted by Board Meeting dated ______________, pursuant to the terms and conditions:

FIRST: DEFINITIONS In this Contract the terms that are capitalized will have the meaning set forth in the Definitions section of Chapter I of the Concession Contract, and this Contract is provided as Annex 1, except in relation to:

1.1. “Contract" which means this Service Agreement.

1.2. “Consideration", which means the monthly payment, which as part of the economic use in his capacity as CONCESSIONAIRE, must be performed by SEDAPAL to the Service Provider under Clause Six of this Contract.

1.3. “Party", which shall mean Service Provider or SEDAPAL as appropriate.

1.4. “Parties" which shall mean the Service Provider and SEDAPAL.

1.5. “Compensation for Maintenance and Operation (RPMO)," which will be the result of the amount proposed by the Service Provider in its Economic Proposal. SECOND: PURPOSE, TERM AND EXTENSION

2.1. By this Contract, the Service Provider agrees to perform the Service for SEDAPAL

under Annex 1.2 of this Contract. 2.2. This Contract shall have the same term of the Concession, even if it expires early for

any grounds or is extended in accordance with the provisions of the Concession Contract.

2.3. If the Concession is extended in accordance with Clause 4.2 of the Concession

Contract, the Parties shall establish the payment of the Consideration, taking into account the conditions at the time when this happens.

2.4. While the parties do not to establish the payment referred to above, the conditions

originally provided for in this Service Agreement shall survive.

2.5. Notwithstanding the term of this Contract from the Closing Date, the obligation to provide Services shall be required to the Service Provider from the date of Start of Operations, in accordance with Clause 8.10 of the Concession Contract.

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THIRD: STATEMENTS OF THE PARTIES

3.1. SEDAPAL guarantees the accuracy of the following statements on the Closing Date:

a) That the State of the Republic of Peru, represented by the Ministry of

Housing, Construction and Sanitation, has entered into the Concession Contract with the Service Provider, of which this Service Agreement is part of.

b) That Clauses 9.1 and 9.18 of the Concession Contract provide that the

CONCESSIONAIRE (the Service Provider) shall be entitled to receive and SEDAPAL is required to pay the compensations for Services under the terms and conditions set forth in the Economic Proposal, in the Concession Contract and the Service Agreement.

c) That for the implementation of the terms of the Concession Contract, the

signing of this Service Agreement is required. d) That it is authorized to sign the Service Agreement and has no impediment to

sign contracts. e) That it has sufficient authority to perform all acts established in this Service

Agreement. f) That it has no legal or contractual impediment to carry out all obligations

under its responsibility contained in the Service Agreement. g) That the validity and scope of the provisions in the Service Agreement have

been formulated on the basis of Applicable Laws and Regulations.

3.2. The Service Provider guarantees the accuracy of the following statements on the Closing Date:

a) That it is a legal entity duly incorporated under the Laws of the State of the

Republic of Peru. b) That it is duly authorized and able to assume the obligations as a result of

entering into the Service Agreement, having met all the requirements necessary to sign the Contract and to fulfill the commitments set out therein.

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FOURTH: CONSIDERATION In consideration for the Service, SEDAPAL shall pay the RPMO to the Service Provider, which pays the costs of operating and maintaining the Desalination Plant and the WWTP, under the settlement procedure established in Clause Six of this Contract. The payment referred to in the preceding paragraph shall be paid through the Collection Trust, through the RPMO subaccount from the Collection Account, as indicated in Section II of Annex 16 of the Concession Contract. FIFTH: SETTLEMENT AND PAYMENT FOR SERVICE

5.1. Settlement must be made according to the following calculation procedure:

5.2. If the Service Provider has performed maintenance works on the flow meters, the

calculation of VAF of the corresponding month, will be as follows:

VAF = (VAFM / DM) x DC

Where: VAF: Is the accumulated volume in cubic meters (m3) of the relevant month

delivered by the Desalination Plant or received by the WWTP, estimated by the Service provider.

VAFM: Is the accumulated volume in cubic meters (m3) of the relevant month delivered by the Desalination Plant or received by the WWTP, estimated by the Service provider, in accordance with Annex 1.1 of this Contract.

DM: Number of Calendar Days in which the measurement was carried out. DC: Number of Calendar Days of the relevant month.

5.3. In case of an error greater than five percent (5%) when comparing the meter that records the volume delivered by the Desalination Plant or received by the WWTP, as provided in Annex No. 1.1. of this Contract, the settlement of the month in which the meter was compared will be based on the average accumulated volume of the three (3) months prior to the month in which the error was detected.

5.4. The % fixed and % variable components of the calculation procedure to settle the RPMO will be established by the Service Provider in its Economic Proposal. The % fixed component may not be greater than _____ percent (X%).

5.5. To carry out the settlement of the corresponding RPMO, the Service Provider will send a monthly statement in respect of Operation and Maintenance services to SEDAPAL, according to the procedure set forth in Section 6.1 of this Contract.

5.6. SEDAPAL will have a term of up to ten (10) Days calculated from the Day when the monthly settlement is delivered by the Service Provider, to give written notice to the Service Provider approving or objecting such settlement.

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The objection of any settlement must be communicated by letter with acknowledgment of receipt (including facsimile and email) by SEDAPAL to the Service Provider within the period specified in the preceding paragraph, explaining the reasons for the objection and accompanying the corresponding support. The Service Provider may accept the objection or ratify the settlement within five (5) Days after receiving the objection.

5.7. Should there be a difference (s) between the Parties regarding the settlement, which

have not been resolved within the time limits, procedures under Clause Fourteenth of this Contract shall apply for those items and amounts under discussion and if the settlement is deemed to be incorrect, the amount of money matter of the dispute shall be adjusted in the settlement and corresponding invoice immediately after the solution of the controversy.

If the dispute is resolved in favor of the Service Provider, SEDAPAL shall pay moratorium interest equivalent to an effective annual rate equal to the Sovereign Bond coupon plus _____ percent (X%)

Regarding those items and amounts that are not in dispute by the Parties, provisions of Clause 6.8 of this Contract will be carried out.

5.8. According to the respective settlement of payment and not grounds for dispute, the

Service Provider will deliver to SEDAPAL the monthly invoice in Nuevos Soles within five (5) Days following: (i) receipt of settlement approval by SEDAPAL or the Service Provider’s response, in case of objection by SEDAPAL, or (ii) the expiry of five (5) Days to provide approval in case SEDAPAL does not issue a response, whichever comes first.

SEDAPAL shall have ten (10) Days to verify the consistency of the required payment as per the invoice with the settlement approved and to cancel through the Collection Trust, according to the procedure laid down in Annex 17 of the Concession Contract. An invoice may only be rejected by SEDAPAL if it differs from the corresponding settlement.

SIXTH: ADJUSTMENT OF THE CONSIDERATION

6.1 The RPMO value will be adjusted on the basis of the following, adjustment by the

General Wholesale Price Index (WPI), Technical - Financial Audit and by classification of hazardous solid waste, according to the provisions of the following clauses.

6.2 General Whole Price Index (WPI) Adjustment

6.2.1 The value of RPMOAR will be adjusted on the basis of Wholesale Price Index (WPI) variation published by the National Institute of Statistics and Informatics (INEI) when it is greater than or equal to three percent (3%) accumulated from the time and opportunity it corresponded to apply the previous adjustment. It shall be SEDAPAL’s responsibility to pay the adjustment to RPMOAR, in favor of the CONCESSIONAIRE.

6.2.2 In the case of the first adjustment, the IPM accumulated variation referred to above shall be calculated from the date of issuance of the Certificate of Completion of the

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corresponding Phase. For this purpose, the CONCESSIONAIRE shall apply the following ratio:


Where:

IPM0 : IPM to the date of issue of the Certificate of Completion of the corresponding Phase.

IPM1 : IPM to date the cumulative index variation is equal to or greater than three percent (3%), from the time and opportunity it corresponded to apply the previous adjustment.

Adjustment Factor

: The adjustment factor should be expressed with five (5) decimal places.

6.2.3 The adjustment in the value of the RPMOAR should be implemented within a period not exceeding ninety (90) Calendar Days after the expiry of the month in which IPM variation accumulated in accordance with Clause 9.27 of this Contract.

6.3 Technical - Financial Audit Adjustment

6.3.1 The Operation and Maintenance costs will undergo a technical - financial audit in order to determine an adjustment to the variable component of RPMOAD and RPMOAR to be paid (RPMOP), exclusively on the variation in energy costs, chemical inputs, management and Final Disposal of solid waste (including sand and mud), regarding the values established in the Service Provider’s Economic Proposal at the following times:

(i) At two (2) years from the Start of Operations of the First Phase. (ii) Subsequently, six (6) months prior to the filing of the rate formulas proposed in

SEDAPAL’s Optimized Master Plan.

6.3.2 To determine the adjustment to the RPMOP, the technical - financial audit will comprise a technical and economic evaluation of inputs and prices for which quotations will be made. Under the technical - financial audit, % fixed and % variable components of the settlement formula, indicated in Clause 6.1 of this Contract, will be reviewed and/or updated.

6.3.3 The aforementioned technical - financial audit will be prepared by a specialized accounting firm hired by SEDAPAL through a public tender, in accordance with Applicable Laws and Regulations. The costs arising from this contract shall be borne by the Service Provider.

The auditing company must meet at least the following requirements: (i) have ten (10) or more years of representation and/or affiliation with an international auditing firm, (ii) have at least five (5) years of auditing experience in public utilities, and (iii)

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be duly entered in the register of companies qualified for the appointment and hiring of the Comptroller General of the Republic of Peru.

6.3.4 The results of the technical - financial audit will be submitted for consideration and

approval by SEDAPAL, which shall have a period of thirty (30) Days from receipt thereof, to provide comments or approval. Also, the Service Provider may make comments to the report resulting from the technical - financial audit, within the aforementioned period.

6.3.5 If observations are made by SEDAPAL and/or the Service Provider, the audit firm shall have thirty (30) Days to remedy such observations, from the date of receipt thereof. SEDAPAL shall have fifteen (15) days to evaluate the corrections made, from the date of receipt thereof. Should no decision be issued by SEDAPAL within the prescribed period, the observations made shall be deemed rectified and the results of the technical - financial audit shall be deemed adopted.

6.3.6 In case of discrepancies between SEDAPAL and Service Provider with respect to the final report by the audit firm, the Parties may recourse to the dispute settlement provisions of Clause Fourteenth in this Contract.

6.3.7 If the results of the technical - financial audit, approved by SEDAPAL determine an adjustment to RPMOAD or RPMOAR requiring a Rate Increase, it will be SEDAPAL’s responsibility to carry out proceedings before SUNASS for the required increase, according to the regulations of the matter.

6.3.8 For the purposes of adjusting the RPMO product of the technical - financial audit, the adjustments made by the WPI will be taken into account, which will be deducted if applicable.

6.4 Adjustment by classification of hazardous solid waste

6.4.1 During the Commissioning Period of the Desalination Plant and the WWTP, as appropriate, the Competent Governmental Authority shall determine whether the solid waste generated in different units or processes correspond to hazardous solid waste, for which the Service provider must carry out handling and disposal procedures of such waste in accordance with the Solid Waste Act and other Applicable Laws and Regulations.

6.4.2 In the event that solid waste is qualified as hazardous, it shall be the Service Provider’s responsibility to request SEDAPAL the readjustment of the Consideration, which will be related in a proportion equivalent to those solid wastes that are considered hazardous. Such readjustment shall be intended to recognize higher operating and maintenance costs incurred by the Service Provider in respect of the new obligations related to the classification of hazardous solid waste.

6.4.3 For these purposes, the Service Provider shall submitted to SEDAPAL a structure of higher costs generated by the classification of hazardous solid waste. SEDAPAL shall have fifteen (15) Days to assess the respective cost structure, after the receipt thereof.

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6.4.4 Should there be discrepancies between SEDAPAL and the Service Provider with respect to costs, the Parties may recourse to the dispute settlement provisions of Clause Fourteenth of this Contract.

6.4.5 Should adjustments pursuant to the preceding paragraphs require a Rate Increase, it will be SEDAPAL’s responsibility to carry out proceedings before SUNASS for the required increase, according to the regulations of the matter. SEVENTH: EXCLUSIVITY CONTRACT IN FAVOR OF SEDAPAL

The Service Provider agrees not to supply drinking water or any of the processes of the Desalination Plant, directly to third parties other than SEDAPAL unless SEDAPAL expressly and in writing authorizes such supply. The Service Provider agrees not to treat wastewater, either directly or through the WWTPs from third parties other than SEDAPAL unless SEDAPAL expressly and in writing authorizes such treatment.

EIGHTH: SEDAPAL’s OBLIGATIONS It shall be SEDAPAL’s responsibility to:

8.1. Operate and maintain Distribution Networks in the districts of Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar, in order to provide users of drinking water, the water produced by the Desalination Plant under the CONCESSIONAIRE’s operation and, if applicable, from other sources under SEDAPAL’s management.

8.2. Operate and maintain Sewage Collection Networks in the districts of Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar, in order that the WWTP under the CONCESSIONAIRE’s operation receive wastewater generated by users of the sanitary sewer service.

8.3. Pay the Consideration pursuant to the terms of this Contract.

8.4. Pay monetary compensation referred to in Articles 91° and 92° of Law No. 29338 - Water Resources Act, or legislation replacing it.

8.5. Perform water quality control audits produced by the Desalination Plant, in order to verify compliance with the quality conditions required to the CONCESSIONAIRE.

8.6. Perform wastewater quality control audits generated by the Desalination Plant and wastewater treated by the WWTP, in order to verify compliance with the quality conditions required to the CONCESSIONAIRE.

8.7. Perform, if deemed appropriate, the characterization of water quality in the receiving body of wastewater from the Desalination Plant and the WWTP, in order to determine its evolution, before and after the Start of Operations of the final disposal infrastructure and verify compliance with the quality conditions required to the CONCESSIONAIRE.

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NINTH: OBLIGATIONS OF THE SERVICE PROVIDER Regarding the Desalination Plant.

9.1. From the Start of Operations, through treatment processes of the Desalination Plant,

the Service Provider must ensure that the quality of water supplied to the Point of Delivery meets the conditions set out in Annex 1.2 of the Contract.

9.2. Drinking water delivered must meet the quality standards specified in the Service Provider’s Technical Proposal and requirements of Annex 1.2 of the Contract, at least ninety-nine percent (99%) and ninety-five percent (95%) of the turbidity and residual chlorine samples, respectively, and 100% of the samples for the other regulated parameters, monthly taken by the Service Provider. With respect to the remaining five percent (5%) of residual chlorine samples taken, none should contain less than 0.3 mg/l and turbidity must be less than 5 nephelometric turbidity units (NTU)

9.3. Wastewater generated by the Desalination Plant must meet the quality standards specified in the Service Provider's Technical Proposal and, if applicable, the requirements of Annex 1.2 of the Contract, at least eighty-five percent (85 %) of the samples taken in the month by the Service Provider.

9.4. Also from the Start of Operations, the Service Provider, through treatment processes and Submarine Outfall infrastructure for the final disposal in the ocean of wastewater generated by the Desalination Plant must ensure there are no risks for the marine ecosystem and that the water quality in the receiving body meets the Environmental Quality Standards for Water established by Supreme Decree No. 002-2008-MINAM and other Applicable Provisions, according to the categorization established by the Competent Governmental Authority, taking the Environmental Baseline into account.

9.5. One (1) month before the Start of Operations of the Desalination Plant and the Submarine Outfall, the Service Provider shall make the characterization of physical, chemical and bacteriological parameters of water in the Sampling Stations on the edge of the Mixing Zone of the receiving body, located in accordance with Annex 1.2 of the Contract, in order to validate the parameters of the Environmental Baseline that are part of the EIA. The results shall be notified to SEDAPAL and the Competent Governmental Authority, so that the latter takes appropriate action in the event of breach of the RCTs ECA before the Start of Operations.

9.6. At least eighty-five percent (85%) of the samples taken by the Service Provider in the sampling stations of the receiving body must comply with the quality standards specified in the Service Provider's Technical Proposal and, if applicable, the requirements of Annex 1.2 of the Contract.

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Compliance with this requirement shall be verified by the Competent Governmental Authority, taking into account all discharges carried out into the receiving body through controls it deems appropriate pursuant to supervision and/or control duties. If pollution increases in the receiving body, it will be the Competent Governmental Authority’s responsibility to determine the origin of such increase.

Regarding Wastewater Treatment Plants 9.7. From the Start of Operations, through the treatment processes of the WWTP, the

Service Provider must ensure that the quality of the treated wastewater complies with the conditions laid down in Annex No. 1.2 of the Contract. Also, in the case of final disposal through Submarine Outfall, it must ensure that the quality in the receiving body meets the Environmental Quality Standards for Water established by Supreme Decree No. 002-2008-MINAM and Applicable Provisions, according to the categorization established by the Competent Governmental Authority, taking the Environmental Baseline into account for this purpose.

9.8. At least eighty-five percent (85%) of the WWTP effluent samples, taken in the month by The Service Provider, shall meet each of the parameters listed in Subsection B of Annex 1.2. this Contract, with removal efficiencies and quality levels indicated in the Service Provider’s Technical Proposal and requirements in Annex 1.2 of the Contract.

9.9. For Final disposal through the Submarine Outfall, one (1) month before the Start of Operations of the Desalination Plant and the Submarine Outfall, the Service Provider shall make the characterization of physical, chemical and bacteriological parameters of water in the Sampling Stations on the edge of the Mixing Zone of the receiving body, located in accordance with Annex 1.2 of the Contract, in order to validate the parameters of the Environmental Baseline that are part of the EIA. The results shall be notified to SEDAPAL and the Competent Governmental Authority, so that the latter takes appropriate action in the event of breach of the RCTs ECA before the Start of Operations. If before the Start of Operations wastewater is being discharged from the Coastal Zone spas in relation to the Submarine Outfall, after six (6) months from the Start of Operations of the Submarine Outfall, the Service Provider shall perform the characterization of the physical, chemical and bacteriological parameters of water in the sampling stations in the Coastal Zone of the receiving body, located in accordance with Annex 1.2 of the Contract, in order to update these parameters in the Environmental Baseline. This characterization must be taken into account by the Service Provider in order to comply with water quality in the Coastal Zone of the receiving body, during the term of the concession.

9.10. At least eighty percent (80%) of the samples taken by the Service Provider in the sampling stations of the receiving body, as defined in Annex 1.2 of the Contract shall meet the bacteriological standards established for total coliforms and thermo-tolerant coliform parameters, and at least eighty-five percent (85%) of the samples must meet the standards established for the case of Biochemical Oxygen Demand (BOD) and Dissolved Oxygen (DO), subject to the provisions issued by the competent governmental authority.

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Compliance with this requirement shall be verified by the Competent Governmental Authority, taking into account all discharges carried out into the receiving body through controls it deems appropriate under its supervision and/or controlling duties. If the aforementioned standards are exceeded, it is the Competent Governmental Authority’s responsibility to determine the origin of such increase. Regarding Sanitary infrastructure under its respons ibility

9.11. If current regulations are amended during the term of the Concession Contract, regarding quality drinking water LMP, WWTP effluent LMP, Desalination Plants effluent LMP or ECA Water, the Service Provider shall comply with the new requirements. Notwithstanding the above, both the Service Provider and the GRANTOR shall be entitled to the restoration of economic - financial balance provided for in the Concession Contract, provided that the Concession is affected by the change in the current regulations mentioned above. In the case referred to above, it shall be the Service Provider’s responsibility to submit to the GRANTOR, within not more than thirty (30) Days, a proposal for technical and economic solution, in order to comply with the new regulations. The GRANTOR in turn will have a period of sixty (60) Days to evaluate the solution proposed. If deemed necessary, the GRANTOR may involve a technical expert. It shall be the CONCESSIONAIRE’s responsibility to bear the costs arising from the aforementioned evaluation. The terms and conditions for the implementation of that complementary treatment system should be the subject of an addendum to the Contract.

9.12. The Service Provider may not partially treat the average and/or maximum flow of the

Desalination Plant or WWTP under its responsibility, i.e., it may not just treat part of the flow through the required units as stated in Annex 5 of the Concession Contract. Also, the quality of the treated wastewater of the WWTP, before their final disposal, cannot be achieved on the basis of the mix thereof or with wastewater from the Desalination Plant. However, for purposes of final disposal such waters may be mixed after the measuring point for the quality control of the effluents of such infrastructures.

9.13. The Service Provider shall carry out the measurement of affluent and effluent volumes of the Desalination Plant and WWTP, under its responsibility, at the point of measurement and comply with the frequency of testing for evaluation of affluent and effluent quality control parameters and sludge generated by this infrastructure, as set out in Annex 1.1 and 1.2 of this Contract.

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Also, from the Start of Operations and under SEDAPAL’s supervision the Service Provider may compare all meters in accordance with the procedures under the metrology standards for each type of meter. The first meter comparison must be made within the last five (5) Days of March, June, September or December immediately after the Start of Operations, as appropriate. The following meter comparisons shall be made on a quarterly basis, within the last five (5) business days of March, June, September or December.

9.14. The Service Provider shall provide the necessary facilities for the GRANTOR, SEDAPAL, the Competent Governmental Authority or his designees, to carry out the corresponding sampling in the monitoring stations and measuring points, located in the Desalination Plant, the WWTP and the receiving wastewater body. The said facilities include, as appropriate, access to and/or transport to the monitoring stations and measuring points for sampling. It shall be the Service Provider’s responsibility to bear the costs of the above facilities.

9.15. The Service Provider must comply with the handling and Final Disposal of sludge from the Desalination Plant and the WWTP, as provided in Applicable Laws and Regulations and the provisions of Annex 1.2 of this Contract.

9.16. The Service Provider must submit a monthly report no later than ten (10) Days of the month following the respective evaluation, measurement and analysis. Such report shall contain, among other information, the results of measurements and parameters set out in Annex 1.1 and Annex 1.2 of this Contract.

9.17. The Service Provider shall manage, before the Competent Governmental Authority, at its cost, the inclusion of seawater catchment infrastructure and final disposal of wastewater through submarine outfalls in the navigation charts. Also, the Service Provider shall develop and implement an outreach program of the existence of such infrastructures aimed at all public and private institutions whose activities are carried out in the maritime scope of the Project. Similarly, the Service Provider shall establish, before the Competent Governmental Authority an area of trespassing restriction or prohibition or permanence of vessels as well as the development of certain activities, in areas related to the seawater catchment infrastructure and submarine outfalls, that must be protected from environmental hazards, as provided in the Regulations of the Law of Control and Supervision of the Maritime, River and Lake, approved by Supreme Decree No. 028-DE-MGP, or rule that replaces it. At the request of the Service Provider, SEDAPAL shall provide appropriate support for the activities referred to in this clause.

9.18. The Service Provider shall be responsible for maintaining a continuous service. To this end, the Service Provider shall provide ad hoc mechanical protection in the submarine outfalls infrastructure, as provided in Annex 5 of the Concession Contract. Also, the Service Provider shall be responsible for performing maintenance and repair of such infrastructures if applicable during Operations, without prejudice to the enforcement of coverage for All Risk Insurance for Completed Civil Works in accordance with Clause 11.9 of the Concession Contract, among others.

9.19. The Service Provider shall be liable for any claim filed to the GRANTOR and/or SEDAPAL for direct damages caused as a result of the Operation and Maintenance

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of the Sanitary Infrastructure under its responsibility, without prejudice to the accrued penalties. TENTH: NON-COMPLIANCES

10.1. Failure in the rate of delivery of drinking water The Service Provider shall be in default of this Contract, if for reasons attributable to it, fails to comply with the drinking water delivery scheme pursuant to Annex 1.3.

10.2. Failure on the quality of drinking water supplied b y the Desalination Plant The Service Provider shall be in default of this Contract, if for reasons attributable to him, fails to provide the water quality set out in Annex 1.2.

10.3. Failure of values and removal efficiencies of the q uality parameters of the WWTP

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The Service Provider shall be in default of this Contract, as of the beginning of Operations of WWTP, for reasons attributable to it, if more than fifteen percent (15%) of the samples of effluent taken during the month report values or removal efficiencies in one or more parameters outside the limits provided in Annex 1.2. of this Contract and the Contractor's Technical Proposal. If the quality of the wastewater delivered by SEDAPAL exceeds the limits set in Annex 1.2, failing to comply with water quality in the receiving body as required by the Competent Governmental Authority, the Service Provider shall report this to SEDAPAL, within twenty four (24) hours after the value that caused the event is determined.

It will be SEDAPAL’s responsibility to issue a statement regarding the Service Provider’s responsibility, within a period not exceeding ten (10) days of receiving the report by the Service Provider. If the Service Provider is found to be exempt from liability, penalties provided in this clause shall not apply. Also, in that event, the Service Provider shall not have any liability before Government Authorities and/or third parties in relation with the impact on water quality of the receiving body. If the Service Provider does not agree with the statement issued by SEDAPAL, it may recourse to dispute settlement provisions of Clause Fourteenth in this Contract. On the other hand, if the quality of the wastewater delivered by SEDAPAL exceeds the limits set out in Annex 1.2, and further, as a result thereof, the treatment process is altered and the Service Provider fails to deliver the quality required for treated wastewater and the water in the receiving body, except in the Mixing Zone, the Service Provider may request SEDAPAL to carry out the corresponding assessment, with the participation of a technical expert in order to determine the responsibility of that increase, and recommend the necessary measures to reverse the existing situation and/or raise the technical options to be implemented in order to comply with the quality parameters for treated wastewater and water and in the receiving body, except in the Mixing Zone, established in the Service Contract. It shall be SEDAPAL’s responsibility to bear the costs arising from the aforementioned evaluation. The technical expert called by SEDAPAL will have thirty (30) Working days to make its determination. Without limiting the foregoing, SEDAPAL may take other appropriate measures in order to provide a solution to the situation described above.

In the event that the situation described above continues for a period of three (3) months, the Service Provider agrees to take the necessary technical measures and/or implement a complementary treatment system, as appropriate, in order to comply with the quality parameters of treated wastewater and the water in the receiving body, except in the Mixing Zone, established in the Service Agreement. Prior to this, the Parties shall establish, by mutual Contract, the terms and conditions for the implementation of that complementary treatment system, if applicable.

10.4. Failure in quality measurement and control

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The Service Provider shall be in default of this Contract, in the event that for reasons attributable to it, measuring of the volume in the measuring points is not carried out, except in cases where the Service Provider carries out maintenance works in flow meters. An error greater than five percent (5%) at the time of comparing the meters will also be considered as breach of this Contract. Additionally, the Service Provider shall be in default if it fails to perform the analysis for evaluation of quality control parameters in the frequency indicated in Annex 1.2 of this Contract.

10.5. Failure to facilitate access to Governmental Author ities for measurement and control procedures The Service Provider shall be in default of this Contract, if it fails to provide the necessary facilities or to bear the respective costs for the GRANTOR, SEDAPAL or their designees to carry out the corresponding sampling in the monitoring stations located in the Desalination Plant, the WWTP and the receiving body.

10.6. Failure in the water quality of the receiving body The Service Provider shall be in default of this Contract, in the event that after the verification carried out by the Competent Governmental Authority, as provided in Clauses 9.4, 9.6, 9.7 and 9.10 of this Contract, the following conditions are verified: (i) the parameters of water quality in the receiving body do not meet Environmental Quality Standards for Water, in consideration to the Environmental Baseline of the receiving body and as provided in Clauses 9.5 and 9.9 of this Contract, and (ii) the Service Provider cannot prove that the said breach is not its responsibility.

10.7. Failure in the handling and disposal of sludge

The Service Provider shall be in default of this Contract, for not implementing the management and disposal of sludge and other by-products resulting from treatment processes in the Desalination Plant and the WWTP, as provided in the Applicable Rules and the provisions of Annex 1.2.

10.8. Failure to submit monthly reports

The Service Provider shall be in default of this Contract, for not submitting monthly reports referred to in Clause 9.169.16 of this Contract within the stipulated period.

10.9. Failure by SEDAPAL

SEDAPAL shall breach this Contract if it fails to make payments of monthly RPMO invoices, within the period established in Clauses 5.8 of this Contract.

10.10. General Provision

In case a breach of contract is regarded as an offense punishable by any Governmental Authority, the corresponding administrative penalty shall only apply, as

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the penalties provided for in this Contract shall not apply to the Service Provider. The disciplinary procedure shall be governed by the existing administrative law. ELEVENTH: PENALTIES

11.1. General Provisions

11.1.1. If more than one default is incurred as provided under Clause Ten of this Contract, the corresponding penalties will accumulate in accordance with this clause.

11.1.2. By notarized letter, SEDAPAL must notify the Service Provider of non-compliances incurred and the applicable penalty (s). If within thirty (30) Calendar Days from receipt of that communication, the Service Provider fails to pay the applicable penalties, the Contract Performance Bond shall be partially enforced in the same proportion allowing compensating for such failures.

11.1.3. SEDAPAL may terminate this Contract if the sum of penalties to be imposed under

this Contract, exceed the following:

i) Fifty percent (50%) of the Concession Contract Performance Bond in effect for one Concession Year, or

ii) Twice the total amount of the Concession Contract Performance Bond in effect for the term of this Contract.

11.1.4. If SEDAPAL decides to terminate the Contract, the Service Provider shall pay the

amount due to the penalties that may be applicable at the time, notwithstanding this, SEDAPAL may proceed to communicate this fact to the GRANTOR who shall enforce the Concession Contract Performance Bond Contract in accordance with the procedure referred to in Section XV of the Concession Contract.

11.1.5. If SEDAPAL decides to continue with the Concession, the Service Provider shall submit an additional letter of guarantee in an amount equal to fifty percent (50%) of the Concession Contract Performance Bond, which shall remain in effect two (2) years after the end of the Concession Contract term. After that, the Service Provider shall identify the source of the failure and submit for SEDAPAL’s approval, a corrective action program as well as the estimated time for implementation, in order to comply with the obligations of this Contract. In the case referred to above, SEDAPAL shall notify the Service Provider the deadline for implementation of the corrective measures program. During the period for implementing the corrective action program referred to in the preceding paragraph, penalties provided for in this Contract shall not be applicable. If the deadline for implementing the corrective action program expires, and if the Service Provider fails to comply with the commitments assumed, generating cumulative penalties for an amount equal to twenty-five percent (25%) of the Concession Contract Performance Bond, the Service Provider shall pay the amount due for the penalties that are applicable to the date, and SEDAPAL may irrevocably terminate this Contract and the Grantor shall enforce the available guarantees.

11.2. Penalties against the Service Provider

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11.2.1. In case of failure referred to in Clause 10.1, the Service Provider will be penalized

with an amount equal to a percentage of the RPMO monthly corresponding to the month in which the failure occurs, as follows:

RPMO = % (to be determined)

11.2.2. In case of failure referred to in Clause ¡Error! No se encuentra el origen de la referencia. 10.2, he Service Provider will be penalized for each non-complied parameter, as follows:

a. Odor and Taste : X per cubic meter b. Color : X per cubic meter c. pH : X per cubic meter d. Conductivity : X per cubic meter e. Turbidity : X per cubic meter f. Free residual chlorine : X per cubic meter g. Thermotolerant coliforms : X per cubic meter h. The remaining : X per cubic meter

If allowed values of more than one parameter are non-complied simultaneously, the corresponding penalties will be added.

The Service Provider is required to suspend the delivery of water when it does not comply with the allowed values of the parameters listed in Annex 1.2 of this Contract; in addition, the penalty specified in Clause 11.1.1. due to delivery of less volume of water will also be applicable.

11.2.3. Every time there is a breach referred to in Clause ¡Error! No se encuentra el

origen de la referencia. 10.3, the Service Provider will be penalized with an amount equal to a percentage of the monthly RPMO corresponding to the month in which the failure occurs, as follows:

Parameter Penal ty (% of monthly

RPMO) Biochemical Oxygen Demand (BOD) X % Chemical Oxygen Demand (COD) X % Total Kjeldahl Nitrogen (TKN) X % Total Phosphorus (P) X % Total Suspended Solids X % Helminths X % Thermotolerant coliforms X % Total Coliforms X %

11.2.4. For breach pursuant to clause ¡Error! No se encuentra el origen de la

referencia. 10.4 of this Contract, based on the measurement of the volumes, the Service Provider shall pay a monthly penalty equal to _____ percent (X%) of the monthly RPMO corresponding to the month when the noncompliance occurred.

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On the other hand, in case there is an error of more than five percent (5%) at the time of comparing the meters, the penalty for each meter will be as follows:

RPMOmensual x (E – 5%)

Where: E = Error when comparing the meters, which value must be greater than 5%.

11.2.5. For breach pursuant to Clause ¡Error! No se encuentra el origen de la referencia. 10.4 of this Contract, based on the frequency of testing for evaluation of quality control parameters of the affluent, effluent and sludge, as appropriate, a daily penalty shall be applied to the Service Provider for each unrealized analysis in each parameter, equal to X% of the monthly RPMO corresponding to the month in which the failure occurs.

11.2.6. Each time the Service Provider fails to comply with the provisions of Clause ¡Error!

No se encuentra el origen de la referencia. 10.5 of this Contract, it shall make a payment equal to ___________ (X%) of the monthly RPMO amount corresponding to the month in which the failure occurs.

11.2.7. Every time failure described in Clause ¡Error! No se encuentra el origen de la

referencia. 10.6 of this Contract occurs, the Service Provider shall pay the penalty as set out in the following table:

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Variable Penalty (% de

of monthly RPMO)

In the receiving body of the Desalination Plant was tewater

Total Dissolved Solids X%

Total Suspended Solids X%

pH X%

Biochemical Oxygen Demand (BOD) X%

Thermotolerant coliforms X%

(Others to be determined)

In the receiving of the WWTP wastewater

Biochemical Oxygen Demand (BOD) X%

Dissolved Oxygen (DO) X%

Thermotolerant coliforms X%

Total Coliforms X%

11.2.8. Failure of provisions established Clause ¡Error! No se encuentra el origen de la

referencia. 10.7 of this Contract, shall generate a penalty for the Service Provider, which will be calculated according to the following procedure:

( )[ ]

2mensualRPMOMSGeneradaMSOfertada ×−

Where: Offered DM = Dewatered and/or dried sludge dry matter defined in the

Concessionaire’s Technical Proposal, corresponding to the monthly average, expressed as a dryness percentage.

Generated DM = Dewatered and/or dried sludge dry matter generated by the WWTP, corresponding to the monthly average, expressed in percentage terms.

11.2.9. Failure to comply with provisions of Clause ¡Error! No se encuentra el origen de

la referencia. 10.8 of this Contract, shall generate a daily penalty by the Service Provider, equal to X% of the monthly RPMO amount corresponding to the month in which the failure occurs.

11.3. Penalty to SEDAPAL

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If SEDAPAL fails to pay an invoice for the Consideration of the period stipulated in Clause Six of this Contract, it shall pay a daily interest on the amount of the invoice, equal to the Sovereign Bond coupon rate plus ____ percent (X%) in annual terms. TWELFTH: FORCE MAJEUR AND ACTS OF GOD 12.1 Events of Force Majeure or Acts of God.

For purposes of this Contract, there will be a situation of Acts of God or Force Majeure whenever there is an event, condition or circumstance not attributable to the Parties, of an extraordinary nature, unforeseeable and irresistible, that prevents them from performing any of their obligations under their responsibility or cause partial, late or defective compliance thereof. The event must beyond the Parties’ reasonable control, which despite all reasonable efforts carried out to prevent or mitigate their effects cannot avoid the non-compliance situation.

Force majeure or Acts of God include, but are not limited to the following:

i. Any external, internal or civil act of war (declared or undeclared), invasion, armed conflict, revolution, blockade, riot, insurrection, civil commotion, acts of terrorism and any approval, site occupation or any substantial part of Area Concession, which prevents performance of this Contract, as a result of the aforementioned;

ii. Any stoppage or strike by workers who do not maintain a working relationship with the Service Provider, directly affecting the Service Provider by causes beyond its reasonable control, or by unpredictable causes.

iii. Any archaeological discoveries that are of a magnitude that would prevent the

Service Provider from complying with the commitments assumed.

iv. Any earthquake, tsunami, flood, fire, explosion or atmospheric phenomena provided it directly affects all or part of the Concession Assets and/or the Work or its elements.

v. Any epidemic, pollution, pest or any similar event that results in the complete

absence or substantial reduction of seawater entering to the Desalination Plant, as appropriate, to the extent that such an event prevents or limits the performance of services by the Service Provider.

vi. The eventual total or partial destruction of the Works or its elements, or property

damage causing total destruction and the impossibility of recovery, o causing a significant reduction of the Service, for reasons not attributable to the Service Provider.

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12.2. The Service Provider may not invoke the approval or effects of Applicable Laws and

Regulations in Peru as an event of Force Majeure of Acts of God in relation to compliance with obligations contained in this Contract, unless the said Applicable Laws and Regulations prevent the Service Provider from continuing compliance with the commitments assumed.

12.3. In cases in which an event of force majeure causes a delay in complying with the services provided in this Contract, and this delay causes economic financial damage to the Service Provider, a required extension to the Concession period and Service Agreement shall be granted, for the Service Provider to recoup from that loss. The damage in this case must be accredited and described in a report issued by an independent consulting firm of recognized standing and relevant experience selected by SEDAPAL and hired by the Service Provider, with the GRANTOR’s prior approval. In response to this report, the GRANTOR shall determine the term and conditions of the extension.

12.4 The Party affected by an event of Force majeure or Acts of God shall inform the other

Party of:

i) The facts constituting the events of Force Majeure or Acts of God, within the next seventy two (72) hours of its occurrence or when it was known, as applicable, and

ii) The estimated period of total or partial restriction of their activities and the degree of expected impact. Additionally, the other Party must be kept informed of the development of such events.

12.5 Force majeure or Acts of God shall not relieve the Parties from compliance with obligations that are not suspended by these events.

12.6 The Parties shall make every effort to ensure the resumption of the performance of

its obligations as soon as possible after the occurrence of such events. Moreover, the Party concerned should make every effort to minimize any delay or additional cost to the other Party.

12.7 If an event of Force Majeure or Acts of God causes inability to meet obligations under this Contract for more than six (6) continuous months or accumulated within one Year of the Concession, either party may invoke the expiry of this Contract. THIRTEENTH: EARLY TERMINATION OF THE CONTRACT This Contract shall terminate early on the following grounds:

13.1 When the Concession Contract expires, as provided in Clause 2.2 of this Contract. 13.2 When SEDAPAL decides to terminate this Contract, on the following grounds:

a) Given the failure of the Service Provider referred to in Clause ¡Error! No se encuentra el origen de la referencia. 10.2, in respect of parameters_______________, for four (4) consecutive months or six (6) months accumulated for each Year of the Concession, without prejudice to the penalties accruing for non-compliance until termination.

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b) Given the failure of the Service Provider referred to in Clause ¡Error! No se

encuentra el origen de la referencia. 10.3, in respect of parameters________________, for four (4) consecutive months or six (6) months accumulated for Year of the Concession, without prejudice to the penalties accruing for non-compliance until termination.

c) Given the failure of the Service Provider stated in Clause ¡Error! No se

encuentra el origen de la referencia. 10.4, based on the frequency of testing for the evaluation of quality control parameters for a period of thirty (30) Calendar Days, accumulated in a year, without prejudice to the penalties accruing for non-compliance until termination.

d) Given the failure of the Service Provider stated in Clause ¡Error! No se

encuentra el origen de la referencia. 10.6, in respect of parameters________________, for four (4) consecutive months or six (6) months accumulated for Year of the Concession, without prejudice to the penalties accruing for non-compliance until termination.

e) When the amount of the accumulated penalties, in every respect, reaches an

amount equal to fifty percent (50%) of the Concession Contract Performance Bond in effect, for the period of one Year, or when a sum equivalent to twice the total amount of the Concession Contract Performance Bond in force is reached throughout the term of this Contract, as stated in Clause 11.1.3.

f) When the deadline for implementing the corrective action program expires, as

provided in Clause 11.1.5, and the Service Provider has failed to comply with obligations under its responsibility, generating cumulative penalties for an amount equal to twenty five percent (25%) of the Concession Contract Performance Bond.

13.3 When the occurrence of an Event of Force Majeure is verified, in the circumstances

set out in Clause 12.712.7 of this Contract.

13.4 If SEDAPAL fails to comply with payments of three (3) consecutive monthly invoices or six (6) monthly invoices accrued in respect of the Consideration, in the course of a Concession Year. Expiry of the Contract will occur provided that the Service Provider chooses to terminate the Contract. The aforesaid also applies to the case in which there are partial payments of the Consideration amounts. FOURTEENTH: DISPUTE SETTLEMENT Applicable Law

14.1 The Contract shall be governed by and construed in accordance with Applicable Laws and Regulations. Therefore, it states that the content, execution, conflicts and other consequences arising from it are governed by that law, which the Service Provider acknowledges. Scope of Application

14.2 This clause covers the settlement of all disputes that may arise between the Parties during the Concession term and those related to the termination of the Contract.

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In accordance with Article 62 of the Political Constitution of Peru, it is acknowledged that disputes arising from this contractual relationship will only be resolved by arbitration, according to the protection mechanisms provided for in the Contract. The award issued will be integrated into the contractual rules laid down in this Concession Contract.

Without prejudice to the above, the Parties recognize that the challenge to SUNASS decisions concerning the application of Tariffs and other decisions issued by SUNASS in the exercise of its administrative functions, shall be subject to the Applicable Laws and Regulations.

Interpretation Criteria

14.3 In case of divergence of interpretation of this Con tract, the following order of precedence shall be followed to resolve such situat ion : a) The Contract; b) The Concession Contract; c) Circular Letters referred to in the Bidding Terms; e) The Bidding Terms, and d) Applicable Laws and Regulations.

14.4 The Contract is signed only in Spanish. If there is any difference between any translation of the Contract and Spanish, the text in Spanish shall prevail. Translations of this Contract shall not be considered for purposes of interpretation.

14.5 The deadlines established will be calculated in days, months or years as appropriate.

The titles contained in the Contract are for identification purposes only and should not be considered as part of the Contract, to limit or expand its content or to determine rights and obligations of the Parties.

The terms "Annex", "Chapter", "Clause" and "Section" relate to this Concession Contract, unless the context indicates unequivocally and without doubt that it refers to another document.

14.6 The words in the singular shall include the plural of the same words and vice versa.

Words in the masculine include the feminine and vice versa. 14.7 The use of the disjunction "or" in a list should be understood as excluding another

element of such enumeration. 14.8 The use of the conjunction "and" in a list should be understood to include all the

elements of that list or enumeration. 14.9 Those revenues, costs, expenses and similar to which the CONCESSIONAIRE is

entitled for the provision of the Services shall be collected in the relevant currency in accordance with the Applicable Laws and Regulations and the terms of the Contract.

Waiver of Diplomatic Claims

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14.10 The Service Provider and its partners and shareholders expressly, unconditionally and irrevocably waive any diplomatic claim by disputes or conflicts that may arise from the Contract. Direct Negotiation

14.11 The Parties declare that it is their will that all conflicts or uncertainties with legal

significance to be settled by arbitration that may arise concerning the interpretation, performance, compliance, and any matter concerning the existence, validity or enforceability of the Contract, except for the regime applicable to Tariffs regulated by SUNASS whose complaint path is the administrative via or other decisions of this body in the exercise of its administrative functions, will be resolved by direct negotiation between the Parties, within fifteen (15) Days calculated from the date a notice in writing is sent to the other Party regarding the existence of conflict or uncertainty with legal significance. In case of international arbitration, as provided in Subsection b) of Clause 14.12 of this Contract, the start date for calculating the direct negotiation will include the requirement of a notice issued by the party invoking this clause to the Ministry of Economy and Finance in its capacity as Coordinator of the Coordination and Response System of the State regarding International Investment Disputes, under the provisions of Law No. 28933. Given that this is a case of International arbitration a direct negotiation period shall apply of not less than six (6) months, applying the rules provided for in the preceding paragraph for its calculation.

The periods referred to in the preceding paragraphs may be extended by joint decision of the parties; this Contract must be in writing, provided that there are real possibilities of resolving the conflict by direct negotiation if this additional term is granted.

If during direct negotiation within the period granted, the Parties fail to resolve the conflict or uncertainty raised, it should be defined as a conflict or uncertainty of a technical or non-technical nature, as applicable. Where the parties fail to reach an Contract on the nature of the dispute, both parties should support their position through a written communication sent to their counterpart, explaining the reasons why they consider that the dispute is technical or non-technical.

Conflicts or technical uncertainties (each, a "Technical Dispute") will be resolved according to the procedure stipulated in Subsection a) of Clause 14.12. Conflicts or uncertainties that are not technical in nature (each, a "Non-Technical Dispute") will be resolved in the manner provided in Subsection b) of Clause 14.12. If the Parties are unable to reach an Contract within direct negotiation on if the dispute or controversy is a Technical Dispute or Non-Technical Dispute, or if the conflict has components of Technical Dispute and Non-Technical Dispute, then such dispute or uncertainty shall be considered a Non-Technical Dispute and shall be resolved under the respective procedure provided in Subsection b) of Clause 14.12.

Arbitration

14.12 Methods of arbitration proceedings:

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a) Equity and good conscience Arbitration. - Each and every Technical Dispute that cannot be resolved directly by the Parties within the period of direct negotiation should be submitted directly to equity and good conscience arbitration in accordance with the provisions of Section 3, Article 57° of Legislative Decree No. 1071, by which arbitrators shall decide according to their skills, knowledge and understanding. Arbitrators may be domestic or foreign experts, but in all cases they must have extensive experience in the field of Technical Disputes respectively, and shall be in no conflict of interest with any of the Parties before, during and after the time of their appointment as such.

The Arbitral Tribunal may request the Parties the information it deems necessary to resolve the Technical Dispute, and as a result they may suggest the Parties a settlement proposal, which may or may not be accepted by them. The Arbitral Tribunal may present all the evidence and request the parties or third parties the evidence it deems necessary to resolve the claims raised. The Arbitral Tribunal shall prepare a draft decision to notify the Parties within thirty (30) Calendar Days after its setting up, and the Parties shall have five (5) Days to prepare and submit to the Tribunal its comments on such preliminary decision. The Arbitral Tribunal shall issue its final decision on the Technical Dispute raised within ten (10) Days after receipt of comments from the Parties, in its preliminary decision or upon the expiration of the deadline for submitting such comments, whichever occurs first. The procedure for the settlement of a Technical Dispute should be performed in Lima, Peru. Exceptionally, and depending on the nature of the concrete case, the Arbitral Tribunal may move to another location for the sole purpose of including evidence such as expert opinions, visual inspections or any other evidence deemed necessary within a period not exceeding ten (10) Days.

The members of the Tribunal shall maintain absolute secrecy and confidentiality of all information known as participants in the resolution of a Technical Dispute.

b) Arbitration in Law. - Non-Technical Disputes shall be settled by arbitration in law, in accordance with the provisions of Sections 1 and 2, Article 57° of Legislative Decree No. 1071, procedure in which the arbitrators shall resolve in accordance with the applicable Peruvian law. The arbitration in law may be local or international, according to the following:

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(i) When Non-Technical Disputes amount to more than Five million and 00/100

Dollars (US$ 5 000 000,00) or its equivalent in national currency, the Parties will try to resolve disputes through direct negotiation within a term of six (6) months as provided in Clause 14.10 of this Contract, term that may be extended by joint decision of the Parties.

If the parties do not reach an Contract within the direct negotiation period referred to in the preceding paragraph, disputes shall be resolved through international arbitration in law through a procedure conducted in accordance with the Rules of Conciliation and Arbitration of the International Centre for Settlement of Investment Disputes ("ICSID"), established under the Convention on the Settlement of Investment Disputes between States and Nationals of other States, approved by Peru through Legislative Resolution No. 26210, which rules the parties submit unconditionally. For purposes of processing international arbitration in law proceedings, in accordance with the arbitration rules of ICSID, SEDAPAL representing the State of the Republic of Peru, declares that the Service Provider is considered as "national of another Contracting State", being under foreign control as provided in subsection b) of Section 2 of Article 25 of the Convention on the Settlement of Investment Disputes between States and Nationals of other States, and the Service Provider agrees to be considered as such. Arbitration will take place in Washington DC, USA, and will be conducted in Spanish, and the arbitration award shall be issued under the provisions of the arbitration rules of the institutions governing arbitrations, accordingly. If for any reason the ICSID decided not to be competent or declines the arbitration initiated under this clause, the Parties agree to submit in advance, on the same terms outlined above, Non-technical Disputes that (a) amount to more than Five million and 00/100 US Dollars (US$ 5,000,000.00) or its equivalent in national currency, or (b) the Parties do not agree on the amount of the matter in dispute, to UNCITRAL Arbitration Rules. In that case, arbitration shall be held in Lima, Peru. Alternatively the Parties may agree to submit the dispute to another jurisdiction other than ICSID if they consider it appropriate. The Parties express their irrevocable and advance consent so any dispute of this nature may be submitted to any of the arbitral tribunals indicated in the preceding paragraphs.

(ii) Non-Technical Disputes where the amount involved is equal to or less than Five million and 00/100 Dollars (US$ 10 000000.00) or the equivalent in national currency, and those purely legal disputes that are not quantifiable in money, shall be settled by arbitration, through a procedure conducted in accordance with the Rules of the Arbitration Center of the Chamber of Commerce of Lima, whose rules the Parties submit to unconditionally, as well as the supplemental application of the Peruvian General Arbitration Law and after that the Civil Procedural Code of Peru.

The arbitration will take place in Lima, Peru, and will be conducted in Spanish. The arbitration award must be issued within one hundred twenty (120)

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Calendar Days from the date of installation of the Arbitral Tribunal. Exceptionally, the award may be issued after this date when the Arbitral Tribunal considers it essential to include evidence such as expert opinions or visual inspections outside the city where the arbitration is being carried out, within a period not exceeding thirty (30) Calendar Days.

Common Procedural Rules

14.13 Both for Equity and Good Conscience Arbitration referred to in Subsection a) of Clause 14.12 and for Legal Arbitration referred to in Subsection b) of Clause 14.12, either in international or domestic mode, the following general provisions shall apply equally: The Arbitral Tribunal shall consist of three (03) members. Each Party shall appoint one arbitrator and the third appointed by Contract of the two arbitrators appointed by the Parties, who in turn will act as Presiding Arbitrator. If the two arbitrators fail to reach Contract on the appointment of the third arbitrator within ten (10) Days from the date of appointment of the second arbitrator, the third arbitrator shall be appointed, at the request of either Party by the Lima Chamber of Commerce, in the case of equity and good conscience arbitration and national legal arbitration, and for the ICSID arbitration in the case of international law. If one of the Parties fails to appoint an arbitrator within ten (10) Days from the date of receipt of the respective request for appointment, the Party shall be deemed to have waived its right and the arbitrator will be appointed at the request of the other Party by the Lima Chamber of Commerce or the ICSID, as the case may be.

If the case may be, the GRANTOR may request to participate in the proceedings or be called to participate, at the request of either Party or by the Arbitral Tribunal. In either case, the Arbitral Tribunal shall approve the GRANTOR’s, participation and define its duties and rights in the arbitral proceedings.

Arbitrators can replace, at their option, any existing difference or gap in the legislation or in the Contract by applying the general principles of law.

The Parties agree that the award of the arbitral tribunal shall be final and unappealable. In this regard, the Parties should consider it as a final instance judgment, with status of res judicata. Accordingly, the Parties waive their rights of reconsideration, appeal, cassation or other means of challenge against the award stating that it is an obligation of definitive fulfillment and immediate execution, except on grounds specifically provided for in Articles 73 and 123 of the Peruvian General Arbitration Law, as applicable.

During the arbitration, the Parties shall continue with the performance of their contractual obligations, to the extent possible, even regarding those matters of arbitration. If the subject of arbitration was the fulfillment of the obligations secured by the Concession Contract Performance Bond or the Works Performance Bond, as appropriate, the respective deadline shall be suspended and such guarantees may not be executed for the reason that prompted the arbitration and shall be maintained in force during the arbitration proceedings.

All expenses incurred in the settlement of a Technical or Non-Technical dispute, including the fees of the arbitrators involved in the resolution of a dispute, shall be borne by the unsuccessful Party. The same rule applies if the defendant or counterclaimant agrees to or recognizes the claim of the plaintiff or counterclaimant.

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The plaintiff or counterclaimant who withdraws the claim shall also bear the costs. In the event that the procedure concludes without a ruling on the merits of the claims because of settlement or compromise, such expenses will be borne equally by the plaintiff and the defendant. Also, in case the award partially favored the opinions of the Parties, the Arbitral Tribunal shall decide on the distribution of these expenditures.

Costs and expenses such as advisory fees, or other internal costs that are attributable to a Party individually shall be excluded from the provisions of this Section. In witness whereof, this Contract is duly subscribed by both Parties in four (4) copies of the same content, in the city of Lima on, , , 2009. Service Provider : _________________________ Legal Representative SEDAPAL : _________________________ Legal Representative

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ANNEX 1.1

MEASUREMENT CONSIDERATIONS

1. MEASURING AND SAMPLING POINTS

1.1. Location: The Measuring Points will be placed in appropriate locations to record the flow rate, volume and sampling of drinking water and waste water, as follows:

1.2.1. A meter gauge at the entrance of the Desalination Plant, totaling the volume and recording the flow to enter the reverse osmosis process. It should include a sampling point within 5 m before the meter.

1.2.2. A meter gauge to the exit of the Desalination Plant, totaling the amount that will enter

the reverse osmosis process. It should include a sampling point within 5 m before the meter.

1.2.3. A meter gauge to the exit of each projected or main reservoir at Santa Maria del Mar,

totaling the amount that will enter the distribution networks in the districts of Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar. It should include a sampling point within 5 m before the meter.

1.2.4. A meter gauge at the exit of the wastewater discharge line generated by the Desalination Plant, totaling the volume and recording the flow that will be discharged into the receiving body. It should include a sampling point within 5 m before the meter.

1.2.5. A meter gauge at the entrance of the channel of each new or existing WWTP, which will be necessarily located after the grilles chamber. This gauge will record the total volume and flow entering the WWTP. The sampling point is the entrance channel of each WWTP.

1.2.6. A meter gauge in the channel or outlet pipe of each new or existing WWTP, before the Final Disposal of treated wastewater. This gauge will record the total volume and flow exiting the WWTP. The sampling point is the entry channel or will be located within 5 m of the gauge on the outlet pipe of each WWTP.

1.3. All measuring points should be automated and with real-time data transmission to SEDAPAL. The Measuring Points and Sampling Points should be clearly identified and marked.

1.3 The Service Provider shall bear the continuous supply of electricity to the meters, and must have an autonomous emergency system, based on a battery bank or similar. 2. INSTRUMENTATION

2.1. Meters previously calibrated and verified by organizations or companies duly authorized and accepted by SEDAPAL shall be installed in the measuring points. These meters shall have the following characteristics:

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2.1.1. Ultrasonic sensor with indicator, totalizer and recorder, provided with telemetry to transmit the information to a control center of SEDAPAL, with a level of precision which deviation shall not exceed +/- 5%.

2.1.2. These meters shall be factory tested and certified by a metrology official body

of the country of origin.

3. PROCEDURE FOR THE DETERMINATION OF VOLUMES To determine monthly volumes of sea water, drinking water, wastewater and treated wastewater, the following procedure will be established:

3.1. The monthly amount is the difference between values recorded in the current month minus values recorded in the previous month. The Service Provider shall deliver to SEDAPAL values recorded at each meter in the first ten (10) Calendar Days of the month following the reading.

3.2. The Service Provider, as of the Start of Operations and under SEDAPAL’s

supervision, shall check the gauges according to procedures provided under metrology standards for each type of meter. Should there be an error greater than five percent (5%), the Service Provider shall immediately replace the respective meter with one in reserve. This replacement meter should be verified by agencies or companies authorized by the Competent Governmental Authority, with full force of use, or alternatively, they should be certified by the manufacturer, subject to approval by SEDAPAL. The first verification of the meters, after Start of Operations, must be made within the last five (5) working Days of March, June, September or December immediately following the Start of Operations, as appropriate. The following verifications to the meters shall be carried out quarterly, within the last five (5) days of March, June, September or December.

3.3. The Service Provider is necessarily subject to SEDAPAL’s approval and supervision in order to perform any maintenance on the meters.

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ANEXO N° 1.2

A. DRINKING WATER QUALITY TO BE DELIVERED BY THE CO NCESSIONAIRE FOR ITS DISTRIBUTION

The drinking water quality delivered by the Service Provider shall comply with the maximum permissible limits of the Drinking Water Quality Standards approved by Supreme Decree No. 031-2010-SA, or legislation replacing it. Additionally, the Service Provider shall meet the following limitations on the quality of water delivered:

• Langelier Index : 0 < LSI < + 0,4 • Boron concentration : ≤ 1mg/l • Turbidity : ≤ 1 UNT • Residual chlorine : 0,5 mg/l ≤ Cl ≤ 2 mg/l • Heterotrophic bacteria : ≤ 250 UFC/ml

B. FREQUENCY OF DRINKING WATER QUALITY ANALYSIS

The Service Provider shall perform the following analysis in drinking water as often as directed, without prejudice to provisions established by the Competent Governmental Authority under the Drinking Water Quality Standards. SEDAPAL, in its discretion, may take, at the same time as the Service Provider, its own samples for drinking water analysis.

C.1. ON A DAILY BASIS

The following parameters should be analyzed: • Color • Taste • Odor • pH • Temperature • Conductivity • Turbidity • Total Coliforms • Thermotolerant coliforms • Heterotrophic bacteria • Residual chlorine

Sampling shall be carried out at the time of increased consumption of drinking water.

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C.2. ON A WEEKLY BASIS

The following parameters should be analyzed: • Oils and Fats • Total Trihalomethanes • Boron • Bromate • Langelier Index • E. Coli • Virus

Sampling will be carried out on Mondays of the first week of the month, on Tuesdays of the second week of the month, on Wednesdays of the third week of the month, on Thursdays of the fourth week of the month and if applicable, on Fridays of the fifth week of the month.

C.3. ON A MONTHLY FREQUENCY

The following parameters should be analyzed: • Helminth eggs and larvae, pathogen protozoan cysts and oocysts. • Free-living organisms, such as algae, protozoa, copepods, rotifers,

nematodes at all stages of development. • Organoleptic Quality parameters of Annex II of S.D. 031-2010-SA not

specified under subsection C.2 • Inorganic Chemical Parameters of Annex III of S.D. 031-2010-SA not

specified under subsection C.2 Sampling will take place on Wednesdays of the first week of each month, after notifying SEDAPAL.

C.4 ON A SEMI-ANNUAL FREQUENCY

The following parameters should be analyzed: • Organic Chemical parameters of Annex III of S.D. 031-2010-SA not specified

under subsection C.2 • Radioactive parameters of Annex IV of S.D. 031-2010-SA.

Sampling shall be conducted in the first week of January and July each year, after coordination with SEDAPAL.

C. WASTE WATER QUALITY TO BE DELIVERED BY THE GRANT OR FOR TREATMENT IN PROJECTED WWTP

The quality of wastewater that will enter the projected WWTP to be delivered by SEDAPAL shall correspond to the quality of collected raw wastewater by means of collection networks in the districts in Punta Hermosa and Punta Negra.

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For the basic parameters of water quality to be treated by the projected WWTP, SEDAPAL has defined the following values:

Parameter Unit Maximum Value

Total organic load per day as BOD5 (kg) XXXXX

Total organic load per day as COD (kg) XXXXX

Total Coliforms (NMP/100 ml) 1x108

Thermotolerant coliforms (NMP/100 ml) 1x108

Sedimentable solids (ml/l-h) 8.5

Total Suspended Solids - TSS mg/l 300

Oils and fats (mg/l) 100

PH 6-8.5

Total Kjeldahl Nitrogen (mg/l) 50

Ammonia nitrogen (mg/l) 40

Total phosphorus (mg/l) 12

D. MINIMUM REMOVAL EFFICIENCIES OF THE PROJECTED WWTP AND TREATED EFFLUENT QUALITY TO BE COMPLIED BY THE SERV ICE PROVIDER

In the case of the projected WWTP, the following minimum removal efficiencies in wastewater shall be required, which will be verified by SEDAPAL:

Variable % Minimum Removal

BOD 80%

COD 80%

TKN 22%

P – Total 11%

Total Suspended Solids 80%

Thermotolerant coliforms 99.99%

Total Coliforms 99.99%

Helminths 97% Additionally, the following minimum quality levels will be required in treated wastewater that SEDAPAL, with authorization by the Competent Governmental Authority, shall make available to third parties, which will be communicated with anticipation to the Service Provider. Such conditions shall be verified by SEDAPAL:

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Variable Maximum Value

Thermotolerant coliforms 1 000 NMP/100 ml

Total Coliforms 1 000 NMP/100 ml Notwithstanding the foregoing, the Service Provider shall achieve removal efficiency and sufficient level of quality in the treated wastewater for compliance with Permissible Maximum Limits in effluents pursuant to Supreme Decree No. 003-2010-MINAM, and Environmental Quality Standards for Water in the receiving body according to the provisions of Supreme Decree No. 002-2008-MINAM and other applicable regulations.

E. QUALITY OF THE RECEIVING BODY

The wastewater generated by the Desalination Plant and WWTP to be discharged through a submarine outfall shall comply with Environmental Quality Standards in the receiving body in accordance with the use category established by the Competent Governmental Authority, except in the Mixing zone, and taking into consideration the results of the Baseline of the receiving body.

F. SLUDGE QUALITY

For Final Disposal of sludge from the Desalination Plant and WWTP treatment processes, the Service Provider shall comply with the provisions of the General Law of Solid Waste and its regulations, performing the appropriate procedures before the Government Authorities for their respective authorization, directly or through an authorized specialist company for transportation and final disposal of solid waste.

The sludge produced in the treatment process, including final disposal in landfills, should comply as a minimum, with the dryness percentage provided in the Technical File, which may not be less than twenty-eight percent (28%) of dry matter. For any other form or choice of treatment and Final Disposal of Sludge, the moisture content must be consistent with the technical requirements of final disposal, as specified in the Technical File, for which the Service Provider shall be authorized by the Competent Governmental Authority. For determining the monthly average value of dryness, the Service Provider must classify sludge produced at least three (3) times a week and calculate the monthly average from the results obtained.

G. FREQUENCY OF ANALYSIS FOR EVALUATION OF WASTEWAT ER AND

TREATED WATER QUALITY CONTROL PARAMETERS OF THE WWT P

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In addition to the sampling and analysis carried out by the Service Provider in accordance with the requirements of the WWTP operation, for purposes of performance evaluation, the Service Provider must carry out the following analysis, in accordance with the provisions contemplated in the Operation and Maintenance Manuals, to be incorporated in Annex 9-A of this Contract:

H.1. TIME FREQUENCY

A sample of raw and treated wastewater must be obtained hourly. The analysis to be carried out by the Service Provider is the following:

• Temperature • PH

H.2 WITH A WEEKLY FREQUENCY

A 24-hour composite sample of wastewater and a 24-hour composite sample of treated wastewater must be obtained through a daily sampling. The analysis to be performed weekly by the Service Provider is the following:

• Total and Soluble BOD5 • Total and Soluble COD • Fats and Oils • Fecal coliforms (simple sampling) • Total Coliforms (simple sampling) • Total Kjeldahl Nitrogen • Ammonia nitrogen • Total Phosphorus • Suspended Solids • Sedimentable Solids • Total Helminth eggs (simple sampling)

Sampling will be carried out on Mondays of the first week of the month, on Tuesdays of the second week of the month, on Wednesdays of the third week of the month, on Thursdays of the fourth week of the month and if applicable, on Fridays of the fifth week of the month.

H.3 WITH A MONTHLY FREQUENCY

A 24-hour composite sample of wastewater and a 24-hour composite sample of treated wastewater must be obtained through a frequency sampling. The analysis to be performed monthly by the Service Provider is the following:

• Arsenic • Cadmium • Cyanides • Copper • Chrome • Mercury • Nickel • Lead

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• Zinc

Sampling will take place on Wednesdays of the first week of each month.

H. FREQUENCY OF QUALITY ANALYSIS OF SLUDGE

I.1. DRYNESS OF SLUDGE

The Service Provider shall obtain three (3) samples of sludge on a monthly basis (Monday, Wednesday and Friday every week) from the exit of dehydration or drying equipment for analysis of sludge dryness. At least four (4) dryness results expressed in kg of dry matter per ton of sludge should be considered per month to determine the monthly average dryness of sludge.

I.2. HEAVY METALS

The Service Provider shall make quarterly sampling of sludge (Wednesday of the first week of each quarter) from the exit of dehydration or drying equipment for analysis of heavy metals. At least four (4) results for each of the parameters measured expressed in kg per ton of sludge should be considered per year to determine annual average for each measured parameter of sludge.

Parameters to be measured are:

• Arsenic • Cadmium • Cyanides • Copper • Chrome • Mercury • Nickel • Lead • Zinc

I. LOCATION OF QUALITY SAMPLING STATIONS OF THE REC EIVING BODY

The Service Provider will establish quality sampling stations in the receiving body as follows, subject to the provisions of the Competent Governmental Authority:

• Sampling stations at least for 1 km over the limit of the Coastal Zone, located every 200 m.

• At least four (4) sampling stations forming a regular polygon, located on the circumference that inscribes the Mixing Zone and whose center is the midpoint of the diffuser’s center of gravity.

• One (1) sampling station on the diffuser’s center of gravity.

The locations must be identified by UTM coordinates in WGS 84 system and included in the Environmental Impact Study approved by Competent Governmental Authority, to be incorporated as Annex 7 in the Concession Contract

J. FREQUENCY OF ANALYSIS FOR QUALITY ASSESSMENT OF THE RECEIVING BODY

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For purposes of assessing water quality in the Sampling Stations in the receiving body, the Service Provider must perform analysis every two weeks, taking three specific samples of the following parameters, in accordance with the provisions contemplated in the corresponding Operation and Maintenance Manual, to be incorporated as Annex 9-A in the Concession Contract, without prejudice to provisions by the Competent Governmental Authority:

• Temperature • PH • Conductivity • Total BOD5 • Dissolved Oxygen • Fats and Oils • Thermotolerant coliforms • Total Coliforms • Chlorides

K. CONSIDERATIONS FOR QUALITY CONTROL

- The Concessionaire shall have facilities for a laboratory on biological and

physicochemical quality control water processes of the Desalination Plant and drinking water, which shall be located on the premises of the Desalination Plant.

- The Equipment used for water quality analysis of the processes in the Desalination

Plant and drinking water must have the relevant calibration certificates issued by the National Institute for the Defense of Competition and Intellectual Property Protection (INDECOPI).

- Quality analyzes should be performed by qualified professionals.

- The sampling and analysis of drinking water parameters shall be performed according

to the SUNASS directives, standards related to water quality for human consumption, and additionally by the WHO, AWWA or ANSI standards.

- The parameters analysis of the residual water and receiving body samples shall be

made in a laboratory accredited by the National Institute for the Defense of Competition and Intellectual Property Protection (INDECOPI). Procedures and methods for the determination of each of the above analysis will be established in the Operation and Maintenance Manual in accordance with applicable rules and without prejudice by the Competent Governmental Authority.

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ANNEX No. 1.3 DRINKING WATER DELIVERY SYSTEM

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ANNEX 2: PROJECT LOCATION

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ANNEX 3: ASSETS TO BE DELIVERED BY THE GRANTOR

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ANNEX 4: MINIMUM TECHNICAL SPECIFICATIONS

The minimum quality criteria for the design and construction of civil, electrical, electromechanical, hydro-mechanical, hydraulic, sanitary facilities and buildings for the Project as well as its Operation and Maintenance must be circumscribed in what is relevant to the Applicable Laws and Regulations, and if applicable, to the applicable international standards for this purpose. National regulations and standards that the CONCESSIONAIRE must meet mandatorily are as follows: • Law No. 29338, Water Resources Act and its Regulations. • Law No. 26338, General Law of Sanitation and the TUO of its rules. • Law No. 27314, Solid Waste Act and its regulations. • Law No. 28611, General Environmental Law. • Law No. 26786, Law on Environmental Impact Assessment for works and activities. • Supreme Decree No. 011-2006-HOUSING, Technical Standard for National Building

Regulations. Especially those regarding Sanitation Works: OS.010 to OS.100. • Law No. 28296, General Law of National Cultural Heritage and amendments and

additional rules that apply. • Law No. 26620, Law of Control and Supervision of Maritime, River and Lake and its

regulations Law No. 26620, Law on Control and Supervision of Maritime, River and Lake Activities and its regulations.

• Law No. 27446, Law of the National System of Environmental Impact Assessment. • Supreme Decree No. 019-2009-MINAM approving the Regulation of the Law of the

National System of Environmental Impact Assessment. • Law No. 28245, Law Framework of the Environmental Management National System. • Law No. 26856 and its regulations stating that the coastal beaches are public assets. • Supreme Decree No. 002-2008-MINAM, approving National Standards for Water

Environmental Quality. • Supreme Decree No. 023-2009-MINAM, approving provisions for the implementation of

the National Environmental Quality Standards (ECA) for Water. • Supreme Decree No. 003-2010-MINAM, approving maximum permissible limits for

effluent of Domestic or Municipal Wastewater treatment plants. • Regulations, Directives and provisions issued by the National Water Authority relating to

the dumping and reuse of treated wastewater. • Other legal regulations in force in Peru and applicable to the Project. • Other legal standards, amendments and complementary regulations in force in Peru and

applicable to the Project. • Technical International Standards of complementary application. Regulations and directives by SEDAPAL that the CONCESSIONAIRE is bound to comply are as follows: • Regulations for drinking water and sewage system projects preparation to be developed

in Lima Metropolitana and Callao, approved by General Management Resolution No. 501-2010-GG dated 21/06/10

• Technical specifications for the execution of water supply and sewerage works, approved by General Management Resolution No. 252-M99-GG dated 10/13/99

• GPODA004: Technical Standards Code, Version 05 dated 28.06.2012

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• GDIET001: Residential Connections Installation of Water and Sewerage (For construction and maintenance), Version 00 dated 26.03.2012

• GPODA022: Technical Considerations for the Design of Primary Drinking Water System, Version 00 dated 25.06.2012

• GPOET006: Local Remote Stations Automation System and their integration with the SCADA System of SEDAPAL’s Control Center, Version 02 dated 11.08.2011

In a referential manner and in the event of a gap in the legislation, the CONCESSIONAIRE may consider the following international standards: • Abwassertechnische Vereinigung -ATV • American Water Works Association- AWWA • American National Standards Institute – ANSI • American Iron and Steel Institute - AISI • American Society of Civil Engineers – ASME • American Society of Mechanical Engineers – ASME • American Society of Testing and Materials - ASCE • American Institute of Steel Construction – AISC • American Welding Society – AWS • American Concrete Institute – ACI • Deutsch Industrie Normen – DIN • Environmental Protection Agency USA – EPA (Environmental Regulations And

Technology. Use and Disposal of Municipal Wastewater Sludge. Control of Pathogens in Municipal Wastewater Sludge)

• Hydraulic Institute Standard -HIS • Institute For Electrical And Mechanical Engineers – IEEE • National Electrical Manufacturers Association – NEMA • Standard Methods For Examination Of Water And Wastewater –SMEWW • Waterways Experimental Station – WES • Water Environment Federation – WEF The rules, regulations and provisions referred to above are not limited.

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ANNEX 5: MINIMUM PROJECT REQUIREMENTS

1.- QUICK IMPACT PROJECTS THE CONCESSIONAIRE will be responsible for: • Improvement of Lurín wells that supply water to the CR-337 pumping chamber, in order

to maximize the capacity and performance of existing wells. • Improvement of the CR-337 pumping chamber, including electromechanical and

hydraulic and electric installations. • Change the length of 8 "to 12" driveline pumping chamber CR-337 to the reservoirs of

Spas Punta Hermosa, Punta Negra and San Bartolo. • Improve Booster pumping chamber of Punta Hermosa, including electromechanical

equipment and hydraulic and electric installations.

These works shall be designed, financed and built by the CONCESSIONAIRE, and delivered to SEDAPAL after obtaining the Commissioning Certificate. 2.- COMPREHENSIVE WORKS THE CONCESSIONAIRE shall be responsible for the performance of all civil works, for equipment, facilities and controls required for: • Producing drinking water up to a maximum daily flow of 250 liters/sec for the first 10

years from the Start of Operations and a maximum flow of 400 liters/sec until the end of the Concession, in accordance with the conditions set out in the Service Provision Contract.

• Disposal of the wastewater generated by the Desalination Plant into the ocean, in accordance with current environmental regulations.

• Supply and storage of drinking water for each of the planned reservoirs. • Distribution of water from reservoirs to home connections. • Collecting wastewater from household connections and leading it to the respective

Wastewater Treatment Plants. • Treating wastewater collected from each of the existing WWTP and the new WWTP

which has been projected for an average flow of 100 liters/sec for the first 10 years from the Start of Operations, and an average flow of 170 liters/sec until the end of the Concession, in accordance with the terms of the Service Provision Contract.

• Disposal of wastewater from Wastewater Treatment Plants, in accordance with current environmental regulations.

THE CONCESSIONAIRE, after obtaining the Commissioning Certificate(s) for Integrated Works, is responsible for the operation and maintenance of: • The sanitary infrastructure intended for the collection of seawater, desalinated water

production, final disposal of wastewater generated by the Desalination Plant, storage and control-regulation of drinking water to the measurement point(s) specified in the Service Provision Contract.

• The sanitary infrastructure for the treatment of wastewater and its final disposal, from the measurement point(s) specified in the Service Provision Contract.

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The Comprehensive Works minimum requirements are as follows:

A. Collection, pumping stations and seawater drive lines

• The catchment works shall be constructed to cover at least the required production capacity, in accordance with the Service Provision Contract.

• In order to ensure continuous operation of the Desalination Plant during periods of maintenance of the collection system, pumping and discharge of seawater, this plant should have a backup or alternative system.

• The catchment infrastructure, pumping stations and equipment must be designed and constructed with materials that are highly resistant to corrosion from aggressive marine environment.

• For the design of the pumping stations and equipment selection the following shall be considered: - Noise limits applicable to the installation site. - Mobile equipment for assembly and disassembly of equipment and access

roads to provide for maintenance and replacement of equipment. - Water hammer relief system.

B. Seawater Desalination Plant

Pretreatment

In the case of direct seawater catchments, the Desalination Plant shall have a pretreatment system which meets the following objectives:

- Retaining floating and sedimentable solids. - Controlling turbidity. - Controlling the formation of compounds that may affect the pipe-work or

membranes. - Adjusting and controlling the pH. - Preventing biological growth on the membrane system.

Regarding the design of the seawater pretreatment system, the production rate of the plant, the conversion factor and water losses, as well as the internal consumption of the plant should be taken into account.

Desalination Process The desalination process shall have, as a minimum, the following components:

• Cartridge filtration. Includes complete installation of cartridge filter units, with

cleaning chemicals dosage piping and for discharging of water contaminated by cleaning equipment and conduction to brine discharge pipes.

• High pressure pumping. Includes complete installation of electromechanical

equipment and facilities to supply required hydraulic pressure for carrying out the reverse osmosis process.

• Reverse Osmosis System. Includes structures, membrane system,

equipment, electrical and hydraulic installations, panels, transformers, control panels, power cables, control instruments and accessories (including

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installation of cable support trays inside the reverse osmosis building and process structures).

• Energy recovery system. This system includes all elements to allow recovery of some of the energy used in the reverse osmosis process.

• Chemical dosing. Includes the complete installation of electromechanical

equipment and hydraulic systems for dosing of chemicals required for the treatment processes.

• Cleaning system and removal of the membranes. Includes a cleaning

system for washing and rinsing the membranes, for each of the considered stages. Once they membranes have been washed, the effluent will be discharged into a neutralization tank and once stabilized, final disposal will be carried out in accordance with current regulations.

• Product water post-treatment system. Water treated through reverse

osmosis process shall be conditioned until reaching values of drinking water quality, in accordance with current regulations or in accordance with the Service Provision Contract provisions.

• Disinfection System. Includes the chlorine contact tank, equipment and

accessories that will supply clean water to the Delivery Point, with a free chlorine residual concentration in accordance with SEDAPAL requirements, to ensure a minimum of 0.5 mg/l in the distribution network.

• Plant, office and laboratory buildings. Includes the complete building

structure comprising office and control room facilities. The office facilities include the mess hall and cafeteria, locker rooms/showers and sanitary facilities.

• Automation System. Includes the instrumentation equipment, boards, cables

and other accessories that allow the operation of the Desalination Plant SCADA system.

• Electromechanical equipment. Should be made of duplex AISI 304 or higher grade stainless steel or material with a similar behavior that meets durability, strength and functionality requirements, amongst others, provided that the material used is resistant to aggressive seawater to be treated, aggressive environments and that is weather resistant, both during the Concession period as well as for useful life of the Desalination Plant. Likewise, the equipment shall include the respective Quality Certificate and prior approval from the GRANTOR.

Reverse osmosis process stages should be configured so that the product water salinity TDS level never goes above 500 ppm. This parameter is measured at the Point of Delivery to SEDAPAL. Desalination Plant product water must meet the quality parameters for drinking water as defined in Drinking Water Quality Standards, approved by Supreme Decree No. 031-2010-SA. Additionally, the following conditions must be met:

• Langelier Index: -0,4 < LSI < +0,4 • Boron concentration: ≤ 1mg/l

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• Turbidity: ≤ 1 UNT

Treated Water Reservoir

Desalinated and disinfected water shall be stored in a concrete reservoir, which volume will be the one required to provide continuous flows per project requirement, in accordance with the Service Provision Contract. However, the reservoir volume shall not be less than 2000 m3.

Power Supply

For purposes of the operation of the Desalination Plant and the pumping system to the reservoirs, the CONCESSIONAIRE shall ensure provision of electricity so as to ensure its operation. For such purposes, a self-contained power generator set shall be available, which will cover electricity demand to keep production at 25% of its maximum capacity. The specific consumption committed by the CONCESSIONAIRE shall not be greater than _____ kWh / m3. It does not include power for catchment pumping stations and treated water reservoir.

Treatment and final disposal of waste For treatment other than the brine effluent, the Desalination Plant shall have the following features:

• Sludge and waste water from the pretreatment stage will be treated before final

disposal, in accordance with the provisions of current regulations or as specified by the Competent Governmental Authority.

• A neutralization tank for membrane wash-water before its final disposal.

• A space shall be available for storage of other solid or liquid waste, by type,

which will allow its control under current regulations, before being removed for final disposal.

C. Desalination Plant waste water final disposal

• Waste water produced by the Desalination Plant will be disposed into the ocean through Submarine Outfall. The minimum length of the Submarine Outfall shall be 500m from the low tide line. Diffusers are not considered along that length.

The length and final depth of the Submarine Outfall, and the configuration of the diffusers to ensure dilution and dispersion of sewage into the ocean, which will allow the receiving waters to meet with Water Quality Standards outside the Mixing Area in accordance with the criteria established by the Governmental Authority. Under no circumstances shall the Mixing Area overlap the Coastal Area.

• In the case of ocean final disposal through a Submarine Outfall for the exclusive use of the wastewater generated by the desalination process, civil works and

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pipelines shall be built for the total production capacity of the Desalination Plant at the end of the Concession period.

• In the case of ocean final disposal through a joint Submarine Outfall for wastewater generated by the desalination process and the WWTP(s), civil works and pipelines shall be built for the total production capacity of the Desalination Plant and the total capacity of the WWTP(s) at the end of the Concession period.

D. Pump Station, Pipeline and Storage

Treated Water Pumping Station It includes the complete installation of discharge manifolds and pipe grid, valve and pump systems, along with a 25% reserve of pumps. Instrumentation for peak control, flow meters, treated water quality testers, feed pipes complete with drain and air valves must also be included. The pumping station will capture treated water from the Desalination Plant reservoir and will conduct it to supply the corresponding reservoirs.

Treated Water drivelines and conduction lines Impulse lines and treated water line needed to supply the projected reservoirs will be installed. Drivelines and conduction lines to be built shall include, amongst others: • Air and bleed valve chambers • Isolation valves • Auxiliary chambers • Crossroads and bridges structure, including their rehabilitation when

necessary. • Instrumentation and telemetry control (SCADA)

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Projected Reservoirs

Projected reservoirs minimum storage capacity shall be as follows:

Reservoir Capacity (m3)

San Bartolo Reservoir 3 200

Punta Negra Reservoir 2 800

Punta Hermosa Reservoir 2 500

The projected reservoirs shall include valve houses where water meters for Measuring Points will be installed. Also, overflow lines that are interconnected to sewer systems shall be installed or otherwise, a percolation system that meets applicable Laws and regulations shall be designed.

Adduction Lines

Each projected reservoir shall have an Adduction line to the Drinking Water Distribution Network, which must comply with Annex 4 Technical Specifications.

E. Drinking Water Distribution Networks

The project involves the expansion and rehabilitation of the Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar districts drinking water distribution networks. Particularly, in the Punta Hermosa, Punta Negra and San Bartolo districts, the following can be seen:

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Projected Networks Unit Quantity

PVC 90 mm ml 27 376

PVC 110 mm ml 1 872

PVC 160 mm ml 27 747

Networks to be Rehabilitated

Unit Quantity

PVC 90 mm ml 1 424

PVC 110 mm ml 19 377

PVC 160 mm ml 6 869

PVC 200 mm ml 2 886

PVC 250 mm ml 365

Household

Connections Unit Quantity

New or rehabilitated (Including ½ "

connection, box, water meter and sidewalk

replacement)

Connection 3 638

The length and number of new or to be rehabilitated network connections in the Santa Maria del Mar district will be communicated in due course.

Quantities and diameters shown in the tables above are referential.

Quantities, diameters and specifications of pipes to be used are defined by the Bidder in its Technical Proposal, in compliance with Annex 4 Technical Specifications, so as to meet the demand in each of the Lots identified in Appendix 1 of this Annex.

During the construction phase, it will correspond to SEDAPAL to inform the CONCESSIONAIRE regarding the location and prioritization for the installation of household connections and water meters depending on the construction progress, being SEDAPAL´s prerogative to require delivery of part or all of the new water meters. As for the water meters that were substituted, these must be delivered to SEDAPAL.

During the operation and maintenance stage, it will correspond to SEDAPAL to inform the CONCESSIONAIRE regarding the distribution of flows or volumes of drinking water to the reservoirs of the districts involved in the project, in accordance with technical constraints of design and operation under normal system conditions and supply conditions in accordance with the Service Provision Contract.

F. Secondary Sewerage Networks and Drainage Pumping Chambers

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The project involves the expansion and rehabilitation of sewerage networks and drainage pumping chambers for the Punta Hermosa, Punta Negra, San Bartolo, and Santa Maria del Mar districts.

In the Punta Hermosa district, the following constructions have been planned:

Drainage Pumping Chamber

Pump Flow Total Dynamic Head

CBD-01 128.0 liter/s 13.6 m

CBD-02 17.5 liter/s 11.6 m

CBD-03 10.5 liter/s 53.6 m

CBD-04 14.9 liter/s 55.0 m

CBD-05 176.2 liter/s 56.4 m

Driveline Diameter Quantity

LI-01 DN 300 mm 842

LI-02 DN 350 mm 1692

LI-03 DN 250 mm 885

LI-04 DN 100 mm 544

LI-05 DN 100 mm 865

LI-06 DN 150 mm 810

Collectors Unit Quantity

PVC 200 mm ml 18 063

PVC 250 mm ml 1 200

Distribution Boxes Unit Quantity

Concrete - 1.20 m diameter Unit 356

In the Punta Negra district, the following constructions have been planned:



CBD-01 64.8 liter/s 24.5 m

CBD-02 19.8 liter/s 21.1 m

CBD-03 103.8 liter/s 24.7 m

CBD-04 90.4 liter/s 7.6 m

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CBD-05 77.0 liter/s 11.1 m

CBD-06 34.0 liter/s 23.9 m


LI-01 DN 150 mm 322

LI-02 DN 200 mm 503

LI-03 DN 250 mm 788

LI-04 DN 250 mm 507

LI-05 DN 300 mm 445

LI-06 DN 300 mm 1639


PVC 200 mm ml 39 779


Concrete - 1.20 m diameter

Unit 723

In the San Bartolo district, the following constructions have been planned:



CBD-01 3 liter/s 20 m


LI-01 DN 80 mm 52


PVC 200 mm ml 15 632


Concrete - 1.20 m diameter

Unit 321

Also, in the above 3 districts, the following will be rehabilitated:


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PVC 200 mm ml 19 551

PVC 250 mm ml 1 163

Sewerage Connections Unit Quantity New or rehabilitated

(Including a 160 mm or 6" connection, box and

sidewalk replacement)

Unit 2 797

Network lengths and number of new connections or connections to be rehabilitated in the Santa Maria del Mar district will be communicated in due course.

Quantities and diameters shown in the tables above are referential.

Quantities, diameters and specifications of pipes to be used are defined by the Bidder in its Technical Proposal, in compliance with Annex 4 Technical Specifications, so as to meet the demand in each of the Lots identified in Appendix 2 of this Annex.

During the construction phase, it will correspond to SEDAPAL to inform the CONCESSIONAIRE regarding the location and prioritization for the installation of household connections and water meters depending on the construction progress.

The drainage pumping chambers should include steel grates, desander, odor control equipment and air extraction system.

G. Wastewater Treatment Plant

The quality of wastewater treated in Treatment Plants must meet the conditions of current environmental regulations and those set out in the Service Provision Contract.

New Treatment Plant

The treatment Plant to be built by the CONCESSIONAIRE will at least be for secondary treatment, in accordance with what is specified by the National Building Regulations OS.090 Standard – S.D. No. 011-2006-HOUSING.

The projected Wastewater Treatment Plant minimum components are:

- Pretreatment or Preliminary Treatment. It shall be designed for maximum flow per hour. Independently of which technical option is proposed, this component shall at least include the following:

o Screening or coarse grinding to remove solids greater than 25 mm.

o Desander for removal of sedimentable solids with a diameter greater than 0.20 mm, with a 95% separation efficiency.

o Degreaser for removal of oil, grease and other low density elements.

- Biological treatment. Consisting of secondary treatment units and may include primary treatment, which should be designed to treat an average flow. The technology will depend on the technical proposal, provided that it

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allows compliance with the quality established in the Service Provision Contract.

- Disinfection System. Such system can use chlorine, UV rays or any other technology, that allows reducing pathogen microorganisms to levels of quality required for final disposal, in accordance with current regulations. It shall also have a contact chamber of sufficient capacity that would ensure effective disinfection.

- Odor Control. An odor control system shall be included for treatment units that generate odors deemed offensive to health and environment, in compliance with applicable standards.

- Intake Device: It should include an intake device or tapping point for treated wastewater, so that SEDAPAL and third parties authorized by the Competent Governmental Authority can capture water for reuse.

Electromechanical equipment should be made of AISI 304 or higher grade stainless steel or material with a similar behavior that meets durability, strength and functionality requirements, amongst others, provided that the material used is resistant to aggressive wastewater and that is weather resistant, both during the period of the Concession and the life of the treatment plant.

The treated wastewater will be disposed through Submarine Outfall that meets the minimum requirements stated in section H below.

In the event that the Technical Bid for the Wastewater Treatment Plant is limited to the current Punta Hermosa treatment plant area, the CONCESSIONAIRE may exploit this infrastructure as part of its treatment processes or ponds to improve the quality of part of the effluent for reclaim purposes.

Existing Treatment Plants

Existing wastewater treatment plants in the San Bartolo and Santa Maria del Mar districts shall be rehabilitated, improved or complemented so that the quality of treated wastewater at least complies with current regulations for reuse for irrigation of green areas without public access, in accordance with the terms of the Service Provision Contract.

H. Disposal of treated wastewater

• Final disposal of the treated wastewater shall be carried out through one or more submarine Outfall into the ocean, which structures will be built in a single stage for maximum hourly capacity of the Treatment Plant(s) at the end of the Concession period.

• The length and final depth of the Submarine Outfall, and the configuration of the diffusers to ensure dilution and dispersion of sewage into the ocean, which will allow the receiving waters to meet with Water Quality Standards outside the Mixing Area in accordance with the criteria established by the Governmental Authority. Under no circumstances shall the Mixing Area overlap the Coastal Area.

• The minimum length of the Submarine Outfall shall be 500m from the low tide line, regardless of the length of the diffusers.

I. Additional work

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• Required temporary and preliminary works • Power and electrical substation works • Administrative offices • Mess hall and restrooms • Laboratory and central control station • Warehouses • Perimeter fence • Exterior Lighting • External and internal access roads for vehicles and pedestrians • Maintenance shop • Guard booth • Green Areas • Infirmary • In general, assume and perform all work necessary for the proper operation of

the Desalination Plant and Wastewater Treatment Plant which are under the responsibility of the CONCESSIONAIRE.

• In addition to the works mentioned above, during the construction phase, the CONCESSIONAIRE shall be responsible for supplying power and drinking water, treatment and final disposal of wastewater produced by works associated with construction, communications system and Internet, among others.

J. Development of the Concession

1. Preparation of the Technical File The preparation of the Technical File shall be developed by taking into account criteria and design parameters that are specified in this Annex, the rules and regulations specified in Annex 4 of this Contract. The cost associated with compiling the Technical File will be recognized and valued as part of one of the Milestones to be proposed in the implementation timetable. Such file shall be prepared before starting Construction of Projects, and shall consist of a set of documents, which minimum content, but not limited to, shall address the following issues: • Work Specifications report • Hydraulic calculation, electromechanical, structural and automation system

reports, amongst others. • Project Technical Specifications, including required equipment and materials

specifications. • Works Implementation Plans, such as architectural, structures, electrical,

plumbing and automation system plans, among others. • Land Surveys • Soil Study • Geological Survey • Oceanographic studies, including bathymetry study, currents, tides, etc. • Hydro-biological Studies. • Characterization studies and/or projection of the quality of the wastewater to be

treated. • Characterization studies of the quality of the seawater to be collected and quality

of seawater as receiving waters for treated wastewater. • Design of seawater catchment structures and pipe-work.

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• Design of the Submarine Outfall(s) and their respective diffusers, which length, features and final location will be determined through a mathematical model, which will be part of the Technical File.

• The Submarine Outfall infrastructure, shall be designed, constructed and installed in accordance with national and international standards governing the matter.

• Definition of Milestones • Quantities (Bill of Quantities) • Analysis of Unit Prices. • Project Budget • General Execution Schedule properly valued and divided into Milestones • Construction process • Commissioning Period Duration and Procedure • Annual Operation and Maintenance costs, disaggregated into fixed and variable

costs. • Equipment and electromechanical facilities replacement plan specifying their

useful life and operational efficiency. • Approved Environmental Impact Study. • Physical and Legal Resolution and Easements. • Any other documentation required by current regulations. The CONCESSIONAIRE shall take into consideration that the Technical File may be modified pursuant to any change requested by the Competent Governmental Authority for the issuance of licenses and permits required as of the respective Effective Date of Obligations, in accordance with clauses 6.24 and 6.25 of the Concession Contract. The Technical File shall consider the following Successful Bidder Technical Bid indicators as definitive: Technical solution; primary or general technical specifications including required equipment and materials; terms of preparatory activities, construction and equipment; commissioning period and procedure, including tests required for the Project. As a design and quality condition, the case of infrastructure projects, a minimum useful life of fifty (50) years must be guaranteed, ten (10) years in the case of hydro-mechanical and electromechanical equipment and fifteen (15) years for equipment and electrical installations. As for the seawater catchment pipe and Submarine Outfalls, the chosen piping should guarantee a useful life of at least fifty (50) years. The CONCESSIONAIRE´s equipment and materials suppliers must have sufficient experience and manufacturing quality, management system and environmental protection certification, such as ISO 9001 and 14001.

2. Implementation of Works and Commissioning 2.1. Implementation of Works

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The development of the construction process shall be limited to the Technical File approved by the GRANTOR. Further aspects to be considered in the Construction of the Works, but not limited to, are the following: • The CONCESSIONAIRE shall be responsible for the construction and

maintenance of access roads, trails or paths to the jobsite. This includes the rehabilitation of the area comprising any road, trail or path to at least the level of safety, stability and condition that existed before the CONCESSIONAIRE arrived at the Project area.

• In the event that vehicles used for purposes of the Concession should soil public

areas with dirt, mud, debris and the like, the CONCESSIONAIRE shall assume responsibility for damages caused.

• The CONCESSIONAIRE shall not cut or interrupt existing public services, without a written Contract by and from the Governmental Authority, a copy of which shall be delivered in accordance with the Design and Construction Supervisor before the start of the corresponding work. Such Contract shall provide the protective measures and minimum safety required to perform the work.

• The CONCESSIONAIRE shall be held responsible for any damages to third

parties, such as causing impairments to other public services and damages to public or private property.

• In the event that drinking water services and sewerage should be interrupted for

more than 12 hours, the CONCESSIONAIRE shall consider a contingency plan to provide these services on an interim basis.

• THE CONCESSIONAIRE shall be responsible for obtaining and managing all

municipal permits and licenses for the construction of the Works.

• Failure to meet these requirements will enable the GRANTOR to impose any penalties that may be applicable.

2.2. Commissioning Period • After the conclusion of the Construction Works and Operational Tests, the

CONCESSIONAIRE shall go ahead with the Commissioning Period for Project units.

• Desalinated water, treated wastewater, solid waste, sludge and other by-

products generated by the Desalination Plant and Wastewater Treatment Plant, as applicable, shall comply with the quality offered by the CONCESSIONAIRE and the quality requirements demanded by the GRANTOR, as specified in this Concession Contract and the Service Provision Contract.

• The Commissioning Period is defined as the set of activities required for the testing and evaluation of the quality and efficiency of each of the components of the Sanitary Infrastructure Project, as provided in the Technical File.

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• The CONCESSIONAIRE is responsible for correcting all faults or defects in the

equipment that were identified during the Commissioning Period, when notified by the Design and Construction Supervisor. Repairs or substitutions are the CONCESSIONAIRE's responsibility and should be undertaken at no cost to the GRANTOR.

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ANNEX 5 - APPENDIX 1

SUBDIVISION SERVED BY THE PROJECTED WATER DISTRIBUT ION NETWORKS

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ANNEX 5- APPENDIX 2

SUBDIVISION SERVED BY PROJECTED SEWERAGE NETWORKS

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ANNEX 6: MINIMUM CONTENT OF THE ENVIRONMENTAL IMPACT STUDY

The Environmental Impact Study will be developed with the minimum content stated by Supreme Decree No. 019-2009-MINAM, approving the Regulation of the National Environmental Impact Assessment, and supplementary regulations or rules that modify or replace it.

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ANNEX 7: ENVIRONMENTAL IMPACT STUDY

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ANNEX 8: MINIMUM CONTENT OF THE MAINTENANCE AND OPERATION MANUAL

The Concessionaire shall prepare six (6) Operation and Maintenance Manuals, one (1) for the Desalination Plant including infrastructure of additional components, and five (5) for the Wastewater Treatment Plants including infrastructure for final disposal.

These Operation and Maintenance Manuals shall include at least the following:

• Technical characteristics of equipment and installations

� General inventory, including all technical characteristics � Requirements for operation and maintenance � Instructions for commissioning (startup), operation and shutdown

• Operation and maintenance manual of treatment processes and complementary

components � Description of processes � Schematic flowcharts � Design criteria of the components � Procedures for start-up and shut-down of the system � Procedure for system operation � Staff requirement in quantity and qualifications for operation and maintenance

activities � System maintenance annual plan � Replacement of equipment and facilities annual plan � Guidelines for system troubleshooting � Emergency Response Procedure � Procedures for measuring volumes � Procedures for quality analysis established in Annex 1.2. � Procedure for management and disposal of solid waste, sludge, gas, and other

elements generated, as appropriate � Procedures for data recording and reporting

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ANNEX 8 - A: MAINTENANCE AND OPERATION MANUAL

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ANNEX 9: EMERGENCY AND OPERATIONAL CONTINGENCY PLAN

The CONCESSIONAIRE shall prepare six (6) Emergency and Operational Contingency Plans, one (1) for the Desalination Plants, including additional components infrastructure, and five (5) for Wastewater Treatment Plants, including the final disposal infrastructure.

Individually, each and Emergency and Operational Contingency Plans shall at least include the following:

1. Introduction

1.1. Background

The infrastructure, which is part of the Emergency and Operational Contingency Plan (hereinafter, the Contingency Plan) shall be described in a concise manner.

1.2. Geographic Area

The Contingency Plan must delineate with absolute precision the total infrastructure area, the immediate catchment area and the area that may be affected by the effects or impact resulting from the incident.

2. Risk Assessment

The CONCESSIONAIRE, within the scope of the Concession Contract, shall structure the assessment of risks that the infrastructure may involve, taking into account the following aspects: 2.1 Structural risks 2.2 Environmental hazards 2.3 Risks to populations 2.4 Operational risks 2.5 Other risks

3. Objective

The objective should be to basically mitigate the impacts caused by faulty operation of the infrastructure, resulting from occurrences or natural or manmade disasters.

4. Response System

4.1. Phase 1: Preventive Measures Within its procedures, the CONCESSIONAIRE shall take into consideration, the periodic and scheduled review mechanisms of facilities, review of equipment and materials, according to useful life and equipment replacement criteria, and material wear and tear and climatic considerations that significantly alter the quality and condition of equipment and materials.

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The Contingency Plan shall take into account, authorized personnel, their actions within the facilities and operating protocols to avoid faulty operation and to avoid the presence of other individuals not involved in the activity. Such Contingency Plan should also include actions regarding the assessment of electromechanical equipment, firefighting equipment, the location of hazardous or flammable materials, electrical installations, the appropriate condition of first aid equipment and basic medicines. Drills and preventive exercises shall be considered as a practice to be carried out on a regular basis.

4.2. Step 2: Alert Period

Upon the occurrence of a natural or manmade event that creates a disaster in the infrastructure, the Plan must put facilities on alert, requesting damage reports to different control points that were established in the geographic infrastructure area.

In the event of an outbreak of fire, after having determined the probable origin of the fire, the firefighting brigades shall be informed in order to carry out an accurate assessment of the origin or cause of the fire.

4.3. Phase 3: Control Measures

Establish the respective control measures for addressing the emergency, taking into account the potential involvement of the CONCESSIONAIRE in the process. In any case, the appropriate authorities must be notified of the incident as soon as possible.

4.4. Phase 4: Rehabilitation Measures.

Consider the necessary rehabilitation measures that were previously designed in the Contingency Plan, for their immediate implementation. In this case, the criteria for replacement should be implemented in the shortest period of the system’s operating conditions, without risk to human life and facilities as well as long-term measures for the full recovery of operating and productive conditions, if applicable.

4.5. Phase 5: Assessment of the Contingency Plan

Consider the necessary rehabilitation measures that were previously designed in the Contingency Plan, for their immediate implementation. In this case, the criteria for replacement should be implemented in the shortest period of the system’s operating conditions, without risk to human life and facilities as well as long-term measures for the full recovery of operating and productive conditions, if applicable.

5. Organization for implementation of the Contingen cy Plan

5.1. Head of the Contingency Plan 5.2. Firefighting Brigade 5.3. Brigade against Disasters 5.4. Institutional Coordinator (SEDAPAL)

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5.5. Internal and External Advisors 5.6. External Organizations (Firefighters, INDECI, Municipalities, Civic Organizations,

etc.)

6. Hazardous Material Information

The Contingency Plan must have a list of the hazardous materials available that specify the following data for each of the materials: 6.1. General data of the material, detailing its physical, chemical, appearance or other

data specifying the nature of the material. 6.2. Use and restrictions 6.3. Handling and transport 6.4. Licenses or permits 6.5. Trademarks and patents 6.6. Storage and delivery methods 6.7. Purchase processes 6.8. Impact on the environment in case of occurrences of incidents 6.9. Other important specific data that should be considered.

7. Training Plans

The CONCESSIONAIRE shall prepare a training plan for the CONCESSIONAIRE’s staff, the population from the area of influence and SEDAPAL’s staff.

8. Equipment

The CONCESSIONAIRE shall detail the following equipment that shall be available to those responsible for implementing the Contingency Plan:

8.1. Personal Protection Equipment 8.2. First Aids 8.3. Other equipment for operation and rescue

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ANNEX 10: WORK PROGRESS CONTROL AND CERTIFICATION MECHANISM

This section regulates the Work progress control and certification mechanism carried out for the Water Component as well as the Sewerage Component, whether those Works have been carried out to achieve the Scale of Production I or II.

SECTION I: CONSTRUCTION MILESTONE REFERENTIAL VALUE

The Construction Milestone referential value is the percentage of progress that represents each Construction Milestone relative to the total amount of corresponding works, whether those Milestones are related to the Water Component to achieve the Scale of Production I or II or the Sewerage Component to achieve the Scale of Production I or II, which will be called Base Works.

SECTION II: IMPLEMENTATION SCHEDULE BY CONSTRUCTION MILESTONE

2.1. It must contain, at least, the following:

a) Detailed specification of the completion and approval of the Technical File. b) Detailed specification of the progress of work for each component and for each

of the items that comprise it, in monthly periods. c) The composition of each Construction Milestone, broken down into components

and their respective items and sub items. Each heading and subheading must indicate quantity, unit of measure, unit price and total price.

Each Construction Milestone may be one or more of the components or parts of one or more of a component provided in Annex 5 of this Contract, as approved in the Technical File and shall not be less than ten percent (10%) of the investment for Base Works. The percentage set forth above shall be verified on the evaluation of the Progress of Works Reports, according to the Performance Schedule. Any change related to the completion of Construction Milestones in accordance with the provisions of the Technical File, will result in an update of the Performance Schedule, with approval from SEDAPAL. The acceptance of the last Construction Milestone shall be conditional upon the Start of Operations.

Monthly Progress Monitoring Procedure

2.2. On a monthly basis, the CONCESSIONAIRE shall submit a Construction Progress Report to SEDAPAL, along with a copy to the Design and Construction Supervisor, which must indicate: a) Valuation of the Construction Milestone

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• The amounts of the executed items and sub items corresponding to the

Construction Milestone carried out as planned in the Technical File will be added up. This sum must be calculated as total cost and shall correspond to the total amount of Construction Milestone and may allow for a one-time inclusion of the Technical File value.

• The incidence percentage for this Milestone will be referred to as the Investment for Base Works.

• It shall be verified that this percentage is not less than ten percent (10%) of the Investment for Base Works.

b) The ratio of components, items and sub items, with their respective quantities

and units of measure implemented, must be reviewed and approved by SEDAPAL in the course of the month.

The term components shall be understood as the units that comprise the Project, listed in Annex 5 of the Concession Contract. Each component comprises one or more items. The term items shall be understood as each of the activities for the execution of civil works, electromechanical, hydraulic, electrical, instrumentation installations, amongst others. Each set is made up of one or more sub items.

Each of the activities should be understood as sub items that enable the completion or implementation of each of the items.

c) The ratio of components, items and sub items with their respective quantities and

accumulated and carried out units of measure, from the start of Construction until the report month.

2.3. The Work Progress Reports referred to in Section 2.2 above shall be submitted by

the CONCESSIONAIRE to SEDAPAL, along with copy to the Design and Construction Supervisor, within three (3) days following the completion of the period of the report. The Design and Construction Supervisor will have a period of time not exceeding ten (10) days to review the document and verify that the components and items have been carried out in accordance with the Technical Proposal and the Technical File, after which the CONCESSIONAIRE shall deliver the respective report to SEDAPAL. SEDAPAL, within a period of time not exceeding ten (10) days from receipt of the report from the Design and Construction Supervisor, shall proceed, according to the report from the Design and Construction Supervisor, as follows: (i) approve the Construction Progress Report if in conformity or, (ii) request the remedy of observations by the CONCESSIONAIRE, within a maximum of ten (10) days.

2.4. By presenting the latest Construction Progress Report for the completion of a Construction Milestone, duly approved by SEDAPAL, the procedure for issuance of a WPC shall begin, as indicated in the following section.

SECTION III: WPC (CAO)

Issuance of Work Progress Certificate (WPC) by SEDAPAL

3.1. For the issuance of a WPC, SEDAPAL shall observe the following procedure:

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a) SEDAPAL shall issue the WPC to the CONCESSIONAIRE within a maximum term of twenty (20) Days after approval of the last Construction Progress Report corresponding to the Construction Milestone or after observations have been remedied, if applicable.

b) The value entered in the WPC will be expressed as a percentage of completion

of the Works Base and be equal to a percentage of completion accounting for Construction Milestone being certified on Investment for Base Works.

c) The issuance of the last WPC, corresponding to the last Construction Milestone,

will be subject to the delivery of the Commissioning Certificate by the GRANTOR.

Issuing of a WPC certificate for Items by SEDAPAL

3.2. The CONCESSIONAIRE may request a WPC for Items in the following cases:

a) SEDAPAL has not approved all of the Work Progress Reports which constitute a

hundred percent (100%) completed Construction Milestone, nonetheless, SEDAPAL has approved at least sixty percent (60%) of the corresponding Construction Milestone. In that case, SEDAPAL shall determine the reference value of the approved Progress of Works Reports.

The CONCESSIONAIRE shall deliver a letter of guarantee to SEDAPAL, having the characteristics of unconditional, irrevocable, solidary, without right to object and payable on demand, equivalent to one hundred percent (100%) of the value of the Progress of Works Reports not yet approved. Such letter of guarantee shall remain in force until approval of pending Work Progress Reports by SEDAPAL. Once the letter of guarantee has been delivered, the WPC for Items will be issued, for one hundred percent (100%) of the value of the Construction Milestone.

As appropriate, SEDAPAL shall release the letter of guarantee, once the pending

Work Progress Reports that originated the WPC for Items has been approved.

b) In the case of Construction Milestones that have not been completed, provided that the CONCESSIONAIRE has made confirmed expenses (including the purchase of equipment and materials), to the satisfaction of SEDAPAL and that have been used towards the Construction Milestone, for an amount of not less than ten percent (10%) of the Base Work.

The CONCESSIONAIRE shall deliver a letter of guarantee to SEDAPAL, having the characteristics of unconditional, irrevocable, solidary, without right to object and payable on demand, equivalent to eighty percent (80%) of the value stated in the WPC for Items. Such letter of guarantee shall remain in force until the corresponding WPC is issued.

Once the letter of guarantee has been delivered, the WPC for Items will be issued for the value of the expenditures, duly verified by SEDAPAL.

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c) In the event that SEDAPAL does issue the WPC merely for causes of disagreement between the Progress of Works Report and the Technical File, within the term provided in Section a) of Subsection 3.1 of Clause III of this Annex, the CONCESSIONAIRE may request the issuance of the WPC by SEDAPAL, upon delivery of a letter of guarantee equivalent to one hundred percent (100%) of the value of the Construction Milestone.

In the event that SEDAPAL accepts the CONCESSIONAIRE’s request, the CONCESSIONAIRE shall proceed to deliver the referred letter of guarantee to SEDAPAL, having the characteristics of unconditional, irrevocable, several, without right to object and payable on demand. Such letter of guarantee shall remain in force until the corresponding WPC is issued.

Once the letter of guarantee has been delivered, the corresponding WPC for Items will be issued by SEDAPAL, for one hundred percent (100%) of the value of the Construction Milestone.

As appropriate, SEDAPAL shall release the letter of guarantee, once the observations which originated of Progress of Works Report nonconformity regarding the Technical File have been remedied by the CONCESSIONAIRE and approved by SEDAPAL.

General Provisions

3.3. Except as indicated in Section a) of Subsection 3.2 above, requesting of a WPC shall

not proceed in the event that there are WPCs pending of approval.

3.4. In the case referred to in Section b) of Subsection 3.2 above, the reference value stated in the WPC for Items shall be deducted from the value of the WPCs to be issued for the Construction Milestones, for which expenditures that gave rise to the issue of WPC Items are charged.

3.5. In the event that the CONCESSIONAIRE fails to complete the components and items

that comprise a Construction Milestone within the period of time specified in the Performance Schedule, SEDAPAL shall set the new deadline for the completion of these. If the new term involves the extension of the deadline, for reasons attributable to the CONCESSIONAIRE, what is provided in Clause 6.31 of the Concession Contract shall apply, without releasing the CONCESSIONAIRE from its obligation to complete the components and items. The aforementioned does not release the CONCESSIONAIRE from its responsibility regarding the compliance with all the components and Construction Milestone Items. In this particular case, the CONCESSIONAIRE will not be entitled to receive the WPC corresponding to the remaining fraction of unapproved Construction Milestone.

3.6. If the amount of the letters of guarantee referred to in Section 3.2 of this Annex is

insufficient to ensure complete execution of the corresponding Construction Milestone works, execution of the current Guarantee provided in Clause 10.1 of the Concession Contract will be used additionally, for the corresponding amount.

CONCESSIONAIRE’s collection rights generated by the WPC 3.7. Each WPC issued by SEDAPAL shall give the CONCESSIONAIRE collection rights,

proportional to the Compensation for Investment (RPI), called RPICAO. Consequently, once each WPC has been issued, SEDAPAL shall have the irrevocable and

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unrestricted obligation to pay the CONCESSIONAIRE for the corresponding RPICAO, through the Collection Trust.

3.8. The value of each RPICAO shall be determined as follows:

RPICAOi = CAOj * RPI 4 Where: RPICAOj = RPICAOj = Collection Rights for the RPI, corresponding to the "i" ith

WPC. Payment of RPICAO to the CONCESSIONAIRE shall be made through the Collection

Trust. 3.9. The RPICAO payment dates shall be the same that apply to the RPI payment

schedule. 3.10. Each WPC give rise to ____________ quarterly RPICAO. 3.11. The RPI will be adjusted in accordance with the provisions of Clauses 9.129.12,

9.139.13 9.279.27 and 9.289.28 of the Concession Contract. 3.12. Suspension or termination of the Term of the Concession, as well as delays in fulfilling

its obligations under the Concession Contract or the Service Agreement are not events that enable SEDAPAL, the GRANTOR or the Collection Trust to terminate or suspend payment of RPICAOs represented in the WPCs already issued, under the terms and procedures set forth in the Concession Contract.

Termination of the Concession Contract for any reason, shall not limit, condition or affect, under any circumstance, SEDAPAL’s liability regarding payment of the RPICAO recognized in the WPCs that have been issued, as well as the other terms of the Contract required for such payment to take place. Therefore, both the Collection Trust and the Provisions of the Contract and its Annexes that may be applicable in order to guarantee this payment shall remain in force.

Con formato: Fuente:(Predeterminado) Arial




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ANNEX 10 - APPENDIX 1: Work Progress Certificate (W PC)

WPC No. ……

Concession Contract for the Provision of Sanitation Services for the southern

districts of Lima Project The Work Progress Certificate – WPC – is issued in accordance with the provisions of Annex 10 of the Concession Contract for the Provision of Sanitation Services for the southern districts of Lima Project (hereinafter, the Concession Contract), signed between the government of the Republic of Peru, acting through the Ministry of Housing, Construction and Sanitation (hereinafter, the GRANTOR) and the company .............. (hereinafter, the CONCESSIONAIRE). Work Progress Certificate SEDAPAL certifies that the works, subject matter of this WPC, have been carried out in accordance with the standards, technical and socio-environmental parameters contained in the Technical File and the Environmental Impact Assessment submitted by the CONCESSIONAIRE and approved by the GRANTOR. Therefore, SEDAPAL states that the works, subject of this certificate, have been carried out in accordance with the provisions of Chapter VI of the Concession Contract. According to the provisions of Chapter IX and Annex 10 of the Concession Contract, SEDAPAL certifies that the CONCESSIONAIRE has complied with carrying an amount of works equivalent to .... (%) of the total work. Issuance Date: _______

______________________________________________ SEDAPAL

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ANNEX 11: GUARANTEE TEMPLATES

Lima, ……...., ......... ,201.... MINISTRY OF HOUSING, CONSTRUCTION AND SANITATION Ref: Letter of Guarantee No ………….. Due Date:...................... Comprehensive Project Bid for the Concession of the "Provision of Sanitation Services for the Southern Districts of Lima" Project Dear Sir or Madam: I hereby and at the request of our customers ......................... (Name of corporation) (hereinafter "the Concessionaire") provide this joint, irrevocable, unconditional and automatically enforceable bond, without benefit of discussion or division, for up to the amount of .................... (............................ and 00/100 Nuevos Soles) to the Ministry of Housing, Construction and Sanitation in order to ensure proper and timely performance of each and every one of the Concessionaire’s obligations arising from the conclusion of the Concession Contract regarding the "Provision of Sanitation Services for the southern districts of Lima" Project (hereinafter "the Contract"). To honor this guarantee in your favor, a notarial request through the Ministry of Housing, Construction and Sanitation will suffice, which must be signed by the Deputy Minister of Construction and Sanitation, or person duly authorized by this agency, indicating that our customers .... (Concessionaire’s name) have not fulfilled the obligations that are guaranteed by this document. Any delay on our part to honor the guarantee referred to above shall bear interest equal to the maximum LIBOR rate plus a margin (spread) of 3% annually. The LIBOR rate will be that established by daily Reuter’s Cable received in Lima at 05:00 pm, London time, on the date on which the payment order was received through a notary public. Interests will accrue from the date of the request for compliance until the date of actual payment. This bond also ensures proper and timely performance of the Concessionaire’s obligations under the provisions contained in the Consolidated Text of rules with force of law governing the granting of concessions to the private sector regarding public infrastructure and public services works, approved by Supreme Decree No. 059-96-PCM. Our obligations under this guarantee will not be affected by any dispute between the Ministry of Housing, Construction and Sanitation, SEDAPAL, or any entity of the Government of Peru and our customers. The letter of guarantee will be renewed on an annual basis, to keep it in force as of the Closing Date up to two (2) years after Contract completion. This bond will be in force from ..... , ............... , 201 ..., until ..... , ....... , 20 ....., inclusive.

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Yours faithfully, Signature ............................ Name ............................ Financial Institution ……………………….

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ANNEX 12: TEMPLATE OF AUTHORIZED CREDITOR STATEMENT

Lima, , , 201… Ministry of Housing, Construction and Sanitation Authorized Creditor: ..............................................

Reference: Comprehensive Project Bid for the Concession of the "Provision of Sanitation Services for the Southern Districts of Lima" Project

In accordance with the provisions of Clause 10.1110.11 of the Concession Contract regarding the "Provision of Sanitation Services for the southern districts of Lima" Project, we hereby declare:

a) That we are not subject to impediments or restrictions (by contract, judicial, arbitral, administrative, legislative or any other provision) to assume and fulfill the commitment to participate in financing ________________ (CONCESSIONAIRE) up to the amount of ____________, with the purpose of being in optimum conditions to comply with obligations under the Concession Contract for the "Provision of Sanitation Services for the southern districts of Lima" Project.

b) We hereby confirm that our competent internal bodies have approved our participation in

financing ________________ (CONCESSIONAIRE) up to the amount of ____________, which shall be intended to comply with the obligations under the Concession Contract for the "Provision of Sanitation Services for the southern districts of Lima" Project.

c) That we meet the requirements established in the Concession Contract regarding the

"Provision of Sanitation Services for the southern districts of Lima" Project as well as those required by the Applicable Laws and Regulations to qualify as Authorized Creditor, pursuant to the terms assigned to this definition in the Concession Contract.

Yours faithfully, Signature: Name:

Authorized Creditor Representative

Entity:

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ANNEX 13: TABLE OF PENALTIES APPLICABLE TO THE CONTRACT

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ANNEX 14: ECONOMIC PROPOSAL

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ANNEX 15: NOTARIAL DEED OF THE CONCESSIONAIRE’s ARTICLES OF INCORPORATION

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ANNEX 16: APPLICABLE GUIDELINES TO THE ANNEX REGARDING THE COLLECTION TRUST CONTRACT

SECTION I: DEFINITIONS In this Annex, the following terms shall have the meanings set out below: Global Collecting Account It is the account established under the Collection Trust Agreement, whose funds will be channeled, on equal terms "pari passu" to the individual collection accounts associated with each payment obligation referred to in the Collection Trust, in accordance with the provisions of Annex 16 to the Collection Trust Agreement. Active Collection Agencies These are all national financial system institutions that are duly authorized or will be duly authorized in the future by SEDAPAL to collect the amounts corresponding to the payment of service by users and that in turn have been designated by SEDAPAL or by the Trustee to deposit such collected amounts in the Collection Trust except for: (i) those entities listed in Appendix I of the Collection Trust, whose flows are assigned in favor of the Fund Administration Trust constituted between SEDAPAL, as trustor, and the Ministry of Economy and Finance, and (ii) those commercial entities which not being part of the national financial system, have been authorized by SEDAPAL to collect the sums for the payment of services. Private Trust It is the trust that may be comprised by the CONCESSIONAIRE, to which the Collection Trust will transfer the necessary funds to honor payments to which the CONCESSIONAIRE is entitled. Fiduciary It refers to _________________ (Company) which is part of the National Financial System and is authorized by the Superintendency of Banking, Insurance and Private Pension Fund of Peru to develop their operations and business, which receives the trust domain of flows coming from the Active Collection Agencies. The Trustee shall carry out the necessary instructions for the fulfillment of the obligations and privileges that are generated with its constitution. SECTION II: OPERATION OF THE PROVISUR ANNEX

2.1. In order to ensure the proper and timely performance of its obligations under this

Agreement, SEDAPAL agrees to sign the PROVISUR Annex with the Trustee. The PROVISUR Annex will be entered into between SEDAPAL as Trustor, the CONCESSIONAIRE as Beneficiary and Trustee, prior express authorization by the GRANTOR.

2.2. Under PROVISUR Annex, instructions laid down will be inserted in this Annex for PROVISUR Collection Account, PROVISUR IGV Account and PROVISUR Monitoring Account, which will be made known by SEDAPAL in his capacity as trustee, pursuant to the terms of the Concession Contract, which may not be unilaterally modified by SEDAPAL.

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The purpose of such instructions shall be to manage resources in payment priorities that integrate the different accounts of the Collection Trust.

2.3. No later than sixty (60) Calendar Days from the Closing Date of the Concession Contract, SEDAPAL shall submit to the CONCESSIONAIRE, a PROVISUR Annex draft. Subsequently, the CONCESSIONAIRE shall have twenty (20) Days to issue its opinion on the draft. If within that period the CONCESSIONAIRE makes comments to the PROVISUR Annex draft, SEDAPAL must address them within a period not exceeding five (5) Days submitting such amendments to the CONCESSIONAIRE, who shall have a period of five (5) days to issue a response.

After the periods referred to above, as applicable, and if the CONCESSIONAIRE has not issued a response, it shall mean that the amendments to the PROVISUR Annex draft have been accepted and approved, and SEDAPAL must send a final copy of the PROVISUR Annex draft to the CONCESSIONAIRE within maximum thirty (30) Days for relevant subscription and subsequent notarization.

2.4. The PROVISUR Annex shall respect the obligations and standards set forth in the

Concession Contract, with express indication of the unconditional payment obligations to be performed by the trustee once the Parties comply with provisions in the Concession Contract, as well as the obligation by the GRANTOR and SEDAPAL to issue instructions, as indicated in Section 2.2 of this Annex.

2.5. The PROVISUR Annex shall add to the Collection Trust at least three (3) separate accounts attributable to the Project, as follows:

a) PROVISUR Collection Account: Collection Trust Account in which the Trust will transfer the amounts for the payment of the total obligations of RPI, both for the Water Component and the Sewerage Component, and RPMO, both for the Desalination Plant and the WWTP, whether they are in the Production Scale I and Production Scale II as well as other obligations under the Concession Contract to be previously deposited in the Global Collection Account, as provided in the Collection Trust Contract.

This account shall be created on the date specified in Clause 6.456.45 of the Concession Contract relating to Financial Closing, and will consist of the RPI and RPMO subaccounts, exclusively designed to meet the obligations of RPI and RPMO, respectively.

The flow of income to such account may proceed immediately after the date of its constitution and in no case later than six (6) months of the date indicated. To this end, SEDAPAL shall instruct the Collection Trust to make the deposit in the RPI subaccount during the first twenty (20) Days of each of the following twelve (12) months the resulting amount of the following expression:

=240RPI

DíaporDepósito

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The next month SEDAPAL shall instruct the Collection Trust to make the deposit in the corresponding subaccounts during the first twenty (20) Days of each month and throughout the term of the RPI payment, the resulting amount of the following expression:

+=240240

RPMORPIDíaporDepósito

RPI amounts correspond to the sum of the RPI for the Water Component and RPI for the Sewerage Component whether they are in Production Scale I and Production Scale II. RPMO amounts correspond to the sum of the RPMO for the Desalination Plant and the WWTP, whether they are in Production Scale I and Production Scale II.

The RPI and RPMO amounts shall be adjusted as provided in Chapter IX of the Concession Contract.

Once the term of the RPI payment has expired, such amount shall be governed by the following expression, until the completion of the term of the Concession:

=240

RPMODíaporDepósito

From the respective subaccounts that make the PROVISUR Collection Account, payments arising under the provisions of Chapter IX of the Concession Contract will be disbursed as well as the provisions of the Service Agreement, as applicable.

b) PROVISUR IGV Account: Collection Trust Account in which the IGV amount corresponding to the RPI and RPMO is deposited.

This account must be set up on the same occasion when the PROVISUR Collection Account is created. To this end, SEDAPAL shall instruct the Collection Trust to deposit the entire amount of IGV corresponding to the amounts calculated in Subsection a) of this Section, on the same day of inflows to the PROVISUR Collection Account.

c) PROVISUR Monitoring Account: Collection Trust Account where the CONCESSIONAIRE shall deposit the resources for the payment of the Design and Construction Supervisor.

The obligation to provide inflows to this account will start from the date of signing the Design and Construction Supervision Agreement.

The CONCESSIONAIRE shall deposit the funds required at least five (5) Days before the expiry of the period specified in the schedule of payments referred to in Clause 6.36.3 of the Concession Contract.

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The GRANTOR, through SEDAPAL, shall instruct the Collection Trust to make the payment due by supervision in accordance with the provisions of the contract entered into between the GRANTOR and the Design and Construction Supervisor.

2.6. All resource flows of money mentioned in Subsections a) and b) of the preceding section may come mainly from the Global Collection Account resources. These resources will be transferred to the PROVISUR Collection Account and PROVISUR IGV Account at the time and opportunity previously defined, considering the adjustments to the RUB and RAS according to the terms of the Concession Contract that affect the value of the RPI and the RPMO. In case the above resources are not sufficient to cover the flows defined in subsections a) and b) of section 2.5 above as provided in the Collection Trust, SEDAPAL shall increase the number of Active Collection Agencies that may enable to provide the necessary resources. The PROVISUR Annex may contain any additional mechanism to ensure the provision of necessary resources to fulfill its obligations under this Contract.

2.7. In order to perform the short-term financial management of resources from the PROVISUR Annex accounts, SEDAPAL shall instruct the trustee to perform the following actions: a. Invest those resources in Certificates of Deposit form the Banco Central de

Reserva del Perú, or other financial instruments and/or short-term deposits with the same credit quality.

b. Transfer the corresponding resources to the CONCESSIONAIRE for RPI and

RPMO concepts under the provisions of Chapter IX of the Concession Contract, as applicable.

c. Adjust the amount of cash flow that corresponds to the PROVISUR Collection

Account and PROVISUR IGV Account of the Collection Trust as provided in this Contract where adjustments set forth in clauses 9.14, 9.15 and from 9.26 to 9.30 of the Concession Contract and Section Five of the Service Agreement are applicable.

2.8. Notwithstanding the preceding paragraph, the Trust Agreement will set out the

following instructions to the Trustee to make the following payments according to the following priorities, opportunities and conditions, during the entire term of the Concession:

2.8.1. During the period of payment of the RPI component:

a) It shall be the Collection Trust’s responsibility to transfer from the RPI subaccount, with extinguishing effect to the CONCESSIONAIRE, to the Private Trust or any account provided, an amount equal to the RPITrim on the date of maturity.

This transfer will take place on the date of maturity of the obligation.

b) On the same occasion, it will be the Collection Trust’s responsibility to transfer from

the PROVISUR IGV Account to the CONCESSIONAIRE or to any account

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allocated, a maximum amount equal to one hundred percent (100%) of the IGV corresponding to the RPI Trim.

c) According to the provisions of the Service Agreement contained in Annex 1 of the

Concession Contract, the Trustee shall pay to the CONCESSIONAIRE, with RPMO subaccount resources, with extinguishing effect, the amount corresponding to the RPMO according the monthly settlement that might arise.

Such payment shall proceed in accordance with Clause Five of the Service Agreement referred to Settlement and payment for the service.

d) It shall be the Trustee’s responsibility to pay the CONCESSIONAIRE, from the

PROVISUR IGV Account, a maximum amount corresponding to one hundred percent (100%) of the RPMO IGV.

e) After the total payment of all of the RPI under Chapter IX and Annex 10 of this Contract have been concluded, all those resources in the PROVISUR Collection Account over an amount equal to one-fourth (1/4) of the RPMO will be considered available resources. The GRANTOR will be reimbursed with those available resources, if applicable, all resource that it may have used as stipulated in Subsection C of the clause 9.33 of the Concession Contract. Resources not used for this purpose, will be available to SEDAPAL.

2.8.2. Without prejudice to the provisions of the preceding paragraph, no later than the date

of Start of Operations, SEDAPAL must have allocated relevant resources to ensure the existence of an equivalent amount to annual RPI from the PROVISUR Collection Account.

2.8.3. After the payment period of the RPI component:

a) The Trustee will pay the amount equivalent to the RPMO component in favor of the CONCESSIONAIRE.

Such payment shall proceed in accordance with Clause Five of the Service Agreement referring to the settlement and payment for the service.

b) It shall be the trustee’s responsibility to pay the CONCESSIONAIRE, from the IGV

PROVISUR Account, the amount corresponding to one hundred percent (100%) of the RPMO.

2.9. In the event of the Expiry of the Concession, provisions of Chapter XV of the

Concession Contract shall apply, to ensure compliance with the obligations arising from the RPI, preserving the functioning and effectiveness of the Collection Trust accounts. Independently of the Expiry of the Concession or early termination thereof, it shall be SEDAPAL’s responsibility, through the Collection Trust, within existing resources in the Global Collection Account, to continue transferring the corresponding amounts that will enable to pay the RPI, remaining in force the provisions of Clause 9.33 of the Concession Contract, with respect to the recognition of the RPI.

2.10. Notwithstanding provision in this Section of Annex 16, the CONCESSIONAIRE may

propose the GRANTOR in the PROVISUR Annex draft other conditions deemed appropriate for bankability and proper execution of the Contract.

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SECTION III: PRIVATE TRUST

3.1. Resources transferred from the Collection Trust to the Private Trust, which may be constituted by the CONCESSIONAIRE shall constitute a payment transaction with extinguishing effect. SECTION IV: RPI PAYMENT

4.1. The CONCESSIONAIRE will be entitled to regular quarterly payments on account of the RPI, which will be paid by the Collection Trust, in accordance with the terms and conditions set forth in Chapter IX of the Concession Contract.

4.2. Delay in the RPI payment will accrue interest to be calculated at an annual rate equal to the Annual Sovereign Bond coupon rate plus two percent (2%). SECTION V: SUPPLEMENTARY PROVISION

5.1. Without prejudice to the obligations of this Annex, SEDAPAL, facing the possibility of establishing or participating directly in one or more trusts that may compromise its flow of revenue, commits to limit the trust estate of the trust mentioned to an amount which under no circumstances shall compromise flows established to honor the obligations ensured with the establishment and operation of this trust.

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ANNEX 17: COLLECTION TRUST AGREEMENT AND PROVISUR ANNEX

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ANNEX 18: TECHNICAL PROPOSAL

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ANNEX 19: POLYNOMIAL FORMULA FOR PRICE VARIATION ADJUSTMENT

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