Argentina - Fourth Buenos Aires Power Project : Loan 1330 - Loan Agreement - Conformed

77-23 CONFORMED COPY LOAN NUMBER 1330 AR LOAN AGREEMENT (Fourth Buenos Aires Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SERVICIOS ELECTRICOS DEL GRAN BUENOS AIRES S.A. Dated November 1, 1976 LOAN AGREDENT AGREEMENT, dated November 1, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and SERVICIOS ELECTRICOS DEL GRAN BUENOS AIRES S.A. (herein- after called the Borrower). -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guaran- tee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said Gen- eral Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the con- text otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) " Estatutos" means the estatutos of the Borrower, ap- proved by Resolution No. 2499 of July 1, 1976 of the Inspecci6n General de Personas Jurfdicas of the Ministry of Justice of the Guarantor. (b) "Concession" means the concession contract dated Febru- ary 1, 1962 between the Guarantor and the Borrower, approved by Decree No. 1247 of the Guarantor, dated February 8, 1962. -3- ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to one hundred and fifteen million dollars ($115,000,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such later date as the Bank shall establish. The Bank shall prompt- ly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. -4- Section 2.06. The Borrower shall pay interest at the rate of eight and ninety hundredths per cent (8.90%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on May 1 and November 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -5- ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Part A of the Project with due diligence and efficiency and in conformity with sound engineering, financial and public utility practices. Section 3.02. Pursuant to the provisions of the Guarantee Agreement, the Guarantor shall carry out Part B of the Project. For such purpose, the Borrower.shall make contractual arrangements with the Guarantor, satisfactory to the Bank, providing for the transfer to the Guarantor of the proceeds of the Loan withdrawn from the Loan Account under Category (2) of Schedule 1 to this Agreement, and for the transfer by the Guarantor to the Borrower of such funds as the Borrower will be required to pay to the Bank on account of such proceeds. Section 3.03. (a) The Borrower shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with sound public utility and business prac- tices. (b) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the ac- quisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be pay- able in a currency freely usable by the Borrower to replace or re- pair such goods. -6- Section 3.04. Except as the Bank shall otherwise agree, the Borrower shall: (a) obtain title to all goods financed out of the proceeds of the Loan free and clear of all encumbrances; (b) cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project; and (c) not sell or otherwise dispose of any of its property or assets necessary for the effici- ent carrying on of its business and undertaking, including the Proj- ect, unless the Borrower shall first pay, or make adequate provi- sion satisfactory to the Bank for payment of, all of the Loan which shall then be outstanding and unpaid. Section 3.05. (a) Upon request from time to time by the Bank, the Borrower shall promptly furnish to the Bank the plans, specifi- cations, contract documents, and work and procurement schedules for Part A of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably re- quest. (b) The Borrower: (i) shall maintain records adequate to re- flect the progress and cost of Part A of the Project and to iden- tify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning Part A of the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. -7- (c) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, prop- erty and equipment of the Borrower and any relevant records and documents. Section 3.06. Whenever the Borrower shall propose to under- take, during the period of construction of the Project, any major expansion project other than the Project or to make any major ad- dition to its plants or other property, the Borrower shall, before taking any action with respect thereto, afford the Bank a reason- able opportunity to exchange views on such proposal. For the purposes of this Section, a "major expansion project" s or a "major addition to its plants or other property" shall be deemed to be a project or an addition regarding generation facil- ities, or transmission lines at a tension of 220 kV or more, the aggregate estimated cost of which shall exceed ten million dollars equivalent. -8- ARTICLE IV Management and Operations of the Borrower Section 4.01. (a) The Borrower shall at all times maintain its corporate existence and right to carry on its operations and shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) The Borrower shall at all times manage its affairs, plan its future investment and expansion, and maintain its financial position, all in accordance with sound business, financial and pub- lic utility principles and practices. (c) The Borrower shall at all times operate and maintain its plants, equipment and property and from time to time make all neces- sary repairs and renewals thereof, all in accordance with sound engineering and public utility principles and practices. Section 4.02. The Borrower shall carry out a study of the structure of its rates and shall furnish to the Bank, for comments, by December 31, 1977 or such later date as the Bank shall agree, the conclusions of such study and the proposals, if any, made by the Borrower to the Guarantor for applying its recommendations. -9- ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. Section 5.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and ex- penses and related statements) for each fiscal year audited, in ac- cordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than fou- months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and finan- cial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no mortgage, pledge or other right in rem exists on any of its assets as security for any debt. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) the Borrower shall not voluntarily create or suffer to be created any mortgage, pledge or other right in rem on any of its assets in favor of third parties unless the Borrower - 10 - shall at the same time create, in favor of the Bank, and at no cost to the Bank, a mortgage, pledge or other right in rem, satisfactory to the Bank, which shall have priority and preference to, and shall rank ahead of, the mortgage, pledge or other right in rem first above mentioned, and, in the creation of any such mortgage, pledge or right in rem, the Borrower shall make express provision for the submission thereof to the priority, preference and prior rank of the Bank's rights; and (ii) if any such mortgage, pledge or other right in rem shall be created by operation of law, the Borrower shall create in favor of the Bank, and at no cost to the Bank, an equivalent mortgage, pledge or other right in rem satisfactory to the Bank which shall secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (ii) any lien arising in the ordinary course of banking trans- actions ani -:uring a debt maturing not more than one year after its date. (c) As soon as practicable after the date of this Agreement, the Borrower shall: (i) in accordance with the laws of the Guaran- .'-, duly protocolize, record and register, or at the Bank's re- quest take any action required to enable the Bank to protocolize, record register, the undertaking contained in paragraph (b) of this Section in such manner and places as may be required under the laws of the Guarantor to make such undertaking valid and bind- ing in favor of the Bank and of the holders from time to time of the Loan and enforceable against the Borrower and all third parties in accord&nce with its terms; and (ii) furnish to the Bank an - 11 - orinion or opinions satisfactory to the Bank of counsel acceptable to the Bank that such undertaking has been duly protocolized, re- corded and registered in such manner and places as may be required under the laws of the Guarantor to make such undertaking valid and binding in favor of the Bank and of the holders from time to time of the Loan and enforceable against the Borrower and all third par- ties in accordance with its terms. The Borrower shall pay all rea- sonable charges, fees and expenses in connection with the forego- ing. Section 5.04. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt if, after the incurrence of any such debt, the net revenue of the Borrower for the fiscal year next preceding such incurrence or for a later consecutive twelve-month period, whichever is the greater, shall be less than one and one- half times the estimated maximum debt service payments (includ- ing repayment of principal and payment of interest and other char- ges) for any succeeding fiscal year on all debt, including the debt proposed to be incurred. For the purposes of this Section: (a) the term "debt" means all debt of the Borrower payable by its terms on demand or maturing by its terms more than one year after the date of its incurrence; (b) debt shall be deemed to be incurred on the day such debt becomes outstanding and repayable in accordance with the loan con- tract or agreement providing therefor or, in the case of guarantee - 12 - of debt, on the date of execution and delivery of the contract pro- viding for such guarantee, but only to the extent that the guaran- teed debt is outstanding; (c) the term "net revenue" means gross income from all sources, adjusted to take account of electricity rates in effect at the time of the incurrence of debt even though such rates were not in effect during the fiscal year or twelve-month period to which such income relates, less all operating and administrative expenses, in- cluding provision for all taxes other than income taxes but before depreciation of assets and before provision for interest and other charges on debt and income taxes; and (d) whenever it shall be necessary to value in terms of the currency of the Guarantor, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt. Section 5.05. The Borrower shall sell electricity at such rates as shall be required to produce, starting in 1977, the reve- nues set forth in the Concession, and shall take, from time to time, all steps required or permitted under the Concession to establish and maintain such rates. Section 5.06. The Borrower shall provide for straight-line de- preciation of assets based on realistic valuations of such assets and on their estimated useful lives but in any case at an average annual rate of not less than 3%. - 13 - Section 5.07. The Borrower shall, from time to time, promptly after each occurrence of the event specified in paragraph 2 of Article 15 of the Concession, take all necessary steps to carry out the action therein set forth regarding the valuation of its assets. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) a change shall have been made in the Estatutos which shall adversely and substantially affect the conduct of the Bor- rower's operation or its financial condition; and (b) the Guarantor or the Borrower shall have modified, term- inated, or failed to enforce or comply with a provision of the Concession in such a way as shall adversely and substantially af- fect the conduct of the Borrower's operation or its financial con- dition. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are sDecified pursuant to paragraph (h) thereof: (a) the event specified in paragraph (a) of Section 6.01 of this Agreement shall occur; and (b) any of the events specified in paragraph (b) of Section 6.01 of this Agreement shall occur and shall continue for a period of 60 d&ys after notice thereof shall have been given by the Bank to the Borrower and the Guarantor. - 15 - ARTICLE VII Effective Date; Termination Section 7.01. The following event is specified as an addition- al condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions, namely, that the Tribunal de Cuentas of the Guarantor has examined the Guarantee Agreement in accordance with the laws of the Guarantor and has issued its opinion thereon without formulating any objec- tion thereto. Section 7.02. The following is specified as an additional mat- ter, within the meaning of Section 12.02(c) of the General Condi- tions, to be included in th% opinion or opinions to be furnished to the Bank, namely, that all action necessary to enable the Bor- rover to procure the goods and services required for the Project in accordance with the procedures for procurement of goods and ser- vices set forth or referred to in this Agreement has been taken. Section 7.03. The date January 31, 1977 is hereby specified for the purposes of Section 12.04 of the General Conditions. - 16 - ARTICLE VIII Addresses; Amendment of Other Agreements Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (wUI) For the Borrower: Servicios E14ctricos del Gran Buenos Aires S.A. Balcarre 184 Buenos Aires, Argentina Cable address: Telex: SELBASA 1043 AR Buenos Aires II - 17 - Section 8.02. Section 5.04(c) of the loan agreement (Buenos Aires Power Project) dated January 19, 1962; Section 5.03(e) of the Loan Agreement (Second Buenos Aires Power Project) dated Janu- ary 25, 1968; and Section 5.03(e) of the Loan Agreement (Third Buenos Aires Power Project) dated November 14, 1969; all of them between the Bank and the Borrower, are hereby deleted; and Section 5.14 of each of said loan agreements is hereby amended to read as Section 5.04 of this Agreement. - 18 - IN WITNESS WHEREOF, the parties hereto, acting through their represei thereunto duly authorized, have caused this Agreement to be signed in the: respective names in the District of Columbia, United States of America, a. of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Adalbert Krieger Regional Vice President Latin America and the Caribbean SERVICIOS ELECTRICOS DEL GRAN BUENOS AIRES S.A. By /s/ Oscar Luis Briozzo Authorized Representative By /s/ Federico Luis Amadeo Authorized Representative - 19 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of ex- penditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Cateaory Dollar Equivalent) to be Financed (1) Equipment and 100,000,000 materials (a) Imported 100% of foreign expenditures (b) Manufactured 60% (represent- locally ing the esti- mated foreign expenditure com- ponent) (2) Consultant ser- 500,000 100% vices (3) Unallocated 14,500,000 TOTAL 115,000,000 -20- 2. For the purposes of this Schedule the term "foreign expendi- tures" means expenditures for goods or services supplied from the territory, and in the currency, of any country other than the Guar- antor. 3. The disbursement percentage for Categories (1) (b) and (2) have been calculated in compliance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of pay- ments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procure- ment or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement per- centage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (i) expenditures prior to the date of this Agreement, and in respect of destination check charges (comprobaci6n de destino); and (ii) contracts under Category (1), the cost of which is less than the equivalent of $20,000. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Cate- gory to the extent required to meet the estimated shortfall proceeds - 21- of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expendi- tures; and (ii) if such reallocation cannot fully meet the esti- mated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the procure- ment of any item is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, with- out in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Bor- rower, cancel such amount of the Loan as in the Bank's reasonable opinion represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. -22- SCHEDULE 2 Description of the Project Part A: Transmission and Distribution Part A of the Project, which is part of the Borrower's 1977-1981 expansion program, consists of the following: (a) Transmission Lines Construction of about 60 km of a single-circuit 500 kV transmission line connecting the Ezeiza and Abasto sub- stations and conversion of the double-circuit 220 kV line between the Rodriguez, Ezeiza and Abasto substations to a single-circuit 500 kV line. Construction of about 120 km of 220 kV double-circuit lines and about 42 km of 220 kV underground cable to interconnect the ring and the feeding points into the subtransmission (132 kV) system. Construction of about 62 km of 132 kV double-circuit transmission lines and about 70 km of 132 kV underground cables. (b) Substations Installation of 1,600 MVA - 500/220 kV transformer capa- city at each of the Rodriguez and Abasto substations. - 23 - Installation of 2,100 MWA - 220/132 kV transformer capa- city and 1,880 MVA - 132/MT kV. The above includes the installation of switchgears, con- trol, communication and load dispatching equipment, as well as 600 MVAR of (132 kV) reactive capacity. (c) Distribution Installation of about 2660 km of 13.2 kV lines, of which approximately 50% will be underground cable. Installation of about 5580 km of low tension, 380/220 volt distribution lines, of which approximately 15% will be underground cable. Installation of 900 MVA of distribution transformers (13.2/.38-.22 kV) distributed among approximately 4,6o0 distribution substations. Installation of about 180,000 service connections, about 300,000 electricity meters, and about 21,000 public lighting fixtures and other distribution equipment. Part B: Plans and Studies (a) A national power expansion plan for generation and trans- mission facilities. (b) A national power sector organization study. The Project is expected to be completed by June 30, 1981. I - 25 - SCHEDULE 3 Amortization Schedule Payment of Principal Date PaMent Due (expressed in dollars)* On each May 1 and November 1 beginning November 1, 1979 through November 1, 1990 4,790,000 On May 1, 1991 4,830,000 To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. -26- Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the prin- cipal amount of the Loan pursuant to Section 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.80% More than three years but not more than six years before maturity 3.55% More than six years but not more than eleven years before maturity 6.50% More than eleven years but not more than thirteen years before maturity 7.70% More than thirteen years before maturity 8.90% - 27 - SCHEDULE 4 Procurement A. General Procedures 1. Contracts for the purchase of goods shall be procured in ac- cordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Evaluation and Comparison of Bids for Goodsi Preference for Domestic Manufacturers 1. With respect to each category of equipment and materials to be financed out of the proceeds of the Loan, the Borrower shall in- vite bids as follows: (a) bids for two-thirds of the total quantity to be procured will be invited from suppliers from &ll member countries of the Bank and Switzerland; and (b) simultaneously, bids for the other one-third will be in- vited only from suppliers offering goods manufactured in Argentina. 2. Bids for the supply of goods shall be evaluated and compared on the following basis: -28- (a) bids offering goods manufactured in Argentina: ex-fac- tory price plus cost of freight and insurance and other expenditures incidental to the delivery of the goods to the place of their use or installation or to the Borrower's warehouse. Sales and similar taxes and destination check charges (coMprobaci6n de destino) on the imported inputs used in the manufacture of such goods will not be included; and (b) bids offering goods manufactured outside Argentina: f.o.b. price plus cost of freight and insurance and other expenditures in- cidental to the delivery of the goods to the place of their use or installation or to the Borrower's warehouse; provided that the freight cost to be used shall be that then applicable by the cor- responding international maritime conference. Customs duties and other import taxes on imported goods and destination check charges (coMrobaci6n de destino) on such goods will not be included. 3. (a) Once the bids under paragraph 1(a) hereof are evaluated, they shall be compared with each other on the following basis: (i) bids offering goods manufactured in Argentina, the manufacturing cost of which includes a value added in Argentina of not less than 20% of their ex-factory price (hereinafter called Argentine bids): the value arrived at pursuant to paragraph 2(a) hereof; (ii) other bids: the f.o.b. price plus cost of freight and insurance as provided in paragraph 2(b) hereof, plus, in the case of bids offering goods manufactured outside Argentina, the amount of customs duties and - 29 - other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such bid or 15% of the c.i.f. cost of such goods, if such import taxes exceed said 15%, plus other expenditures incidental to the delivery of the goods to the place of their use or installation or to the Borrower's warehouse, plus 0.5% of the said c.i.f. cost on account of the difference in the cost of inspection during manufacture of the goods produced in Argentina and abroad. If as a result of this com- parison an Argentine bid is the lowest, it shall be selected for the award. (b) If v . result of such comparison another bid is the low- est, all bids other than the Argentine bids shall be compared with each other on the basis provided in paragraph 2 hereof, and the lowest evaluated bid shall be selected for the award. 4. (a) If in accordance with the provisions of paragraph 3 here- of an Argentine bid is selected for award, the bidder may, at the Borrower's option, be awarded the contract for a quantity of one and a half times the quantity specified in the bid invitations, at the price contained in the bid submitted by such bidder under para- graph 1(a) hereof. (b) If in accordance with the provisions of paragraph 3 here- of any bid other than an Argentine bid is selected for award, such bidder shall be awarded the contract notwithstanding any Argentine taxes which the Borrower may have to pay by reason of such award, and the bids for the additional one-third, referred to in para- graph 1(b) hereof, shall be opened and evaluated. -30- 5. If the bid cost (in accordance with paragraph 2(a) hereof) of the lowest evaluated bid under paragraph 1(b) hereof does not exceed the cost of the bid under paragraph 1(a) hereof selected for award, determined in accordance with paragraph 2(b) hereof (in- cluding difference in inspection costs), plus 38% thereof, such bid shall be selected for the award. If all bids under paragraph 1(b) exceed such amount, the Borrower shall invite the bidders under paragraph 1(b) to reduce their price to that level. If no such bid- der agrees to reduce his bid to such amount, the bidder of the bid under paragraph 1(a) hereof selected for award shall be given the option to increase by one-half the quantity under the contract awarded to him, at a price not to exceed that stipulated in his bid. Contracts for goods manufactured in Argentina, awarded under this paragraph, shall not be financed out of the proceeds of the Loan. C. Review of Procurement Decisions by the Bank 1. Review of invitation to bid and of proposed awards and final contracts: With respect to each contract for equipment and/or materials estimated to cost the equivalent of $400,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further - 31 - modification to the bidding documents shall require the Bank's con- currence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Borrower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, with- out the Bank's concurrence, materially differ from those on which bids were invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the -32- invitation to, and analysis of, bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly in- form the Borrower and state the reasons for such determination.