El Salvador - Ahuachapan Expansion Project : Loan 1289 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1289 T-ES LOAN AGREEMENT (Ahuachapan Expansion Project) between REPUBLIC OF EL SALVADOR and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated July 28, 1976 LOAN AGREEMENT AGREEMENT, dated July 28, 1976, between REPUBLIC OF EL SALVA- DOR (hereinafter called the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS (A) by an agreement (hereinafter called the CEL Loan Agreement) of even date herewith between Comision Ejecutiva Hidroelectrica del Rfo Lempa (hereinafter called CEL) and the Bank, the Bank is agreeing to assist in the financing of the Project described in Schedule 2 to the CEL Loan Agreement by making a loan (hereinafter called the CEL Loan) in an amount in various currencies equivalent to thirty million dollars ($30,000,000); and (B) the Borrower has also requested the Bank to provide addi- tional financial assistance towards the financing of the foreign exchange cost of the Project by making the present Loan (hereinafter called the Loan) as hereinafter provided; (C) the Bank has determined that the Borrower is eligible to receive the Loan as an intermediate term loan, as that term is defined in Resolution No. 75-111 of the Executive Directors of the Bank establishing an Interest Subsidy Fund for the Third Window (hereinafter called te Fund) and upon the terms and conditions set forth in such Resolution; (D) the Administrator of the Fund (hereinafter called the Administrator), subject to the terms and conditions set forth in -2- the Resolution referred to in (C) above, is obligated to pay to the Bank semi-annually from the resources of the Fund an amount equal to four per cent (4%) per annum of the outstanding amounts of principal on intermediate term loans, of which this Loan is one; (E) By a subsidiary loan agreement to be entered into between the Borrower and CEL, the Borrower will make the proceeds of this Loan available to CEL as hereinafter provided; (F) the Borrower and the Bank intend that the proceeds of the First Loan and of this Loan be disbursed pro rata on the basis of a 10:3 ratio; (G) Concurrently with this Loan, CEL intends to sell part of an issue of its bonds in the principal amount of 025,000,000 (here- inafter called the Bonds) to assist in the financing of the local costs of its investments, including, inter alia, those of the Proj- ect; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -3- 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 Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General 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 context otherwise requires, the several terms defined in the Gen- eral Conditions, in the Preamble to this Agreement have the respec- tive meanings therein set forth and the following additional terms have the following meanings: (a) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and CEL pursuant to the provi- sions of Section 3.02 of this Agreement; and (b) "Ley Constitutiva" means the Ley Constitutiva of CEL set forth in Decreto No. 137, of September 18, 1948, of the Asamblea Legislativa of the Borrower, establishing and organizing CEL, as amended from time to time. ARTICLE II The Lean Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or re- ferred to, an amount in various currencies equivalent to nine mil- lion dollars ($9,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to the First Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, 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 the First Loan Agree- ment and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) On each of the semi-annual interest payment dates speci- fied in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself such amounts as the Borrower shall be required to pay to the Bank on such date pursuant to Section 2.06 of this Agreement, on account of interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amount allocated there- for in Schedule 1 to the First Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank. -5 Section 2.03. Except as the Bank shall otherwise agree, con- tracts for the purchase of goods or for civil works to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to the CEL Loan Agreement. Section 2.04. The Closing Date shall be December 31, 1980 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower 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. Section 2.06. The Borrower shall pay interest at the rate of four and eighty-five hundredths per cent (4.85%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time; provided, however, that if the Administrator shall at any time determine that the resources of the Fund shall not be sufficient to pay to the Bank at the next succeeding semi-annual interest payment date of the Loan the amount scheduled to be paid by the Administrator at that interest payment date as specified in para- graph (D) of the Preamble to this Agreement, the Borrower shall, upon notification by the Administrator of such determination and the amount of the resulting shortfall, pay additional interest on such principal amount of the Loan equal to such shortfall. Section 2.07. Interest and other charges shall be payable semi-annually on January 15 and July 15 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 the Schedule to this Agreement. Section 2.09. The Director Ejecutivo of CEL or such person as he shall designate in writing is designated as representative of the Borrower for the purpose of taking any action required or per- mitted to be taken under the provisions of Section 2.02 (a) of this Agreement and Article V of the General Conditions. -7- ARTICLE III Execution of the Project; Other Covenants with Respect to CEL Section 3.01. The Borrower shall cause CEL to carry out the Project and to perform punctually all the obligations of CEL as set forth in the CEL Loan Agreement. Section 3.02. (a) The Borrower shall relend the proceeds of the Loan to CEL under a Subsidiary Loan Agreement to be entered into between the Borrower and CEL under terms and conditions which shall have been approved by the Bank, and which shall, without li- mitation, provide that CEL: (i) will pay to the Borrower a commit- ment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount so relent and not withdrawn by CEL from time to time; (ii) will pay to the Borrower interest at the rate of eight and eighty-five hundredths per cent (8.85%) per annum on the principal amount so relent and withdrawn by CEL and outstanding from time to time; and (iii) will repay to the Borrower the principal amount so relent over a period of 25 years from the date of this Agreement, including therein a period of grace of four and one-half years. (b) The Borrower shall exercise its rights under the Subsi- diary Loan Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. -8- Section 3.03. With regard to the tariff study forming Part D (ii) of the Project, the Borrower shall: (a) cause CEL to include in such study the determination of the incremental cost of providing service to various customer classes and proposals for an alternative rate structure to reflect margin- al costs in the event that such study determines that the present rate structure does not adequately reflect such marginal costs; and (b) cause CEL to: (i) complete such study not later than December 31, 1977 or such other date as the Bank shall agree; (ii) promptly after such completion review the conclusions of such study with the Borrower's Ministerio de Economia and the Bank; and (iii) adjust CEL's rate structure on the basis of such study and within the context of the Borrower's development strategy so as to ade- quately reflect marginal costs. ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of,for- eign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or per- mitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or admini- strative subdivisions, the Borrower shall promptly and at no cost to the Bank secure th, principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfac- tory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; - 10- and (ii) any lien arising in the ordinary course of banking trans- actions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdi- vision thereof and of any entity owned or controlled by, or oper- ating for the account or benefit of, the Borrower or any such subdivision, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. - 11 - ARTICLE V Remedies of the Bank Section 5.01. For the purnoses of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) the Ley Constitutiva, or any provision thereof, shall have been amended, suspended or abrogated, or new legislation shall have been adopted by the Borrower so as to materially and adversely affect the management or operation of CEL; (b) the Bonds shall have become due and payable prior to the agreed maturity thereof; and (c) a default shall occur in the performance by CEL of its obligations under the Subsidiary Loan Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) the Bonds or any other debt of CEL with an original ma- turity of one year or more shall have become due and payable before its agreed maturity in accordance with the terms thereof. (b) any event specified in paragraph (a), (b) or (c) of Sec- tion 8.02 of this Agreement shall occur. - 12 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) CEL shall have duly issued the Bonds, ;old an amount thereof of not less than 015,000,000 and received payment therefor. (b) all conditions precedent to the effectiveness of the CEL Loan Agreement shall have been fulfilled subject only to the effectiveness of this Agreement. (c) the Asamblea Legislativa of the Borrower shall have approved an extraordinary budget for CEL to carry out the Project. (d) the execution and delivery of the Subsidiary Loan Agree- ment on behalf of the Borrower and CEL, respectively, shall have been duly authorized or ratified by all necessary corporate and governmental action. Section 6.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (c) of the General Con- ditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Asamblea Legislativa of the Borrower has approved an extraordinary budget for CEL to carry out the Project. - 13 - (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by, and executed and delivered on behalf of, the Borrower and CEL, respectively, and constitutes a valid and binding obligation of the Borrower and CEL in accordance with its terms. Section 6.03. The date October 28, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VII Representative of 'he Borrower; Addresses Section 7.01. The Ministro de Hacienda of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Sectioa 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministro de Hacienda Ministerio de Hacienda San Salvador, El Salvador Centroamerica Cable address: MINHACIENDA San Salvador For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. - 15 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF EL SALVADOR By /s/ Francisco Bertrand Galindo Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Enrique Lerdau Director Country Programs Department Latin America and the Caribbean Regional Office - 16 - SCHEDULE Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)f January 15, 1983 150,000 July 15, 1983 155,000 January 15, 1984 160,000 July 15, 1984 165,000 January 15, 1985 170,000 July 15, 1985 170,000 January 15, 1986 180,000 July 15, 1986 180,000 January 15, 1987 185,000 July 15, 1987 190,000 January 15, 1988 195,000 July 15, 1988 200,000 January 15, 1989 200,000 July 15, 1989 210,000 January 15, 1990 215v000 July 15, 1990 220,000 January 15, 1991 225,000 July 15, 1991 230,000 January 15, 1992 235,000 July 15, 1992 240,000 January 15, 1993 245,000 July 15, 1993 255,000 January 15, 1994 260,000 July 15, 1994 265,000 January 15, 1995 270,000 July 15, 1995 280,000 January 15, 1996 285,000 July 15, 1996 290,000 January 15, 1997 300,000 July 15, 1997 305,000 - 17 - Payment of Principal Date Payment Due (expressed in dollars) January 15, 1998 3159000 July 15, 1998 320,000 January 15, 1999 330,000 July 15, 1999 340,000 January 15, 2000 345,000 July 15, 2000 350,000 January 15, 2001 370,000 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 equiva- lents determined as for purposes of withdrawal. - 18 - Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal 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 1.05% More than three years but not more than six years before maturity 2.10% More than six years but not more than eleven years before maturity 3.90% More than eleven years but not more than sixteen years before maturity 5.65% More than sixteen years but not more than twenty-one years before maturity 7.45% More than twenty-one years but not more than twenty-three years before maturity 8.15% More than twenty-three years before maturity 8.85%