Uruguay - Fifth Power Project : Loan 1779 - Guarantee Agreement - Conformed

 OFFICIAL LOAN NUMBER 1779 UR DOCUMENTS Guarantee Agreement (Fifth Power Project) between REPUBLICA ORIENTAL DEL URUGUAY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated W arf, 1980 LOAN NUMBER 1779 UR GUARANTEE AGREEMENT AGREEMEN1, dated ixA.--vcL, 1980, between REPUBLICA ORIENTAL DEL URUGUAY (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and Administraci6n Nacional de Usinas y Trasmisiones Elctricas (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to twenty-four million dollars ($24,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: 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 Guarantee 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 Agree- ments 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 General Conditions and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor -2- and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan and the punctual performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. (a) Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. (b) The Guarantor undertakes to cause banks owned by the Guarantor to provide to, and at the request of, the Borrower a standby line of credit of not less than the equivalent of $1,500,000. ARTICLE III Execution of Part C (g) of the Project Section 3.01. (a) The Guarantor shall carry out Part C (g) of the Project, through Direcci6n, with due diligence and efficiency and in conformity with appropriate practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) In the carrying out of Part C (g) of the Project, the Guarantor shall: (i) by June 30, 1980, employ consultants whose qualifi- cations, experience and terms and conditions of employment shall be satisfactory to the Bank; (ii) by December 31, 1981, furnish to the Bank for comments the conclusions of such study; and (iii) prepare, on the basis of the conclusions of such study and the comments of the Bank thereon, a master energy plan. -3- Section 3.02. The Guarantor shall cause Direcci6n to establish and maintain separate accounts on its records to be used exclusively for Part C (g) of the Project and to register in such accounts all its receipts and payments for or in connection with such Part of the Project, in accordance with sound accounting principles and procedures consistently applied. 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, specific security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distri- bution of foreign 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 Guarantor, in creating or permitting 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 administrative subdivisions, the Guarantor shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory 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; and (ii) any lien arising in the ordinary course of banking transactions 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 Guarantor, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Guarantor or any -4- such subdivision, including gold and other foreign exchange assets held by any institution performing the firntions of a central bank or exchange stabilization fund, or similar functions, for the Guarantor. Section 4.02. The Guarantor shall take all necessary action, including the granting of all necessary authorizations, import licenses, foreign exchange permits and all other approvals required under the laws of the Guarantor, for ensuring the timely procurement of the goods and services required for the Project. Section 4.03. The Guarantor undertakes that it shall compen- sate the Borrower for any losses arising from fire, explosion, flood, storms, accidents, earthquakes, war or civil disturbance incurred by the Borrower which are not covered by external insur- ance or the self-insurance fund referred to in paragraph (b) of Section 4.01 of the Loan Agreement. Section 4.04. The Guarantor shall take all necessary action to transfer to the Borrower, upon completion of such facilities: (a) full ownership and operational responsibility for the Palmar hydroelectric facilities and the Salto Grande non-common transmis- sion facilities; and (b) all responsibility for debt related to such facilities, provided, however, that the Borrower shall be responsible for fifty per cent only of such debt due during the period running from the date of transfer of such facilities through the end of the calendar year in which such transfer is made. Section 4.05. The Guarantor shall prepare and furnish to the Bank, by March 31, 1980: (a) a program satisfactory to the Bank for the financing of the Guarantor's power sector investment plan through the year 1983; and (b) a report on the cost and financing of the power projects in Uruguay, including those being carried out with neighboring countries, which are not carried out by the Borrower, such report to include proposals for modifying as required the surcharge on electricity services used to finance the contributions of the Guarantor to the Fondo Energftico Nacional in order to achieve a reasonable level for the contribution by electricity consumers in the financing of such projects. -5- Section 4.06. (a) The Guarantor shall pay and shall cause each of its d7partments and national agencies, or subdivisions thereof, including municipalities, to pay: (i) all their outstanding debts to the Borrower as of December 31, 1979 for past services rendered, within the period ending June 30, 1980; and (ii) all debts to the Borrower for services rendered or to be rendered by the Borrower, on or after January 1, 1980, within 75 days after the date of billing. (b) In the event that any debt included in paragraph (a) above shall not be timely paid to the Borrower in accordance with such paragraph, the Guarantor shall promptly pay such debt to the Borrower on behalf of the debtor. Section 4.07. The Guarantor shall approve by April 15, 1980 a program, satisfactory to the Bank, for setting the Borrower's rates for the sale of electricity at levels sufficient to enable the Borrower to achieve, in the year 1980, a rate of return of 7.5%. Section 4.08. Sections 3.02 and 3.03 of the Prior Guarantee Agreement are hereby deleted. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Ministro de Economia y Finanzas of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 5.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministerio de Economfa y Finanzas Colonia 1089 Montevideo Uruguay -6- Cable address: Telex: MINECON 269 MINECON UY Montevideo, Uruguay 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) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of t-e day and year first above written. REPUBLICA ORIENTAL DEL URUGUAY By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction dnd Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this -Lday of AaA -, 198 AL. FOR SECRETARY