Conformed Copy - L2889 - Power Sector Adjustment Loan - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 2889 CO (Power Sector Adjustment Loan) between REPUBLIC OF COLOMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated March 16, 1988 LOAN NUMBER 2889 CO LOAN AGREEMENT AGREEMENT, dated March 16, 1988, between REPUBLIC OF COLOMBIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Bank has received a letter dated September 11, 1987, from the Borrower describing a program of actions, objectives and policies designed to improve the efficiency of its electric power sector (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Bank in the financing of imports required during such execution; (B) the Borrower intends to borrow, or cause to be borrowed, from lenders outside Colombia other than the Bank (hereinafter called the External Lenders), an amount equivalent to about one billion thirty million dollars ($1,030,000,000) (hereinafter called the Additional Financing) to assist in the financing of the Program; and (C) on the basis, inter alia, of the foregoing, the Bank has decided in support of the Program to provide such assistance to the Borrower by making the Loan Page 2 in three tranches as hereinafter provided; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 2.01, paragraph 11, shall be modified to read: "'Project' means the imports and other activities that may be financed out of the proceeds of the Loan pursuant to the provisions of Schedule 1 to the Loan Agreement."; (b) Section 9.07 (c) shall be modified to read: "(c) Not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution of the program referred to in the Preamble to the Loan Agreement, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan."; and (c) the last sentence of Section 3.02 is deleted. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "SITC" means the Standard International Trade Classification, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series M, No. 34/Rev.3 (1986); (b) "pesos" means the currency of the Borrower; (c) "ICEL Group" means the following group of companies operating in the generation, transmission and distribution of electricity in Colombia: Instituto Colombiano de Energia Electrica (ICEL), Empresa Antioquena de Energia S.A., Electrificadora de Boyaca S.A., Central Hidroelectrica de Caldas S.A., Electrificadora del Caqueta S.A., Centrales Electricas del Cauca S.A., Electrificadora de Cundinamarca S.A., Electrificadora del Choco S.A., Electrificadora del Huila S.A., Electrificadora del Meta S.A., Centrales Electricas de Narino S.A., Centrales Electricas del Norte de Santander S.A., Electrificadora de Santander S.A., and Electrificadora del Tolima S.A; (d) "CORELCA Group" means the following group of companies operating in the generation, transmission and distribution of electricity in Colombia: Corporacion Regional de la Costa Atlantica (CORELCA), Electrificadora del Atlantico S.A., Electrificadora de Bolivar S.A., Electrificadora del Cesar S.A., Electrificadora de Cordoba S.A., Electrificadora de la Guajira S.A., Electrificadora del Magdalena S.A., Electrificadora de Sucre S.A., and Electricadora de San Andres y Providencia S.A.; (e) "EEEB" means Empresa de Energia Electrica de Bogota; (f) "ISA" means Interconexion Electrica S.A.; (g) "FEN" means Financiera Electrica Nacional S.A; (h) "EPM" means Empresas Publicas de Medellin; Page 3 (i) "CVC" means Corporacion Autonoma Regional del Cauca; (j) "Electric Power Companies" means the following companies operating in the generation, transmission and distribution of electricity in Colombia referred to collectively: the ICEL Group, the CORELCA Group, EEEB, EPM, CVC and ISA; (k) "Sector" means the Borrower's Electric Power Sector which includes all Electric Power Companies; (l) "1987-1990 Sector Investment Program" means the Sector's investment program and financial plan for the years 1987 through 1990 furnished to the Bank by the Borrower as Attachment 5 to the letter describing the Program, as such Program shall be updated pursuant to the provisions of Section 3.03 of this Agreement; (m) "Least-cost Investment Program" means the Program referred to in paragraph 2 of Schedule 4A to this Agreement; (n) "Guavio Program" means the action plan to address the financial, managerial, social and environmental issues related to the execution and operation of the Guavio hydroelectric project, provided for in Attachment 2 to the letter describing the Program; (o) "ISA Social and Ecological Program" means ISA's action program referred to in Section 3.04 (a) of this Agreement; (p) "Loss Reduction Program" means the Borrower's plan to reduce energy losses by the Electric Power Companies provided for in the attachment 3 to the Program; (q) "Financial Rehabilitation Plans" means the financial rehabilitation action plans for the ICEL Group and the CORELCA Group provided for in the Attachment 1 to the Program; (r) "Arrears Reduction Plan" means the action plan aimed at reducing the arrears of the Borrower and all of its agencies and all entities owned, administered or controlled by the Borrower to the Electric Power Companies provided for in the Attachment 4 to the Program; (s) "Management Improvement Plans" means the action plans, satisfactory to the Bank, to address management problems of the ICEL Group, the CORELCA Group and EEEB; and (t) "Resolution No. 86" means Resolution No. 86 of November 1986 issued by Junta Nacional de Tarifas of the Borrower, as such resolution may be amended from time to time. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount in various currencies equivalent to three hundred million dollars ($300,000,000). 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. Section 2.03. The Closing Date shall be June 30, 1989 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Page 4 Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one-half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed. Section 2.06. Interest and other charges shall be payable semiannually on February 1 and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 2 to this Agreement. Section 2.08. (a) Banco de la Republica is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. (b) Without limitation or restriction to the foregoing, the Borrower hereby entrusts Banco de la Republica with responsibility for the preparation of withdrawal applications under the Loan and for the collection of the documents and other evidence to be furnished to the Bank in support of such applications; such withdrawal applications shall, to the extent practicable, be consolidated so as to apply for withdrawal of aggregate amounts of not less than $5,000,000 equivalent. ARTICLE III Particular Covenants Section 3.01. (a) The Borrower and the Bank shall from time to time, at the request of either party, exchange views on the progress achieved in carrying out the Program and the actions specified in Schedules 4A and 4B to this Agreement. (b) Prior to each such exchange of views, the Borrower shall furnish to the Bank for its review and comment a report on the progress achieved in carrying out the Program, in such detail as the Bank shall reasonably request. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. (a) The Borrower shall, not later than December 31, 1988 and December 31, 1989, update the 1987-1990 Sector Investment Program in terms satisfactory to the Bank. (b) For such purposes, not later than October 31, 1988 and October 31, 1989, the Borrower shall exchange views with the Bank on the status of execution, financing plan and proposed revisions to the 1987-1990 Sector Investment Program. Section 3.04. The Borrower shall: (a) cause ISA to: (i) prepare and furnish to the Bank, not later than March 31, 1988, an action program, satisfactory to the Bank, pursuant to which ISA shall develop and implement (or cause the implementation of) solutions for ecological and social problems affecting the Sector; and (ii) carry out such program and ISA's social and ecological responsibilities in a manner satisfactory to the Bank; (b) cause the ICEL Group and the CORELCA Group to: (i) carry out their respective Financial Rehabilitation Plan in a manner and according to timetables, Page 5 satisfactory to the Bank; and (ii) carry out their respective Management Improvement Plan in a manner and according to a timetable, satisfactory to the Bank; and (c) cause EEEB to: (i) furnish to the Bank, not later than June 30, 1989, its respective Management Improvement Plan; and (ii) carry out such plan in a manner and according to a timetable, satisfactory to the Bank. Section 3.05. Not later than March 31, 1988, the Borrower shall put into effect a system, satisfactory to the Bank, to monitor the performance of the Electric Power Companies and the compliance by the Electric Power Companies with the targets set forth in the Program. Section 3.06. The Borrower shall carry out and shall cause the Electric Power Companies to carry out the Loss Reduction Program in a manner and according to a timetable, satisfactory to the Bank. Section 3.07. The Borrower shall carry out the Arrears Reduction Plan in a manner satisfactory to the Bank. Section 3.08. (a) The Borrower shall maintain or cause to be maintained separate records and accounts adequate to reflect in accordance with consistently maintained sound accounting practices the expenditures financed out of the proceeds of the Loan. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate 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 four months after the end of each such year, a certified copy of 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 said records and accounts and the audit thereof as the Bank shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and accounts reflecting such expenditures; (ii) retain, until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Bank's representatives to examine such records; and (iv) ensure that such records and accounts are included in the annual audits referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals. Section 3.09. Taking into account the Bank's comments thereon, the Borrower shall carry out the recommendations of the study entitled "Mecanismos Juridicos para Page 6 el Tratamiento de los Usos Ilegales de Energia Electrica" (the study on the Borrower's legal framework related to the illegal use of electricity), dated December 30, 1987, according to a timetable satisfactory to the Bank. ARTICLE IV Additional Events of Suspension Section 4.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) that a situation has arisen which shall make it improbable that the Program, or a significant part thereof, will be carried out; (b) that the Program or the 1987-1990 Investment Program or the Guavio Program or the ISA Social and Ecological Program or the Loss Reduction Program or the Financial Rehabilitation Plans or the Arrears Reduction Plan or the Management Improvement Plans shall have been amended to an extent that, in the Bank's reasonable opinion, the Program will fail to meet its operational, financial, ecological or social objectives; and (c) that the Borrower shall have failed to carry out the provisions of Resolution No. 86 or Resolution No. 86 shall have been repealed or amended to an extent which, in the Bank's reasonable opinion, it shall adversely affect the execution of the Program or the financial situation of the Sector or of any of the Electric Power Companies. Section 4.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional event is specified, namely that any event specified in Section 4.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE V Effective Date; Termination Section 5.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that an amount equivalent to $200,000,000 of Additional Financing, from the External Lenders, have been secured in a manner satisfactory to the Bank or a contingent financial plan, satisfactory to the Bank, shall have been put into effect. Section 5.02. The date June 16, 1988 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance and Public Credit of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministerio de Hacienda y Credito Publico Palacio de los Ministerios Bogota, Colombia Cable address: Telex: MINHACIENDA 44473 MHAC CO Bogota Page 7 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 duly authorized representatives, have caused this Agreement 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 COLOMBIA By /s/ Victor Mosquera-Chaux Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the Loan may be withdrawn from the Loan Account for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods required during the execution of the Program and to be financed out of such proceeds. 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures for goods included in the following SITC groups or sub-groups, or any successor groups or sub-groups under future revisions to the SITC, as designated by the Bank by notice to the Borrower: Group Sub-group Description of Items 112 - Alcoholic beverages 121 - Tobacco, unmanufactured tobacco refuse 122 - Tobacco, manufactured 667 - Pearls, precious and semi-precious stones, unworked or worked Page 8 688 - Uranium depleted in U235 and thorium, and their alloys, un- wrought or wrought, and articles therefor, n.e.s.; waste and scrap of uranium depleted in U235 and of thorium 718 718.7 Nuclear reactors, and parts thereof, n.e.s. 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) - 971.0 Gold, non-monetary (excluding gold ores and concentrates) (b) expenditures in the currency of the Borrower or for goods supplied from the territory of the Borrower; (c) payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of $150,000,000 may be made on account of payments made for such expenditures before that date but after April 1, 1987; (d) payments made for expenditures equivalent to less than $50,000; (e) expenditures for goods supplied under a contract which any national or international financing institution or agency shall have financed or agreed to finance; and (f) expenditures for goods intended for a military or para-military purpose or for luxury consumption. 3. (a) No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed out of the proceeds of the Loan after the aggregate of the proceeds of the Loan withdrawn from the Loan Account and the total amount of such commitments shall have reached the equivalent of $150,000,000, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Bank: (i) with the progress achieved by the Borrower in the carrying out of the Program; and (ii) that the actions described in Schedule 4A to this Agreement have been taken. (b) If, after such exchange of views described in sub-paragraph (a) immediately preceding, the Bank shall have given notice to the Borrower that the progress achieved and actions taken are not satisfactory and, within 90 days after such notice, the Borrower shall not have achieved progress and taken actions satisfactory to the Bank, then the Bank may, by notice to the Borrower, cancel the unwithdrawn amount of the Loan or any part thereof. 4. (a) No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed out of the proceeds of the Loan after the aggregate of the proceeds of the Loan withdrawn from the Loan Account and the total amount of such commitments shall have reached the equivalent of $225,000,000, unless the Bank shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Bank: (i) with the progress achieved by the Borrower in the carrying out of the Program; and (ii) that the actions described in Schedule 4B to this Agreement have been taken. (b) If, after such exchange of views described in sub-paragraph (a) immediately preceding, the Bank shall have given notice to the Borrower that the progress achieved and actions taken are not satisfactory and, within 90 days after Page 9 such notice, the Borrower shall not have achieved progress and taken actions satisfactory to the Bank, then the Bank may, by notice to the Borrower, cancel the unwithdrawn amount of the Loan or any part thereof. SCHEDULE 2 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 1 and August 1: beginning August 1, 1992 through August 1, 2004 11,540,000 On February 1, 2005 11,500,000 ________________________ * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal. See General Conditions, Sections 3.04 and 4.03. Premiums on Prepayment The following premiums are specified for the purposes of Section 3.04 (b) of the General Conditions: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years .18 before maturity More than three years but .35 not more than six years Page 10 before maturity More than six years but .65 not more than 11 years before maturity More than 11 years but not .88 more than 15 years before maturity More than 15 years before 1.00 maturity SCHEDULE 3 Procurement 1. Contracts for the procurement of goods estimated to cost the equivalent of $5,000,000 or more each shall be awarded through international competitive bidding in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines), subject to the following modifications: (a) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification, or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) a notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." (b) The following is added at the end of paragraph 2.21 of the Guidelines: "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." (c) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. 2. Contracts for goods estimated to cost the equivalent of less than $5,000,000 each shall be awarded on the basis of the normal procurement procedures of the purchaser of such goods. 3. With respect to each contract referred to in paragraph 1 of this Schedule, the Borrower shall furnish to the Bank, 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 analysis of the respective bids and recommendations for award, a description of the advertising and tendering procedures followed and such other information as the Bank shall reasonably request. 4. With respect to each contract referred to in paragraph 2 of this Schedule, the Borrower shall furnish to the Bank, prior to the submission to the Bank of the first Page 11 application for withdrawal of funds from the Loan Account in respect thereof, such documentation and information as the Bank may reasonably request to support withdrawal applications in respect of such contract. 5. The provisions of the preceding paragraphs 3 and 4 shall not apply to contracts on account of which the Bank has authorized withdrawals from the Loan Account on the basis of statements of expenditure. SCHEDULE 4A Actions Referred to in Paragraph 3 (a) (ii) of Schedule 1 to this Agreement The Borrower shall have taken, or caused to be taken, in a manner satisfactory to the Bank, the following actions: 1. The Energy Board proposed law shall have been enacted or, in the event that such proposed law is not enacted, the Borrower shall have taken all action as shall be necessary for the achievement of the policy objectives of such proposed law. 2. The Borrower shall have furnished to the Bank the draft of a least-cost expansion program for the generation and transmission of electricity, satisfactory to the Bank, for the period of 1991 through 2000. 3. Satisfactory progress shall have been achieved in the carrying out of the 1987-1990 Sector Investment Program. 4. Satisfactory progress shall have been achieved in the implementation of the Guavio Program, the ISA Social and Ecological Program, the Loss Reduction Program, the Arrears Reduction Plan and the Financial Rehabilitation Plans. 5. The Borrower shall have submitted drafts, satisfactory to the Bank, of the Management Improvement Plans, other than the Management Improvement Plans for ICEL, CORELCA and EEEB. For the purposes of this Schedule "Energy Board proposed law" means the proposed law submitted by the Borrower to its Congress in November 1986, providing for the establishment of an energy board. SCHEDULE 4B Actions Referred to in Paragraph 4 (a) (ii) of Schedule 1 to this Agreement The Borrower shall have taken, or caused to be taken, in a manner satisfactory to the Bank, the following actions: 1. The Borrower shall have furnished to the Bank: (a) the Least-Cost Investment Program for the Sector, satisfactory to the Bank, for the period 1991 through 2000; and (b) an updated 1987-1990 Sector Investment Program, satisfactory to the Bank. 2. ISA shall have been assigned the ownership, construction, and operation of all future major generating plants and major transmission lines in Colombia, except as such ownership, construction or operation shall have been exempted or delegated under the provisions of the Program. 3. The Borrower shall have submitted the Management Improvement Plans for the ICEL Group, the CORELCA Group, and EEEB. 4. Satisfactory progress shall have been achieved in the implementation of the Guavio Program, the ISA Social and Ecological Plan, the Loss Reduction Program, the Arrears Reduction Plan and the Financial Rehabilitation Plans. 5. The Borrower shall have obtained commitments for at least $250,000,000 (in addition to the amount referred to in Section 5.01 of this Agreement) of Additional Page 12 Financing or for purposes of the contingent financial plan referred to in Section 5.01 of this Agreement. For purposes of this Schedule: (a) "major generating plant" means any generating plant with an installed capacity of 100 megawatts or more; and (b) "major transmission lines" means all transmission lines connecting the major generating plants to the national grid and all transmission lines interconnecting the areas served by the Electric Power Companies that have participation in ISA's capital.