Conformed Copy - L3083 - Hydroelectric Development Project - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3083 ME (Hydroelectric Development Project) between UNITED MEXICAN STATES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated September 25, 1989 LOAN NUMBER 3083 ME GUARANTEE AGREEMENT AGREEMENT, dated September 25, 1989, between UNITED MEXICAN STATES (the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor, NACIONAL FINANCIERA, S.N.C. (the Borrower) and COMISION FEDERAL DE ELECTRICIDAD (CFE) having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; (B) by an agreement (the Loan Agreement) of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in various currencies equivalent to four hundred and sixty million dollars ($460,000,000), 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 provided in this Agreement; Page 2 (C) by an agreement (the Project Agreement) of even date herewith, between the Bank and CFE, the latter has agreed to undertake the obligations set forth in the Project Agreement; 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 "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985 (the General Conditions), with the last sentence of Section 3.02 deleted, constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to and 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 and not merely as surety, 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, and CFE, as set forth in the Loan Agreement and the Project Agreement, respectively. Section 2.02. 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 CFE 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 CFE, or cause CFE to be provided with, such funds as are needed to meet such expenditures. ARTICLE III Execution of the Project Section 3.01. Without limitation to or restriction upon any of its obligations under this Agreement, the Guarantor declares its commitment to the objectives of the Project set forth in Schedule 2 to the Loan Agreement, and to this end shall: (i) carry out Part C of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, public utility and environment practices, and shall provide promptly as needed, the funds, facilities, services and other resources required for Part C of the Project; (ii) take all measures necessary or appropriate to assist CFE in carrying out its obligations under the Project Agreement; and (iii) not take or permit to be taken, any action which would prevent or interfere with the performance by CFE of its obligations under the Project Agreement, respectively. Section 3.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Page 3 Section 3.03. The Guarantor and the Bank hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating respectively to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) shall be carried out: (i) by CFE in respect of Parts A, B and D of the Project, and (ii) by the Guarantor in respect of Part C of the Project. Section 3.04. The Guarantor shall, through SEMIP: (i) by September 30, 1989, present to the Bank terms of reference, satisfactory to the Bank, for purposes of carrying out the studies referred to in Part C of the Project; (ii) by September 30, 1991, carry out such studies pursuant to such terms of reference; (iii) by December 31, 1991, exchange views with the Bank on the conclusions and recommendations of such studies. Section 3.05. The Guarantor shall: (a) perform all of its obligations under the Financial Rehabilitation Agreement; (b) enter into the contractual arrangements with CFE referred to in Section 2.02 (c) of the Project Agreement; (c) by September 30, 1989, amend the Financial Rehabilitation Agreement to include terms and conditions satisfactory to the Bank; and (d) except as amended pursuant to Section 3.05 (c) hereof, and except as the Bank may otherwise agree, not change or fail to enforce the Financial Rehabilitation Agreement, such contractual arrangements, or any provision thereof. Section 3.06. The Guarantor specifically undertakes that it shall: (i) review the progress of carrying out the Ten-Year Investment Plan with the Bank and CFE by September 1 of each year during implementation of the Project, in order to ensure, among other things, adequate consideration of economic and financial factors as well as compatibility with the Guarantor's macroeconomic policies; and (ii) take all measures necessary or appropriate to ensure compliance by CFE with its investment and other obligations under Sections 4.02, 4.03 and 4.04 of the Project Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Guarantor shall maintain, or cause to be maintained, separate records and accounts adequate to reflect, in accordance with sound accounting practices, the operations, resources and expenditures in respect of Part C of the Project of the departments or agencies of the Guarantor responsible for carrying out such Part of the Project. (b) The Guarantor shall: (i) have the accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with generally accepted auditing Page 4 standards and procedures consistently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six 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 accounts and the audit thereof and said records 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 Guarantor shall: (i) maintain, or cause to be maintained, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain or cause to be retained, 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 separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, 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. ARTICLE V Representative of the Guarantor; Addresses Section 5.01. The Director General de Captacion de Credito Externo of the Secretaria de Hacienda y Credito Publico 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: Direccion General de Captacioo Credito Externo Secretaria de Hacienda y Credito Publico Palacio Nacional Primer Patio Mariano, 4o Piso 06066 Mexico, D.F. Mexico Cable address: Telex: 1777313 SHDCME For the Bank: International Bank for Page 5 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. UNITED MEXICAN STATES By /s/ Pedro Aspe Armella Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ S. Shahid Husain Regional Vice President Latin America and the Caribbean