Columbia - Emergency Sector Technical Assistance Project : Loan 3827 - Loan Agreement - Conformed

LOAN NUMBER 3827-CO Loan Agreement (Enegy Seeor Technical Assistance Project) befiw~e REPUBLIC OF COLOMBIA and INTERNATIONAL BANK FOR RECONSTRUCION AND DEVELOPMENT Dated 7 , 1995 LOAN NUMBER 3827-CO LOAN AGREEMENT AGREEMENT, dated 3 4d- /9 , 1995, between REPUBLIC OF COLOMBIA (the Borrower) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Baik). WHEREAS the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project; and WHEREAS the Bank has agreed to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; 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 set forth below (the General Conditions) constitute an integral part of this Agreement: (a) The last sentence of Section 3.02 is deleted. (b) In Section 6.02, subparagraph (k) is relettered as s'bparagraph (1) and a new subparagraph (k) is added to read: "(k) An extraordinary situation shall have arisen under which any further withdrawals under the Loan would be inconsistent with the provisions of Article III, Section 3 of the Bank's Articles of Agreement." Section 1.02. Unless the context 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) "Coordinating Group" means a group to be charged with providing overall orientation to the Project and guidance to the Executing Unit (as the term is defined below), and established pursuant to the provisions of Section 5.01 (a) of this Loan Agreement with one representative of each of the Borrower's DNP, MME and the Energy Regulatory Commission, as the 3 terms are defined below; -2- (b) "DNP" means the Borrower's Departamento Nacional de Planeaci6n (National Department of Planning); (c) "Energy Regulatory Commission" means Comisi6n de Regulaci6n de Ener.Jay Gas, the Commission established, as an Administrative Special Unit (nidad Administrativa Esyecial), within MME, by the relevant provisions (particularly Title III, Chapter III) of the Borrower's Decree No. 2119 dated December 29, 1992, issued pursuant to the provisions of Transitory Article 20 of the Borrower's Constitution and of the Borrower's Law No. 143 of 1994, July 11, (particularly Chapter IV), as said Law was published in the July 12, 1994 issue of the Borrower's Official Gazette; (d) "Executing Unit" means an ad-hoc unit to be attached to the Planning Unit (as defined below), and established and staffed for purposes of the daily administration of the Project, all pursuant to the provisions of Section 5.01 (c) of this Loan Agreement; (e) "Grid Operator" means the separate legal entity resulting from the restructuring of ISA (as the term is defined below) to be effected under Part B.3 of the Project, that, while transmitting electricity, will also handle the dispatch of the transmission system currently being operated by ISA; (f) "Implementation Program" means the program provided for in Schedule 5 to this Loan Agreement pursuant to the provisions of paragraph (b) of Section -.01 of this Loan Agreement; (g) "INEA" means Instituto de Ciencias Nucleares y Enerias Alternativas an entity controlled by the Borrower through MME and established by the Borrower's Decree No. 2119 dated December 29, 1992 issued by the Borrower's Executive Branch pursuant to the provisions of Transitory Article 20 of the Borrower's Constitution; (h) "ISA" means Interconexi6n Eldctrica S.A. a corporation controlled by the Borrower and owned partly by the Borrower and partly by third parties, and currently operating in electricity generation and transmission activities under the Borrower's laws, particularly Law No. 143 referred to in paragraph (c) above; (i) "MME" means the Borrower's Ministry of Mines and Energy, with the functions, powers and responsibilities vested upon it by virtue of the Borrower's Decree No. 2119 and Law No. 143, both referred to in paragraph (c) above; (j) "Planning Unit" means Unidad de Planeaci6n Minero Energ6tica (Mining and Energy Planning Unit), the entity with legal personality and autonomous patrimony and own budgetary resources, established, as an Administrative Special Unit (Unidad -3- Administrativa Especial) under the control of MME, by the relevant provisions (particularly Title III, Chapter IV) of the Borrower's Decree No. 2119 and Law No. 143 (particularly Chapter III), both referred to in paragraph (c) above; and (k) "Project Administration Agreement" means the agreement to be entered into by the Borrower pursuant to the provisions of Section 3.03 (a) of this Loan Agreement. ARTICLE I 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, various currencies that shall have an aggregate value equivalent to the amount of eleven million dollars ($11,000,000), being the sum of withdrawals of the proceeds of the Loan, with each withdrawal valued by the Bank as of the date of such withdrawal. 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 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. The Closing Date shall be December 31, 1999 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 Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Cost of Qualified Borrowings determined in respect of the preceding Semester, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rate applicable during such Interest Period. -4- (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Semester. (c) For the purposes of this Section: (i) "Interest Period" means a six-month period ending on the date immediately preceding each date specified in Section 2.06 of this Agreement, beginning with the Interest Period in which this Agreement is signed. (ii) "Cost of Qualified Borrowings" means the cost, as reasonably determined by the Bank and expressed as a percentage per annum, of the outstanding borrowings of the Bank drawn down after June 30, 1982, excluding such borrowings or portions thereof as the Bank has allocated to fund: (A) the Bank's investments; and (B) loans which may be made by the Bank after July 1, 1989 bearing interest rates determined otherwise than as provided in paragraph (a) of this Section. (iii) "Semester" means the first six months or the second six months of a calendar year. (d) On such date as the Bank may specify by no less than six months' notice to the Borrower, paragraphs (a), (b) and (c) (iii) of this Section shall be amended to read as follows: "(a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Quarter equal to the Cost of Qualified Borrowings determined in respect of the preceding Quarter, plus one-half of one percent (1/2 of 1%). On each of the dates specified in Section 2.06 of this Agreement, the Borrower shall pay interest accrued on the principal amount outstanding during the preceding Interest Period, calculated at the rates applicable during such Interest Period." "(b) As soon as practicable after the end of each Quarter, the Bank shall notify the Borrower of the Cost of Qualified Borrowings determined in respect of such Quarter." "(c) (iii) 'Quarter' means a three-month period commencing on January l,'April 1, July I or October I in a calendar year." Section 2.06. Interest and other charges shall he payable semiannually on February 15 and August 15 in each year. -5- Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE m Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project, through the Executing Unit and under the overall orientation and guidance of the Coordinating Group, with due diligence and efficiency and in conformity with appropriate administrative, environmental, financial, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement. (c) Without limitation upon the provisions of paragraph (a) of this Section, the Borrower shall maintain the Executing Unit, the Coordinating Group, the Energy Regulatory Commission, and the Planning Unit, except for changes thereto which, in the opinion of the Borrower and the Bank shall not adversely affect the carrying out of the Project, until all activities under the Project shall have been completed; and the Borrower shall provide the Executing Unit and the Coordinating Group, promptly as needed, the funds, facilities, services, staff and other resources required for the discharge of their respective powers and responsibilities. For purposes of this paragraph, it shall be deemed that the activities of the Executing Unit under the Projeci shall continue being required until the Bank has received to its satisfaction all reports and information to be furnished to the Bank under this Loan Agreement, particularly those provided for under paragraph (b) of Section 4.01 of this Agreement and under paragraphs (aXiii) and (c) of Section 9.07 of the General Conditions. 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 this Agreement. Section 3.03. (a) For purposes of assisting the Executing Unit in the recruitment, hiring and supervision of the consultant services to be procured under the Project, the -6- Borrower shall, through MME, enter, with an entity acceptable to the Bank, into an agreement on terms and conditions satisfactory to the Bank (the Project Administration Agreement). (b) The Borrower shall comply, and cause the aforesaid entity to comply, with all their respective obligations under the Project Administration Agreement, and unless otherwise agreed with the Bank shall not assign (or agree to the assignment of), amend, abrogate or fail to enforce the Project Administration Agreement or any provision thereof. Section 3.04. Without limitation upon the provision of Section 9.07 of the General Condition, the Borrower shall, through the Executing Unit: (a) furnish to the Bank not later than: (i) August 31 in each year, until the Loan Account has been closed, a forecast of the sources and uses of funds during the next following calendar year; and (ii) a date 30 days after the end of each calendar semester, a report on the results of the Project and on the meeting of the targets set forth in the Implementation Program; (b) at the time of submitting to the Bank each report to be submitted pursuant to the provisions of paragraph (a) (ii) above, review jointly with the Bank the time-table for the Implementation Program, and revise such time-table if so agreed with the Bank; (c) submit to the Bank for comments, promptly upon receipt, all reports and recommendations received by consultants whose services are expected to be financed under the Project, in a manner that shall ensure affording to the Bank an opportunity to seek reasonable clarification or expansion on any aspect of said rtsports or recommendations before the services of the consultants are terminated or the applicable recommendations are put into effect, whichever is earlier; and (d) review jointly with the Bank and the Coordinating Group not later than October 31, 1997 or whenever 50% of the Loan proceeds have been committed, whichever is earlier, all aspects of the Project, with a view to reallocate Project resources in response to the evolving needs of the Project. Section 3.05. (a) Without limitation upon the provisions of Section 3.01 of this Agreement, the Borrower shall ensure at all times for purposes of the carrying out of Part E.2 of the Project, the participation of the gas industry in Colombia, including manufacturers, merchants and service providers, through adequate mechanisms for seeking the widest range of views thereof, including adhesion contracts and/or other contractual -7- arrangements, if and as warranted, to be entered into through the Executing Unit on terms and conditions satisfactory to the Bank; (b) Unless otherwise agreed with the Bank, the Borrower shall not, and shall cause the contracting parties not to, assign, amend, abrogate, waive or terminate such contractual arrangements or any provisions thereof. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain or cause to be maintained records and separate accounts adequate to reflect in accordance with sound accounting practices the operations, resources and expenditures in respect of the Project of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall: (i) have or cause to be had 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 or cause to be furnished to the Bank as soon as available, but in any case not later than four months after the end of each such year, 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 or cause to be furnished 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 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 -8- 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 or cause to be ensured that such records and accounts are included in the annual audit 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. ARTICLE V Effective Date; Termination Section 5.01. 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) the Coordinating Group shall have been established and a procedure for the activities thereof shall have been put into effect, all in form and substance satisfactory to the Bank. (b) the Project Administration Agreement has been entered into and become effective; and (c) the Executing Unit shall have been established in form and substance satisfactory to the Bank, including the entering into contractual arrangements for the purpose between the Borrower, through MME, and the Planning Unit, and the head and key staff thereof, all with qualifications and experience satisfactory to the Bank, have been appointed and have commenced to discharge their respective functions. Section 5.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Project Administration Agreement has been duly executed and delivered on behalf of the Borrower and is legally binding on the Borrower in accordance with its terms. Section 5.03. The date of eem6e-,r 19 , 1995 is hereby specified for the purposes of Section 12.04 of the General Conditions. -9- ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance 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 Cr6dito Pu'blico Carrera 7A, No. 6-45 SantaF6 de Bogoti Colombia Cable address: Telex: MINHACIENDA 44473 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 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) - 10 - 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 Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 5/( <5/oa/ '/ Jatl a 9ar<1 Regional Vice President Latin America and the Caribbean - 11 - 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 expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Computing, 500,000 100% communications and ancillary equipment for the implementa- tion of information systems under Parts A.1 and A.2 of the Project, the strengthening of the dispatch center under Part B.3 of the Project, the strengthening of the Executing and Planning Units, and other goods for the Project agreed from time to time between the Borrower and the Bank (2) Consultants' 9,500,000 100% services - 12 - Amount of the Loan Allocated % of (Expressed in Expenditures Categorv Dollar Equivalent) to be Financed (3) Training, work- 600,000 100% shops and services (other than consultants') under Parts A.1, A.2 B.3, D.1,D.3 and D.4 of the Project (4) Fees of the entity 400,000 100% referred to in Section 3.03 (a) of this Loan Agreement payable under the Project Administration Agreement TOTAL 11,000,000 - 13 - 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $1,000,000, may be made on account of payments made for expenditures before that date but after July 31, 1994; (b) expenditures under Categories (1) and (2) of the table set forth in paragraph 1 above incurred in respect of third parties whose assistance under contractual arrangements is to be secured for purposes of the carrying out of Part E.2 of the Project, if and when it has been determined that the contractual arrangements stipulated to be entered into pursuant to Section 3.05 (a) of this Agreement are warranted, unless said arrangements have been entered into in form and substance satisfactory to the Bank; and (c) expenditures under Category (3) of the aforesaid table unless the expenditures in question have been included in a training plan submitted by the head of the Executing Unit and approved by the Bank. 3. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for such expenditures for goods and services under contracts not exceeding $100,000 equivalent and which are not subject to the Bank's prior review according to the provisions of Schedule 4 to this Loan Agreement, under such terms and conditions as the Bank shall specify by notice to the Borrower. - 14 - SCHEDULE 2 Description of the Project The objectives of the Project are: (a) to implement regulatory reforms by strengthening the newly created Borrower's entities in charge of regulation and energy policy formulation and implementation for the power and gas sub-sectors in order to help them build experience and thereby increase their chances of performing efficiently; (b) to implement strategies specifically designed for the energy sector, respecting environmental concerns and constraints and attracting private investment in the sector; and (c) to develop a demand-side management strategy and assist in its implementation; additionally, the specific objectives of the Project in respect of the power and gas sub- sectors, environmental care and demand-side management are: (d) for the power sub- sector: (i) to achieve the divestment of state-owned assets and/or enterprises; (ii) to attract new private investments for system expansion; and (iii) to execute the institutional reforms required for putting in place a fully competitive market at the generation level; (e) for the gas sub-sector: (i) to assist in developing the industry's structure and regulations for building up a gas market; and (ii) to assist the Borrower in organizing the required institutions; (f) for the environmental care, to develop a consistent set of environmental guidelines for energy sector development; and (g) for demand-side management, to develop standards and guidelines for efficient energy use and to disseminate them among consumers and industries. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objectives: Pg A: Regulation, Pricing and Energy Policy, aimed at fostering competition, consumer protection, and increased private sector participation in the sub-sector and at coping with market failures stemming from monopoly characteristics. 1. Assisting the Energy Regulatory Commission, including training and development and implementation of information systems, in the following areas: (a) in respect of the power sub-sector: (i) price regulation; (ii) consumer protection; (iii) technical matters such as value of lost load, cost analyses, financial analyses, codes and norms for distribution concessionaires, network charges and operation of the interconnected system; (b) in respect of the gas sub-sector: (i) comprehensive models for trading licenses and contracts for purchase, sale and transportation of gas; (ii) establishment of price levels for regulated gas consumers and setting use-of-system charges; and (iii) identifying principles which will govern the terms and conditions to be observed by users of the gas transportation system, and accounting arrangements for gas utilities; (c) establishment of decision - 15 - making procedures to be observed by the Energy Regulatory Commission in matters such as instituting regulatory proceedings and defining the legal instruments required to issue binding regulatory decisions and to secure the enforcement thereof; and (d) such other areas related to the sector, and topics and issues within the preceding areas, as the Borrower and the Bank may agree upon from time to time. 2. Assisting the Planning Unit, including training and development and implementation of information systems, in the following areas: (a) organization of the said Unit and of its staff, including: (i) assessment of its human resources, staff and infrastructure requirements; (ii) defining the Unit's scope for involvement in specific projects to support the plan referred to in (b) (ii) below and their budgetary requirements and the Unit's analysis procedures for structuring such plan; (iii) defining the Unit's analysis procedures for the structuring of the gas sub-sector development plan; (iv) building environmental constraints, costs and trade-offs into the plans referred to in (b) (ii) below and in (a) (iii) above; (v) assisting in the development of the strategy referred to in (b) (ii) below; (vi) assessing alternative structures for the oil sub-sector; and (vii) addressing other policy areas such as distribution and electrification plans; (b) tackling the following issues: (i) defining the governmental role in assuring energy supplies, particularly electricity, (ii) defining the procedures to be followed for structuring an energy strategy for the Nation and a plan for the expansion of the electricity sub-sector; (iii) defining the scope of governmental action regarding the response of electricity utilities and private sector enterprises to generation plant installations so as to ensure that the plan mentioned in 2 (a) (iii) above retains an indicative nature; (iv) addressing development and social-related issues such as coverage extension policies, rural electrification and electricity supplies to isolated communities; (v) addressing the question .of market structure in the oil sub-sector and possible restructuring requirements; (vi) developing expertise for the formulation of a gas sub-sector expansion plan; and (vii) introducing the environmental dimension into sector planning; and (c) such other areas, or topics or issues within the preceding areas, as the Borrower and the Bank may agree upon from time to time. Part B: Electricity Sub-sector Assistance, aimed at implementing sub-sector strategies and policies, completing the legal and regulatory reform of the energy sector, and providing assistance in the process of attracting private sector capital for new investments in the sub-sector. 1. Assisting the Borrower's Ministry of Finance in the process of divestment of selected government-owned assets in the sub-sector by providing said Ministry with options for divestment of each power plant, advising in methods for marketing and promoting the divestment according to the preferred option for the case in question, and providing advisory services to the Borrower in connection with the competitive divestiture - 16 - process, including bidding, if any, and in the negotiation with the successful bidders and/or purchasers of the plant in question, in the preparation of all aspects, including contracts, related to the divestiture. 2. Assisting MME, and through it, any power company involved in promoting a project for the expansion of generation capacity to be handled by the private sector, in carrying out pre-feasibility or feasibility studies for any such project, or in procuring advisory services to assist the company in question in the preparation of tenders soliciting private sector participation in such project, or in bid evaluation or negotiation, or such other tasks as agreed upon from time to time between the Borrower and the Bank. 3. Assisting, including training, the Grid Operator by providing advisory services that will also assist ISA and the Borrower's Ministry of Finance and MME in the process of reorganizing ISA into separate corporations, one that will handle separately generation activities and the other to fulfill the functions of a network operator that will handle system dispatch under the new wholesale market rules, transactions clearing, system security, transmission maintenance and, possibly, support for the Planning Unit. Part C: Gas Sub-sector Assistance, aimed at promoting substitution of gas for electricity, maximization of private sector involvement in competitive terms and protecting the interest of smaller consumers. 1. Development of a plan for the implementation of a new gas industry structure with private sector participation. 2. Establishment of a mixed capital entity in charge of planning gas-related investments, promoting the development of new gas pipelines, participating in the investments and in the operation of critical portions of the gas network, and implementing governmental policy for the gas sub-sector. Part D: Environment Protection Enhancement, aimed at developing a consistent set of guidelines which will constitute an appropriate base for future sectoral environmental regulations to be designed by the Borrower's Ministry of the Environment. 1. Execution of sectoral environmental assessments for the purpose of establishing environmental guidelines to develop a sectoral environmental plan, and development of said plan and of regulatory and/or institutional measures, particularly taking into account the role of the private sector, including, but not limited to, reviewing and consolidating existing regulations into a consistent framework, identifying the main environmental problems caused by energy projects, developing environmental operating guidelines for planning purposes, developing standard relocation procedures and guidelines and - 17 - methodologies for costing environmental and socioeconomic consequences of energy projects, and integrating them with project appraisal and analysis. 2. Execution of environmental assessments related to specific projects at their feasibility and pre-feasibility level to be selected by the head of the Executing Unit and carried out under arrangements satisfactory to the Bank. 3. Training of personnel for the development of key environmental management skills such as environmental impact assessment and environmental auditing, data base development and management, development of environmental information systems and library services and environmental education and awareness programs. 4. Organization of workshops and seminaries to disseminate the relevant policies and regulatory information to the concerned industries and government officers. Part E: Energy Demand Management and Safety Enhancement, aimed at providing information to energy consumers so that they may make more and better informed decisions on its use. 1. Designing, in cooperation with INEA, an energy demand side management strategy with the purpose of using it as a tool to achieve energy conservation, rational utilization of energy resources and efficient resource and investment allocation. The design in question, which presupposes the implementation of an efficient energy pricing policy, shall include the updating of the information on consumer characteristics and behavior as well as on consumer equipment, the evaluation of potential savings and the prioritization of areas for action, and the identification of causes of market failure which are an obstacle to the efficient use of energy. 2. Reviewing and, if warranted, revising or formulating, as the case may be and for the gas sub-sector, standards for material and equipment, design parameters, and installation and operational procedures and standards for gas quality and supply, all in cooperation with the gas industry and using international gas standards and codes as the basis. The Project is expected to be completed by June 30, 1999. - 18 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* August 15, 1999 265,000 February 15, 2000 275,000 August 15, 2000 285,000 February 15, 2001 295,000 August 15, 2001 305,000 February 15, 2002 315,000 August 15, 2002 325,000 February 15, 2003 340,000 August 15, 2003 350,000 February 15, 2004 360,000 August 15, 2004 375,000 February 15, 2005 390,000 August 15, 2005 400,000 February 15, 2006 415,000 August 15, 2006 430,000 February 15, 2007 445,000 August 15, 2007 460,000 February 15, 2008 480,000 August 15, 2008 495,000 February 15, 2009 515,000 August 15, 2009 530,000 February 15, 2010 550,000 August 15, 2010 570,000 February 15, 2011 590,000 August 15, 2011 610,000 February 15, 2012 630,000 * 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. - 19 - Premiums on Prepayment Pursuant to Section 3.04 (b) of the General Conditions, the premium payable on the principal amount of any maturity of the Loan to be prepaid shall be the percentage specified for the applicable time of prepayment below: Time of Prepayment Premium The interest rate (expressed as a percentage per annum) applicable to the Loan on the day of prepayment multiplied by: Not more than three years 0.18 before maturity More than thiee years but 0.35 not more than six years before maturity More than six years but 0.65 not more than eleven years before maturity More than eleven years but not 0.88 more than fifteen years before maturity More than fifteen years before 1.00 maturity - 20 - SCHEDULE 4 Procurement and Consultants' Services Section 1. Procurement of Goods and Works Part A: International CoMpetitive Bidding Except as provided in Part C hereof, goods shall be procured under contracts awarded 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 1992 (the Guidelines), and in accordance with the following additional procedures: (a) When contract award is delayed beyond the original bid validity period, such period may be extended once, subject to and in accordance with the provisions of paragraph 2.59 of the Guidelines, by the minimum amount of time required to complete the evaluation, obtain necessary approvals and clearances and award the contract. The bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. With respect to each contract made subject to the Bank's prior review in accordance with the provisions of Part E.1 (a) of this Section, the Bank's prior approval will be required for: (i) a first extension of the bid validity period if the period of extension exceeds sixty (60) days; and (ii) any subsequent extension of the bid validity period. (b) In the procurement of goods in accordance with Parts A and C of this Section, the Borrower shall use the relevant standard bidding documents issued by the Bank, with such modifications thereto as the Bank shall have agreed to be necessary for the purposes of the Project. Where no relevant standard bidding documents have been issued by the Bank, the Borrower shall use bidding documents based on other internationally recognized standard forms agreed with the Bank. Part B: Preference for Domestic Manufacturers F. the procurement of goods in accordance with the procedures described in Part A hereof, goods manufactured in Colombia may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. - 21 - Part C: Other Procurement Procedures Goods to be financed under Category (1) of the table set forth in paragraph I of Schedule 1 to this Loan Agreement which cannot be grouped in packages estimated to cost the equivalent of $150,000 or more, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of qualified suppliers eligible under the Guidelines whose number shall have been agreed with the Bank and in accordance with the procedures set forth in Sections I and II of the Guidelines (ekcluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). Part D: Other Procurement Provisions Without limitation upon the provision of the Guidelines, in respect of procurement of goods under Part A of this Schedule and, only in respect of (f) below, under Parts A and C thereof: (a) no requirements shall be made of local agents for foreign bidders, or for certification by Colombian consular authorities of translations into Spanish of support documentation in cases where the bidder assumes the responsibility for errors of the translation in question; (b) no prior registration of foreign bidders shall be required; (c) no provision regarding minimum number of bidders shall be applied; (d) bids shall be evaluated on a cost, insurance, freight (c.i.f.) basis; (e) freight costs quoted by each bidder shall be used for purposes of bid evaluation; and (f) awards shall be made to the lowest evaluated bidders, and no bidder shall be disqualified because the price of the corresponding bid falls above or below a predetermined given value, unless otherwise agreed with the Bank, or out of a post-bid- presentation-determined price band. 2. Unless otherwise agreed between the Borrower and the Bank, and notwithstanding the provisions of Part A (b) of Section I and of paragraph I of Section II, both of this Schedule, the Borrower shall invite bids in regard to the procurement of goods for the Project under Part C of this Schedule exclusively on the basis of standard documents - 22 - agreed with the Bank from time to time and shall inform the Bank on any proposed departure from said documents before any such tender is made public. Part E: Review by the Bank of Procurement Decisions 1. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for goods estimated to cost the equivalent of $100,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply. (b) With respect to each contract not governed by the preceding paragraph, if any, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which withdrawals from the Loan Account are to be made on the basis of statements of expenditure. 2. The figure of 10% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Emloyment of Consultants 1. In order to assist the Borrower in the carrying out of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981 (the Consultant Guidelines). Vor complex, time-based assignments, the Borrower shall employ such consultants under contracts using the standard form of contract for consultants' services issued by the Bank, with such modifications as shall have been agreed by the Bank. Where no relevant standard contract documents have been issued by the Bank, the Borrower shall use other standard forms agreed with the Bank. 2. Notwithstanding the provisions of paragraph I of this Section, the provisions of the Consultant Guidelines requiring prior Bank review or approval of budigets, short lists, selection procedures, letters of invitation, proposals, evaluation reports and contracts, shall not apply to contracts for the employment of consulting firms estimated to cost less than $100,000 equivalent each. However said exceptions to prior Bank review shall not apply - 23 - to: (a) the terms of reference for such contracts; (b) single-source selection of consulting firms; (c) assignments of a critical nature, as reasonably determined by the Bank; or (d) amendments to contracts for the employment of consulting firms raising the contract value to $100,000 equivalent or above. - 24 - SCHEDULE 5 Implem ntation Program Activities under the Project and dates for expected completion of each activity: Part A.1 of the Project 1. Development and testing of December 31, 1997 software for information systems to be used for regulatory purposes, and putting the systems into effect 2. Development of models for cost estimation and financial impact assess- ment, including: (a) official publication December 31, 1995 of electricity pricing formulae; and (b) official publication July 31, 1996 of gas pricing formulae 3. Establishment and putting January 31, 1997 into effect of audit prin- ciples and procedures for regulatory reviews of utilities, including completion of review of at least one utility -25 - Part A.1 of the Project 4. Development of norms governing transmission and distribution acti- vities to ensure open access to grids, includ- ing: (a) promulgation of December 31, 1995 norms for power sub-sector (power codes); and (b) promulgation of December 31, 1996 norms for gas sub-sector (gas codes) 5. Development of service standards and customer liaison procedures, in- cluding official publi- cation and dissemination thereof: (a) for power sub-sector; October 31, 1996 and (b) for gas sub-sector October 31, 1997 Part A.2 of the Project 6. Completion of a work program December 31, 1995 for the assessment of Planning Unit's role and requirements 7. Publication of a compre- December 31, 1995 hensive energy strategy - 26 - Part A.2 of the Project 8. Development, testing December 31, 1997 and operation of energy information systems, and publica- tion of first set of statistics processed through said systems 9. Publication of indicative December 31 of plans for power and gas each year, com- subsectors mencing in 1995 for power and 1996 for gas Part B.3 of the Project 10. Creation of Grid December 31, 1995 Operator, satisfactory operation of dispatch and clearing house func- tions thereof, and implementation of separate accounting systems for Grid Operator and genera- tion company Part C.1 of the Project 11. Completion December 31, 1996 PRt C.2 of the Project 12. Completion December 31, 1997 - 27 - Parts D.1 and D.2 of the Project 13. Development and publication July 31, 1998 of an energy sector environ- mental policy and an environ- mental action plan 14. Putting into effect of December 31, 1998 environmental enabling norms concerning all acti- vities related to the pro- duction or generation of electricity and natural gas and to the transmission, distribution or transporta- tion thereof and their supply to ultimate consumers 15. Publication of operating December 31, 1998 guidelines for the energy sector in respect of solid waste disposal, liquid effluent and air emission control, and post-closure remediation Part E.1 of the Project 16. Completion December 31, 1997 Part E.2 of the Project 17. Publication of gas quality December 31, 1997 supply standards 18. Publication of standards December 31, 1998 for materials and equip- ment 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 International Bank for Reconstruction and Development. FOR SECRETARY SOO