Conformed Copy - L3954 - Power Market Development Project - Supplemental Letter 3

Page 1 March 26, 1996 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C., 20433 United States of America Re: Loan No. 3954-CO (Currency Pool) Loan No. 3955-CO (Floating Rate Single Currency) (Power Market Development Project) Representations Dear Sirs: In connection with each of the Loan Agreements of even date herewith between International Bank for Reconstruction and Development (the Bank) and Interconexion Electrica S.A. "E.S.P." (ISA) for the above Project, we hereby undertake and warrant to the Bank that: 1. The financial statements of ISA as of December 31, 1995, as certified by its accountants which have been furnished to the Bank, correctly set forth its financial condition as of such date and that, since such date, there has been no material adverse change in its financial condition. 2. ISA is not engaged in litigation as plaintiff or defendant, the outcome of which might materially and adversely affect its financial condition or its corporate structure. 3. ISA has no outstanding agreements or liabilities, contingent or otherwise (including tax liabilities) which might materially and adversely affect its financial condition or its corporate structure. 4. Except in respect of some taxes, labor charges, debts to personnel, and the Loans FEX-003, FEX-011 and Nacion - BID - 687 (see Annex) no debt of ISA is secured by any mortgage, pledge, charge, priority or other lien, and no contract or arrangement exists for the creation of any such mortgage, pledge, charge, priority or other lien. 5. There are no existing defaults in repayment of principal of, or interest or other charges on, any of the debts of ISA. 6. ISA is not in violation of, and the execution and delivery of the Loan Agreements and compliance with all their terms do not and will not result in any violation of, its statutes (as the term is defined in the Loan Agreement) or any existing contract or agreement or of any provision of any statute, law, decree-law, executive decree, or other governmental or legal rule or regulation presently in effect and applicable to ISA. 7. ISA is a duly created and existing autonomous entity under the laws of Colombia with full authority to carry out its present business, to execute and deliver the Loan Agreements and to comply with all the terms and conditions thereof, and has furnished to the Bank true and complete copies of its Statutes and other basic corporate instruments, as amended up to the date of the Loan Agreements. 8. ISA has heretofore disclosed in writing to the Bank all agreements material to the Loan Agreements and all other facts and circumstances which may materially affect the carrying on of the ISA's business, its corporate structure, the Project or compliance by ISA with the laws of Colombia or of its obligations under each of the Loan Agreements. It is our mutual understanding that in making the Loan to ISA, the Bank may rely on the representations contained herein. Page 2 Very truly yours, INTERCONEXION ELECTRICA S.A. "E.S.P." (ISA) By /s/ _______________________________ Authorized Representative ANNEX (*) Loans which are in period of disbursements and repayment. (**) Open-end Pledge on Bucaramanga-Ocana-Cucuta line will be constituted. (***) The expected maximum outstanding could be greater due to financial expenses. Types of liens: (1) Pledge on ISA's general income in an amount equivalent to 120% of each semi-annual debt service payment. In order to determine the value of the general income to be pledged in respect of each semi-annual debt service payment, it is necessary to exclude therefrom the amount of interest and other charges financed out of the proceeds of the credit. This exclusion will take place while interest and other charges are financed under such credit. (2) Open-end pledges on the specific assets possessed by ISA and financed out of the proceeds of the credit, which assets are secured with the corresponding pledge. Each pledge on specific assets gradually replaces the initially constituted pledge on general income. Each pledge on specific assets is registered with the Chamber of Commerce.