Ecuador - Third Power Project : Credit 0286 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 286 EC Development Credit Agreement (Third Power Project) BETWEEN REPUBLIC OF ECUADOR AND INTERNATIONAL DEVELCPMENT ASSOCIATION DATED FEBRUARY 15, 1972 CONFORMED COPY CREDIT NUMBER 286 EC Development Credit Agreement (Third Power Project) BETWEEN REPUBLIC OF ECUADOR AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED FEBRUARY 15, 1972 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated February 15, 1972, between REPUBLIC OF ECUADOR (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of a part of the foreign exchange cost of the Project described in Schedule 2 to this Development Credit Agreement by extending the Credit as hereinafter provided; (B) The Project will be carried out by Empresa Elkctrica "Quito" S.A. with the Borrower's assistance and, as part of such assistance, the Borrower will make available to Empresa Electrica "Quito" S.A. the proceeds of the Credit as hereinafter provided; and (C) The Association is willing to make the Credit available upon the terms and conditions set forth hereinafter and in a project agreement of even date herewith between the Association and Empresa Electrica "Quito" S.A., NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Development Credit Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the following modifications thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions): (a) Section 5.01 is deleted; (b) Section 6.02 (h) is deleted and Section 6.02 (i) becomes 6.02 (h); and (c) the words ", the Project Agreement" are inserted after the words "the Development Credit Agreement" wherever they occur in Section 6.06 and 8.02. 4 Section 102. Wherever used in this Development Credit Agreement, 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 fol!-wing meanings: (a) "Project Agreement" means the agreement between the Association and Empresa Elctrica "Quito" S,A. of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and Emp;esa Electrica "Quito" S.A. pursuant to Section 3.01 (c) of this Development Credit Agreement, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Subsidiary Loan Agreement; (c) "the Company" means Empresa Eldctrica "Quito" S.A., an instrumentality of the Borrower, established and authorized to do business in accordance with the laws of the Borrower, on October 25, 1955; (d) "Escritura" means the Escritura de Constitui6n of the Company, a public deed dated September 29, 1955, providing for the creation of the Company; (e) "Estatutos" means the estatutos of the Company, dated October 25, 1955; (f) "Prior Loan Agreements" means the loan agreements between the Bank and the Company, dated March 29, 1956 and September 20, 1957, respectively; and (g) "Mortgage" means an "hipoteca de primer grado " under the laws of the Borrower, provided for in Section 4.04 of the Project Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in this Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to six million eight hundred thousand dollars ($6,800,000). 5 Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule I to this Development Credit Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed under this Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services required for the Project and to be financed out of the proceeds of the Credit shall be procured pursuant to the provisions set forth or referred to in Section 2.04 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1974, or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semi-annually on March 15 and September 15 in each year. Section 2.07. (a) The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each March 15 and September 15 commencing March 15, 1982, and ending September 15, 2021, each installment to and including the installment payable on September 15, 1991 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. (b) In the event the Company repays to the Borrower any portion of the proceeds of the Credit relent under the Subsidiary Loan Agreement in advance of maturity, the Borrower shall promptly notify the Association and shall repay to the Association on the next following payment date an amount of the principal of the Credit equal to the portion of the proceeds so repaid. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. 6 Section 2.09. The Company 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 Development Credit Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall cause the Company to carry out the Project with due diligence and efficiency, under competent management and in conformity with sound financial, engineering and public utility practices, and shall provide, or cause the Company to be provided with, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) Without limiting the generality of the foregoing, the Borrower shall obtain, or enable the Company to obtain, from time to time whenever necessary, such other loans or other financial accommodations, on terms and conditions acceptable to the Association, to finance such expenditures to be incurred by the Company in the carrying out of the Project as shall not be financed out of the proceeds of the Credit. (c) The Borrower shall relend the proceeds of the Credit to the Company under a subsidiary loan agreement to be entered into between the Borrower and the Company under terms and conditions which shall have been approved by the Association. (d) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit and, except as the Association shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (e) The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to enable the Company to perform all of its obligations under the Project Agreement and the Subsidiary Loan Agreement and shall not take or permit to be taken any action which might interfere with such performance. 7 ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall take all steps necessary on its part to enable the Company to maintain such rates for the sale of electric power as shall be required for the Company to comply with the provisions of Section 4.05 (a) of the Project Agreement. (b) Without limiting the generality of the foregoing, and except as the Association shall otherwise agree, the Borrower shall not, before June 30, 1974, cause the Company to reduce such rates for the sale of electric power as were in effect on January 1, 1972. (c) The provisions of this Section shall supersede all prior agreements between the Borrower and the Bank concerning the Company's rates for the sale of electric power. ARTICLE V Consultation, Information and Inspection Section 5.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement and the Subsidiary Loan Agreement, the performance by the Company of its obligations under the Project Agreement and the Subsidiary Loan Agreement, the administration, operations and financial condition, resources and expenditures of the Company and, in respect of the Project, of the departments or agencies of the Borrower other than the Company responsible for carrying out the Project or any part thereof, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of any of its political subdivisions and of any agency of the Borrower or of any such political subdivision. 8 Section 5.02. (a) The Borrower shall furnish or cause to be furnished to the Association all such information as the Association shall reasonably request concerning the operations and financial condition, resources and expenditures of the Company and, in respect of the Project, of the departments or agencies of the Borrower other than the Company responsible for carrying out the Project or any part thereof. (b) The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by either of them of their respective obligations under this Development Credit Agreement, or the performance by the Borrower or the Company of its obligations under the Project Agreement and the Subsidiary Loan Agreement. Section 5.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to inspect all plants, installations, sites, works, buildings, property and equipment of the Company and any relevant records and documents and to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE VI Taxes and Restrictions Section 6.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 6.02. This Development Credit Agreement, the Project Agreement and the Mortgage shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 6.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. 9 ARTICLE VII Remedies of the Association Section 7.01. If any event specified in Section 7.01 of the General Conditions or in Section 7.03 of this Development Credit Agreement shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in this Development Credit Agreement notwithstanding. Section 7.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: (a) a default shall have occurred in the payment of principal or interest or any other payment required under the Subsidiary Loan Agreement; (b) a default shall have occurred in the performance of any other obligation (i) on the part of the Company, under the Project Agreement or under the Subsidiary Loan Agreement, or (ii) on the part of the Borrower, under the Subsidiary Loan Agreement; (c) the Company shall have become unable to pay its debts as they mature or any action or proceeding shall have been taken by the Company or by others whereby any of its property or assets shall or may be distributed among, or administered for the benefit of, its creditors; (d) any creditor of the Company shall have demanded payment of monies lent to the Company, prior to the agreed maturity of any loan having an original maturity of one year or longer, in accordance with the terms of such loan; (e) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Company or for the suspension of its operations; (f) the Decreto Supremo No. 86 of the Borrower, dated January 20, 197 1, shall have been amended, suspended, abrogated, repealed or waived in such a way as to materially and adversely affect the ability of the 10 Company to carry out the covenants, agreements and obligations set forth in the Project Agreement and the Subsidiary Loan Agreement; (g) an extraordinary situation shall have arisen which shall make it improbable that the Company will be able to perform its obligations under the Project Agreement or under the Subsidiary Loan Agreement. Section 7.03. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified: (a) Any event specified in paragraph (a) of Section 7.02 of this Development Credit Agreement shall occur and shall continue for a period of thirty days after notice thereof shall have been given by the Association to the Borrower and the Company; (b) Any event specified in paragraph (b) or in paragraph (f) of Section 7.02 of this Development Credit Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower and the Company; (c) Any event specified in paragraph (c), or in paragraph (d), or in paragraph (e) of Section 7.02 of this Development Credit Agreement shall occur. ARTICLE VIII Effective Date; Termination Section 8.01. The following events are specified as additional conditions to the effectiveness of this Development Credit Agreement within the meaning of Section 10.01 (b) of the General Conditions: (a) The execution and delivery of the Project Agreement on behalf of the Company have been duly authorized or ratified by all necessary corporate and governmental action. (b) The execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and the Company, respectively, have been duly authorized or ratified by all necessary corporate and governmental action. (c) Contractual arrangements, satisfactory to the Association, providing for financing as required by Section 3.01 (b) of this Development Credit Agreement 11 and by Section 2.01 (b) of the Project Agreement have been maue initially to satisfy the provisions of such Sections. (d) The consultants referred to in Section 2.02 (a) (ii) :nd (iii) of the Project Agreement have been employed by the Compaiiy. (e) The Escritura and the Estatutos have been amended by the Company's shareholders in accordance with the proposal referred to in S-ction 3.03 of the Project Agreement and such amendments have been duly authorized or ratified by all necessary corporate and governmental action. (f) The Mortgage has been created, filed, registered and recorded as provided in Section 4.04 (a) and (b) of the Project Agreement. (g) Arrangements satisfactory to the Association, to enter into force not later than January 1, 1972, have been made concerning the provision by the Company of street lighting service within the city of Quito and payment therefor to the Company. (h) Contractual arrangements between the Municipalidad de Quito and the Company, on terms and conditions satisfactory to the Association, concerning the . transfer, after December 31, 1970, of all power distribution facilities of the Municipalidad de Quito to the Company have been made and all acts, consents and approvals required in connection therewith have been duly and validly performed or given. (i) The condition of the Company, as represented or warranted t. the Association at the date of this Development Credit Agreement, has undergone no material adverse change between such date and the date agreed upon between the Association and the Company for the purposes of this Section. Section 8.02. The following are specified as additional matters, within the meaning of Section 10.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) That the Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Company, and constitutes a valid and binding obligation of the Company in accordance with its terms. (b) That the Subsidiary Loan Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and the 12 Company, respectively, and constitutes a valid and binding obligation of the Borrower and the Company in accordance with its terms. (c) That the contractual arrangements referred to in Section 8.01 (c) of this Development Credit Agreement have been duly authorized or ratified by, and executed and delivered on behalf of, the Company and all other parties thereto, respectively, and constitute valid and binding obligations of the Company and such parties in accordance with their respective terms. (d) That the Mortgage has (i) been duly executed and delivered; (ii) been duly filed, registered and recorded in all jurisdictions or offices; and (iii) created a valid lien in favor of the Bank under the laws of the Borrower, enforceable in accordance with its terms, all in accordance with Section 4.04 (a) and (b) of the Project Agreement; and that as of the date of filing, registration or recording thereof the Company had valid title to the property included therein free of all liens and encumbrances other than the lien arising therefrom. Section 8,03. The date of May 15, 1972, is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 8.04. The obligations of the Borrower under Sections 4.01 (b), 4.02 and 5.02 of this Development Credit Agreement and the provisions of Sections 7.02 and 7.03 of this Development Credit Agreement shall cease and determine on the date on which this Development Credit Agreement shall terminate or on the date when the Subsidiary Loan, together with interest and all other charges accrued thereon, shall have been paid, whichever shall be the earlier. ARTICLE IX Representative of the Borrower; Addresses Section 9.01. The Ministro de Finanzas of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions, Section 9.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Ministerio de Finanzas Quito, Ecuador 13 Cable address: Minfinanzas Quito, Ecuador For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Development Credit Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF ECUADOR By /s/ A. Salgado G. Authorized Representatibe INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M.Shoaib Vice President 14 SCHEDULE I Withdrawal of the Proceeds of the Credit 1. The table below sets forth the categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each category and the percentage of eligible expenditures so to be financed in each category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Civil Works (a) Nay6n plant 900,000 36% of total ex- penditures (rep- resenting the estimated for- eign expenditure component) (b) Cumbayd by-pass 400,000 40% of total ex- penditures (rep- resenting the estimated for- eign expenditure component) (c) Equipment, ma- 100,000 100% of foreign terials and expenditures tools II. Diesel Plant Equipment, materials 2,600,000 100% of foreign and associated ser- expenditures vices 15 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed II. Transmission and Distribution System Line switching and 1,450,000 substation equipment, including transformers; cement, reinforcing steel and structural steel for poles; dis- tribution and street lighting equipment, including transformers; and materials and as- sociated services: (a) produced outside 100% of foreign the territories expenditures of the Borrower (b) produced within 40% of local ex- the territories penditures (rep- of the Borrower resenting the estimated for- eign expenditure component) IV. Consultants' Services (a) Engineering super- 170,000 100% of foreign vision for civil expenditures works (b) Consultant ser- 580,000 100% of foreign vices for studies expenditures and management assistance V. Unallocated 600,000 TOTAL 6,800,000 16- 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; (b) the term "local expenditures" means expenditures in the currency of the Borrower, or for goods produced in, or services supplied from, the territories of the Borrower; and (c) the term "total expenditures" means the aggregate of foreign and local expenditures. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Development Credit Agreement, except that withdrawals may be made in respect of Categories I (a) and II on account of expenditures incurred after March 15, 1971, in an aggregate amount not exceeding the equivalent of $1,400,000; and (b) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph I above: (a) if the estimate of the expenditures under any Category shall decrease, the amount of the Credit then allocated to such Category and no longer required therefor will be reallocated by the Association by increasing correspondingly the unallocated amount of the Credit; (b) if the estimate of the expenditures under any Category shall increase, the percentage set forth in the third column of the table in paragraph I above in respect of such expenditures shall be applied to the amount of such increase, and a corresponding amount will be allocated by the Association, at the request of the Borrower, to such Category from the unallocated amount of the Credit, A 17 subject, however, +o the requirements for contingencies, as determined by the Association, in respect of any other expenditures. 5. Notwithstanding the percentages set forth in the third column of the table in paragraph I above, if the estimate of total expenditures under Category I (a) and (b) or of local expenditures under Category III (b) shall increase and no proceeds of the Credit are available for reallocation to such Category, the Association may, by notice to the Borrower, adjust the percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 18 SCHEDULE 2 Description of the Project The Project consists of the following Parts: A. Construction of a hydro-electric plant on the Rio San Pedro at Nay6n with an installed generating capacity of about 30 MW, comprising intake, tunnel, headtank, penstock, power house, tailrace and personnel housing; and the Cuimbayd by-pass, comprising access road, intake, tunnel, sedimentation basin and outlet. B. Construction of a new diesel plant in the city of Quito with an installed generating capacity of about 18 MW. C. Construction of a 46 kV transmission line from the Nay6n plant to Curnbayd and the city of Quito and the completion of the 46 kV ring system around the city of Quito, including substations; conversion from 22 kV to 46 kV of the existing transmission line from Los Chillos to Guangopolo; and improvement of the existing 46 kV transmission line from Guangopolo to Quito. D. The Company's 1971-1974 program of renovation, strengthening and expansion of the distribution system in the Cant6n Quito, including street lighting in the city of Quito and village electrification in the Nono-Gualea-Pacto and the San Jose de Minas areas. E. 1. A study for the next stage of the Company's generation program. 2. Review of the Company's tariffs structure. 3. Technical assistance to the Company in the fields of management and administration. 4. A network and load dispatch center feasibility and preliminary engineering study. 5. Such phases of the village electrification study, referred to in Section 2.09 of the Project Agreement, as the Ascociation and the Company shall agree to include in the Project. The Project is expected to be completed by June 30, 1974.