Philippines - Seventh Power Project : Loan 1460 - Guarantee Agreement - Conformed

CONFORMED COPY LOAN NUMBER 146o PH Guarantee Agreement (Seventh Power Project) between REPUBLIC OF THE PHILIPPINES and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated August 9, 1977 GUARANTEE AGREEMENT AGREEMENT, dated August 9, 1977, between REPUBLIC OF THE PHILIPPINES (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). WHEREAS by the Loan Agreement of even date herewith between the Bank and National Power Corporation (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to fifty-eight million dollars ($58,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guar- antee the obligations of the Borrower in respect of such loan as hereinafter provided; and WHEREAS the Guarantor, in consideration of the Bank's enter- ing 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: -2- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guar- antee Agreements of the Bank dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth. - 3- 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 as surety merely, 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, all as set forth in the Loan Agreement. 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 the Borrower will be inade- quate to meet the estimated expenditures required for the carry- ing out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expendi- tures. ARTICLE III Other Covenants Section 3.01. (a) It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on governmental assets. (b) To that end the Guarantor: (i) represents that at the date of this Agreement no lien exists on any governmental assets as security for any external debt except as otherwise disclosed in writing by the Guarantor to the Bank, and (ii) undertakes, that except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto equally and ratably, and at no cost to the Bank, secure the payment of the principal of, and interest and other charges on, the Loan and in the creation of any such lien express provision will be made to that effect. The Guarantor shall promptly inform the Bank of the creation of any such lien. (c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (d) The Guarantor further undertakes that, within the limits of the laws in force in its territories, it will make the foregoing undertaking effective with respect to liens on the assets of its political subdivisions and their agencies, and to the extent that -5- the Guarantor is unable within the limits of the laws in force in its territories to make this undertaking effective, the Guarantor will give to the Bank an equivalent lien satisfactory to the Bank. (e) As used in this Section, the term "governmental assets" means assets of the Guarantor or of any agency of the Guarantor including the Central Bank of the Philippines or any institution performing the functions of a central bank for the Guarantor. Section 3.02. (a) The Guarantor shall take or cause to be taken all necessary action to enable the Borrower to set and main- tain rates at such levels as shall be necessary to meet the re- quirements of Section 5.07 of the Loan Agreement. (b) To help ensure fulfillment of the obligations set forth in paragraph (a) of this Section, the Guarantor shall, at the request of the Bank, review, and consult with the Bank on, all matters relating to tariff policy in the power sector and shall participate in the consultations set forth in Section 5.07 (b) of the Loan Agreement. Section 3.03. The Guarantor shall take all such action as is necessary to ensure that in carrying out the tariff study of the power sector forming Part D (2) of the Project, the Borrower will have access to all data and information necessary or useful to such study. Section 3.04. Without any limitation or restriction on the Borrower's obligations under Section 5.02 of the Loan Agreement, the Guarantor shall review the auditing procedures relating to the -6- Borrower and implement, in agreement with the Bank, a program to improve the said procedures by not later than September 30, 1978, or such other date as the Bank shall agree. -7- ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Secretary of Finance of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Secretary of Finance Department of Finance Manila, Philippines Cable address: SECFINANCE Manila 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) -8- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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 THE PHILIPPINES By /s/ Eduardo Z. Romualdez Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Gregory B. Votaw Acting Regional Vice President East Asia and Pacific