Nicaragua - Thermal Power Project : Loan 0121 - Loan Agreement - Conformed

LOAN NUMBER 121 NI Loan Agreement (Thermal Power Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE LUZ Y FUERZA DATED JULY 8, 1955 AGREEMENT, dated July 8, 1955, between INTERNA- TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (here- inafter called the Bank) and EmPRESA NACIONAL DE Luz Y FUERZA (hereinafter called the Borrower). ARTICLE I Loan Regulations SECTION 1.01. The parties to this Loan Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated February 15, 1955, (said Loan Regulations No. 4 being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II The Loan SECTION 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to seven million one hundred thousand dollars ($7,100,000). SECTION 2.02. The Bank shall open a Loan Account on its books in the name of the Borrower and shall credit to such account the amount of the Loan. The amount of the Loan may be withdrawn from the Loan Account as provided in, and subject to the rights of cancellation and suspension set forth in, the Loan Regulations. SECTION 2.03. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%/0) per annum on the pirincipal amount of the Loan not so withdrawn from time to time. 4 SECTION 2.04. The Borrower shall pay interest at the rate of four and three-fourths per cent (43/4%) per annum on the principal amount of the Loan so withdrawn and out- standing from time to time. SECTION 2.05. Except as the Bank and the Borrower shall otherwise agree, the charge payable for special com- mitments entered into by the Bank at the request of the Borrower pursuant to Section 4.02 of the Loan Regulations shall be at the rate of one-half of one per cent (1/ of 1%) per annum on the principal amount of any such special commitments outstanding from time to time. SECTION 2.06. Interest and other charges shall be payable semi-annually on April 1 and October 1 in each year. SECTION 2.07. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. ARTICLE III Use of Proceeds of the Loan SECTION 3.01. The Borrower shall apply the proceeds of the Loan exclusively to financing the cost of goods re- quired to carry out the Project described in Schedule 2 to this Agreement. The specific goods to be financed out of the proceeds of the Loan shall be determined by agreement between the Bank and the Borrower, subject to modification by further agreement between them. SECTION 3.02. The Borrower shall cause all goods financed out of the proceeds of the Loan to be imported into the territories of the Guarantor and there to be used exclu- sively in the carrying out of the Project. 5 ARTICLE IV Bonds SECTION 4.01. The Borrower shall execute and deliver Bonds representing the principal amount of the Loan as provided in the Loan Regulations. SECTION 4.02. The General Manager (Gerente General) of the Borrower acting jointly with such other person or persons as the Borrower shall appoint in writing are des- ignated as authorized representatives of the Borrower for the purposes of Section 6.12 (a) of the Loan Regulations. ARTICLE V Particular Covenants SECTION 5.01. (a) The Borrower shall carry out the Project with due diligence a(d efficiency and in confo rmitv with sound engineering and financial practices. To assist it in carrying ont the Project the Borrower shall employ competent and experieiced engineering consultants and contractors. (b) The Borrower shall furnish to the Bank, promptly upon request, the plans and specifications for the Project and any material modifications subsequently made therein. (c) The Borrower shall maintain records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the financial condition and operations of the Borrower; shall enable the Bank's representatives to inspect the Project, the goods and any relevant records and documents; and shall furnish to the Bank all such information as the Bank shall reasonably request concern- ing the expenditure of the proceeds of the Loan, the Project, the goods, and the financial conlition anm(d operations of the Borrower. 6 SECTION 5.02. (a) The Bank and the Borrower shall co- operate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. (b) The Bank and the Borrower shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Borrower shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service thereof. SECTION 5.03. The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower as security for any debt, such lien will ipso facto equally and ratably secure the pay- ment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (ii) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is originally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt matur- ing not more than one year after its date. SECTION 5.04. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall not incur any long-term indebtedness if thereby the proportion of long-term in- debtedness to equity would exceed a ratio of 2 to 1. I 7 For the purposes of this Section the following terms shall have the meanings hereinafter set forth: (a) The term "long-term indebtedness" shall mean debt maturing by its terms more than one year after the date on which it is incurred. Whenever for purposes of this Section it shall be necessary to value in Nicaraguan cur- rency long-term indebtedness payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is, at the time such valuation is made, obtainable for the purposes of servicing such debt. (b) The term "equity" shall include capital and surplus determined in accordance with sound accounting practices. It shall also include such advances made by the Guarantor to the Borrower as are to be serviced from surplus funds available to the Borrower only after meeting all obligations of the Borrower, including the obligations arising from the carrying out of the Project, the operation, maintenance and expansion of the plants, equipment and property of the Borrower, the building up of an adequate reserve fund, and the maintenance of service on the Loan and on any other long-term indebtedness. SECTION 5.05. The Borrower shall pay or cause to be paid all taxes or fees, if any, imposed under the laws of the Guarantor or laws in effect i the territories of the Guarantor on or in connection with the execution, issue, de- livery or registration of this Agreement, the Guarantee Agreement or the Bonds, or the payment of principal, inter- est or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, payments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 5.06. The Borrower shall pay or cause to be paid all taxes and fees, if any, imposed under the laws of 8 the country or countries in whose currency the Loan and the Bonds are payable or laws in effect in the territories of such country or countries on or in connection with the exe- cution, issue, delivery or registration of. this Agreement, the Guarantee Agreement or the Bonds. SECTION 5.07. (a) The Borrower shall at all times main- tain its existence and right to carry on operations and shall, except as the Bank shall otherwise agree, maintain and renew all rights, powers, privileges and franchises owned by it and necessary or useful in the operation of its business. (b) The Borrower shall operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with sound engineering standards; and shall at all times operate its plants and equipment and maintain its financial position in accordance with sound business and public util- ity practices. (c) Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall not undertake, execute or invest in any project or development (other than the Project) the cost of which is estimated to exceed $300,000, or the equivalent; provided, however, that the foregoing provision shall not apply to any project or devel- opment for the expansion of the distribution facilities of the Borrower. SECTION 5.08. The Borrower shall not, without the con- sent of the Bank, sell or otherwise dispose of all or substan- tially all of its property and assets or all or substan- tially all the property included in the Project or any plant the cost of which is financed in whole or in part out of the proceeds of the Loan, unless the Borrower shall first redeem and pay, or make adequate provision satisfactory to the Bank for redemption or payment of, all of the Loan which shall then be outstanding and unpaid. 9 SECTION 5.09. Except as shall be otherwise agreed be- tween the Bank and the Borrower, the Borrower shall in- sure or cause to be insured the goods financed with the proceeds of the Loa.n against risks incident to their purchase and importation into the territories of the Guarantor. Such insurance shall be consistent with sound commercial prac- tice and shall be payable in dollars or in the currency in which the cost of the goods insured thereunder shall be payable. SECTION 5.10. The Borrower shall from time to time take all steps necessary or desirable to obtain such adjustments in its rates as will provide revenues sufficient: (a) to cover operating expenses, including adequate maintenance and depreciation, taxes, and interest; (b) to meet repayments on long-term indebtedness but only to the extent that such repayments shall exceed provision for depreciation; (c) to leave a reasonable surplus for financing new investment. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of the Loan Regulations shall occur and shall continule for a period of thirty days, or (ii) if any event specified in paragraph (c) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent time during the continu- ance thereof, the Bank, at its option, may declare the prin- cipal of the Loan and of all the Bonds then outstanding to be due and payable immiediately, and upon any such declara- tion such principal shall become due and payable immedi- ately, anything in this Agreement or in the Bonds to the contrary notwithstanding. 10 ARTICLE VII Effective Date; Termination SECTION 7.01. The following event is specified as an additional condition to the effectiveness of this Agreement within the meaning of Section 9.01 (a) (ii) of the Loan Reg- ulations: Appropriate legislative or other action of the Guaran- tor satisfactory to the Bank shall have been taken for provision to the Borrower of not less than 21,460,000 Nicaraguan c6rdobas, to be made available to it at the rate of not less than 7,000,000 c6rdobas during the fiscal year 1955-1956, not less than 9,000,000 c6rdobas during the fiscal year 1956-1957, and not less than 5,460,000 c6rdobas during the fiscal year 1957-1958. SECTION 7.02. A date sixty days after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the Loan Regulations. ARTICLE VIII Miscellaneous SECTION 8.01. The Closing Date shall be June 30, 1958. SECTION 8.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Borrower: Empresa Nacional de Luz y Fuerza Managua, Nicaragua For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America 11 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. JNTRNATIONAL BAN K FOR RECONSTRUCTION AN[) DEVELOPMINT By EcoN j R. BTLACNI Presidentf EM-PRESA NACIONAL DE LZ Y FUThEZA By SALVO A uth orized Reprcsentativ, 12 SCHEDULE 1 Amortization Schedule Principal Payment of Amount Outstanding Principal After Each Payment Date (expressed in (expressed in Payment Due dollars) * dollars) * April 1, 1958 - $7,100,000 October 1, 1958 $138,000 6,962,000 April 1, 1959 141,000 6,821,000 October 1, 1959 145,000 6,676,000 April 1, 1960 148,000 6,528,000 October 1, 1960 152,000 6,376,000 April 1, 1961 155,000 6,221,000 October 1, 1961 159,000 6,062,000 April 1, 1962 163,000 5,899,000 October 1, 1962 167,000 5,732,000 April 1, 1963 170,000 5,562,000 October 1, 1963 175,000 5,387,000 April 1, 1964 179,000 5,208,000 October 1, 1964 183,000 5,025,000 April 1, 1965 187,000 4,838,000 October 1, 1965 192,000 4,646,000 April 1, 1966 196,000 4,450,000 October 1, 1966 201,000 4,249,000 April 1, 1967 206,000 4,043,000 October 1, 1967 211,000 3,832,000 April 1, 1968 216,000 3,616,000 October 1, 1968 221,000 3,395,000 April 1, 1969 226,000 3,169,000 October 1, 1969 231,000 2,938,000 April 1, 1970 237,000 2,701,000 October 1, 1970 242,000 2,459,000 April 1, 1971 248,000 2,211,000 October 1, 1971 254,000 1,957,000 April 1, 1972 260,000 1,697,000 October 1, 1972 266,000 1,431,000 April 1, 1973 273,000 1,158,000 October 1, 1973 279,000 879,000 April 1, 1974 286,000 593,000 October 1, 1974 293,000 300,000 April 1, 1975 300,000 * To the extent that any part of the Loan is repayable in a currency other than dollars (see Loan Regulations, Section 3.02), the figures in these columns represent dollar equivalents determined as for purposes of withdrawal. 13 Premiums on Prepayment and Redemption The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the Loan pursuant to Section 2.05 (b) of the Loan Regulations or on the redemption of any Bond prior to its maturity pursuant to Section 6.16 of the Loan Regulations: Time of Prepaymet or Redemption Premium Not more than 5 years before maturity . .. .1/2o More than 5 years but not more than 10 years before maturity .............. 10 More than 10 years but not more than 15 years before maturity . ....... ...... 14% More than 15 years before maturity ....... 21/2%c 14 SCHEDULE 2 Description of Project The Project will consist of: 1. The construction at the site of the existing diesel-pow- ered generating plant owned by the Borrower in Ma- nagua of a new thermal plant containing two turbo- generators each of 15,000 KW capacity and two boilers each with about 160,000 lbs. per hour steam capacity to supply steam to the turbines at a pressure of about 850 lbs. per square inch and at a temperature of about 900 degrees F. complete with the conventional auxiliaries, a warehouse, fuel oil handling and storage facilities, sub- station and other electrical equipment. 2. The construction of about 180 kilometers of 69 Kv trans- mission lines and about 91 kilonieters of 13.2 Kv traiis- mission lines with the necessary substations to transmit energy from the thermal )iant in Managua to about 15 communities north and south of Managua, incluOing Granada, Masaya, Diviamba, Nandaime, Le6n, Chinan- dega and Corinto, and the provision of carrier current equipmeit for connunicating between the thermal plant in Managua and other generating plants that may be connected into the transmission system and substations on the transmission lines. 3. The installation of the necessary equipment to enable the existing diesel plant of the Borrower and the exist- ing generating plaids in Le6n, Granada and Diriamba to operate in parallel with the new thermal plant to be constructed in Managua. 4. The rehabilitation and expansion of the distribution system in Managua to enable it to service adequately the demand anticipated in about the next ten years.