Uruguay - Fifth Power Project : Loan 1779 - Loan Agreement - Conformed

OFFICIAL, LOAN NUMBER 1779 UR DOCUMENTS Loan Agreement (Fifth Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and ADMINISTRACION NACIONAL DE USINAS Y TRASMISIONES ELECTRICAS Dated oL y ,l, 1980 LOAN NUMBER 1779 UR LOAN AGREEMENT AGREEMENT, dated oq&WaNC ..- O , 1980, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and ADMINISTRACION NACIONAL DE USINAS Y TRAS- MISIONES ELECTRICAS (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) in order to finance works related to those included in the Project (said works being hereinafter called the IDB Project), the Borrower intends to contract from the Inter- American Development Bank (hereinafter referred to as IDB) a loan (hereinafter referred to as the IDB Loan) in an amount of not less than twenty-four milleon dollars ($24,000,000) to be made available on the terms and conditions set forth in an agreement (hereinafter referred to as the IDB Loan Contract) to be entered into between the Borrower and IDB; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: 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 Guarantee 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 Agree- ments of the Bank being hereinafter called the General Condi- tions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "Electricity Law" means the electricity law of the Guarantor, No. 14,694, dated September 1, 1977, including the regulations to such law as issued by the Guarantor in Decree No. 339/979, dated June 8, 1979 and the regime for periodic tariff adjustments as issued by the Guarantor in Decree No. 498/979, dated September 5, 1979, and such term includes all amendments to such law, regulations and regime; (b) "UTE Law" means the by-laws of the Borrower referred to in Section 7.01 (a) of this Agreement, and such term includes the regulations to such by-laws; (c) "Tribunal de Cuentas" means Tribunal de Cuentas de la Naci6n, of the Guarantor; (d) "Ministerio" means the Ministerio de Industria y Energla, of the Guarantor; (e) "Direcci6n" means Direcci6n Nacional de Energla of Ministerio; (f) "ANCAP" means Administraci6n Nacional de Combustibles, Alcohol y Portland; (g) "ANTEL" means Administraci6n Nacional de Telecomunica- ciones; (h) "Prior Loan Agreement" means the loan agreement for Loan No. 712-UR (Power Generation and Distribution Project) of November 25, 1970 between the Bank and the Borrower, and "Prior Guarantee Agreement" means the guarantee agreement for Loan No. 712-UR (Power Generation and Distribution Project) of even date between the Guarantor and the Bank; (i) "Project Unit" means the Project Unit to be established pursuant to Section 3.02 of this Agreement; (j) the term "nuevo peso" and the symbol "N$" mean the unit of the currency of the Guarantor; and (k) "non-common facilities" means the Uruguayan solely-owned transmission facilities of the binational (Uruguayan-Argentinian) Salto Grande Project. -3- ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to twenty-four million dollars ($24,000,000). 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, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures 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. Except as the Bank shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Loan, shall be governed by the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be June 30, 1982 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay interest at the rate of seven and ninety-five hundredths per cent (7.95%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on April 1 and October 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -4- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out Parts A, B and C (a), (b), (c), (d), (e) and (f) of the Project, all with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility prac- tices. (b) Part C (g) of the Project shall be carried out by the Guarantor as provided in the Guarantee Agreement and for this purpose the Borrower shall make available to the Guarantor, upon terms and conditions satisfactory to the Bank which shall be substantially the same as those contained in this Agreement in respect of repayment of principal of, and interest and other charges on, the Loan, the proceeds of the Loan withdrawn from time to time from the Loan Account for expenditures for Part C (g) of the Project. Section 3.02. (a) The Borrower shall maintain, within its Planning and Development Division, a Project Unit, to be respon- sible for: (i) the coordination of, and assistance with, the preparation of plans and designs for the Project and the IDB Project; (ii) the coordination of, and assistance with, the preparation and issuance of bidding documents and the evaluation of bids and recommendations for awards of contracts; (iii) the preparation of construction schedules; (iv) the general supervision of construction of the Project and the IDB Project; and (v) the reporting thereon. The Project Unit shall be headed by the Manager of the Planning and Development Division of the Borrower, who shall be a qualified and experienced engineer, responsible to the Borrower's General Manager and assisted by the consultants to be employed pursuant to Section 3.03 (a) of this Agreement for the purpose of carrying out -5- Part C (a) of the Project, until such time as the Bank and the Borrower shall agree that qualified employees of the Borrower have been trained to take over the consultants' responsibilities. (b) The Borrower shall provide the Project Unit, promptly as needed, with such qualified counterpart staff, funds and other resources as shall be required for the efficient operation thereof. Section 3.03. (a) For the carrying out of Part C (a), (b), (d), (e) and (f) of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank. (b) For the carrying out of the study included in Part C (c) of the Project, the Borrower shall: (i) not later than May 31, 1980, invite proposals therefor from suitably qualified consul- tants; and (ii) employ, not later than December 31, 19R8., consul- tants whose qualifications, experience, and terms ani conditions of employment shall be satisfactory to the Bank. (c) The Borrower shall: (i) ensure that the study included in Part C (b) of the Project be completed by September 30, 1980; (ii) (A) carry out and complete not later than June 30, 1980, an electricity load measurement program, satisfactory to the Bank, such program to provide a preliminary basis for identifying the composition of electricity losses in the Borrower's systems and to serve as an additional data input to the study to be carried out under Part C (c) of the Project; (B) cause the study included in Part C (c) of the Project to be completed not later than June 30, 1981 and discuss with the Bank the findings and recommendations thereof and the proposed program for carrying out the recommendations of such study, and put into effect, starting not later than June 30, 1982, such recommendations as shall have been agreed upon between the Bank and the Borrower in accordance with an agreed time sched- ule; and (C) furnish to the Bank not later than December 31, 1980 a report on the nature, size and occurrence of electricity losses in the Borrower's - 6 - systems, including terms of reference and a work program for further studies needed to recommend a long-term program for reduction of losses; (iii) (A) ensure that the study included in Part C (d) of the Project be completed by September 30, 1980; and (B) discuss with the Bank the results of such study and the proposed program for carrying out the recommendations of such study, and put into effect, not later than June 30, 1981, such recommendations as shall have been agreed upon between the Bank and the Borrower; and (iv) (A) by June 30, 1980, furnish to the Bank for comments the findings and recommendations of the study included in Part C (f) of the Project; (B) prepare on the basis of such findings and recommendations and furnish to the Bank for its agreement, by September 30, 1980, the proposed structure and policies for staff compensation; and (C) implement, by January 1, 1981, such structure and policies. (d) The Borrower shall, in the carrying out of Part C (e) of the Project, discuss with the Bank, by December 31, 1980, the recommendations of the independent auditors referred to in Section 5.02 of this Agreement for the staffing and operations of the internal audit unit of the Borrower and the production of timely quarterly income statements, cost accounting reports and adequate management information, and the Borrower's proposals for carrying out such recommendations. Section 3.04. (a) The Borrower undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Borrower to replace or repair such goods: (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. -7- Section 3.05. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, studies, contract documents and construction and procure- ment schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project including its cost and the benefits to be derived from it, to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facili- ties and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any rele- vant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) The Borrower shall: (i) prepare quarterly reports of such scope and in such detail as the Bank shall have reasonably requested, giving information on the progress of the Project and the operating and financial performance of the Borrower, including a list of the outstanding debts of the Guarantor, its departments and national agencies, or subdivisions thereof, including munici- palities, to the Borrower, and information on billings and col- lections regarding such debt; and (ii) furnish to the Bank such reports within sixty days after the end of the respective quarter. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in.such detail as the Bank shall reason- ably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. (e) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, -8- property and equipment of the Borrower and any relevant records and documents. Section 3.06. The Borrower shall take all such action as shall be necessary to acquire as and when needed all such land or rights in respect of land, or both, as shall be required for the construction and operation of the facilities included in the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land or rights in respect of land, or both, are available for purposes related to the Project. Section 3.07. The Borrower shall take all reasonable measures to ensure that the execution and operation of the Project are carried out with due regard to ecological and environmental factors. ARTICLE IV Management and Operations of the Borrower Section 4.01. (a) The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. (b) The Borrower shall, beginning in the year 1980, set up a self-insurance fund against risks which are not insured through external insurance. Section 4.02. The Borrower shall cause all dams, earthworks, dikes and all other hydroelectric works and installations of the Borrower to be periodically inspected in accordance with appro- priate engineering practices in order to determine whether there are any deficiencies or potential deficiencies in their condition or in the quality and adequacy of their maintenance or the methods of their operation which may. endanger their safety, and, in the event that any such deficiency or potential deficiency is dis- covered, the Borrower shall promptly take all steps required to correct such deficiency or to eliminate such potential deficiency. Section 4.03. Except as the Bank shall otherwise agree, the Borrower shall increase the professional staff of the Borrower by sixty-three additional professionals, in accordance with the provisions of Schedule 5 to this Agreement. -9- Section 4.04. The Borrower shall: (a) by April 30, 1980, employ a training expert acceptable to the Bank, under terms and conditions satisfactory to the Bank, for the purpose of evaluating the Borrower's staff training programs and assisting the Borrower in developing a comprehensive training program for the Borrower's staff; (b) by November 30, 1980, exchange views with the Bank con- cerning the recommendations of such expert and a proposed program for carrying out such recommendations; and (c) promptly thereafter, carry out a staff training program satisfactory to the Bank. Section 4.05. The Borrower shall at all times manage its affairs, maintain its financial position, plait its future expan- sion and conduct its business, all in accordance with sound business, financial and public utility practices, and under the supervision of experienced and competent management assisted by adequate and competent staff. Section 4.06. (a) The Borrower shall take all steps necessary for the orderly transfer of ownership and o,erational responsibil- ity to the Borrower of the facilities described in Section 4.04 of the Guarantee Agreement. (b) The Borrower shall: (i) include the facilities referred to in paragraph (a) of this Section in its assets account at full value; (ii) include the debts related to said facilities in its liabilities account; and (iii) include the Guarantor's capital contribution towards the construction of said facilities in its equity account. (c) The Borrower shall at all times operate and manage such facilities, as well as its other plants, equipment and property, and from time to time make all necessary repairs or renewals thereof, all in accordance with sound engineering and public utility practices. (d) Except as the Bank shall otherwise agree, the valuation of the facilities referred to in paragraph (a) of this Section shall be carried out in accordance with the provisions of the Electricity Law pertaining to valuation and revaluation of works. - 10 - Section 4.07. The Borrower shall at all times maintain its existence and right to carry on its operations and shall, except as the Bank shall otherwise agree, take all necessary steps that are required to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. ARTICLE V Other Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. Section 5.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank, without affecting the legally required auditing by the Tribunal de Cuentas; (ii) furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably re- quested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reason- ably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably 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, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satis- factory to the Bank to secure the payment of the principal of, - 11 - and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. (a) Except as the Bank shall otherwise agree, the Borrower shall take, promptly as needed from time to time, all such steps as shall be required (including, but without limitation, action with regard to the adjustment of the level of its rates for the sale of electricity, such action to include, inter alia, exercising its rights under Decree No. 498/79, dated September 5, 1979) to provide the Borrower with revenues suffi- cient to cover all operating and administrative expenses, including taxes and levies, if any, adequate maintenance and depreciation, and yield an annual rate of return, beginning in 1980, on its rate base, both calculated in accordance with the provisions of Schedule 6 to this Agreement, of not less than 6%. In case that, in any one year, the annual rate of return is less than 7.5%, the difference between the attained rate and 7.5% shall be compensated in the next year. (b) On or before July 31 of each year, the Borrower shall: (i) review, on the basis of realistic estimates and forecasts, its revenues to ascertain whether they will be sufficient to produce the annual return required by paragraph (a) of this Section for the current year and the next following year; (ii) furnish to the Bank the results of such review; and (iii) inform the Bank of the measures taken or proposed to be taken by the Borrower, if necessary, in order to achieve the required rate of return. (c) Section 5.04 of the Prior Loan Agreement is hereby amended to read the same as paragraphs (a) and (b) of this Section. (d) The Borrower shall: (i) cause the auditors referred to in Section 5.02 of this Agreement to prepare a report and - 12 - recommendations for alternative asset revaluation procedures which would, inter alia, adequately reflect the effects of exter- nal inflation; (ii) furnish to the Bank not later than Decem- ber 31, 1980 said report and recommendations together with the Borrower's proposal for putting such recommendations into effect; and (iii) put into effect such proposals as shall have been approved by the Bank. Section 5.05. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt unless its net revenues for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, which- ever amount is the greater, shall be not less than 1.5 times the maximum debt service requirement for any succeeding fiscal year on all debt, including the debt proposed to be incurred. For the purposes of this Section: (i) The term "debt" shall mean all debt of the Borrower including debt for the service of which the Borrower is responsible, maturing by its terms more than one year after the date on which it is originally incurred. (ii) Debt shall be deemed to be incurred: (A) under a contract, loan agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into. (iii) The term "net revenues" shall mean gross operating revenues excluding customer contributions and deposits, adjusted to take account of the Bor- rotier's rates for the sale of electricity in effect at the time of incurrence of debt even though such rates were not in effect during the fiscal year or twelve-month period to which such revenue relates, less all operating expenses, including direct costs of operation, administration, overhead and adequate maintenance expenses, taxes and levies, if any, but before provision for depreciation, interest and other charges on debt, - 13 - (iv) The term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (v) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, debt payable in another currency such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valua- tion, obtainable for the purposes of servicing such debt. Section 5.06. The Borrower shall take all necessary steps to obtain, as and when needed for maintaining an adequate liquidity for its operations, short-term credits, from banks owned by the Guarantor, of not less than the equivalent of one million five hundred thousand dollars ($1,500,000). Section 5.07. The Borrower shall take adequate measures, satisfactory to the Bank, for (i) collecting, within the period ending on June 30, 1980, all the Borrower's overdue accounts receivable as of December 31, 1979 from the Guarantor, its depart- ments and national agencies, or subdivisions thereof, including municipalities, in respect of electricity supplied by the Bor- rower; (ii) collecting bills issued on or after January 1, 1980, within 75 days of the issuance thereof; and (iii) the timely payment of the Borrower's debt to the Guarantor, its departments and national agencies, or subdivisions thereof, including munici- palities and ANCAP. Section 5.08. Except as the Bank shall otherwise agree, the Borrower shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking, including the Project. Section 5.09. In accordance with the timetable included in Schedule 7 to this Agreement, the Borrower shall: (a) transfer all assets, staff and auxiliary services and facilities related to telecommunications operations to ANTEL; and - 14 - (b) enter into normal commercial agreements with ANTEL for the supply of electricity and other services related thereto, and the purchase of telecommunications and other services related thereto. Section 5.10. Until the completion of the Project, the Borrower shall retain in its business all its earnings. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof, namely, that the Electricity Law or the UTE Law, or any provision thereof, shall have been amended, suspended, abrogated, repealed or waived so as to affect adversely the carrying out of the Project, the performance by the Borrower of its other obligations under the Loan Agreement or the opera- tions or financial condition of the Borrower. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that any event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Bank has received evidence that new By-laws for the Borrower and Regulations under the By-laws have been enacted in a form and substance satisfactory to the Bank; (b) the IDB Loan Contract has been duly signed; (c) the Bank has received evidence of adequate progress, satisfactory to the Bank, towards the fulfillment of the obliga- tions set forth in Section 4.06 of the Guarantee Agreement; (d) a decree has been enacted granting the Borrower the necessary authorization from the Guarantor to carry out all procurement required for the Project; and - 15 - (e) the independent auditors referred to in Section 5.02 of this Agreement have been employed. Section 7.02. The date 5Yu41L 7, 1180 , is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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) For the Borrower: Administraci6n Nacional de Usinas y Trasmisiones El'ctricas Palacio de la Luz-Paraguay 2431 Mbntevideo, Uruguay Cable address: Telex: LUX 850 UY ANTEL Montevideo IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District - 16 - of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 11%tb *4 r-0tA ia Q*t4" Regional Vice President Latin America and the Caribbean ADMINISTRACION NACIONAL DE USINAS Y TRASMISIONES ELECTRICAS By Repesntaiv Authorized Representative - 17 - 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) Imported equip- 18,600,000 100% of for- ment and mate- eign expendi- rials, and an- tures cillary services (2) Consultants' 3,400,000 90% services (3) Unallocated 2,000,000 TOTAL 24,000,000 2. For the purposes of this Schedule, the term "foreign expendi- tures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. - 18 - 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made: (a) in respect of payments made for expenditures prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of $900,000, may be made in respect of Category (2) on account of payments made for such expenditures before that date but after June 1, 1979; and (b) in respect of contracts not exceeding in value the equivalent of $10,000. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insuffi- cient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such realloca- tion cannot fully meet the estimated shortfall, reduce the dis- bursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 19 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's 1980-1981 power devel- opment program, and consists of the following Parts: Part A: Montevideo Distribution Renovation and expansion of the distribution networks in Montevideo, including approximately the following facilities: (i) 210 kilometers of underground cables for 30 and 6 kilovolts and for low tension; (ii) 6 substations (new and extensions) with about 80 megavolt-ampere transforming capacity; (iii) 750 kilometers of bare and insulated conductor; and (iv) 200 transformer stations with about 50 megavolt- ampere transforming capacity. Part B: Interior Distribution Renovation and expansion of distribution networks mainly in the following zones: Treinta y Tres, Valentines, Tacuarembo, Rivera, Rocha and Chuy, and including approximately the following facilities: (i) 920 kilometers of overhead lines for 60, 30, 15 and 6 kilovolts and for low tension; (ii) 40 kilometers of underground cables for 30, 15 and 6 kilovolts; , (iii) 17 substations with about 100 megavolt-ampere transforming capacity; (iv) 230 transformer stations with about 25 megavolt- ampere capacity; and (v) Capacitors aggregating 10 megavolt-ampere. - 20 - Part C: Consultants' Services Consultants' services for: (a) the organization, operation and staffing of the Project Unit, and for assistance with Project planning, design and implementation; (b) a study of the Borrower's generation development program for the years 1980 to 2000; (c) a tariff structure study based on marginal cost cri- teria; (d) a management study of the Borrower; (e) a study of the Borrower's internal auditing, financial reporting and cost accounting and management information systems; (f) a study of the Borrower's staff compensation structure and policies; and (g) a study of the Guarantor's energy sector. The Project is expected to be completed by December 31, 1981. - 21 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 1 and October 1 beginning April 1, 1983 through October 1, 1994 1,000,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. - 22 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.60% More than three years but not more than six years before maturity 3.20% More than six years but not more than eleven years before maturity 5.85% More than eleven years but not more than thirteen years before maturity 6.90% More than thirteen years before maturity 7.95% - 23 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Goods shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, and in addition to the requirements of paragraph 1.2 of the Guidelines, the Borrower shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods remain to be procured on the basis of inter- national competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding, (i) bidders shall be required to state in their bid the c.&f. (port of entry) price for imported goods, or the ex-factory price for domestically manufactured goods; (ii) customs duties and other import taxes on goods evaluated on a c.&f. basis, and sales and similar taxes (applicable to finished domestic products) on goods evaluated on an ex-factory basis, shall be excluded; and (iii) the cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 4. For bidding purposes, goods shall be grouped in such manner as shall be agreed between the Bank and the Borrower prior to issuing the invitation to bid. - 24 - B. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to any contract estimated to cost the equivalent of $100,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received with the recommendations for award together with the opinion of the consultants to be employed pursuant to Section 3.03 (a) of this Agreement for the purpose of carrying out Part C (a) of the Project, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Account in respect of sucT, zontract. 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the delivery to the Bank of the first application for withdrawal of funds from the Loan Accuunt - 25 - in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sio- of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency and except where specifically provided for under the terms of the contract) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. 4. Any modification, waiver, extension or change order, made in accordance with the provision to this paragraph, shall be sequentially numbered and each subsequent change order shall indicate the total contract price as agreed under the previous change order, the details of the agreed change in contract price (if any) under the change order and the total revised price resulting therefrom. - 26 - SCHEDULE 5 Employment of Additional Staff* The table below sets forth the categories of additional staff** to be employed pursuant to Section 4.03 of this Agreement and the timetable for the employment thereof: Engineers Other Electrical Civil Accountants Professionals Total October 1, 1979 18 5 - 8 31 March 31, 1980 April 1, 1979 11 1 2 6 20 September 30, 1980 October 1, 1980 7 - 1 4 12 March 31, 1981 63 * The number of additional staff given herein shall be in- crease. in respect of each period by the equivalent of the number of staff whose service has been terminated during that period. ** Students in their last year are included. - 27 - SCHEDULE 6 Methods of Calculating Rate of Return For the purpose of Section 5.04 (a) of this Agreement: 1. The rate of return in respect of any fiscal year will be calculated by relating the Borrower's net income from operations for that year to the rate base during that fiscal year. 2. The term "net income from operations" means gross operating revenue less all operating and administrative expenses including adequate maintenance, straight-line depreciation, insurance or self-insurance premiums, reserves for bad debts, taxes (including income taxes) and levies, if any, or any payments in lieu thereof, but without deduction of interest or other charges on debt. The term "gross operating revenue" means the proceeds from the sale of electricity, including fixed charges and claim fees, but excluding connection fees (which shall be considered non-operating income). 3. The term "rate base" means the average gross value of total fixed assets in operation as revalued at least once every calendar year in accordance with methods of revaluation acceptable to the Bank less average accumulated depreciation, plus current assets at the end of the year. 4. The average gross value of the total fixed assets in opera- tion will be determined by adding the gross value of the total fixed assets in operation at the end of a fiscal year to the gross value of the total fixed assets in operation at the beginning of that year and dividing the total by two; and the average accumu- lated depreciation will be calculated by adding the value of accumulated depreciation at the beginning and at the end of the year and dividing the total by two. 5. The term "current assets" means the sum of cash, bank depo- sits, accounts receivable resulting from the sale of electricity and inventories of parts and materials. Until the Borrower has introduced a system for accounting for its operating inventories which conforms to sound accounting practices, as certified by the independent auditors referred to in Section 5.02 of this Agree- ment, the term "inventories of parts and materials" shall mean the full amount of "Inventories" as shown on the Borrower's balance sheet for the fiscal year. - 28 - 6. The annual depreciation shall not be less than 2.5% of the average gross value of fixed assets in operation, revalued as indicated in paragraph 3 above. 7. Except as the Bank shall otherwise agree, for fiscal years 1979 and 1980 asset revaluation shall be calculated by applying a revaluation index (RI) given by: RI -0.5 [CLI t +ERt ] [CLIt-1 ERt-11 For subsequent years the revaluation shall be based on the alternative procedures referred to in Section 5.04 (d) (iii) of this Agreement. * CLI: Consumer Price Index, published by the Direcci6n Na- cional de Estadfstica of the Secretarfa de Planeamiento, Coordinaci6n y Difusi6n, an agency of the Guarantor. ER: Official Selling Exchange Rate (nuevos pesos per dollar) in the commercial market, in December 31 of the corres- ponding fiscal year. - 29 - SCHEDULE 7 Timetable for the Separation of UTE and ANTEL 1. Separation of both staffs: October 31, 1979 2. Assets: (a) setting of criteria for the separation: December 31, 1979 (b) final allocation of all assets (rent will be mutually charged): December 31, 1980 3. Mutual billing for services rendered: (a) light and power and telephones: January 1, 1979 (b) other common services: January 1, 1980 4. Collecting for services: (a) rendered after January 1, 1980, within 75 days of the billing date, starting January 1, 1980 (b) rendered up to December 31, 1979 December 31, 1980 5. Final agreement on the amount owed due to asset allocation, recording of this amount in the books of both entities and settlement of this balance December 31, 1980 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 Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this iL day of ., .AOA., 198 a2.. FOR SECRETARY