Colombia - San Carlos II Hydro Power Project : Loan 1725 - Loan Agreement - Conformed

OFF iCIAL 0ý ~LOAN NUMBER 1725 CO DOCUMENTS Loan Agreement (San Carlos II Hydro Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and INTERCONEXION ELECTRICA S.A. Dated 03 , 1979 1.. LOAN NUMBER 1725 CO LOAN AGREEMENT AGREEMENT, dated e A , 1979, between INTERNA- TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and INTERCONEXION ELECTRICA S.A. (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of part of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; and (B) the Borrower will obtain from its shareholders and from other sources assistance in the financing of the balance of the cost of the Project; 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, subject, however, to the following modifications thereof (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions): Section 11.03 is amended to read as follows: "Section 11.03. Action on behalf of the Borrower or Guarantor. Any action required or permitted to be taken, and any documents required or permitted to be executed, pursuant to the Loan Agreement or the Guarantee Agreement, on behalf of the Borrower or the Guarantor, may be taken or executed by the representa- tive of the Borrower or the Guarantor designated in the Loan Agreement or the Guarantee Agreement for I- 2 - -2- the purposes of this Section or any person thereunto authorized in writing by him. Any modification or amplification of the provisions'of the Loan Agreement or the Guarantee Agreement may be agreed to on behalf of the Borrower or the Guarantor by written instrument executed on behalf of the Borrower or the Guarantor by the representative so designated or any person thereunto authorized in writing by him; provided that such modification or amplification is reasonable in the circumstances and will not substantially increase the obligations of the Borrower under the Loan Agreement or of the Guarantor under the Guarantee Agreement." Section 1.02. Wherever fused in this 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 following meanings: (a) "First Loan Agreement" means the loan agreement for Loan No. 575-CO (Power Interconnection Project) of December 2, 1968 between the Bank and the Borrower; (b) "Second Loan Agreement" means the loan agreement for Loan No. 681-CO (Chivor Hydroelectric Project) of June 4, 1970 between the Bank and the Borrower; (c) "Third Loan Agreement" means the loan agreement for Loan No. 1582-CO (San Carlos I Hydro Power Project) of July 14, 1978 between the Bank and the Borrower; (d) "Prior Project Agreement" means the project agreement for Loan No. 1583-CO (500-kV Interconnection Project) of July 14, 1978 between the Bank and the Borrower; (e) "Prior Shareholders' Agreement" means the shareholders' agreement for Loan No. 1582-CO (San Carlos I Hydro Power Project) of July 14, 1978 between the Bank and Empresa de Energia El'ctrica de Bogota, Empresas Pfiblicas de Medellin, Corporaci6n Aut6noma Regional del Cauca, Instituto Colombiano de Energia El4ctrica and Corporaci6n El'ctrica de la Costa Atlantica; (f) "Estatutos" means the estatutos of the Borrower dated September 14, 1967, as amended as of the date of this Agreement and as further amended from time to time, under which the Borrower was established and operates; -3- (g) "EEEB" means Empresa de Energla El'ctrica de Bogota; (h) "EPM" means Empresas Pfiblicas de Medellin; (i) "CVC" means Corporaci6n Aut6noma Regional del Cauca; (j) "ICEL" means Instituto Colombiano de Energia El'ctrica; (k) "CORELCA" means Corporaci6n El'ctrica de la Costa Atlantica; (1) "Shareholders" means collectively the entities referred to in paragraphs (g), (h), (i), (j) and (k) hereof; (m) "Shareholders' Agreement" means the shareholders' agree- ment (San Carlos II Hydro Power Project) of even date herewith between the Bank and the Shareholders, as the same may be amended from time to time; (n) "Sales Arrangements" means the arrangements (as defined in the Acuerdo Reglamentario de Compra y Venta a Largo Plazo de Energia y Potencia, approved by the Junta Directiva of the Borrower on April 13, 1978 (Acta No. 205), as amended by such Junta Directiva on October 4, 1978 (Acta No. 215) and as further -amended as of the date of this Agreement) existing between the Borrower and the Shareholders for the sale by the Borrower to the Shareholders of electricity generated by the Borrower; (o) "bonds" means titulos issued by the Borrower pursuant to paragraph (b) of Article 12 of the Estatutos; (p) "Jaguas Project" means the Jaguas hydro-facilities of about 170 megawatts to be constructed by the Borrower, diverting waters from the Nara River to the Guatap6 River; and (q) "pesos" and "Col.$" mean pesos in the currency of the Guarantor. 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 seventy-two million dollars ($72,000,000). -4- 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 exlenditures 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 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 and civil works 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, 1985 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 nine-tenths per cent (7.90%) 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 15 and October 15 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. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appro- priate administrative, financial, engineering and public utility practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. -5- Section 3.02. The Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank to assist the Borrower in: (a) the design of the Project and in the supervision of the carrying out of the Project; and (b) the carrying out of the studies included in Part D (a) and (b) of the Project; the consultants referred tc in (b) hereof shall be employed by the Borrower not later than December 31, 1979. Section 3.03. The Borrower shall take all necessary measures to ensure that the Project is carried out with due regard to ecological and environmental factors. Section 3.04. The Borrower shall, by December 31, 1980, carry out a plan, satisfactory to the Bank, for the evacuation of the areas where the works included in the Project will be carried out. Section 3.05. (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. Section 3.06. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction, work and procurement 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 (in- cluding its cost and, where appropriate, 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 facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as IAt -6- the Bank shall reasonably request concerning the Project, its cost and, where appropriate, 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 on the carrying out of the Project and the Borrower's financial condi- tion, including detailed information on the status of payments to the Borrower from the Guarantor and the Shareholders, and of payments to the Shareholders from the Borrower including payment of dividends on shares and interest on bonds, and a forecast of such payments for the succeeding quarter; and (ii) furnish to the Bank such reports promptly after their completion. (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 Guarantor, the Bank, the Borrower and the Shareholders of their respective obligations under the Loan Agreement, the Guarantee Agreement and the Shareholders' Agree- ment, and the accomplishment of the purposes of the Loan. (e) The Borrower shall afford the Bank's representatives a reasonable opportunity to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant records and documents. Section 3.07. The Borrower shall take all such action as shall be necessary to acquire: (i) by December 31, 1980 all land and rights in respect of land required for the carrying out of the construction works included in Part B of the Project; and (ii) by December 31, 1981, all other land and rights in respect of land required for the carrying out of the Project. ARTICLE IV Management and Operations of the Borrower Section 4.01. (a) The Borrower shall at all times manage its affairs, maintain its financial position, plan its future expan- sion and carry on its operations in accordance with appropriate -7- business, financial and public utility practices and under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. (b) The Borrower shall afford the Bank a reasonable oppor- tunity to comment on any proposed reorganization of the Borrower which may affect adversely the operations or financial condition of the Borrower or the carrying out of the Project. Section 4.02. (a) The Borrower shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary in the conduct of its business. (b) The Borrower shall take all action, including the provision of funds and resources, to ensure that its facilities, equipment and property are adequately operated, maintained, renewed and repaired. (c) Except as the Bank shall otherwise agree, the Borrower shall not sell, lease, transfer or otherwise dispose of any of its property or assets whic' shall be required for the efficient operation of its business and undertaking, including the Project. Section 4.03. 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. Section 4.04. The Borrower shall cause its dams, reservoir banks, associated structures, earthworks and waterways to be continuously monitored and inspected at least once a year, by qualified and experienced expert: in accordance with appropriate engineering practices, in order to determine whether there are any deficiencies or potential deficiencies in the condition of such structures and earthworks, or in the quality and adequacy of maintenance or methods of operation of such structures and earth- works, which may endanger the safety of such structures and earthworks. Section 4.05. The Borrower shall, jointly with the Share- holders: (a) prepare and furnish, by December 31, 1979, to the Guarantor and the Bank for review and comments, the terms of reference for a study for the establishment of a uniform system of -8 accounts and asset revaluation methodology for the Borrower and the Shareholders; (b) by December 31, 1980, carry out such study under terms of reference satisfactory to the Guarantor and the Bank; (c) by March 31, 1981, furnish to the Guarantor and the Bank for review and comments, the draft report regarding such study; and (d) by June 30, 1981, furnish to the Guarantor and the Bank the final report regarding such study. 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; (ii) furnish to the Bank as soon as available, but in any case not later than four 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 requested; 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 reasonably 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 lit - :zL -9- 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 satisfac- tory to the Bank to secure the payment of the principal of, 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 wh4-h it is originally incurred. Section 5.04. The Borrower shall, jointly with the Share- holders, prepare and furnish to the Guarantor and the Bank for comments, not later than December 31, 1979, a sector development master plan for power generation and transmission in Colombia for the period 1980 through 2000, such plan to: (i) be part of the power sector development master plan for Colombia; (ii) cover in detail the years 1980 through 1990; and (iii) consolidate all existing and future programs for power generation and transmis- sion. Section 5.05. The Borrower shall, to the satisfaction of the Bank: (a) by December 31, 1980, prepare a program for the rational use of the Project basins, including reforestation; (b) establish by December 31, 1981 and operate thereafter, a unit for the carrying out of such program; and (c) provide the unit in (b) hereof, promptly as needed, with such supporting staff, facili- ties, funds and other resources as shall be required for the :ficient operation thereof. Section 5.06. Until the Project shall have been completed: (a) The Borrower shall: (i) inform the Bank on any proposal of the Borrower to make any capital expenditure (not required for the Project or for other projects financed by the Bank) for increasing its power generating capacity by more than two hundred megawatts; (ii) afford the Bank a reasonable opportunity to comment on any such proposal; and (iii) not commit itself to any such capital expenditure unless the proposed expenditure is economically justified as part of the Borrower's national power expansion program and the Borrower has obtained financing under terms and conditions which will not affect its financial condi- tion, and the carrying out of the Project or of any other project financed by the Bank. -10- (b) The Borrower shall obtain the concurrence of the Bank before committing itself to any capital expenditure not included in paragraph (a) above if the aggregate of such capital expendi- ture and all such other capital expenditures made or to be made in any one fiscal year exceed or will exceed an amount equivalent to two and one-half per cent (2.5%) of the net current value of the Borrower's fixed assets in operation, as defined in Schedule 5 to this Agreement. Section 5.07. The Borrower shall, to the extent permitted under the laws of the Guarantor, apply any payment made to it by any of the Shareholders to the settlement of amounts owed by the Shareholder to the Borrower in the following order of prior- ity: first, accounts for energy sales and transmission and inter- connection charges; second, accounts for equity subscriptions; and third, accounts for bond subscriptions. Section 5.08. Except as the Bank and the Borrower shall otherwise agree: (a) The Borrower shall establish and maintain tariffs for the supply of electricity which will generate an annual return at a rate of at least eight per cent (8%) in the year 1979, nine per cent (9%) in the year 1980, eleven per cent (11%) in the year 1981 and, nine per cent (9%) in the year 1982 and thereafter, on the average net current value of its assets in operation, calculated in accordance with the method outlined in Schedule 5 to this Agreement. (b) The Borrower shall, within the first two months of each calendar quarter, review the adequacy of its tariffs to produce the annual return required under paragraph (a) and shall furnish to the Bank the results of such review. (c) If any such review shall show that the Borrower would not earn the annual return required under paragraph (a) in the course of the twelve-month period commencing with such calendar quarter, the Borrower shall adjust its tariffs accordingly, and the adjusted tariffs shall be brought into effect noL Later than the end of the following calendar quarter. Section 5.09. (a) Except as the Bank shall otherwise agree, the Borrower shall not incur any long-term 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, - 11 - whichever amount is the greater, shall be not less than 1.5 times the maximum long-term debt service requirement for any succeeding fiscal year on all long-term debt, including the long-term debt proposed to be incurred. (b) For purposes of this Section: (i) The term "long-term debt" shall mean all debt of the Borrower including debt for the service of which the Borrower is responsible (excluding bonds of the Borrower registered in the name of any Shareholder), 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 but only to the extent that the guaranteed debt is outstanding. (iii) The term "net revenues" shall mean gross revenues from all sources, adjusted to take account of the Borrower's tariffs in effect at the time of the incurrence of long-term debt even t1dough they were not in effect during the fiscal year or twelve- month period to which such revenues relate, less all operating and administrative expenses and provision for taxes, if any, but before provision covering depreciation, interest and other charges on debt. (iv) The term "long-term debt service requirement" shall mean the aggregate amount of amortization (includ- ing sinking fund payments, if any), interest and other charges on long-term debt, excluding any interest and other charges payable by the Borrower during construction of any project of the Borrower, provided that such interest and other charges shall be financed with the proceeds of any loan made to the Borrower for the financing of works under such project. - 12 - (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 valuation, obtainable for the purposes of servicing such debt. Section 5.10. The Borrower shall obtain reimbursement from the pertinent Shareholder of all interest and other charges payable by the Borrower on borrowings made by it to cover cash shortfalls caused by the non-payment by such Shareholder of any of its outstanding debts to the Borrower. ARTICLE VI Amendment of the First Loan Agreement, the Second Loan Agreement, the Third Loan Agreement and the Prior Project Agreement Section 6.01. The First Loan Agreement is hereby amended by the deletion of the text of Section 5.09 and the substi- tution therefor of the text of Section 5.08 of this Agreement. Section 6.02. The Second Loan Agreement is hereby amended by the deletion of the text of Section 5.13 and the substitution therefor of the text of Section 5.08 of this Agreement. Section 6.03. The Third Loan Agreement is hereby amended by the deletion of the text of Section 5.08 and the substitution therefor of the text of Section 5.08 of this Agreement. Section 6.04. The Prior Project Agreement is hereby amended by the deletion of the text of Sectlon 4.04 and the substitution therefor of the text of Section 5.08 of this Agreement. ARTICLE VII Remedies of the Bank Section 7.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: - 13 - (a) the Estatutos, or any provision thereof, shall have been amended, suspended or abrogated without the prior agreement of the Bank; (b) the Sales Arrangements, or any provision thereof, shall have been amended, suspended or abrogated, in any material respect, without the prior agreement of the Bank; (c) a default shall have occurred in the performance by any of the Shareholders of any obligation on its part under the Shareholders' Agreement, under the Estatutos or under the Sales Arrangements; and (d) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agree- ment providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement, and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions con- sistent with the obligations of the Borrower under this Agreement. Section 7.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any events specified in paragraphs (a) and (b) of Section 7.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower; and (b) the event specified in paragraph (d) (i) (B) of Section 7.01 of this Agreement shall occur. - 14 - ARTICLE VIII Effective Date; Termination Section 8.01. 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) arrangements, satisfactory to the Bank, have been made for the financing of the Jaguas Project; (b) arrangements, satisfactory to the Bank,. have been made to provide the Borrower with the necessary foreign exchange financing for the Project in addition to the Loan; and (c) the execution and delivery of the Shareholders' Agree- ment on behalf of the Shareholders have been duly authorized or ratified by all necessary corporate and governmental action. Section 8.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank, namely, that the Shareholders' Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the Shareholders and that such Agreement constitutes a valid and binding obligation of the Shareholders in accordance with its terms. Section 8.03. The date ,AY' r c , is hereby specified for the purpose of Section 12.04 of the General Conditions. ARTICLE IX Addresses Section 9.01. 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 - 15 - Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Interconexi6n El'ctrica S.A. Calle 50 No. 50-21 (Piso 13) Medellfn Colombia Cable address: Telex: ISA 06559 Medellfn 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 city of Bogota, Republic of Colombia, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Regional Vice President Latin America and the Caribbean INTERCONEXION ELECTRICA S.A. By lt 4ry-00 Authorized Representative A I~ -16- 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) Equipment and 40,900,000 100% of foreign materials (in- expenditures or cluding services 94% of the ex- for their in- factory cost of stallation) for locally manu- Parts A and B factured goods of the Project (excluding tur- bines and alter- nators for Part A of the Project) and equipment and materials for Part C of the Project (2) Civil works for 5,400,000 100% of foreign Part B of the expenditures Project (3) Civil works and 11,500,000 100% of foreign erection ser- expenditures vices for Part C of the Project (4) Consultants' ser- 6,500,000 100% of foreign vices (including expenditures and equipment and 50% of local ex- vehicles there- penditures for) and train- ing - 17 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Surveys and dril- 600,000 50% ling (Parts B and C of the Project) (6) Unallocated 7,100,000 TOTAL 72,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" 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, and (b) the term "local expenditures" means expenditures in the currency of the Guarantor and for goods or services supplied from the territory of 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. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made 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 one million dollars ($1,000,000) may be made in respect of Category (4) on account of payments made for expenditures for engineering services under Parts A, B and C of the Project before that date but after October 1, 1978. I r - 18 - 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in. the table in paragraph 1 above, if the Bank has reasonably-ie*timiated that the amount of the Loan then allocated to any Category will be insufficient 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 reallocation cannot fully meet the estimated shortfall, reduce the disbursement 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. 1j1~ .,r -19- SCHEDULE 2 Description of the Project The Project is part of the Borrower's power development program and consists of: Part A: San Carlos (a) Construction of a penstock and the carrying out of works ancillary thereto. (b) Acquisition and installation of four turbine-alternator and transformer groups aggregating about 620 megawatts, and the carrying out of works ancillary thereto. Part B: Calderas (a) Construction of a dam in the Calderas River and the carrying out of works ancillary thereto. (b) Construction of intake and discharge structures, intake and discharge tunnels and a power station building for the power station at Calderas, and the carrying out of works ancillary thereto. (c) Acquisition and installation of two turbine-alternator and transformer groups totalling about 15 megawatts, and the carrying out of works ancillary thereto. Part C: Transmission (a) Construction of a 230-kilovolts transmission line, about 90 kilometers long, between San Carlos and Medellin, expansion of the terminal substations and the carrying out of works ancillary thereto. (b) Construction of a 230-kilovolts transmission line, about 200 kilometers long, between Esmeralda and Yumbo, expansion of the terminal substations and the carrying out of works ancillary thereto. Part D: Studies and Training (a) Carrying out, by December 31, 1981, of: (i) a study of the dispatch functions of the Borrower and the Shareholders; and J1 - 20 - (ii) a program, satisfactory to the Bank, for the training of the Borrower's and the Shareholders' staff engaged in such functions. (b) Carrying out, by June 30, 1980, of a study for assessing the Borrower's manpower and training requirements. (c) Carrying out, by June 30, 1983, of a program, satisfac- tory to the Bank, for the training of the Borrower's professional staff. Parts A, B and C of the Project are expected to be completed by June 30, 1984. - 21 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each April 15 and October 15 beginning October 15, 1983 through October 15, 1995 2,770,000 On April 15, 1996 2,750,000 * 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. r - 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 t( Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.40% More than three years but not more than six years before maturity 2.80% More than six years but not more than eleven years before maturity 5.10% More than eleven years but not more than fifteen years before maturity 6.95% More than fifteen years before maturity 7.90% - 23 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Goods and civil works 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 cclled the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. 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 sixty days prior to the date of availability to the public of the first tender documents, 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 and works in question. The Borrower shall provide the necessary information to update such notice annually so long as any goods or works remain to be pro- cured. 3. For the purpose of evaluation and comparison of bids for the supply of goods: (i) bidders shall be required to state in their bid the c.i.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 imported goods, and sales and similar taxes on domestically supplied goods, 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. B. Preference for Domestic Manufacturers Goods manufactured in Colombia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid - 24 - for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Colombia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Colombia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, *and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: - 25 - With respect to all contracts for goods or civil works 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, 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 such contract. 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 dalivery to the Bank of the first application for withdrawal of funds from the Loan Account 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. - 26 - 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% 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. - 27 - SCHEDULE 5 Method for Calculating Rate of Return 1. The annual return specified in Section 5.08 of the Loan Agreement will be calculated, in each calendar quarter in respect of the twelve-mouth period beginning with such quarter and the twelve-month period immediately preceding, by using as the denom- inator the average between the net current, values of the respec- tive fixed assets in operation at the beginning and at the end of each such period and as numerator the operating income of the Borrower for the same period. 2. Any shortfall or overrun in the required annual return for the twelve-month period immediately preceding the quarter in which the calculation is to be made will be carried forward and sub- tracted or added, as the case may be, to the numerator used for the forthcoming twelve-month period. 3. "Operating income" will be the difference between all reve- nues from the sale of electricity and transmission charges, and all administrative and operating costs relating thereto, including maintenance and adequate provision for straight-line depreciation *on the average gross value of revalued fixed assets in operation. 4. The net current value of fixed assets in operation will be at any given date their gross value less accumulated depreciation to such date, as revalued and depreciated in accordance with para- graphs 5 and 6 below. 5. Until another method, satisfactory to the Bank, for the maintenance of value of assets of public utilities shall have been made applicable to the Borrower, the gross value of the Borrower's fixed assets in operation and works in progress will be revalued quarterly in accordance with the corresponding variations in the Indice nacional de precios al consumidor - Obreros - published by the Departamento Administrativo Nacional de Estadistica of the Guarantor, or a similar index approved by the Bank, to the last month preceding the quarter in which the calculation is to be made. For the purposes of this calculation, as of December 31, 1976: (a) the aggregate gross value of the Borrower's fixed assets in operation will be fixed in one thousand eight hundred thirty-three million pesos (Col.$1,833,000,000); - 28 - (b) the aggregate gross value of the Borrower's fixed assets in construction will be fixed in ten thousand four hundred sixty-four million pesos (Col.$10,464,000,000); and (c) the accumulated depreciation on the assets in (a) hereof will be fixed in two hundred eleven million pesos (Col.$211,000,000). 6. The Borrower will furnish to the Bank during the first quarter of each fiscal year a report on the revaluation of assets through the end of the preceding fiscal year. The report for the fiscal year 1978 will be furnished to the Bank by June 30, 1979. 7. Depreciation will be charged on a straight-line basis over the estimated useful life of the Borrower's fixed assets. ik 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 day of i -,1972. FOR SECRETARY I1