Colombia - Guadalupe IV Hydro Power Project : Loan 1868 - Loan Agreement - Conformed

OFFICTAL LOAN NUMBER 1868 CO Loan Agreement (Guadalupe IV Hydro Power Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and EMPRESAS PUBLICAS DE MEDELLIN Dated b9 , 1980 LOAN NUMBER 1868 CO LOAN AGREEMENT AGREEMENT, dated b e enbe-- l1 , 1980, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and EMPRESAS PUBLICAS DE MEDELLIN (hereinafter called the Borrower). 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 Guaran- tee Agreement, on behalf of the Borrower or the Guaran- tor, may be taken or executed by the representative of the Borrower, or of the Guarantor designated in the Guarantee Agreement for the purposes of this Section, or any person thereunto authorized in writing by such representative. 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 such representatives or any person thereunto authorized in writing by him; provided that such modification or amplification is reasonable in the circumstances and will not substan- tially increase the obligations of the Borrower under the Loan Agreement or of the Guarantor under the Guaran- tee Agreement." Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the -2- General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Power Department" means the Borrower's power service department; (b) "Department" means one of the following of the Borrower's departments: energla, telefonos, and acieducto and alcanta- rillado; (c) "Power Assets" means all electric power generating plants, substations, transmission lines and related facilities and assets assigned to the Power Department; (d) "pesos" and "Col$" means pesos in the currency of the Guarantor; (e) "Estatutos" means the estatutos of the Borrower set forth in Acuerdo No. 58 of 1955 of the Municipalidad de Medellin issued in accordance with Decreto No. 1816 of 1955 as such estatu- tos may be amended from time to time and such term shall include all other applicable legislation of the Municipalidad de Medellin; (f) "Telecommunications Loan Agreement" means the loan agreement for Loan 1825-CO between the Bank and the Borrower, and "Telecommunications Guarantee Agreement" means the guarantee agreement for Loan 1825-CO between the Guarantor and the Bank; (g) "First Power Loan Agreement" means the loan agreement for Loan No. 225-CO of May 20, 1959 between the Bank and the Borrower, and "First Power Guarantee Agreement" means the gia- rantee agreement for Loan No. 225-CO of even date between the Guarantor and the Bank; (h) "Second Power Loan Agreement" means the loan agreement for Loan No. 282-CO of May 12, 1961 between the Bank and the Borrower, and "Second Power Guarantee Agreement" means the gua- rantee agreement for Loan No. 282-CO of even date between the Guarantor and the Bank; (i) "Third Power Loan Agreement" means the loan agreement for Loan No. 369-CO of February 7, 1964 between the Bank and the Borrower, and "Third Power Guarantee Agreement" means the gua- rante- agreement for Loan No. 369-CO of even date between the Guarantor and the Bank; -3- (j) "Fourth Power Loan Agreement" means the loan agreement for Loan No. 874-CO of January 12, 1973 between the Bank and the Borrower, and "Fourth Power Guarantee Agreement" means the gua- rantee agreement for Loan No. 874-CO of even date between the Guarantor and the Bank; (k) "First Power Shareholder Agreement" means the share- holder agreement for Loan 1582-CO of July 14, 1978 between the Bank and the Borrower, and "Fifth Power Guarantee Agreement" means the guarantee agreement for Loan 1582-CO of even date between the Guarantor and the Bank; (1) "Second Power Shareholder Agreement" means the share- holder agreemeut for Loan 1725-CO of November 30, 1979 between the Bank and the Borrower, and "Sixth Power Guarantee Agreement" means the guarantee agreement for Loan 1725-CO of even date between the Guarantor and the Bank; (m) "Power Loan Agreements" means collectively the loan agreements referred to in paragraphs (g), (h), (i) and (j) hereof; (n) "Power Guarantee Agreements" means collectively the guarantee agreements referred to in paragraphs (g), (h), (i), (j), (k) and (1) hereof; (o) "Power Shareholders' Agreements" means collectively the shareholders' agreements referred to in paragraphs (k) and (1) hereof; and (p) "Investment Program" means the Borrower's investment program set forth in Acta No. 931 of April 1979 of the Junta Directiva of the Borrower. 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 one hundred twenty-five million dollars ($125,000,000). 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 -4- expenditures 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 eight and twenty-five hundredths per cent (8.25%) 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 March 15 and September 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. 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 and supervision of the carrying out of Part A of -5- the Project, such consultants to be employed by the Borrower not later than April 30, 1982; and (b) the carrying out of the study referred to in Part F (a) of the Project, such consultants to be employed by the Bor- rower not later than December 31, 1981. Section 3.03. The Borrower shall by September 30, 1980, employ consultants under terms of reference satisfactory to the Bank, in order to assist the Borrower in the design, procurement and supervision for the carrying out of Part C of the Project. Section 3.04. The Borrower shall take all necessary measures to ensure that the Project is carried out with due regard to ecological and environme tal factors. 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 ir 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 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 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 -6- 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) 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. (d) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Borrower and any relevant reords and documents. Section 3.07. The Borrower shall take all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land 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 acqui- sition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. ARTICLE IV Management and Operations of the Borrower Section 4.01. 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 business, financial and public utility practices and under the supervision of experienced and competent management assisted by adequate, experienced and competent staff. -7- Section 4.02. The Borrower shall take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. 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. (a) The Borrower shall operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with appropriate engineering standards; and shall at all times operate its plants and equipment and maintain its financial position in accordance with appropriate public utility and business practices. (b) Without limiting the generality of the preceding para- graph, the Borrower shall, under arrangements satisfactory to the Bank, cause all of its dams, reservoir banks, waterways and earthworks assigned to the Power Department to be periodically inspected, in accordance with sound 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 earthworks which may endanger the safety of such structures and earthworks. ARTICLE V Other Covenants Section 5.01. The Borrower shall operate each of its Depart- ments separately and shall, for the assets, revenues and expendi- tures of each of its Departments, maintain separate records adequate to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of such Departments. Section 5.02. The Borrower shall: (i) for each of its Depart- ments, 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 -8- 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 requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower's Departments and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. Not later than three months after the end of each calendar year, the Borrower shall for each of its Departments prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall have reasonably requested, showing the Borrower's financial performance through the end of such year and projected through the following twelve months. Section 5.04. (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 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 which it is originally incurred. Section 5.05. The Borrower shall not, without the consent of the Bank, sell or otherwise dispose of all or substantially all of its Power Assets or all or substantially all of the property included in the Project or any plant included therein, unless the Borrower shall first redeem and pay, or make adequate provision satisfactory to the Bank for redemption or payments of, all of the Loan which shall then be outstanding and unpaid. -9- Section 5.06. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt for the benefit of the opera- tions of any Department, unless the net revenues earned on the operations of such Department for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever amount is 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 to be incurred, to be serviced with revenues generated by the operations of such Department. For the purposes of this Section: (a) the term "debt" shall mean all debt of the Borrower, including debt for the service of which the Borrower is respon- sible, maturing by its terms more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (A) under a con- tract, 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; (c) 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 debt even though 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; (d) (i) the term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; provided, however, that in respect of the Borrower's Power Department this term shall also include all amounts to be payable by the Borrower to Interconexi6n El6ctrica S.A. (hereinafter called ISA) in exchange for shares and bonds of ISA, as required by the Estatutos of ISA (ii) for the purpose of sub-paragraph (i) hereof, the term "Estatutos" means the estatutos of ISA dated September 14, 1967, as amended as of the date of this Agreement and as further amended from time to time, under which ISA was established and operates, and the term "bonds" means titulos issued by ISA pursuant to paragraph (b) of Article 12 of the Estatutos; and - 10 - (e) 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 5.07. Except as the Bank and the Borrower, with the concurrence of the Guarantor, shall otherwise agree: (a) the Borrower shall establish and maintain for the -services provided by each Department tariffs which will provide revenues at least sufficient to cover its administrative and operating expenses (including taxes, if any, contributions to the Municipalidad de Medellin and adequate provision for maintenance and depreciation), debt service in excess of depreciation, and a reasonable contribution towards new capital investments of that Department; provided, however, that the provisions of this para- graph shall not be construed, under any circumstances, as limiting the rate of return requirements for the Borrower's telephone operations, as set forth in the Telecommunications Loan Agreement. (b) without limitation upon the foregoing, the Borrower ir. the carrying out of its power operations shall take all such steps as shall be necessary (including adjustment of tariffs) in order to generate an annual return at a rate of at least ten and a half per cent (10.5%) in the year 1981, thirteen per cent (13%) in the years 1982 and 1983 and ten per cent (10%) in the year 1984 and thereafter, on the average net current value of its fixed Power Assets in operation calculated in accordance with the method outlined in Schedule 5 to this Agreement; (c) the Borrower shall, within the first two months of, each calendar quarter: (i) calculate in respect of its Power Department: (A) the actual return earned in the course of the twelve-month period immediately preceding such quarter; (B) the return which, on the basis of reasonable estimates, is expected to be earned in the course of the twelve-month period beginning with such quarter, after adding to or sub- stracting from the estimated operating income for such period any overrun or shortfall in - 11 - the actual return for the preceding twelve- month period; and (ii) furnish to the Bank the assumptions for and the results of such calculations; and (d) if any such calculation shall show that the Borrower cannot be expected to earn in respect of its Power Department the return required under paragraph (b) during the twelve-month period commencing with the calendar quarter in which the calculation is made, the Borrower shall adjust its electric power tariffs accordingly, and the adjusted tariffs shall be brought into effect not later than the end of the following calendar quarter. Section 5.08. Without limitation upon the provisions of Section 5.07 of this Agreement, and except as the Bank shall otherwise agree, the Borrower shall maintain the current 2.2% monthly tariff increases through December 31, 1983. Section 5.09. The Borrower shall obtain the concurrence of the Bank before committing itself to, or making, any capital expenditure not directly related to the operations of any of its Departments. Section 5.10. 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) for increasing its power generating capacity by more than one-hundred megawatts; (ii) afford the Bank a reasonable opportunity to comment on any such proposal; and (iii) not commit itself to, nor make, any such capital expenditure unless the proposed expenditure is economically justified as part of the national power expansion program of Interconexi6n El6ctrica S.A. and the Borrower has obtained financing under terms and conditions which will not affect its financial condition, the carrying out of the Project and the performance of its obligations under the Power Shareholders' Agreements; and (b) The Borrower shall obtain the concurrence of the Bank before committing itself to any capital expenditure for the benefit of its power operations if the aggregate of such capital expenditure and all such other capital expenditures made or to be made in any one fiscal year (excluding those referred to in paragraph (a) above and those required for (i) the Project, (ii) - 12 - payments to Interconexi6n E14ctrica S.A., and (iii) investments included in the Borrower's Investment Program) exceed or will exceed an amount equivalent to one per cent (1%) of the net current value of the Borrower's fixed assets in operation, as defined in Schedule 5 to this Agreement. Section 5.11. The Borrower shall allocate all funds generated by the Power Department exclusively to such Department and shall not transfer such funds, or any portion thereof, to any of its other Departments unless the funds proposed to be transferred are in excess of those required by the Power Department to cover all: (i) administrative, operating and maintenance expenses, including the adequate funding of such reserves in respect of the Borrower's power operations as shall be consistent with appro- priate public utility and business practices; (ii) repayment of loans (including sinking fund payments), interest and other charges on debt; and (iii) capital expenditures, including the Project; provided, however, that any such transfer shall be treated as a loan from the Power Department to the other Depart- ments, on commercial terms and conditions. Section 5.12. (a) The Borrower shall: (i) for purposes of revising the structure of the Borrower's tariffs and rates for its services prepare, by March 31, 1981, a program satisfactory to the Bank, such program to be prLpared taking into account the conclusions of the study referred to in Sections 5.10 of the Power Shareholders' Agreements and the comments of the Bank thereon; and (ii) put into effect such program by May 30, 1981. (b) In the event that the Borrower shall be unable to prepare the program in paragraph (a) of this Section due to delays in the conclusion of the study referred to in Sections 5.10 of the Power Shareholders' Agreements the Borrower shall, by March 31, 1981, prepare an interim program, satisfactory to the Bank, covering the period from May 30, 1981 through May 30, 1983, for the same purposes as the program referred to in paragraph (a) of this Section and shall put into effect such interim program not later than May 30, 1981; provided, however, that upon preparation of the program referred to in paragraph (a) of this Section, the latter program shall be substituted for said interim program and put into effect in accordance with paragraph (a) of this Section. - 13 - ARTICLE VI Amendment of the Fourth Power Loan Agreement and Power Shareholders' Agreements Section 6.01. The Fourth Power Loan Agreement is hereby amended by the deletion of the text of Sections 4.04 (b) and 5.06 of such Agreement and the.substitution therefor of the text of Sections 4.04 (b) and 5.07 of this Agreement, respectively. Section 6.02. The Power Shareholders' Agreements are hereby amended by the deletion of the text of Section 5.02 (a) (ii) of each such Agreement and the substitution therefor of the following text: "EPM, at least nine per cent (9%) in the year 1980, ten and a half per cent (10.5%) in the year 1981, thirteen per cent (13%) in the years 1982 and 1983 and ten per cent (10%) in the year 1984 and thereafter." 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: (a) the Estatutos or any provision thereof shall have been amended, suspended or abrogated, or new legislation shall have been adopted by the Municipal Council of Medellfn which would affect, materially and adversely, the operations or finan- cial condition of the Borrower or the performance by the Borrower of its obligations under the Loan Agreement; and (b) a default shall have occurred in the performance of any obligation (other than an obligation to pay monies) on the part of the Borrower or the Guarantor under the Power Loan Agree- ments, the Power Guarantee Agreements, the Power Shareholders' Agreements, the Telecommunication Loan Agreement or the Tele- communication Guarantee 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, namely, that the 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. - 14 - ARTICLE VIII Effective Date; Termination Section 8.01. The following event is specified as an addi- tional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that arrangements, satisfactory to the Bank, have been made in order to meet the Borrower's financing requirements for the years 1980 through 1982. Section 8.02. The date 1ewC 1) 1q) 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 Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Empresas Pfblicas de Medellin Calle 53, No. 52-16 Medellin Colombia Cable address: Telex: EMPRESAS 06649 Medellin - 15 - 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 of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By 1I" t'JI'caYS /A+ l4""e Regional Vice President Latin America and the Caribbean EMPRESAS PUBLICAS DE MEDELLIN By RepresnTai Authorized Representative - 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) Civil works 37,000,000 52% for Part A of the Project (2) Electro- 21,000,000 100% of foreign mechanical expenditures equipment and 94% of the (excluding ex-factory cost turbines and of locally generators) for manufactured Part A of the goods Project (3) Transmission 24,000,000 100% of foreign lines and sub- expenditures station mate- and 94% of the rial and equip- ex-factory cost ment (Part B of of locally the Project) manufactured goods (4) Control Center 9,500,000 100% of foreign (Part C of the expenditures Project) and 94% of the ex-factory cost of locally manufactured goods - 17 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (5) Distribution 12,000,000 100% of foreign equipment expenditures (Part D of the and 94% of the Project) ex-factory cost of locally manufactured goods (6) Special utility 1,500,000 100% of foreign equipment (Part E expenditures of the Project) and 94% of the ex-factory cost of locally manufactured goods (7) Training 1,000,000 100% of foreign Part F of the expenditures Project (8) Engineering 6,000,000 100% of foreign consulting expend4tures services for foreign consultants and 50% of local expenditures for local consultants (9) Unallocated 13,000,000 TOTAL 125,000,000 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 - 18 - (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 com- pliance 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 withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement, except that with- drawals, in an aggregate amount not exceeding the equivalent of $500,000, may be made in respect of Categories (1), (3), (5) and (6) of paragraph 1 above before that date but after May 1, 1980. 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 - 19 - 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. - 20 - SCHEDULE 2 Description of the Project The Project is part of the Borrower's development program and consists of: Part A: Guadalupe IV Hydro Power Plant Construction and equipping of the Guadalupe IV hydro elec- tric station on the Guadalupe River comprising compensating tank, intake works, power and pressure tunnels, surge tank and surface penstocks; a surface type power house with three 71 MW turbo- generator units operating under a head of 417 m and reserve space for a fourth unit, together with accessory equipment; and a substation including matched transformers and accessory equipment. Part B: Transmission (a) Acquisition and installation of about 50 km of 115 kV transmission lines, and of about 100 km of 230 kV transmission lines. (b) Expansion of about five existing substations and construction of about five new substations which would provide an additional aggregate transformer capacity of about 420 MVA. Part C: Control Center Part D: Distribution (a) Acquisition and installation of about: (i) 130 km of overhead lines of 13.2 kV; (ii) 40 km of underground cables of 13.2 kV; (iii) 35 km of overhead lines of 44 kV; and (iv) 110 km of LT lines. (b) Acquisition and installation of distribution trans- formers with an aggregate capacity of about 11 MVA. - 21 - Part E: Equipment (a) Acquisition and utilization of special metering equip- ment, including a cable fault locator, about 2,900 current sensors and about 16 power registering meter systems. (b) Acquisition and utilization of about 7 special utility vehicles, line and cable tools, 30 mobile phones and 2 manhole ventilatorso Part F: Studies, Training and Fellowships (a) Carrying out, by September 30, 1982, a study of the development of high voltage transmission facilities of the Bor- rower. (b) Carrying out, by December 31, 1984 a program, satisfac- tory to the Bank, for the training of the Borrower's staff. Part A of the Project is expected to be completed by June 30, 1984, and Parts B, C, D, E and F are expected to be completed by December 31, 1984. - 22 - SCHEDULE 3 Amortization Schedule Payment .f Principal Date Payment Due (expressed in dollars)* On each March15 and September 15 beginning September 15, 1984 through September 15, 1996 4,810,000 On March 15, 1997 4,750,000 * 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. - 23 - 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 1.45% before maturity More than three years but not 2.90% more than six years before maturity More than six years but not 5.35% more than eleven years before maturity More than eleven years but not 7.30% more than fifteen years before maturity More than fifteen years 8.25% before maturity - 24 - 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 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 csp 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 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 on the basis of international 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.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or &'e sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in Colombia may be granted a margin of preference in accordance with, and subject to, the following provisions: - 25 - 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 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. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eval- uated 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. - 26 - C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiv- alent of US $500,000 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 or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the submis- sion 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 submission 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 - 27 - 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- sion 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 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. - 28 - SCHEDULE 5 Method for Calculating Rate of Return 1. The annual return specified in Section 5.07 (b) of this Agreement will be calculated, in each calendar quarter in respect of the twelve-month 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 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 7 below. 5. Until another method for the maintenance of value of assets of the Borrower shall have been established, 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 - Nivel 1 - published by the Departamento Administrativo Nacional de Estadistica of the Guarantor, 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 at eight thousand forty-four million pesos (Col$8,044,000,000); (b) the aggregate gross value of the Borrower's fixed assets in construction will be fixed at three thousand one hundred forty-eight million pesos (Col$3,148,000,000); and - 29 - (c) the accumulated depreciation on the assets in (a) hereof will be fixed at one thousand seven hundred seventy-nine million pesos (Col$1,779,000,000). 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. 7. Depreciation will be charged on a straight-line basis over the estimated useful life of the Borrower's fixed assets. 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 L9 day of . ,198 o_ FOR SECRETARY