Ecuador - Revised Quito Power Project : Loan 0177 - Loan Agreement - Conformed

LOAN NUMBER 177EC Loan Agreement (Revised Quito Power Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA ELECTRICA QUITO, S.A. DATED SEPTEMBER 20, 1957 LOAN NUMBER 177EC Loan Agreement (Revised Quito Power Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA ELECTRICA QUITO, S.A. DATED SEPTEMBER 20, 1957 E~nan Areement AGREEMENT, dated September 20, 1957, between INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and EMPRESA ELECTRICA QUITo, S.A. (hereinafter called the Borrower). WHEREAS by a loan agreement dated March 29, 1956, be- tween the Bank and the Borrower (hereinafter called thiE First Loan Agreement), the Bank agreed to make to the Borrower a loan on the terms and conditions therein set forth or referred to, in an amount in various currencies equivalent to $5,000,000 as provided therein for the con- struction of certain electric power generating, transmission, distribution and other facilities of the Borrower therein specified; and WHEREAS by a guarantee agreement of even date there- with between the Republic of Ecuador (hereinafter called the Guarantor) and the Bank, the Guarantor agreed to guarantee the payment of the principal, interest and other charges on such loan; and WHEREAS upward adjustments of the estimated costs of the works specified in the First Loan Agreement have been made and the engineering consultants have recommended fundamental changes in such works which have resulted in substantially increased costs; and WHEREAS in order to meet such increased costs, additional foreign exchange amounting to the equivalent of $5,000,000 is needed by the Borrower and the Bank bas agreed to make an additional loan for such purpose; Now THEREFORE, the parties hereto agree as follows: 4 ARTICLE I Loan Regulations SECTION 1.01. The parties to this Loan Agreement ac- cept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifica- tions thereof set forth in Schedule 3 to this Loan Agreement (said Loan Regulations No. 4 as so modified being herein- after called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II The Loan SECTION 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Loan Agreement set forth or referred to, an amount in various currencies equiv- alent to five million dollars ($5,000,000). SECTION 2.02. The Bank shall open a Loan Account on its books in the name of the Borrower and shall credit to such Account the amount of the Loan. The amount of the Loan may be withdrawn from the Loan Account as pro- vided, and subject to the rights of cancellation and suspen- .ion set forth herein and in the Loan Regulations. SECTION 2.03. The Borrower shall pay to the Bank a com- mitment charge at the rate of three-fourths of one per cent (3/4 of 1%X) per annum on the principal amount of the Loan not so withdrawn from time to time. Such commitment charge shall accrue from a date sixty days after the date of this Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Loan Account as provided in Article IV of the Loan Regulations or shall be cancelled pursuant to Article V of the Loan Regulations. SECTION 2.04. The Borrower shall pay interest at the rate of five and three-fourths per cent (5%%) per annum on the principal amount of the Loan so withdrawn and out- standing from time to time. 5 SECTION 2.05. Except as the Bank and the Borrower shall otherwise agree, the charge payable for special com- mitments entered into by the Bank at the request of the Borrower pursuant to Section 4.02 of the Loan Regulations shall be at the rate of one-half of one per cent (1/ of 1%) per annum on the principal amount of any such special commitments outstanding from time to time. SECTION 2.06. Interest and other charges shall be pay- able semi-annually on February 1 and August 1 in each year. SECTION 2.07. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. ARTICLE III Use of Proceeds of the Loan SECTION 3.01. The Borrower shall apply the proceeds of the Loan exclusively to financing the cost of goods required to carry out the Project described in Schedule 2 to this Loan Agreement. The specific goods to be financed out of the pro- ceeds of the Loan and the methods and procedures for pro- curement of such goods shall be determined by agreement between the Bank and the Borrower, subject to modifica- tion by further agreement between them. SECTION 3.02. Th . Borrower shall cause all goods financed out of the proceeds of the Loan to be imported into the territories of the Guarantor and there to be used exclusively in the carrying out of the Project. ARTICLE IV Bonds SECTION 4.01. The Borrower shall execute and deliver Bonds representing the principal amount of the Loan as provided in the Loan Regulations. 6 SECTION 4.02. The Presidente and the Gerente of the Borrower acting jointly and such person or persons as they shall jointly appoint in writing are designated as author- ized representatives of the Borrower for the purposes of Section 6.12 (a) of the Loan Regulations. ARTICLE V Particular Covenants SECTION 5.01. (a) The Borrower shall carry out the Project with due diligence and efficiency and in conformity with sound engineering and financial practices. (b) In the carrying out of the Project the Borrower shall employ engineering consultants, and, except as the Bank and the Borrower shall otherwise agree, the Borrower shall employ contractors for the construction of the Project. The engineering consultants and the contractors, and the terms and conditions on which they are employed, shall be mutually satisfactory to the Bank and the Borrower. Ex- cept as the Bank and the Borrower shall otherwise agree, equipment to be used for the Project and the terms and conditions of its purchase shall be mutually satisfactory to the Bank and the Borrower. (c) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans and specifications for the Project and any material modifications subsequently made therein, in such detail as the Bank shall from time to time request. (d) The Borrower shall maintain records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the prog- ress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound account- ing practices the operations and financial condition of the Borrower; shall enable the Bank's representatives to in- spect the Project, the goods and any relevant records and 7 documents; and shall furnish to the Bank all such informa- tion as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the goods, and the operations and financial condition of the Borrower. SECTION 5.02. (a) The Bank and the Borrower shall co- operate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the loan. (b) The Bank and the Borrower shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Borrower shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. SECTION 5.03. Except as the Bank shall otherwise agree, the Borrower shall not incur any long-term indebtedness if, as a result, the long-term indebtedness of the Borrower would exceed the total capital and surplus of the Borrower. For the purposes of this Section: (a) The term "long-term indebtedness", shall mean debt maturing by its terms more than one year after the date on which it is incurred. (b) The amount in currency of the Guarantor of debt payable in another currency shall be determined on the basis of the rate of exchange at which such other currency is (at the time when it is necessary to make such determination for the purposes of this Section) obtainable by the Borrower for the purposes of serv- icing such debt. 8 (c) The term "capital and surplus" shall mean paid-in capital and surplus determined in accordance with sound accounting practices. SECTION 5.04. The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower as security for any debt, such lien will ipso facto equally and ratably secure the pay- ment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for the payment of the purchase price of such property; (ii) any lien on com- mercial goods to secure a debt maturing not more than one year after the date on which it is originally incurred and to be paid out of the proceed; of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. SECTION 5.05. Unless the Bank shall otherwise agree, the Borrower shall not declare or pay any dividend, or make any distribution on any shares of its capital stock, other than a dividend payable solely in shares of its capital stock, nor shall the Borrower acquire any shares of its capital stock for a consideration, if, as a result of any such divi- dend or distribution (other than those payable solely in shares of its stock) or such acquisition of shares of capital stock the net working capital in the hands of the Borrower would be reduced to an amount less than the aggregate amount of its operating expenses (including administra- tive and general expenses) for the preceding four calendar months. For purposes of this Section the term "net work- ing capital" shall mean the excess of current assets (cash and those assets which in the regular course of business can be readily converted into cash) over current liabilities 9 (those obligations payable within one year, including pay- ments on funded debt falling due during such period). SECTION 5.06. The Borrower shall pay or cause to be paid all taxes or fees, if any, imposed under the laws of the Guarantor or laws in effect in the territories of the Guar- antor on or in connection with the execution, issue, delivery or registration of this Loan Agreement, the Guarantee Agreement or the Bonds, or the payment of principal, inter- est or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, payments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 5.07. The Borrower shall pay or cause to be paid all taxes and fees, if any, imposed under the laws of the country or countries in whose currency the Loan and the Bonds are payable or laws in effect in the territories of such country or countries on or in connection with the exe- cution, issue, delivery or registration of this Agreement, the Guarantee Agreement or the Bonds. SECTION 5.08. (a) Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall insure or cause to be insured with responsible insurers all goods financed with the proceeds of the Loan. Such insur- ance shall cover such marine, transit and other hazards incident to purchase and importation of the goods into the territories of the Guarantor and to delivery thereof to the site of the Project, and shall be for such amounts as shall be consistent with sound commercial practice. Such insur- ance shall be payable in the currency in which the cost of the goods insured thereunder shall be payable. (b) In addition, the Borrower shall insure against such risks and in such amounts as shall be consistent with sound public utility and business practices. 10 SECTION 5.09. (a) The Borrower shall at all times main- tain its existence and right to carry on operations and shall, except as the Bank shall otherwise agree, take all steps necessary to maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) The Borrower shall operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with sound engineering standards; and shall at all times operate its plants and equipment and maintain its financial position in accordance with sound business and public utility practices. (c) The Borrower shall not, without the prior consent of the Bank (i) sell or otherwise dispose of all or substan- tially all of its property and assets unless the Borrower shall first redeem and pay or make adequate provision satisfactory to the Bank for redemption and payment of all of the Loan which shall be outstanding and unpaid; or (ii) sell or otherwise dispose of 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 and payment of a proportionate part of the Loan which shall then be outstanding and unpaid equal to the proportion4.te part of the Project so sold or disposed of. The Borrower may, however, without reference to the fore- going, sell or otherwise dispose of any property which shall have become old, worn-out, obsolete or unnecessary for use in its operations. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of the Loan Regulations shall occur and shall 11. continue for a period of thirty days, or (ii) if any event specified in paragraph (c) of Section 5.02 of the Loan Reg- ulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent time during the continuance thereof, the Bank, at its option, may declare the principal of the Loan and of all the Bonds then out- standing to be due and payable immediately, and upon any such declaration such principal shall become due and pay- able immediately, anything in this Loan Agreement or in the Bonds to the contrary notwithstanding. ARTICLE VII Modifications of the First Loan Agreement SECTIOY 7.01. For the purposes of the First Loan Agree- ment, paragraph (c) of Section 5.02 of Loan Regulations No. 4 of the Bank, dated February 15, 1955, is hereby amended to read as follows: "(c) A default shall have occurred in the performance of any other covenant or agreement on the part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds or under the Loan Agreement dated Sep- tember 20, 1957, the Guarantee Agreement of even date therewith, or the Bonds therein provided for."; and the term "Loan Regulations" as used for the purposes of the First Loan Agreement shall mean Loan Regulations * No. 4 of the Bank, dated February 15, 1955, as hereby amended. SECTIox 7.02. The Description of the Project set forth in Schedule 2 to the First Loan Agreement is hereby amended to read as set forth in Schedule 2 to this Loan Agreement. 12 SECTION 7.03. Except as provided in this Loan Agree- ment, the First Loan Agreement shall remain in full force and effect. ARTICLE VIII Effective Date; Termination SECTION <.01. The following event is specified as an additional condition to the effectiveness of this Agreerr ent within the meaning of Section 9.01 (a) (ii) and Section 9.01 (b) (ii) of the Loan Regulations: That the Guarantee Agreement has been ratified by the Congress of the Republic of Ecuador. SECTION 8.02. The following is specified as an additional matter, within the meaning of Section 9.02(e) of the Loan Regulations, to be included in the opinion or opinions to be furnished to the Bank: The ratification of the Guarantee Agreement by the Congress of the Republic of Ecuador has been duly given. SECTION 8.03. A date 60 days after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the Loan Regulations. ARTICLE IX Miscellaneous SECTION 9.01. The Closing Date shall be December 31, 1961. SECTION 9.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Borrower: Empresa El'ctrica Quito, S. A. P.O. Box 473 Quito, Ecuador 13 Alternative address for cablegrams and radiograms: Empresa El'ctrica Quito For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D. C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above writ- ten. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By EUGENE R. BLACK President EMPRESA ELECTRICA QUITO, S.A. By E. POLIT MORENO R. ESPINOSA PALACIOS Authorized Representatives 14 SCHEDULE 1 Amortization Schedule Date Payment of Principal Payment Due (expressed in dollars)* February 1, 1962 $ 97,000 August 1, 1962 100,000 February 1, 1963 103,000 August 1, 1963 106,000 February 1, 1964 109,000 August 1, 1964 112,000 February 1, 1965 115,000 August 1, 1965 119,000 February 1, 1966 122,000 August 1, 1966 126,000 February 1, 1967 129,000 August 1, 1967 133,000 February 1, 1968 137,000 August 1, 1968 141,000 February 1, 1969 145,000 August 1, 1969 149,000 February 1, 1970 153,000 August 1, 1.970 157,000 February 1, 1971 162,000 August 1, 1971 167,000 February 1, 1972 172,000 August 1, 1972 177,000 February 1, 1973 182,000 August 1, 1973 187,000 February 1, 1974 192,000 August 1, 1974 198,000 February 1, 1975 203,000 August 1, 1975 209,000 February 1, 1976 215,000 August 1, 1976 221,000 February 1, 1977 228,000 August 1, 1977 234,000 * To the extent that any part of the Loan is repayable in a currency other than dollars (see Loan Regulations, Section 3.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 15 Premiums on Prepayment and Redemption The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the Loan pursuant to Section 2.05 (b) of the Loan Regulations or on the redemption of any Bond prior to its maturity pursuant to Section 6.16 of the Loan Regulations: Time of Prepayment or Redemption Premium Not more than three years before maturity I/% More than three years but not more than six years before maturity ........... .. 1 % More than six years but not more than eleven years before maturity.......... 2 2% More than eleven years but not more than sixteen years before maturity.......... 31/2% More than sixteen years but not more than eighteen years before maturity ...... 43/4% More than eighteen years before maturity. . 53/4% 16 SCHEDULE 2 Description of Project The Project consists of: 1. The construction and installation, in Quito, of a diesel generating plant which will have a capacity of 6,000 kw at an elevation of approximately 2,860 meters above sea level. 2. The construction of about 28 kilometers of 22 kv single circuit transmission lines strung on wooden poles to bring from Machachi to Quito about 2,000 kw of power to be made available to the Borrower by the Municipality of Machachi. 3. The construction on the Rio Machangara of the Cumbaya hydroelectric plant with a total installed generating ca- pacity of 20,000 kw and a head of about 139 meters. For the most part, the tailrace waters from the existing Guangopolo hydroelectric plant will be utilized for the operation of the Cumbaya plant. A tunnel about 8.5 kilo- meters long and designed to handle a flow of about 21 cubic meters per second will convey the waters from the Guangopolo plant to a regulating basin which will also act as a desilting basin. From the basin a reinforced concrete non-pressure penstock will convey the water to a surge chamber. The penstock from the surge chamber to the powerhouse will be constructed of steel pipes. Excavation will be made for a second penstock. The headworks at Guangopolo will be designed to permit the supplying of water to the Cumbaya' tunnel from the tail- race of the Guangopolo plant, from the forebay of the Guangopolo plant, and directly from the Rio San Pedro. 4. The construction of a powerhouse which will be built above ground to accommodate four 10,000 kw generating units, of which only two will be installed initially, and 17 which will consist of two vertical 14,200 h.p. Francis- type turbines connected to two 10,000 kw generators. The first unit is scheduled to be in commercial operation by the first quarter of 1961 to be followed a, few months later by the second unit. A step-up 11/64 kv substation will be erected on the side of the hill above the plant. 5. The construction of two sets of steel towers capable of carrying two 46 kv double-circuit lines to connect, by direct route, the step-up substation with Quito and the installation of one circuit on each set of towers. 6. The replacement of the existing double-circuit 22 kv line (about 6.5 kilometers) between the Guangopolo plant and Quito by two single-circuit 46 kv lines. 7. The rehabilitation and expansion of the distribution net- work in Quito. The network is to be served by two main substations and a 46 kv ring bus around the city, about 37 kilometers long, with the two main substations inter- connected in such a way that the supply to all parts of the city will be assured at all times. Suitable distribution feeders will connect the two main substations to various points in the city where at least four step-down substa- tions will feed an underground network. The secondary system for the entire city and the adjoining suburban area, both underground and overhead, will be rehabili- tated and expanded. Sufficient meters will be installed to reduce the number of unmetered customers to about 12% by December 31, 1961. Spare meters will be purchased initially to provide an adequate stock for repair and expansion needs. 18 SCHEDULE 3 Modifications of Loan Regulations No. 4 For the purposes of this Loan Agreement the provisions of Loan Regulations No. 4 of the Bank, dated June 15, 1956, shall be deemed to be modified as follows: (a) Section 2.02 is deleted. (b) Paragraph (c) of Section 5.02 is amended to read as follows: "(c) A default shall have occurred in the perform- ance of any other covenant or agreement on the part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds or under the Loan Agreement dated March 29, 1956, the Guar- antee Agreement of even date therewith, or the Bonds therein provided for." (c) The second sentence of Section 7.02 is amended to read as follows: "Such obligations shall not be subject to any prior notice to, demand upon or action against the Bor- rower or to any prior notice to or demand upon the Guarantor with regard to any default by the Bor- rower, and shall not be impaired by any of the following: any extension of time, forbearance or concession given to the Borrower; any assertion of, or failure to assert, or delay in asserting, any right, power or remedy against the Borrower or in respect of any security for the Loan; any modi- fication or amplification of the provisions of the Loan Agreement contemplated by the t ,rms thereof; any modification or amplification of any other document related to the Loan or related to any security therefor; any failure of the Borrower to comply with any requirement of any law, regu- lation or order of the Guarantor or of any politi- cal subdivision or agency of the Guarantor."