Peru - Sixth Power Project : Loan 2179 - Project Agreement - 1 - Conformed

OFFICIAL LOAN NUMER 2179 E DD"UMENTS Project Agreement (Sixth Power Project) between INTERNATIONAL BAB= FOR RECONSIUTCTION AND DVELOPMKEJ and EMPRESA ELECTRICIDAD DE7 PERU S.A. Dated , 1982 LOAN NUMBER 2179 PE PROJECT AGREEMENT AGREEMENT, dated A 7 , 1982, between INTERNATIONAL BANK FOR REtONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and EMPRESA ELECTRICIDAD DEL PERU S.A. (hereinafter called ELECTROPERU). WHEREAS (A) by the Loan Agreement of even date herewith between ELECTROLIMA S.A. (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to eighty-one million two hundred thousand dollars ($81,200,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that ELECTROPERU agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan contract to be entered into between the Borrower and ELECTROPERU, a portion of the proceeds of the loan provided for under the Loan Agreement will be made available to ELECTROPERU on the terms and conditicns therein set forth; and WHEREAS ELECTROPERU, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to under- take the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble thereto, the Preamble to this Agree- ment and the General Conditions (as so defined) have the res- pective meanings therein set forth. ARTICLE II Execution of Part B of the Project Section 2.01. (a) ELECTROPERU shall carry out Part B of the Project described in Schedule 2 to the Loan Agreement and in -2- Schedule 1 to this Agreement, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility practices. (b) For purposes of the carrying out of Part B of the Pro- ject, ELECTROPERU shall enter with the Borrower into the ELECTRO- PERU Subsidiary Loan Contract. (c) ELECTROPERU shall exercise its rights under the ELEC- TROPERU Subsidiary Loan Contract in such manner as to protect its interest and those of the Guarantor, the Bank and the Borrower. Except as the Bank shall otherwise agree, ELECTROPERU shall not take or concur in any action which would have the ef fect of assigning, amending, abrogating or waiving the ELECTROPERU Sub- sidiary Loan Contract or any provision thereof. Section 2.02. (a) In order to assist ELECTROPERU in the carrying out of Part B of the Project, ELECTROPERU shall employ engineering consultants whose selection, qualifications, expe- rience and terms and conditions of employment shall be in accor- dance with the principles and procedures described in the "Guide- lines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981, and in Part E of Schedule 4 to the Loan Agreement. (b) ELECTROPERU shall cooperate fully with such consultants in the performance of their services for the Project and make available to them all information relevant to the Project. (c) ELECTROPERU shall cause the consultants employed by it for purposes of the Project promptly to furnish to the Bank copies of the documents prepared by them for the Project, includ- ing reports and drafts thereof, plans, designs, specifications, work schedules and estimates of costs, in such number as the Bank shall reasonably request. (d) With respect to the evaluation and putting into effect of the recommendations and other conclusions contained in all documents referred to in the preceding paragraph, ELECTROPERU shall, during the carrying out of Part B (1) of the Project and upon its completion, exchange views with the Bank on said recom- mendations and conclusions. -3- Section 2.03. Except as the Bank shall otherwise agree, pro- curement of the goods required for Part B of the Project and to be financed out of the proceeds of the Loan relent to ELECTROPERU by the Borrower shall be governed by the provisions of Schedule 2 to this Agreement. Section 2.04. (a) ELECTROPERU undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by the Bor- rower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnIty ahall be payable in a currency freely usable by ELECTROPERU to replace or repair such goods. (b) ELECTROPERU shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for the purposes of the Project. Section 2.05. (a) ELECTROPERU shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work and procurement schedules for Part B of the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) ELECTROPERU: (i) shall maintain records and procedures, including separate accounts for Part B of the Project, adequate to record and monitor the progress of such Part of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan relent to it by the Borrower, and to disclose their use in such Part of the Project; (ii) shall enable the Bank's repre- sentatives to visit the facilities and construction sites related to such Part of the Project and to examine the goods financed out of the proceeds of the Loan relent to it by the Borrower and any relevant records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning Part B of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan relent to it by the Borrower and the goods and services financed out of such pro- ceeds. (c) Upon the award by ELECTROPERU of any contract for goods, works or services to be financed out of the proceeds of -4- the Loan relent to it by the Borrower, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of Part B of the Project, as the case may be, 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 ELECTROPERU and the Bank, ELECTROPERU shall pre- pare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution of Part B of the Project, its cost and the benefits derived and to be derived from it, the performance by ELECTROPERU and the Bank of their respective obligations under this Agreement, the per- formance by ELECTROPERU and the Borrower of their respective obligations under the ELECTROPERU Subsidiary Loan Contract and the accomplishment of the purposes of the Loan. (e) ELECTROPERU shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, pro- perty and equipment of ELECTROPERU and any relevant records and documents. Section 2.06. (a) ELECTROPERU shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement and under the ELECTROPERU Subsidiary Loan Con- tract. (b) ELECTROPERU shall promptly inform the Bank of any con- dition which interferes or threatens to interfere with the pro- gress of Part B of the Project, the accomplishment of the pur- poses of the ELECTROPERU Subsidiary Loan, or the performance by ELECTROPERU of its obligations under this Agreement and under the ELECTROPERU Subsidiary Loan Contract. ARTICLE III Management and Operations of ELECTROERFU Section 3.01. ELECTROPERU shall at all times manage its affairs, maintain its financial position, plan its future expan- sion and carry on its operations in accordance with the ELECTRO- PERU Charter and the Estatutos with appropriate administrative, business, financial, engineering, and public utility practices, -5- and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate numbers. Section 3.02. (a) ELECTROPERU shall at all times take all steps necessary to maintain its legal existence and right to carry on operations, including, without limitation, Part B of the Project and shall, except as the Guarantor and the Bank may otherwise agree, take all steps necessary to acquire, maintain and renew such licenses, consents, franchises or other rights as may be necessary or useful for its operations (including such Part of the Project). (b) ELECTROPERU shall take all such action, including the provision of funds and resources, as shall be necessary to ensure that its facilities, equipment and property, are adequately operated, maintained, renewed and repaired. (c) Except as the Guarantor and the Bank shall otherwise agree, ELECTROPERU shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be an impor- tant requirement for the efficient operation of its business and undertaking, including Part B of the Project. Section 3.03. ELECTROPERU shall take and cause to be taken all action as shall be required to ensure that its operations, including Part B of the Project, are carried out in conformity with appropriate pollution control and ecological standards. Section 3.04. ELECTROPERU shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.05. ELECTROPERU shall, by December 31, 1985, reor- ganize its accounting and internal auditing methods in form and substance satisfactory to the Bank; such reorganization will include, without limitation: (i) definition of the responsibili- ties of ELECTROPERU's financial and accounting units; (ii) devel- opment of standard accounting procedures and handbooks; and (iii) preparation of specifications for data processing equipment suit- able to meet ELECTROPERU's needs. Section 3.06. Notwithstanding the obligations of ELECTROPERU in respect of the carrying out of Part B (1) of the Project in -6- this Agreement contained, ELECTROPERU acknowledges that the legal relationships between ELECTROPERU, Servicio de Agua Potable y Alcantarillado de Lima - SEDAPAL and the Borrower in respect thereof are governed by the Association Contract. Consequently, ELECTROPERU shall exchange views with the Borrower and SEDAPAL during the execution of the study included in such Part of the Project, shall make available to the Borrower and SEDAPAL all reports and draft reports, and all documentation in support thereof, originated in such study and shall reflect the cost of carrying out such study in its books as part of ELECTROPERU's contribution to the Mantaro Project pursuant to the Association Contract. Section 3.07. ELECTROPERU shall take all such steps as shall be necessary on its part to ensure that the findings and recom- mendations of the studies to be carried out by the Borrower under Part A (3) and Part A (4) of the Project, and by HIDRANDINA under Part C of the Project are appropriately integrated with the conclusions of ELECTROPERU's studies for the Master Plan. ARTICLE IV Financial Covenants Section 4.01. ELECTROPERU shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial conditions. Section 4.02. ELECTROPERU shall: (i) have its accounts, including the accounts referred to in Section 2.05 (b) (i) of this Agreement, and financial statements (balance sheets, state- ments of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements and of the accounts referred to in Section 2.05 (b) (i) of this Agreement, 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 ELECTROPERU and the audit thereof as the Bank shall from time to time reasonably request. -7- Section 4.03. Except as the Bank and ELECTROPERU shall otherwise agree: (a) ELECTROPERU shall take all necessary steps, including filing applications with the Guarantor for tariff adjustments, so as (i) to yield adequate rates of return for each calendar year starting in 1982, calculated in accordance with Part B of the Schedule to the Guarantee Agreement, and (ii) to permit the Guarantor to comply with Section 3.05 of the Guarantee Agreement; (b) ELECTROPERU shall, within the first two months of each calendar quarter, review the adequacy of its tariffs to produce an adequate annual return required for the year in question and shall furnish to the Bank the results of such review; and (c) if any such review shows that ELECTROPERU would not earn the annual return required for the year in question ELECTRO- PERU shall apply for an adjustment of its tariffs accordingly. Section 4.04. (a) ELECTROPERU shall not incur any long-term debt during the years 1982 and 1983 which shall increase the long-term debt shown in ELECTROPERU's books as of December 31, 1981 beyond the limits agreed between the Guarantor, the Bank and ELECTROPERU. (b) Starting in the year 1984, and except as the Bank shall otherwise agree, ELECTROPERU shall not incur any long-term debt unless: (i) the incurrence of such long-term debt has been agreed between the Guarantor, the Bank and ELEC- TROPERU as a result of the review referred to in Section 4.05 (c) of this Agreement; or (ii) the net revenues for the fiscal year next prece- ding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever amount is the greater, shall be not less than 1.5 times the maximum long-term debt service require- ment for any succeeding fiscal year on all long- term debt, including the long-term debt to be incurred. (c) For purposes of the preceding paragraph: -8- (i) the term "long-term debt" shall mean all debt of ELECTROPERU maturing by its terms more than one year after the date on which it is incurred; (ii) the term "net revenues " shall mean gross revenues adjusted to take account of the rates applied by ELECTROPERU which are in effect at the time of the incurrence of long-term debt even though they were not in effect during the fiscal year or twelve- month period to which such revenues relate, less operating and administrative expenses, but before provision covering depreciation of assets, and other non-cash expenses to the extent provision therefor is required under the laws and regula- tions of the Guarantor, interest and other charges on long-term debt; and (iii) the term "debt service requirement" shall mean the aggregate amount of amortization (including sink- ing fund payments, if any), interest and other charges on long-term debt regardless of whether the incurrence of such debt has been agreed upon as a result of the review referred to in Section 4.05 of this Agreement. (d) Except as the Bank shall otherwise agree, ELECTROPERU shall not incur any short-term debt after January 1, 1984, unless the aggregate of all short-term debt incurred by ELECTROPERU, including the short-term debt to be incurred but deducting, to the extent the Bank is satisfied therewith, cash and the cash value of negotiable instruments held by ELECTROPERU is equal to or less than one-sixth (1/6) of the operating, maintenance and administrative expenses (excluding depreciation and other non-cash provisions) of ELECTROPERU ror the twelve-month period preceding such incurrence. For the purposes of this paragraph the term "short-term debt" means all debt of ELECTROPERU for money borrowed, including bank overdrafts, maturing by its terms on demand or less than onL year after the date on which it was incurred. (e) For the purposes of this Section, debt shall be deemed to be incurred on the date of execution and delivery of a con- tract, loan agreement or other instrument providing for such debt; provided, however, that in the case of guarantee of debt, debt shall be deemed to be incurred on the day the agreement -9- guaranteeing such debt has been entered into but only to the extent that the guaranteed debt is outstanding. Section 4.05. (a) ELECTROPERU shall take all such steps as shall be necessary to prepare a program of capital expenditures to be incurred by it or its Subsidiaries (including the financing plan therefor) during the period 1984 to, and inclusive, 1987, outside the Guarantor's central-north interconnected electric power system, including rural electrification works and small hydroelectric plants, to obtain the approval of the Guarantor to such program and to furnish it to the Bank, not later than December 31, 1983 in a timely fashion so as to afford the Bank a reasonable opportunity to comment on such program before it is put into effect. (b) The provisions of Section 4.05 of the Prior Loan Agree- ment shall apply, under this Agreement, with the same force and effect as if they were fully set forth herein. (c) ELECTROPERU shall, not later than November 30, 1983 and each anniversary thereafter, review jointly with the Guarantor and the Bank a detailed program of its expenditures and its financing plan for the calendar year next following the review in question. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and ELECTROPERU thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify ELECTROPERU thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. - 10 - ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 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 ELECTROPERU: Empresa Electricidad del Peru', S.A. Paseo de la Republica 144 Lima, Peru Cable address: Telex: ELECTROPERU 25680 PE Lima, Peru Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of ELECTROPERU, or by ELECTROPERU on behalf of the Borrower under the Loan Agreement, may be taken or exe- cuted by the Gerente General or such other person or persons as - 11 - the Gerente General shall designate in writing, and ELECTROPERU shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. 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 Regional Vice President Latin America and the Caribbean EMPRESA ELECTRICIDAD DEL PERU By Authorized Representative - 12 - SCHEDULE 1 Description of Part B of the Project (1) Mantaro Transfer Scheme Studying and preparation of the final design, preparation of tender documents and the remainder of the preparatory studies and activities required for the carrying out of the Mantaro Transfer Scheme, other than those referred to in Part A (5) of the Pro- ject. (2) Training (a) Execution of a training program for instructors who will train ELECTROPERU's staff in fields such as plant operation and maintenance, distribution network main- tenance and testing of measurement equipment. (b) Strengthening of ELECTROPERU's training center, and acquisition and utilization of equipment therefor. (c) A program of fellowships for ELECTROPERU's staff. (3) Technical Assistance A program of technical assistance for ELECTROPERU to streng- then its financial planning capability. - 13 - SCHEDULE 2 Procurement Contracts for goods for Part B (2) of the Project shall be awarded following evaluation and comparison of proposals requested from at least three qualified suppliers from not less than three countries and territories eligible under the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits". The evaluation and comparison of such proposals shall be made in accordance with criteria and procedures set forth in Part A of such Guidelines. 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 L/ I day of , 1982. FOR SECRETARY