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

LOAN NUMBER 2179 PE DOCUMENTS Loan Agreement (Sixth Power Project) between INTERNAIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and ELECTROLIMA S.A. and CORPORACION FINANCIERA BE DESAROLLO S.A. - COFIDE Dated . 77/ , 1982 LOAN NUMBER 2179 PE LOAN AGREEMENT AGREEMENT, dated 7drrye- le , 1982, between INTERNATIONAL BANK FOR REC NSTRUCTION AND DEVELOPMENT (here'n- after called the Bank) and ELECTROLIMA S.A. (hereinafter called the Borrower). WHEREAS (A) the Borrower has requested the Bank to assist in the financing of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) Part A of the Project will be carried out by the Bor- rower or any successor thereto, Part B of the Project will be carried out by Empresa Electricidad del Peru S.A. or any succes- sor thereto (hereinafter called ELECTROPERU), and Part C of the Project will be carried out by Energia Hidroelectrica Andina (HIDRANDINA) S.A. or any successor thereto (hereinaft r called HIDRANDINA). The Borrower will make available to ELECTROPERU and HIDRANDINA the proceeds of the Loan allocated for purposes of the carrying out of Parts B and C of the Project, respectively, as hereinafter provided; (C) CORPORACION FINANCIERA DE DESARROLLO S.A. - COFIDE (hereinafter called COFIDE) has participated in the negotiation of this Agreement and has represented to the Bank that it has discharged all of its other responsibilities as financial agent of the Borrower pursuant to the Decreto Legislativo No. 5 of the Republic of Peru published in El Peruano on December 31, 1980; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan available to the Borrower upon the terms and conditions set forth hereinafter and in the Project agreements of even date herewith between the Bank and ELECTROPERU and HIDRANDINA respectively; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with -2- the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agree- ments of the Bank being hereinafter called the General Condi- tions). Section 1.02. Wherever used in this Agreement, unless the context otterwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth: (a) "ELECTROPERU Subsidiary Loan Contract" means the con- tract referred to in Section 3.01 (b) (i) of this Agreement; (b) "IIIDRANDINA Subsidiary Loan Contract" means the contract referred to in Section 3.01 (b) (ii) of this Agreiment; (c) "Subsidiary Loan Contract" means any one of the contracts referred to in paragraphs (a) and (b) of this Section and "Subsidiary Loan" means the loan provided for under a Subsidiary Loan Contract; (d) "ELECTROLIMA'S Charter" means the public deed No. 506, dated August 24, 1906, incorporating the company, and the term includes the estatutos thereof adopted under such public deed, as amended by public deed No. 3393, dated December 6, 1976, and as further amended thereafter solely to increase the capital social; (e) "ELECTROPERU's Charter" means the Guarantor's Legisla- tive Decree No. 41, published in El Peruano on March 5, 1981, as amended by the Guarantor's Legislative Decree No. 61, published in El Peruano on March 25, 1981, as further amended by the Gua- rantor's Legislative Decree No. 157 published in El Peruano on June 15, 1981, and the term includes all legal provisions men- tioned or referred to in Article 5 of such Decree No. 41 and such provisions of the Guarantor's Legislative Decree No. 40, pub- lished in El Peruano on March 5, 1981, as are applicable to the Guarantor's electric power subsector; and "Estatutos" means the public deed incorporating ELECTROPERU as approved by Decreto Supremo, 007-EM/SG dated May 13, 1981, published in El Peruano on May 18, 1981 and registered by the Registro Mercantil of the Registros Publicos de Lima on July 16, 1981; (f) "HIDRANDINA'S Charter" means the public deed No. 1417, dated November 22, 1946, incorporating the company, and the term -3- includes the estatutos thereof, adopted under such public deed, as amended as of October 10, 1973, and as further amended there- after solely to increase the capital social; (g) "Entity" means any one of ELECTROPERU or HIDRANDINA; (h) "Subsidiary" means any company, including filiales and subsidiarias, of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by the Borrower or an Entity, and the term includes any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by any one or more Subsidiaries or by the Borrower or such Entity, as the case may be, and one or more Subsidiaries. (i) "Prior Project" means the Project described in Schedule 2 to the Loan Agreement for Loan 2018-PE (Power Engineering Project) between the Bank and ELECTROPERU dated August 19, 1981, and "Prior Loan Agreement" means such Loan agreement, as amended from time to time; (j) "Credito Pulblico" means Direccion General de Credito PU'blico (General Directorate of Public Credit) of the Guarantor's Ministry of Economy, Finance and Commerce; (k) "Mantaro Transfer Scheme" means a project which will supply additional pc 'er to the Guarantor's central-north interconnected power system and water to Lima, increasing the water discharge in the Rimac basin by diverting water thereto from the Mantaro basin. The water so diverted will be used to increase energy production in the existing hydro-plants, to develop a new hydro plant in Sheque with an initial generating capacity of about 300 MW and to increase the supply of drinking water to Lima; (1) "Association Contract" means the contract (Contrato de Asociacion en Participacion) dated September 30, 1981, between ELECTROPERU and the Borrower and Servicio de Agua Potable y Alcantarillado de Lima - SEDAPAL, as approved by the Guarantor's Supreme Decree 031-81-EM/DGE, entered into by the aforesaid par- ties for purposes of the carrying out of all the activities of such parties related to the Mantaro Transfer Scheme; -4- (m) "Mayush Hydro Project" means a pxcect, the feasibility of which is being studied under the Prior Loan Agreement, which will consist of the construction of a plant of about 130 MW generating capacity and which was described in Part C.2 of the Prior Project as consisting of a 40 MW plant and referred to therein as Cahua II; (n) "ELECTROPERU Project Agreement" means the Project Agreement between the Bank and ELECTROPERU of even date herewith, as amended from time to time; and "HIT'ANDINA Project Agreement" means the Project Agreement between the Bank and HIDRANDINA of even date herewith, as amended from time to time; and, in both cases, the term includes all agreements supplemental to the respective Project Agreement and all Schedules thereco; (o) "Project Agreement" means any one of the Project Agree- ments referred to in paragraph (n) above; (p) "1215 Loan Agreement" means the agreement between the Guarantor and the Bank dated September 20, 1976, as amended from time to time, and the term includes all Schedules and agreements supplemental thereto; (q) "Master Plan" means the plan for future generation and transmission additions to the overall electric power system of the Guarantor prepared under the 1215 Loan Agreement and updated pursuant to Section 4.05 of the Prior Loan Agreement; and (r) "Enterprise" means any one of the Borrower or ELECTROPERU or HIDRANDINA, and "Enterprises" means all of them collectively. 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 eighty-one million two hundred thousand dollars ($81,200,000). Section 2.02. The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 -5- to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expendi- tures made (or, if the Bank shall so agree, to be made) in re- speci.- 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, pro- curement of the goods and civil works required for Part A and of goods required for Part B of the Project and 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, 1987 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. Not later than the Effective Date, the Bor- rower shall pay to the Bank a fee equivalent to one million two hundred thousand dollars ($1,200,000). The fee shall be payable in such currency or currencies as the Bank shall specify. In the event that the Bank shall not have received full payment of the fee by the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount required for the full payment of the fee in the currency or currencies specified for the purpose. Section 2.06. The Borrower shall pay to the Bank a commit- ment 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 2.07. The Borrower shall pay interest at the rate of eleven and three-fifths per cent (11-3/5%) per annum on the prin- cipal amount of the Loan withdrawn and outstanding from time to time. Section 2.08. Interest and other charges shall be payable semiannually on May 1 and November 1 in each year. Section 2.09. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -6- Section 2.10. The Board of Directors of ELECTROPERU and the Board of Directors of HIDRANDINA, or the person or persons authorized by each of them, are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions, in respect of Parts B and C of the Project, respectively. ARTICLE III Execution of the Project Section 3.01. The Borrower shall carry out Part A of the Project and cause ELECTROPERU and HIDRANDINA to carry out Parts B and C of the Project, respectively, with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. (b) For purposes of the preceding paragraph the Borrower shall enter with: (i) ELECTROPERU, into a Subsidiary Loan Contract (hereinafter called the ELECTROPERU Subsidiary Loan Contract) whereby ELECTROPERU will borrow from the Borrower, for purposes of carrying out Part B of the Project, the proceeds of the Loan allocated from time to time to Categories (5) and (6) of the table set forth in Part 1 of Schedule 1 to this Agreement (hereinafter called the Table); and (ii) HIDRANDINA, into a Subsidiary Loan Contract (hereinafter called the HIDRANDINA Subsidiary Loan Contract) whereby HIDRANDINA will borrow from the Borrower, for purposes of carrying out Part C of the Project, the proceeds of the Loan allocated from time to time to Category (7) of the Table. (c) Except as the Bank shall otherwise agree, the terms and conditiorn of each Subsidiary Loan Contract shall be satisfactory to the Bank, and shall include the following: -7- (i) all provisions of this Agreement and the General Conditions concerning repayment of principal of, and payment of interest and other charges on, the Loan, shall apply mutatis mutandis to the repay- ment of the principal of, and to payments of interest and other charges on, each Subsidiary Loan; (ii) each withdrawal from the Loan Account for purposes of the carrying out of Part B or Part C of the Project made pursuant to Section 2.10 of this Agreement shall be deemed a disbursement in re- spect of the corresponding Subsidiary Loan under the applicable Subsidiary Loan Contract; and (iii) each payment to the Borrower under each Subsidiary Loan Contract shall be made sufficiently in ad- vance of the applicable payment date under this Agreement, so as to enable the Borrower to utilize the proceeds of such payment to discharge in a timely fashion its obligations under this Agree- ment. (d) The Borrower shall exercise its rights under the ELEC- TROPERU Subsidiary Loan Contract and the HIDRANDINA Subsidiary Loan Contract in such manner as to protect the interests of the Guarantor, the Bank and the Borrower and to accomplish the pur- poses of the Loan. Except as the Bank shall otherwise agree, the B3rrower shall not assign, amend, abrogate or waive any of such Subsidiary Loan Contracts or any provision thereof. Section 3.02. (a) In order to assist the Borrower in the supervision of Part A (2) of the Project and in the carrying out of Part A (3), Part A (4), Part A (5) and Part A (6) (b), (c), and (e) of the Project, the Borrower shall employ consultants whose selection, qualifications, experience and terms and condi- tions of employment shall be satisfactory to the Bank in accor- dance with principles and procedures described in the "Guidelines 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 this Agreement. -8- (b) The Borrower shall cooperate fully with such consul- tants in the performance of their services for the Project and make available to them all information relevant to the Project. (c) The Borrower shall cause such consultants promptly to furnish to the Bank, in such number as the Bank shall reasonably request, copies of the documents prepared by them for the Project, including reports and drafts thereof, plans, designs, specifications, work schedules and estimates of costs. (d) With respect to the evaluation and putting into effect of the recommendations and other conclusions contained in any document prepared by the consultants for purposes of the carrying out of Part A (3), Part A (4) and Part A (5) of the Project, the Borrower shall, during the carrying out of such Parts of the Project and upon their completion, exchange views with the Bank on said recommendations and conclusions. Section 3.03. (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 indem- nity shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the purposes of the Project. Section 3.04. (a) The Borrower shall, not later than two months after the completion of the feasibility study included in Part B.2 (i) of the Prior Project, appoint a board of consultants under terms of reference satisfactory to the Bank who will re- view, from a safety viewpoint, the design for the dam and related structure, to be constructed under Part A (2) of the Project. These consultants shall, during the carrying out of such Part of the Project, also review, from a safety viewpoint, the works being carried out under such Part of the Project. (b) The Borrower shall, before issuing tender documents to the prospective bidders for the carrying out of Part A (2) of the Project, afford the Bank a reasonable opportunity to comment on 9- the findings and conclusions of the studies included in Part B.2 of the Prior Project. Section 3.05. The Borrower shall take all such steps as shall be necessary on its part to ensure that the findings and recommendations of the studies to be carried out under Part A (3), Part A (4) and Part C of the Project are appropriately integrated with the conclusions of ELECTROPERU's studies for the Master Plan. Section 3.06. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction or work, as the case may be, and procurement schedules for Part A of 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 pro- cedures, including separate accounts for Part A of the Project, adequate to record and monitor the progress of Part A of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the pro- ceeds of the Loan, and to disclose their use in Part A of the Project; (ii) shall enable the Bank's representatives to visit the facilities and construction sites included in Part A of the Project and to examine the goods financed out of the pr, -eeds of the Loan 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 A of the Proj- ect, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by the Borrower of any contrace for goods, works or services to be financed out of the proceeds of the Loan, the Bank may pub-lsh a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (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 records and documents. -10- (e) Promptly after completion of Part A 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 reasonably request, on the execution and initial operation of Part A (1) and Part A (2) of the Project, their cost and the benefits derived and to be derived from them, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. Section 3.07. Notwithstanding the obligations of the Bor- rower in respect of the carrying out of Part A (5) of the Project in this Agreement contained, the Borrower 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, the Borrower shall exchange views with ELECTROPERU and SEDAPAL during the execution of the study included in such Part of the Project, shall make available to ELECTROPERU 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 the Borrower's contribution to the Mantaro Project pursuant to the Association Contract. ARTICLE IV Management and Operations of the Jorrover Section 4.01. The Borrower shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations in accordance with ELECTROLIMA's Charter and with appropriate administrative, business, financial, engineering, and public utility practices under the supervision of experienced and competent management assisted by experienced and competent staff in adequate numbers. Section 4.02. (a) The Borrower shall at all times take all steps necessary to maintain its legal existence and right to carry on operations, including, without limitation, Part A of the Project, and shall, except as the Guarantor and the Bank may - 11 - 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) The Borrower 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 and maintained, and where applicable, repaired and renewed. (c) Except as the Guarantor and the Bank shall otherwise agree, the Borrower shall not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be an impor- tant requirement for the efficient operation of its business and undertaking, including Part A of the Project. Section 4.03. The Borrower shall take and cause to be taken all action as shall be required to ensure that its operations, including Part A of the Project, are carried out in conformity with appropriate pollution control and ecological standards. Section 4.04. The Borrower 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 practices. Section 4.05. Without limiting the generality of the preced- ing Sections the Borrower shall, under arrangements satisfactory to the Bank, cause the dam and related structures constructed under Part A (2) of the Project to be periodically inspected by the board of consultants referred to in Section 3.04 (a) of this Agreement in accordance with sound engineering practices in order to determine whether there are any deficiencies in the condition of such structures, or in the quality and adequacy of maintenance or methods of operations of the same, which may endanger their safety. To this end, the Borrower shall propose to the Bank appropriate arrangements for the Bank's review no later than one year before the expected completion of such structures. Section 4.06. The Borrower shall cause any Subsidiary it may create or establish to observe and perform the obligations of the Borrower under this Agreement to the extent to which such obliga- - 12 - tions shall or can be applicable thereto, as if such obligations were binding upon such Subsidiary. Section 4.07. (a) The Borrower shall, not later than December 31, 1982, set forth a plan of activities aiming at improving its current demand forecasting, based on the study included in Part A.4 (b) of the Project described in Schedule 2 to the 1215 Loan Agreement. (b) The Borrower shall, starting on December 31, 1982, furnish to the Bank for comment a 10-year demand forecast, and update it annually thereafter. ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.02. The Borrower shall: (i) have its accounts, including the accounts referred to in Section 3.06 (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 3.06 (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 the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt except as otherwise currently reported to the bank or stated in writing. - 13 - (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 there- of, solely as security for the payment of the purchase price of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.04. Except as the Guarantor and the Bank shall otherwise agree: (a) the Borrower 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) the Borrower shall, within the first month of each calendar quarter, review the adequacy of its tariffs to produce an adequate annual return for the year in question and shall furnish to the Bank the results of such review; and (c) if any such review shows that the Borrower would not earn an adequate annual return required for the year in question, the Borrower shall apply for an adjustment of its tariffs accordingly. Section 5.05. Except as the Bank shall otherwise agree, the Borrower shall not incur: (a) any long-term debt, unless its net revenues for the fiscal year next preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever - 14 - amount is the greater, shall be not less than 1.5 times the maximum long-term debt service requirement for any succeeding fiscal year on all long-term debt, including the long-term debt to be incurred. For the purposes of this paragraph: (i) the term "long-term debt" shall mean all debt of the Borrower 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 Borrower's rates in effect at the time of the incurrence of long- term debt even though they were not in effect dur- ing the fiscal year or twelve-month period to which such revenues relate, less operating and administrative expenses, but before provision cov- ering depreciation of costs and provision for other non-cash expenses required by laws or regu- lations of the Guarantor, interest and other char- ges 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; (b) any short-term debt, unless the aggregate of all short-term debt incurred by the Borrower, including the short- term debt t) be incurred but deducting, to the extent the Bank is satisfied therewith, cash and the cash value of negotiable instruments held by the Borrower, 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 the Borrower for the twelve-month period preceding such incur- rence. For the purpose of this paragraph the term "short-term debt" means all debt of the Borrower for money borrowed, includ- ing bank overdrafts, maturing by its terms on demand or less than one year after the date on which it was incurred. For the purposes of this Section, debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt; pro- vided, however, (i) that in the case of a loan contract or agree- ment or other instrument providing for a short-term debt or for - 15 - the modification of its terms of payment, debt shall be deemed to be incurred on the date, and to the extent, the amount of such debt has become outstanding pursuant to such contract, agreement or instrument, and (ii) that in the case of guarantee of debt, debt shall be deemed to be incurred on the day the agreement guaranteeing such debt has been entered into but only to the extent that the guaranteed debt is outstanding. Section 5.06. Section 4.08 of the agreement between the Bank and the Borrower dated September 20, 1976 (5th Power Project) is hereby deleted, and the provisions of Sections 4.05 and 4.06 of such agreement are hereby replaced by the provisions of Sections 5.04 and 5.05 of this Agreement. ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) the Borrower or any Entity shall have failed to perform any of its respective obligations under a Subsidiary Loan Con- tract; (b) an Entity shall have failed to perform any of its obli- gations under the corresponding Project Agreement; (c) an extraordinary situation shall have arisen which shall make it improbable that any of ELECTROPERU or HIDRANDINA will be able to perform its obligations under the ELECTROPERU Project Agreement or the HIDRANDINA Project Agreement, respec- tively; (d) the Guarantor or any other authority having jurisdic- tion shall have taken any action for the dissolution or disestab- lishment of ELECTROPERU or for the suspension of its operations, or the Borrower or ELECTROPERU shall have passed any resolution for its respective dissolution or liquidation; (e) (i) subject to subparagraph (ii) of this paragraph: - 16 - (A) the Guarantor or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of HIDRANDINA or for the suspension of its operations, or (B) HIDRANDINA shall have passed any resolution for its dissolution or liquidation; (ii) subparagraph (i) of this paragraph shall not apply if the Guarantor establishes to the satisfaction of the Bank that other legal entity or entities, acceptable to the Bank, has or have been assigned functions, powers and responsibilities equivalent to those set forth in the Charter with respect to HIDRANDINA and in HIDRANDINA's By-laws; (f) any action or proceeding shall have been taken by an Entity or by others whereby any of the assets of such Entity shall or may be distributed among its creditors; and (g) a change in (A) ELECTROPERU's Charter or its Estatutos or ELECTROLIMA's Charter or HIDRANDINA's Charter or (B) the legislation of the Guarantor, shall have occurred which shall materially and adversely affect the ability of the Borrower or ELECTROPERU or HIDRANDINA to carry out its respective covenants, agreements and obligations set forth in the Loan or Project Agreement, as the case may be. For the purposes of this paragraph the term "change in the legislation of the Guarantor" shall mean any change (including, but without limitation, any amendment or repeal of, or failure to carry out or enforce, any such legislation) in the entire body of legislation of the Guarantor (including, but without limitation, all constitutional provisions, statutes, laws, legislative decrees, decree-laws, executive decrees, including Supreme Decrees, and regulations, and any other legal provisions of a similar nature) directly or indirectly relating to the carrying on of the business of any of the Enterprises and the deter- mination and adjustment of the rates for the sale of electricity of any of the Enterprises. - 17 - Section 6.02. For the purposes of Section 7.01 of the Gen- eral Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any event specified in paragraph (a) or (b) of Section 6.01 of this Agreement shall occur and shall continue for a per- iod of 60 days after notice thereof shall have been given by the Bank to the Borrower; (b) any event specified in paragraph (d) or (e) or (f) of Section 6.01 of this Agreement shall occur; and (c) any event specified in paragraph (g) of Section 6.01 of this Agreement shall occur and shall continue for a period of 30 days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Condi- tions: (a) that this Agreement has been duly registered by Credito Piblico; and (b) that the ELECTROPERU Project Agreement has been exe- cuted and delivered on behalf of the Bank and ELECTROPERU and the HIDRANDINA Project Agreement has been executed and delivered on behalf of the Bank and HIDRANDINA, and that each such execution and delivery have been duly authorized or ratified by all neces- sary governmental and corporate action. Section 7.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank: - 18 - (a) that this Agreement has been registered by Crfdito Publico; and (b) that the ELECTROPERU Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of ELECTROPERU and the HIDRANDINA Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of HIDRANDINA, and are legally binding upon ELECTROPERU and HIDRANDINA, severally, in accordance with their respective terms. Section 7.03. The date 620113/82 , is hereby speci- fied for the purpose of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: ELECTROLIMA, S.A. Jirdn Lima 261 Lima 1, Peru Cable address: Telex: LIGHT 39420057 - 19 - IN WITNESS WHEREOF, the parties hereto, and COFIDE in the role described in the Preamble of this Agreement, 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 ELECTROLIMA S.A. By Authorized Representative CORPORACION FINANCIERA DE DESARROLLO S.A.- COFIDE By Authorized Representative By / Authorized Representative - 20 - 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) Goods for 28,700,000 100% of for- Part A (1) eign expendi- of the ditures and Project 100% of ex- factory cost of local ex- penditures (2) Civil works 9,700,000 30% (ex-cluding amounts wi held as per- formance guarantees) for Part A (1) (a), Part A (1) (b) and Part A (2) (3) Goods and 2,300,000 100% of for- fellowships eign expendi- for Part A tures (6) of the Project (4) Consultants' 6,000,000 services for Part A (2) of the Project - 21 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed under Sections 3.02 and 3.04 (a) of this Agreement, Part A (3), Part A (4), Part A (5), and Part A (6) of the Project (a) Procured 100% of for- abroad eign expendi- tures (b) Locally 90% of local procured expenditures (5) Goods and fellow- 2,700,000 100% of for- ships for Part B eign expendi- (2) of the Project tures (6) Consultants' 6,300,000 services for Part B of the Project (a) Procured 100% of for- abroad eign expendi- tures (b) Locally 90% of local procured expenditures (7) Consultants' 2,500,000 services for Part C of the Project - 22 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (a) Procured 100% of for- abroad eign expendi- tures (b) Locally 90% of local procured expenditures (8) Fee under 1,200,000 Amount due Section 2.05 of this Agree- ment (9) Unallocated 21,800,000 TOTAL 81,200,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Guarantor or for goods or services supplied from the territory of the Guarantor. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable - 23 - 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: (a) in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggre- gate amount not exceeding the equivalent of $1,000,000 may be made in respect of Categories (4) and (6) on account of payments made for such expenditures before that date but after Septem- ber 30, 1981, to the extent such expenditures have been incurred for purposes of Part A (5) or B (1) of the Project, or both; (b) on account of expenditures for Part A (2) of the Proj- ect unless the Bank and the Borrower have approved the findings and conclusions of the studies included in Part B.2 of the Prior Project and the Bank has been furnished with evidence satisfac- tory to the Bank that the carrying out of Part A (2) of the Proj- ect will be consistent with such approval; (c) in respect of payment made for expenditures under Cate- gory (5), or (6), or (7) unless !vidence satisfactory to the Bank has been furnished to the Bank showing that the corresponding Subsidiary Loan Contract has been executed on behalf of the Bor- rower and the applicable Entity, including an opinion or opinions satisfactory to the Bank of counsel acceptable to the Bank show- ing on behalf of the Borrower and such Entity that such Subsid- iary Loan Contract has been duly authorized and ratified, and executed on behalf of the Borrower and such Entity, and is legally binding thereupon in accordance with its terms; and (d) on account of expenditures for Part C of the Project, unless evidence satisfactory to the Bank has been furnished to the Bank that the Mayush Project is justified under the Master Plan. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Cate- gory, the Bank may, after consulting with the Borrower: (i) reallocate to such Category, to the extent required to meet the -24- estimated shortfall, proceeds of the Loan which are then allo- cated to another Category and which in the opinion of the Bank are not needed to meet other expenditures, and (ii) if such real- location cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Bank shall have reasonably determined that the pro- curement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expen- ditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or lim- iting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, ir. 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. - 25 - SCHEDULE 2 Description of the Project Part A: To be carried out by the Borrower (1) Borrower's 1982-1986 Distribution Program (a) Construction of new substations and expansion and improvement of existing substations, totalling about 19 in number, with an aggregate of about 390 megavolt-ampere of additional transformer capacity, and equipping thereof as required. (b) Construction of about 700 circuit kilometers of a single or double circuit, 60 kV or 10 kV, as the case may be, distribution lines. (c) Acquisition and installation of about 1,700 10,000/ 220 V transformers and equipment as required. (d) Installation of about 400 circuit kilometers of single or double circuit 220 V urban distribution lines and street lighting equipment as required. (e) Domiciliary connection to about 130,000 new clients. (f) Acquisition and utilization of equipment to improve the Borrower's communications system and auxiliary services. (2) Yuracmayo Dam Construction of an earth dam about 44 meters high at Yuracmayo in the Rimac river forming a reservoir of about 45 million cubic meters, a concrete spillway, a valve chamber, and acquisition and installation of related operation and control equipment. (3) Huinco Hydro Plant Expansion (a) Studying the feasibility of, and (b), if warranted, preparation of final design and tender documents for, - 26 - addition of a fifth 60 megawatt unit to the existing 240 megawatt Huinco plant. (4) Salto Bajo Scheme Studying (i) the alternatives for the use of the hydro potential downstream from the Huinco plant mentioned in (3) above (the Salto Bajo Scheme) and (ii) the selection of one alternative and the feasibility thereof. (5) Mantaro Transfer Scheme Studying and preparation of the final design and preparation of tender documents for the expansion of the Transandean Tunnel and the modifications to the Marcapomacocha Canal, both as part of the overall preparatory studies and activities required for the carrying out of the Mantaro Transfer Scheme. (6) Enhancement of the Borrower's training facilities and training of the Borrower's staff, and strengthening of the Borrower's administrative and technical procedures (a) Relocation and renewal of the Borrower's training center and acquisition and utilization of equipment therefor. (b) Up-dating of teaching material and methodology. (c) Training of instructors. (d) A program of fellowships for the Borrower's staff. (e) A program of technical assistance to strengthen the Borrower's administrative and technical procedures including procurement methods, inventory control system and distribution planning. Part B: To be carried out by ELECTROPERU (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 - 27 - Scheme, other than those referred to in Part A (5) of the Project. (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 maintenance 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 strengthen its financial planning capability. Part C: To be carried out by HIDRANDINA Mayush Hydro Project After completion of Part C.2 of the Prior Project, preparation of the final design and tender documents therefor. The Project is expected to be completed by December 31, 1986. - 28 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each May I and November 1 beginning November 1, 1986 through November 1, 1998 3,125,000 On May 1, 1999 3,075,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditions, Section 3.04. - 29 - 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 3.04 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 2.05% More than three years but not more than six years before maturity 4.10% More than six years but not more than eleven years before maturity 7.50% More than eleven years but not more than fifteen years before maturity 10.25% More than fifteen years before maturity 11.60% - 30 - SCHEDULE 4 o Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of 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 or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publica- tion 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 procured on the basis of international com- petitive bidding. 3. Bidders for the works included in Part A (2) of the Project shall be prequalified as described in paragraph 1.3 of Part A of the Guidelines. 4. For the purposes 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. and 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; (ii) customs duties and other import taxes levied in connection with the importation, or the 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; and (iii) the cost of transportation - 31 - insurance, inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installa- tion shall be included. B. Preference for Domestic and Regional Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Peru or in a country which is a party to the Cartagena Agreement or to any other regional trade agreement, to which the Guarantor is a party and which is acceptable to the Bank (the Cartagena Agreement and any such other regional agreement hereinafter called the Regional Agreement), may be granted a margin of pref- erence in accordance with, and subject to, the following provi- sions: 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 four groups: (a) Group A: bids offering goods manufactured in Peru if the bidder shall have established to the satis- faction of the Borrower and the Bank that the man- ufacturing cost of such goods includes a value added in Peru equal to at least 20% of the ex-factory bid price of such goods. (b) Group B: all other domestic bids. (c) Group C: bids offering goods manufactured in a country other than Peru which is a party to the Regional Agreement. (d) Group D: bids offering goods manufactured else- where. 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 - 32 - 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 evalu- ated 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 or group D, all group C and group D 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 and group D 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 group D bid; or (ii) 15% of the c. and f. bid price of such goods if said customs duties exceed 15% of such price. If either the group A bid or the group C bid is the lowest, it shall be selected for the award. 5. If, as a result of the further comparison under paragraph 4 above, a bid from group D is the lowest, and provided there are taxes actually payable for the importation of goods offered in the lowest evaluated bid from group C, as determined under para- graph 3 above, all group D bids shall be finally compared with such lowest evaluated bid from group C, after adding to the c. and f. bid price of goods to be imported offered in each group D bid, for the purpose of this final comparison only, an amount equal to the smaller of (i) the positive difference, if any, between the amount of customs duties and other import taxes which would actually be payable for the importation of goods offered in such group D bid and for the importation of goods offered in group C bid, or (ii) 15% of the c. and f. price of goods to be imported offered in such group D bid. If the lowest bid in such comparison is the group C bid, it shall be selected for the award; if not, the lowest evaluated bid from group D, as deter- mined under paragraph 3 above, shall be selected for the award. 6. The detailed technical evaluation shall be performed only on the lowest responsive offer in each group. - 33 - C. Other Procurement Procedures 1. Contracts for communication equipment, special workshop and laboratory equipment and computer software and teaching materials for Part A (1) (f), Part A (6) (b) and Part B (2) of the Project, may be awarded following evaluation and comparison of proposals requested from not less than three qualified suppliers from not less than three countries and territories eligible under the Guidelines, but only to the extent each contract so awarded is estimated to cost not more than the equivalent of $150,000, is awarded to the lowest evaluated proposal evaluated and compared with other proposals in accordance with criteria and procedures set forth in Part A of such Guidelines and the aggregate of the contracts so awarded does not exceed the equivalent of $1,500,000. 2. Contracts for civil works under Part A (1) of the Project, including installation of equipment acquired thereunder, shall be awarded after competitive bidding locally advertised and applying for bid evaluation and comparison the same criteria and proce- dures to be used in respect of international competitive bidding in accordance with the Guidelines. D. Review of Procurement Decisions by the Bank 1. Review of prequalification. The Borrower shall, before qualification is invited, inform the Bank in detail of the proce- dure to be followed, and shall introduce such modifications in said procedure as the Bank shall reasonably request. The list of prequalified bidders, together with a statement of their qualifi- cations and of the reasons for the exclusion of any applicant for prequalification shall be furnished by the Borrower to the Bank for its comments before the applicants are notified of the Bor- rower's decision, and the Borrower shall make such additions to, deletions from, or modifications in, the said list as the Bank shall reasonably request. 2. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts for goods and civil works estimated to cost the equivalent of $200,000 or more: -34 - (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 docu- ments 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 Borrower 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 was 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. 3. 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 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. 4. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension - 35 - 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 20% 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. E. Procurement of Consultant Services 1. Consultants whose services are to be employed for purposes of Section 3.02 (a) of this Agreement and Section 2.02 (a) of each of the Project Agreements shall be selected after inviting proposals from a short list of firms or individuals. Such short list will be sent to the Bank for approval and the invitations to be issued will, in each case, set forth the criteria to be taken into account for the selection of the individual or firm to which the contract will be awarded. Such criteria will be determined from time to time by agreement between the Bank and the Enter- prise in question, and will take price into account in accordance with methods and procedures satisfactory to the Bank. 2. Although under certain circumstances, as described in the Guidelines referred to in Section 3.02 (a) of this Agreement, the Bank may consider the possibility of asking proposals from a single firm or individual, extended lists will not be used for asking proposals. 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 Z 7iL.. day of i, 198 FOR SECRETARY