Mexico - Power Projects -1958: Loan 0194 - Loan Agreement - Conformed

LOAN NUMBER 194 ME Loan Agreement (Power Projects-1958) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMISION FEDERAL DE ELECTRICIDAD AND NACIONAL FINANCIERA, S.A. DATED MAY 5, 1958 LOAN NUMBER 194 ME Loan Agreement (Power Projects-1958) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMISION FEDERAL DE ELECTRICIDAD AND NACIONAL FINANCIERA, S.A. DATED MAY 5, 1958 wnan Agrerment AGREEMENT, dated lay 5, 1958, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, party of the first part (hereinafter called the Bank), and CoMIsJ6 FED- ERAL DE ELECTIICIDAD and NACIONAL FINANCIERA, S.A., par- ties of the second part (hereinafter called the Borrowers). ARTICLE I Loan Regulations; Special Definitions SECTION 1.01. The parties to this Loan Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifications thereof set forth in Schedule 3 to this Agreement (said Loan Regulations No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. SECTION 1.02. Except where the context otherwise re- quires, the following terms have the following meanings wherever used in this Agreement or any Schedule hereto: (1) The term "Comisi6n" means Comisi6n Federal de Electricidad. (2) The term "Financiera" means Nacional Financiera, S.A. ARTICLE II The Loan SECTION 2.01. The Bank agrees to lend to the Borrowers, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to thirty-four million dollars ($34,000,000). SECTION 2.02. The Bank shall open a Loan Account on its books in the name of the Borrowers and shall credit to 4 such Account the amount of the Loan. The amount of the Loan may be withdrawn from the Loan Account as pro- vided in, and subject to the rights of cancellation and sus- pension set forth in, the Loan Regulations. SECTION 2.03. The Borrowers shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (34 of 1%) per annum on the principal amount of the Loan not so withdrawn from time to time. Such commit- ment 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shall accrue from a date sixty days after the date of this Agreement to the respective dates on which amounts shall be withdrawn by the Borrowers from the Loan Account as provided in Article IV of the Loan Regulations or shall be cancelled pursuant to Article V of the Loan Regulations.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 Borrowers shall pay interest at the rate of five and three-eighths per cent (5%%) per annum on the principal amount of the Loan so withdrawn and out- standing from time to time. SECTION 2.05. Except as the Bank and the Borrowers shall otherwise agree, the charge payable for special com- mitments entered into by the Bank at the request of the Borrowers pursuant to Section 4.02 of the Loan Regulations shall be at the rate of one-half of one per cent ( 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 Borrowers shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. SECTION 2.08. All obligations of the Borrowers under this Loan Agreement (not including, however, obligations expressly undertaken by only one of the Borrowers) and 5 the Bonds shall be joint and several and the obligation of either of them to comply with any provision of this Loan Agreement is not subject to any prior notice to, demand upon or action against the other. No extension of time or forbearance given to either of the Borrowers in respect of the performance of any of its obligations under this Loan Agreement or the Bonds, and no failure of the Bank or of any holder of the Bonds to give any notice or to make any demand or protest whatsoever to either of the Borrowers, or strictly to assert any right or pursue any remedy against either of them in respect of this Loan Agreement or the Bonds, and no failure by either of the Borrowers to comply with any requirement of any law, regulation or order, shall in any way affect or impair any obligation of the other Borrower under this Loan Agreement or the Bonds. ARTICLE III Use of Proceeds of the Loan SECTION 3.01. The Borrowers shall apply the proceeds of the Loan exclusively to financing the cost of goods required to carry out the Projects described in Schedule 2 to this Agreement. The specific goods to be financed out of the proceeds of the Loan shall be determined by agree- ment between the Bank and the Borrowers, subject to modi- fication by further agreement between them. SECTION 3.02. The Borrowers shall cause all goods financed out of the proceeds of the Loan to be used in the territories of the Guarantor exclusively in the carrying out of the Projects. Except as shall be otherwise agreed be- tween the Bank and the Borrowers, title to all such goods shall be conveyed to Comisi6n free and clear of all incum- brances. ARTICLE IV Bonds SECTION 4.01. The Borrowers shall execute and deliver Bonds representing the principal amount of the Loan as 6 provided in the Loan Regulations. The form of Bonds referred to in Article VI of the Loan Regulations shall be appropriately modified to provide for joint and several obligations on the part of the Borrowers. SECTION 4.02. (a) The Director General of Comisi6n and such person or persons as he shall appoint in writing are designated as authorized representatives of Comisi6n for the purposes of Section 6.12(a) of the Loan Regulations. (b) The Director General of Financiera and such person or persons as he shall appoint in writing are designated as authorized representatives of Financiera for the purposes of Section 6.12(a) of the Loan Regulations. ARTICLE V Particular Covenants SECTION 5.01. The Borrowers shall carry out the Proj- ects with due diligence and efficiency and in conformity with sound engineering and financial practices. SECTION 5.02. (a) The Borrowers shall furnish to the Bank, promptly upon their preparation, the plans, specifi- cations and construction schedules for the Projects and any material modifications subsequently made therein, ifl such detail as the Bank shall from time to time requemcl (b) The Borrowers shall maintain records adequate to identify the goods purchased out of the proceeds of the Loan, to disclose the end-use thereof in the Projects, to record the progress of the Projects (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the financial con- dition and operations of the Borrciwers. (c) The Borrowers shall enable the Bank's representa- tives to inspect any and all goods purchased out of the proceeds of the Loan and the sites, works and construction included in the Projects and any of the properties owned 7 or operated by Comisi6n and to examine any relevant records and documents. (d) The Borrowers shall furnish to the Bank all such information as the Bank shall reasonably request concern- ing the expenditure of the proceeds of the Loan, the use of the goods purchased therewith, the progress of the Projects and the operations and financial condition of the Borrowers. SECTION 5.03. (a) The Bank and the Borrowers shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to any other of them all such information as it shall reason- ably request with regard to the general status of the Loan.. (b) The Bank and the Borrowers 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 Borrowers shall promptly inform the Bank of any condition which shall arise that shall interfere with, or threaten to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service thereof. SECTION 5.04. Comisi6n shall not, without the prior ap- proval of the Bank, incur any debt if thereby the aggregate amount required in any fiscal year of Comisi6n (including the fiscal year in which Comisi6n proposes to incur such debt) for the payment of principal (including ' amortization and sinking fund payments) of, and interest and other charges on, all outstanding debt (including said proposed debt) incurred by Comisi6n would exceed 66 2/3% of the aggregate amount of the revenues of Comisi6n during a period of any twelve consecutive months out of the fifteen months last preceding the date on which Comisi6n proposes to incur such debt. For purposes of this Section: (a) the term '"k-evenues of Comisi6n'' shall be deemed to mean the aggregate of all current revenues of Comisi6n 8 excluding public appropriations, contributions, grants and proceeds of taxes and levies less the amount of all operating, administrative and overhead expenses of Comisi6n, but without deduction of any amounts for depreciation, replace- ment, retirement, obsolescence, interest, sinking fund, amortization of principal indebtedness or the entero tax payable by Comisi6n to the Guarantor; (b) The term "debt" shall not include debt incurred in the ordinary course of business and maturing by its terms not more than one year after the date on which it is incurred; (c) The term "incur" with reference to any debt shall include any assumption or guarantee of such debt or any modification of the terms of payment of such debt; and (d) sums in currency other than currency of the Guaran- tor shall be converted into currency of the Guarantor at the official selling rate of Banco de Mexico, S.A., for such other currency on the date on which Comisi6n proposes to incur the debt in question. SECTION 5.05. Each of the Borrowers undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any of its assets ac' security for any external debt, such lien shall ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and in the creation of any such lien express provision shall 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 or (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. SECTION 5.06. The Borrowers 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 9 Guarantor on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement or the Bonds, or the payment of principal, interest or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxa- tion 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 Guar- antor. SECTION 5.07. The Borrowers 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 Bords are payable or laws in effect in the territories of such country or countries on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement or the Bonds. SECTION 5.08. Except as shall be otherwise agreed be- tween the Bank and the Borrowers, (a) the Borrowers shall insure or cause to be insured with responsible insurers all goods financed with the pro- ceeds of the Loan. Such insurance shall cover such marine, transit and other hazards incident to purchase and impor- tation of the goods into the territories of the Guarantor and to delivery thereof to the sites of the Projects, and shall be for such amounts as shall be consistent with sound commercial practice. Such insurance shall be payable in the currency in which the cost of the goods insured there- under shall be payable; and (b) in addition, Comisi6n shall insure against such risks and in such amounts as shall be consistent with sound public utility and business practices. SECTION 5.09. (a) The Borrowers shall at all times main- tain their existence and right to carry on, operations and Comisi6n shall, except as the Bank shall otherwise agree, maintain and renew all rights, powers, privileges and fran- I 10 chises owned by it and necessary or useful in the operation of its business. (b) Comisi6n shall operate and maintain its plants, equip- ment and property, and from time to time make all neces- sary 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 prac- tices. (c) Comisi6n siiall not, without the consent of the Bank, sell or otherwise dispose of all or substantially all of its property and assets, unless the Borrowers shall first redeem and pay, or make adequate provision satisfactory to the Bank for redemption and payment of, all of the Loan which shall then be outstanding and unpaid. (d) Comision shall not, without the consent of the Bank, sell or otherwise dispose of all or substantially all the prop- erty included in any of the Projects described in Schedule 2 to this Agreement or any plant included in any such Project unless the Borrowers shall first redeem and pay, or make adequate provision satisfactory to the Bank for the redemp- tion and payment of, the amount of the Loan which shall have been withdrawn from the Loan Account by the Bor- rowers on account of each such Project and which shall then be outstanding and unpaid. SECTION 5.10. Whenever there is reasonable cause to believe that at any time the amount of currency of the Guarantor held by Comisi6n and accruing to it for the twelve month period next following such time will be inade- quate to meet the estimated expenditures payable in cur- rency of the Guarantor and required for carrying out the Projects during such twelve month period, Comisi6n shall forthwith notify Financiera, the Guarantor and the Bank of such fact and of the amount of the anticipated deficit for such twelve month period. Upon the receipt of such notice, Financiera shall forthwith take such action as may be neces- 11 sary to r'ovide Comisi6n with an amount of currency of the Guarantor adequate to meet such deficit if and a.s it arises, and upon the completion thereof Comisi6n shall advise the Bank in writing concerning the details of the arrangements made. SECTION 5.11. Comisi6n shall from time to time take all steps necessary or desirable to obtain such adjustments in its rates, subject to the laws of the Guarantor, as may be required to ensure the continued operation and expansion of Comisi6n's business in accordance with ,ound- financial and public utility practices. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e), paragraph (f) or para- graph (j) of Section 5.02 of the Loan Regulations shall occur and shall continue for a periou of thirty days, or (ii) if any event specified in paragraph (c) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrowers, 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 outstanding to be due and payable immediately, and upon any such declaration such principal shall become due and payable immediately, anything in this Agreement or in the Bonds to the contrary notwithstanding. ARTICLE VII Miscellaneous SECTION 7.01. The Closing Date shall be June 30, 1962. SECTION 7.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: 12 (a) For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United S,ates of America Alternative address for cablegrams and radIo- grams: Intbafrad Washington, D. C. (b) For the Borrowers: Comisi6n Federal de Electricidad Calle de R6dano 14 Mexico 5, D.F., Mexico Alternative address for cablegrams and radio- grams: Cefelec Mexico and Nacional Financiera, S.A. Avenida Venustiano Carranza 25 Mexico, D.F., Mexico Alternative address for cablegrams and radio- grams: Nafin Mexico SECTION 7.03. A date 60 days after the date of this Agreement is hereby specified for the purposes of S-ction 9.04 of the Loan Regulations. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have 13 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 written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT -by J. BURKE KNAPP Vice President Comisi6N FEDERAL DE ELECTRICIDAD By C. RAMIREZ ULLOA Authorized Representative NACIONAL FINANCIERA, S.A. By R. MARTINEZ OsTos Authorized Representative 14 SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* August 1, 1962 $ 429,000 February 1, 1963 441,000 August 1, 1963 453,000 February 1, 1964 465,000 August 1, 1964 477,000 February 1, 1965 490,000 August 1, 1965 504,000 February 1, 1966 517,000 August 1, 1966 531,000 February 1, 1967 545,000 August 1, 1967 560,000 February 1, 1968 575,000 August 1, 1968 590,000 February 1, 1969 606,000 August 1, 1969 622,000 February 1, 1970 639,000 August 1, 1970 656,000 February 1, 1971 674,000 August 1, 1971 692,000 February 1, 1972 711,000 August 1, 1972 730,000 February 1, 1973 749,000 August 1, 1973 770,000 February 1, 1974 790,000 August 1, 1974 812,000 February 1, 1975 833,000 August 1, 1975 856,000 February 1, 1976 879,000 August 1, 1976 902,000 February 1, 1977 927,000 August 1, 1977 952,000 February 1, 1978 977,000 August 1, 1978 1,003,000 February 1, 1979 1,030,000 August 1, 1979 1,058,000 February 1, 1980 1,087,000 August 1, 1980 1,116,000 February 1, 1981 1,146,000 August 1, 1981 1,176,000 February 1, 1982 1,208,000 August 1, 1982 1,240,000 February 1, 1983 1,274,000 August 1, 1983 1,308,000 * 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. I 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 3 years before maturity. . 1/2% More than 3 years but not more than 6 years before maturity..............1 % More than 6 years but not more than 11 years before maturity............. 11% More than 11 years but not more than 16 years before maturity.............. 2% % More than 16 years but not more than 21 years before maturity.............. 3%1% More than 21 years but not more than 23 years before maturity.............. 4% % More than 23 years before maturity ...... 5%o% 16 SCHEDULE 2 Description of the Projects A. Mazatepec Hydroelectric Project This project involves the construction of a 156,000 kw plant and auxiliary works on the Apulco River in the State of Puebla. A diversion dam at Atexcaco will divert the Xiucayucan River through a tunnel of approximately 4,000 meters to the Apulco River Basin. A concrete dam at Soledad on the Apulco River, of the thin arch type, approxi- mately 82 meters high, will provide a reservoir of approxi- mately 25 million cubic meters of useful storage for weekly regulation. A pressure tunnel of approximately 6,600 meters, a surge tank and penstocks will conduct the water from the Soledad reservoir to the powerhouse. Three verti- cal Pelton turbo-generating units with a capacity of 52,000 kw each will be installed with the necessary auxiliary equipment. A substation at the plant will step-up the volt- age from 13.8 to 220 kv at 50 cycles. A transmission line with a length of 220 kms, consisting of two circuits insulated at 220 kv on galvanized steel towers, will run from the plant to a substation at Ixtapalapa near Mexico City, which will step-down the voltage from 220 to 85 kv for connection with the Mexican Light and Power Company. The project is scheduled to be completed by August 31, 1961. B. Temaxcal Hydroelectric Project This project involves the construction of a 154,000 kw plant using the electric power potential of the existing Miguel Aleman flood control dam on the Tonto River in the State of Oaxaca. A power intake and pressure tunnel through the dam will conduct the water to the powerhouse on the downstream side of the dam. Four Francis turbo- generating units with a capacity of 38,500 kw each will be installed with the necessary auxiliary equipment. A sub- station at the plant will step-up the voltage from 13.8 to 115 kv at 60 cycles. Transmission lines from the plant to L 17 Tuxpango with a length of 127 kms, consisting of one circuit insulated at 115 kv on galvanized steel towers, and to Veracruz with a length of 125 kms, consisting of two circuits insulated at 115 kv on galvanized steel towers, will supply the network of the Cia. Impulsora de Empresas Electricas, S.A. A transmission line from the plant with a length of 56 kms, consisting of one circuit insulated at 115 kv on galvanized steel towers, will supply the newly constructed paper mill at Sebastopol. To connect the trans- mission lines to the corresponding distribution systems, step-down substations will be built at Veracruz (115/44kv and 25,000 kva), Jose Cardel (115/13.2 kv and 3,000 kva), Jalapa (115/13.2 kv and 10,000 kva) and Cruz Blanca (115/6 kv and 18,000 kva), and the substation at Tezuitlan will be extended. C. Cupatitzio Hydroelectric Project This project involves the construction of a 73,600 kw plant and auxiliary works on the Cupatitzio River in the State of Michoacan. A secondary diversion dam will divert the waters of the Tzararacuilla River to the Cupatitzio River. A main diversion dam at Tzararacua will divert the waters of the Cupatitzio River through a series of open canals, tunnels and syphons with a total length of 9,900 meters to two regulation tanks with a total capacity of 150,000 cubic meters. From there a penstock will conduct the water to the powerhouse, where two vertical Pelton turbo-generator units with a capacity of 36,800 kw each will be installed with the necessary auxiliary equipment. A sub- station at the plant will step-up the voltage from 13.2 to 161 kv. A transmission line with a length of 70 kms, con- sisting of one circuit insulated at 161 kv on galvanized steel towers, will run from the plant to the Carapan switching station. From Carapan a transmission line with a length of 171 kms, consisting of one circuit insulated at 161 kv on galvanized steel towers, will run to Guadalajara and an- other with a length of 129 kms, consisting of one circuit insulated at 161 kv on galvanized steel towers, to Irapuato. 18 Substations at the ends of these lines, with capacities of 54,000 kva and 27,000 kva respectively, will provide connec- tion with the network of the Cia. Impulsora de Empresas Electricas. D. Guaymas Thermal Project This project involves the installation of a third generat- ing unit at the existing Guaymas steam plant. It will con- sist of one 30,000 kw turbo-generator with corresponding steam boiler, switchboard, auxiliary equipment and trans- formers. A transmission line with a length of 130 kms, consisting of one circuit insulated at 115 kv on wooden H structures, will run from the plant to Hermosillo, where the existing 115/13.2 kv substations will be expanded by 10,000 kva. From Hermosillo a transmission line with a length of 70 kms, consisting of one circuit insulated at 115 kv on wooden H structures, will run to the pumping zone of Siete Cerros, where three substations with a capacity of 5,000 kva each will step-down the voltage to 13.2 kv for supply to the rural distribution system. The existing rural distribution sy,tem of that area will be expanded by ap- proximately 200 kms of new single circuit lines insulated at 13.2 kv on wooden poles. SCHEDULE 3 Modifications of Loan Regulations No. 4 For the purposes of this 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) Sub-sections (c), (i) and (j) of Section 5.02 are 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 Borrowers or either of them I 19 or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds, or under the loan agreements between the Bank and the Borrowers dated January 6, 1949 and January 11, 1952 or under any bonds issued thereunder, or under the guarantee agree- ments between the Guarantor and the Bank dated January 6, 1949 and January 11, 1952. "(i) On or after the date of the Loan Agreement and prior to the Effective Date there shall have been any act or omission to act which would have constituted a violation of any cove- nant contained in the Loan Agreement or the Guarantee Agreement if the Loan Agreement and Guarantee Agreement had been effective on the date of such act or omission. "(j) By action of the Guarantor or of any govern- mental authority, the ownership, possession or control of all or substantially all of the prop- erties which are included in the Projects, or of any plant included therein, or of any prop- erty necessary for the operation thereof, shall have been taken from Comisi6n." (c) The second senten-e 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 Borrowers or either of them or to any prior notice to or demand upon the Guarantor with regard to any default by the Borrowers or either of them, and shall not be impaired by any of the following: any extension of time, forbearance or concession given to the Bor- rowers or either of them; any assertion of, or failure to assert, or delay in asserting, any right, power or remedy against the Borrowers or either of them or in respect of any security 20 for the Loan; any modification or amplification of the provisions of the Loan Agreement con- templated by the terms thereof; any modifica- tion or amplification of any other document related to the Loan or related to any security therefor; any failure of the Borrowers or either of them to comply with any requirement of any law, regulation or order of the Guaran-. tor or of any political subdivision or agency of the Guarantor." (d) Paragraph 6 of Section 10.01 is amended to read as follows: "6. The term 'Borrower' means the Borrowers, ex- cept that as used in Sections 5.02(b), (d), (e) and (f), and Section 7.01 such term shall mean the Borrowers or either of them. The term 'Guarantor' means United Mexican States." (e) Paragraph 12 of Section 10.01 is amended to read as follows: "12. The terms 'Project' and 'Projects' mean the Projects (or any of them, or such groupings of them, as the context may require) for which the Loan is granted, as described in the Loan Agreement and as the description thereof shall be amended from time to time by agreement between the Bank and the Borrowers."