Colombia - Rio Grande Multipurpose Project : Loan 2449 - Loan Agreement - Conformed

OFFICIAL LOAN NUMBER 2449 CO DOCU ME NTS Loan Agreement (Rfo Grande Multipurpose Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and EMPRESAS PUBLICAS DE MEDELLIN Dated 4 Z42/ 1984 LOAN NUMBER 2449 CO LOAN AGREEMENT AGREEMENT, dated O2/ , 1984, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and EMPRESAS PUBLICAS DE MEDELLIN (here- inafter called the Borrower). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with 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 otherwise requires, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following addition- al terms have the following meanings: (a) "Power Department" means the Borrower's power service department; (b) "Water Supply and Sewerage Department" means the Bor- rower's water supply and sewerage service department; (c) "Department" means one of the following of the Bor- rower's departments: energia, telefonos, and acueducto and alcantarillado; (d) "Power Assets" means all electric power generating plants, substations, transmission lines and related facilities and assets assigned to the Power Department; (e) "Water Supply and Sewerage Assets" means all raw water facilities, treatment plants, water distribution and sewerage facilities assigned by the Borrower to its Water Supply and Sewerage Department; - 2 - (f) "pesos" and "Col$" means pesos in the currency of the Guarantor; (g) "Estatutos" means the estatutos of the Borrower set forth in Acuerdo No. 58 of 1955 of the Municipalidad de Medelln issued in accordance with Decreto No. 1816 of 1955, as such estatutos may be amended from time to time and such term shall include all other applicable legislation of the Municipalidad de Medell(n; (h) "Telecommunications Loan Agreement" means the loan agreement for Loan 1825-CO of December 19, 1980, between the Bank and the Borrower, and "Telecommunications Guarantee Agreement" means the guarantee agreement for Loan 1825-CO of even date bet- ween the Guarantor and the Bank; (i) "First Power Loan Agreement" means the loan agreement for Loan No. 225-CO of May 20, 1959 between the Bank and the Bor- rower, and "First Power Guarantee Agreement" means the guarantee agreement for Loan No. 225-CO of even date between the Guarantor and the Bank; (j) "Second Power Loan Agreement" means the loan agreement for Loan No. 282-CO of May 12, 1961 between the Bank and the Bor- rower, and "Second Power Guarantee Agreement" means the guarantee agreement for Loan No. 282-CO of even date between the Guarantor and the Bank; (k) "Third Power Loan Agreement" means the loan agreement for Loan No. 369-CO of February 7, 1964 between the Bank and the Borrower, and "Third Power Guarantee Agreement" means the guaran- tee agreement for Loan No. 369-CO of even date between the Gua- rantor and the Bank; (1) "Fourth Power Loan Agreement" means the loan agreement for Loan No. 874-CO of January 12, 1973 between the Bank and the Borrower, and "Fourth Power Guarantee Agreement" means the gua- rantee agreement for Loan No. 874-CO of even date between the Guarantor and the Bank; (m) "Fifth Power Loan Agreement" means the loan agreement for Loan No. 1868-CO of December 19, 1980 between the Bank and the Borrower, and "Fifth Power Guarantee Agreement means the guarantee agreement for Loan No. 1868-CO of even date between the Guarantor and the Bank; -3- (n) "Sixth Power Loan Agreement" means the loan agreement for Loan No. 1953-CO of November 6, 1981 between the Bank and the Borrower and "Sixth Power Guarantee Agreement" means the guaran- tee agreement for Loan No. 1953-CO of even date between the Gua- rantor and the Bank; (o) "First Power Shareholders' Agreement" means the share- holder agreement for Loan 1582-CO of July 14, 1978 between the Bank and the Borrower, and "Seventh Power Guarantee Agreement" means the guarantee agreement for Loan 1582-CO of even date bet- ween the Guarantor and the Bank; (p) "Second Power Shareholders' Agreement" means the share- holder agreement for Loan 1725-CO of November 30, 1979 between the Bank and the Borrower, and "Eighth Power Guarantee Agreement" means the guarantee agreement for Loan 1725-CO of even date between the Guarantor and the Bank; (q) "Power Sponsors' Agreement" means the sponsors' agree- ment for Loan 2008-CO of March 8, 1980 between the Bank and various sponsors including the Borrower; (r) "Power Loan Agreements" means collectively the loan agreements referred to in paragraphs (i), (j), (k), (1), (m) and (n) hereof; (s) "Power Guarantee Agreements" means collectively the guarantee agreements referred to in paragraphs (i), (j), (k), (1), (m), (n), (o) and (p) hereof; (t) "Power Shareholders' Agreements" means collectively the shareholders' agreements referred to in paragraphs (o) and (p) hereof; (u) "Power Investment Program" means the Borrower's invest- ment program for its Power Department for the years 1984 to 1991 set forth in Acta No. 931 dated April 18, 1984 and Acta No. 952 dated February 2, 1980 and Acta. No. 1,018 dated September 28, 1982 of the Junta Directiva of the Borrower; (v) "Water Supply and Sewerage Investment Program" means the Borrower's investment program for the years 1984 to 1991 for its Water Supply and Sewerage Department set forth in Acta No. 909 dated July 3, 1978 and Acta No. 1,018 dated September 28, 1982 of the Junta Directiva of the Borrower; 4- (w) "Special Account" means the account to be opened and thereafter maintained pursuant to Section 2.02 (b) of this Agree- ment; (x) "Initial Deposit" means the amount of the proceeds of the Loan withdrawn from the Loan Account through one or more withdrawals under Category 6 in the table set forth in para- graph 1 of Schedule 1 to this Agreement, and deposited in the Special Account pursuant to paragraph 3 of Schedule 6 to this Agreement; and (y) "Account Bank" means Banco de la Repulblica. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Loan Agreement, an amount in various currencies equivalent to one hundred sixty four million five hundred thousand dollars ($164,500,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, for expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. (b) The Borrower shall, for the purposes of the Project, open and thereafter maintain in the Account Bank a special account denominated in, and convertible into, dollars on terms and conditions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 6 to this Agreement. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works required for 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. -5- Section 2.04. The Closing Date shall be December 31, 1991 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. (a) The Borrower shall pay to the Bank a fee equivalent to four hundred ten thousand two hundred twenty-four dollars ($410,224). (b) On or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of the said fee in such currency or currencies as the Bank shall determine. 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. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one half percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period. (b) As soon as practicable after the end of each Semester, the Bank shall notify the Borrower and the Guarantor of the Cost of Qualified Borrowings for such Semester. (c) For purposes of this Section: (i) "Interest Period" means the six-month period com- mencing on each date specified in Section 2.08 of this Agreement, including the Interest Period in which this Agreement is signed. (ii) "Cost" of Qualified Borrowings means the cost, expressed as a percentage per annum, as reasonably determined by the Bank, provided that the amount of $8,520.5 million referred to in (iii) (B) here- under shall be reckoned at a cost of 10.93% per annum. -6- (iii) "Qualified Borrowings" means (A) outstanding borrowings of the Bank drawn down after June 30, 1982; and (B) until July 1, 1985, the amount of $8,520.5 million (representing borrowings of the Bank between July 1, 1981 and June 30, 1982) less any part thereof repaid earlier than July 1, 1985. (iv) "Semester" means the first -ssix months or the second six months of a calendar year. Section 2.08. Interest and other charges shall be payable semiannually on February 15 and August 15 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. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and public utility prac- tices, and shall provide, promptly as needed, the funds, facili- ties, services and other resources required for the purpose. (b) The Borrower shall: (i) carry out by December 31, 1989, the program described in Part E of the Project in terms satis- factory to the Bank; and (ii) carry out by December 31, 1987, the activities included in Part F of the Project. Section 3.02. (a) In order to assist the Borrower in the carrying out of the Project, the Borrower shall employ consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of 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. (b) Without limitation to paragraph (a) above, the Borrower shall employ three consultants to staff its board of experts in -7- charge of the overall supervision of the carrying out of the Project and shall maintain the operation of such board until the completion of the Project. 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 furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and proce- dures adequate to record and monitor the progress 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, and to disclose their use in the Project; (ii) shall enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds 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 reason- ably request concerning the Project, its cost and, where appro- priate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of the proceeds. (c) Upon the award by the Borrower of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. -8- (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. (e) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respective obligations under the Loan Agreement and the accom- plishment of the purposes of the Loan. Section 3.05. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed but in any case not later than December 31, 1986, all such land and rights in respect of land as shall be required for the construction (and operation) of the facilities included in the Project and shall furnish to the Bank, promptly after such acquisition, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 3.06. The Borrower shall take all necessary measures to ensure that the Project is carried out with due regard to ecological and environmental factors. Section 3.07. The Borrower shall take all actions necessary (including the provision of the financial resources) for the completion of the water treatment plant and related distribution networks required for the development of the second phase of the water supply facilities referred to in Part B of the Project, such development to be carried out in accordance with a timetable agreed between the Bank and the Borrower. Section 3.08. The Borrower shall, not later than March 15, 1985, enter into contractual arrangements with the Municipalities of Envigado, Sabaneta and La Estralla, in terms and ccrditions satisfactory to the Bank, regarding the provision by the Borrower of water supply and sewerage services to the population of such Municipalities. -9- AKTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall at all times carry on its operations, conduct its affairs, maintain its financial position and plan its future expansion in accordance with sound admini- strative, financial, business and public utility practices under the supervision of qualified and experienced management, assisted by competent and experienced staff in adequate numbers. Section 4.02. (a) The Borrower shall at all times operate and maintain its plants, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. (b) Without limiting the generality of the preceding para- graph, the Borrower shall, under arrangements satisfactory to the Bank, cause all of its dams, reservoir banks, waterways and earthworks assigned to the Power Department to be periodically inspected, in accordance with sound engineering practices, in order to determine whether there are any deficiencies or poten- tial deficiencies in the condition of such structures and earth- works, or in the quality and adequacy of maintenance of methods of operation of such structures and earthworks which may endanger the safety of such structures and earthworks. Section 4.03. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against -uch risks and in such amounts as shall be consistent with appropriate practice. ARTICLE V Financial Covenants Section 5.01. (a) The Borrower shall operate each of its Departments separately and shall, for the assets, revenues and expenditures of each of its Departments maintain separate records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of such Departments. - 10 - (b) Without limitation on the foregoing, the Borrower shall: (i) maintain or cause to be maintained separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditures; and (iii) enable the Bank's repre- sentatives to examine such records. Section 5.02. The Borrower shall: (a) for each of its Departments have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than five months after the end of each such year: (i) certified copies of its financial statements and of the Special Account for such year as so audited; (ii) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested, including without limitation to the foregoing a separate opinion by said auditors in respect of the expenditures and records referred to in paragraph (b) of Section 5.01 as to whether the proceeds of the loan withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; (c) furnish to the Bank monthly certified statements of the Special Account; and (d) furnish to the Bank such other information concerning the accounts, records and financial statements of the Borrower's Departments and of the Special Account, as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 5.03. Not later than three months after the end of each calendar year, the Borrower shall for each of its Depart- ments prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall- have reasonably requested, - 11 - showing the Borrower's financial performance through the end of such year and projected through the following twelve months. Section 5.04. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt, except as otherwise reported to the Bank or stated in writing. (b) The Borrower undertakes that, except as the Bank shall otherwise agree: (i) if the Borrower shall create any lien on any of its assets as security for any debt, such lien will equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and in the creation of any such lien express provision will be made to that effect, at no cost to the Bank; and (ii) if any statutory lien shall be created on any assets of the Borrower as security for any debt, the Borrower shall grant, at no cost to the Bank, an equivalent lien satisfac- tory to the Bank to secure the payment of the principal of, and interest and other charges on, the Loan; provided, however, that the foregoing provisions of this paragraph shall not apply to: (A) any lien created on property, at the time of purchase there- of, solely as security for the payment of the purchase price of such property or as security for the payment of debt incurred for the purpose of financing the purchase of such property; or (B) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after the date on which it is originally incurred. Section 5.05. The Borrower shall not, without the consent of the Bank, sell or otherwise dispose of all or substantially all of its Power Assets or Water Supply and Sewerage Assets or all or substantially all of the property included in the Project or any plant included therein, unless the Borrower shall first redeem and pay, or make adequate provision satisfactory to the Bank for redemption or payment of, all of the Loan which shall then be outstanding and unpaid. Section 5.06. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt for the benefit of the operations of any Department, unless the net revenues earned on the operations of such Department for the fiscal year imme- diately preceding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever amount is greater, shall be not less than 1.5 times the maximum debt service requirement for any succeeding fiscal year on all debt, - 12 - including the debt to be incurred, to be serviced with revenues generated by the operations of such Department. For the purposes of this Section: (a) the term "debt" means any indebtedness of the Borrower, maturing by its terms more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment on the date of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; (c) the term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations adjusted to take account of the Borrower's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the fiscal year or twelve-month period to which such revenues relate and net non-operating income; and (B) the sum of all expenses related to operations including administra- tion, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash opera- ting charges and interest and other charges on debt; (d) the term "net non-operating income" means the dif- ference between: (A) revenues from all sources other than related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above; (e) (i) the term "debt service requirement" shall mean the aggregate amount of repayment (including sinking fund pay- ments, if any) of, interest and other charges on, debt; provided, however, that in respect of the Borrower's Power Department this term shall also include all amounts to be payable by the Borrower to Interconexi6n El'ctrica S.A. (hereinafter called ISA) in exchange for shares and bonds of ISA, as required by the Estatutos of ISA; and (ii) for the purpose of sub-paragraph (i) hereof, the term "Estatutos" means the estatutos of ISA dated September 14, 1967, as amended as of the date of this Agreement and as further amended from time to time, under which ISA was established and operates, and the term "bonds" means titulos issued by ISA pursuant to paragraph (b) of Article 12 of the Estatutos; and - 13 - (f) whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Guarantor, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. Section 5.07. Except as the Bank and the Borrower, with the concurrence of the Guarantor, shall otherwise agree: (a) the Borrower shall: (i) in the carrying out of its power operations, earn an annual return of not less than 7% in the year 1984, 10% in the year 1985, 12% in the year 1986, 10% in the year 1987 and thereafter, on the average net current value of its fixed Power Assets in operation calculated in accordance with the method outlined in Schedule 5 to this Agreement; and (ii) in the carrying out of its water supply and sewerage operations, earn an annual return of not less than 1.1% in the year 1984, 2.5% in the year 1985, 3.5% in the year 1986, 5.5% in the year 1987, 6% in the year 1988, and 5.2% in the year 1989 and there- after on the average net current value of its fixed Water Supply and Sewerage Assets in operation calculated in accordance with the method outlined in Schedule 5 to this Agreement; (b) the Borrower shall, within the first two months of each calendar quarter: (i) calculate in respect of its Power Department and its Water Supply and Sewerage Department: (A) the actual return earned in the course of the twelve-month period immediately preceding such quarter; (B) the return which, on the basis of reasonable estimates, is expected to be earned in the course of the twelve-month period beginning with such quarter, after adding to or sub- tracting from the estimated operating income for such period any overrun or shortfall in the actual return for the preceding twelve- month period; and - 14 - (ii) furnish to the Bank the assumptions for the results of such calculations; and (c) if any such calculation shall show that the Borrower cannot be expected to earn in respect of its Power Department or its Water Supply and Sewerage Department, as the case may be, the requirements set forth under paragraph (a) during the twelve- month period commencing with the calendar quarter in which the calculation is made, the Borrower shall take all such steps as shall be necessary (including those steps necessary on its part for obtaining the adjustment of its tariffs) to meet such requirements. Section 5.08. Without limitation upon the provisions of Sec- tion 5.07 of this Agreement and except as the Bank shall other- wise agree, the Borrower shall increase on a monthly basis its tariffs: (i) for the sale of electricity by not less than 2.2% until December 31, 1988, and 1.8% thereafter; and (ii) for water supply by not less than 1.8% until December 31, 1988 and 1.5% thereafter. Section 5.09. The Borrower shall obtain the concurrence of the Bank before committing itself to, or making, any capital expenditure not directly related to the operations of any of its Departments. Section 5.10. Until the Project shall have been completed: (a) the Borrower shall: (i) inform the Bank on any proposal of the Borrower to make any capital expenditure (not required for the Project) for increasing its power generating capacity by more than one-hundred megawatts; (ii) afford the Bank a reasonable opportunity to comment on any such proposal; and (iii) not commit itself to, nor make, any such capital expenditure unless the pro- posed expenditure is economically justified as part of the national power expansion program of Interconexi6n El"ctrica S.A. and the Borrower has obtained financing under terms and condi- tions which will not affect its financial condition, the carrying out of the Project and the performance of its obligations under this Agreement; and (b) the Borrower shall obtain the concurrence of the Bank before committing itself to any capital expenditure for the - 15 - benefit of its Power Department or its Water Supply and Sewerage Department if the aggregate of such capital expenditure and all such other capital expenditures made or to be made in any one fiscal year (excluding those referred to in paragraph (a) above and those required for: (i) the Project; (ii) payment to Inter- conexion El'ctrica S.A.; and (iii) investments included in the Borrower's Power Investment Program or in the Borrower's Water Supply and Sewerage Program, as the case may be) exceed or will exceed an amount equivalent to one percent (1%) of the net current value of the Borrower's fixed assets in operation, as defined in Schedule 5 to this Agreement. Section 5.11. (a) The Borrower shall allocate all funds generated by the Power Department or the Water Supply and Sewer- age Department exclusively to each such Department and shall not transfer such funds, or any portion thereof, to any of its other Departments unless the funds proposed to be transferred are in excess of those required by the Power Department or the Water Supply and Sewerage Department, as the case may be, to cover all operating expenses; and capital expenditures provided, however, that any such transfer shall be treated as a loan from the Power Department or the Water Supply and Sewerage Department, as the case may be, to the other Departments, on commercial terms and conditions. (b) For purposes of this Section, the term "operating expenses" shall mean all expenses related to operations, including administration, adequate maintenance and taxes and payments in lieu of taxes (excluding provision for depreciation and other non-cash operating charges), debt service requirements, all cash dividends and other cash distributions of surplus, in- crease in working capital other than cash and other cash out- flows other than capital expenditures; and the term "capital expenditures" means all expenditures incurred on account of fixed assets, including the Project and interest charged to construc- tion, related to operations. Section 5.12. The Borrower shall enter into arrangements satisfactory to the Bank in order to obtain financial resources (other than the Loan) for the benefit of the Water Supply and Sewerage Department as required for the carrying out of the Project during the years 1984 and 1985, such financial resources estimated to be, in the aggregate, of one thousand two hundred million pesos (Col$1,200,000,000). - 16 - ARTICLE VI Amendments to the Power Loan Agrecments, Power Shareholders' Agreements and Power Sponors' Agreement Section 6.01. The Bank and the Borrower agree that the financial covenants set forth in Sections 5.06, 5.07, 5.08 and 5.10 of this Agreement supersede any of the Power Loan Agree- ments, Power Shareholders' Agreements and Power Sponsors' Agree- ment on the matters referred to in the above-reierenced Sections, and, to the extent that the provisions of such Agreements may be inconsistent with the terms of the above-referenced Sections, the former provisions shall be deemed amended and substituted by the corresponding Sections of this Agreement. ARTICLE VII Remedies of the Bank Section 7.01. 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 Estatutos or any provision thereof shall have been amended, suspended or abrogated, or new legislation shall have been adopted by the Municipal Council of Medellin which would affect, materially and adversely, the operations or financial condition of the Borrower or the performance by the Borrower of its obligations under the Loan Agreement; and (b) a default shall have occurred in the performance of any obligation (other than an obligation to pay monies) on the part of the Borrower or the Guarantor under the Power Loan Agreements, the Power Guarantee Agreements, the Power Shareholders' Agree- ments, the Telecommunication Loan Agreement or the Telecommunica- tion Guarantee Agreement. Section 7.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof, namely, that the event specified in paragraph (a) or paragraph (b) of Section 7.01 shall occur and shall continue for a period of sixty (60) days after notice thereof shall have been given by the Bank to the Borrower and the Guarantor. - 17 - ARTICLE VIII Effective Date; Termination Section 8.01. The date A 640e-g4 80 1//9 , is hereby specified for the purpose of Section 12.04 of the General Condi- tions. ARTICLE IX Addresses Section 9.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Empresas Publicas de Medellin Calle 53 No. 52-16 Medellin Colombia Cable address: Telex: EMPRESAS 65282 Medellin - 18 - 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/1'* Regional Vice President Latin America and the Caribbean EMPRESAS PUBLICAS DE MEDELLIN By /! Authorized Representative - 19 - SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil works for 81,000,000 58% Parts A, B, C and D of the Project (2) Equipment and 43,000,000 100% of foreign materials (exclud- expenditures and ing turbines and 91% of local generators) and expenditures ancillary services for Parts A, B, C and D of the Project (3) Equipment and 800,000 100% of foreign materials and expenditures and ancillary services 91% of local for Part F of the expenditures Project (4) Consultants' services 8,000,000 for Parts A, B, C and D of the Project: (a) foreign consul- 100% of foreign tants expenditures (b) local consultants 50% (5) Training and equipment 800,000 100% of foreign for Part E of the expenditures Project - 20 - Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (6) Initial Deposit 8,000,000 Amount due pur- suant to para- graph 3 of Sched- ule 6 to this Agreement (7) Fee 410,224 Amount due under Section 2.05 of this Agreement (8) Unallocated 22,489,776 TOTAL 164,500,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Guarantor for goods or services supplied from the territory of any country other than that of 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 com- pliance with the policy of the Bank that the proceeds of the Loan shall not 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 there- of; on this basis, if the amount of any such taxes levied on or in respect of items in any Category decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such Category as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for - 21 - expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $13,000,000, may be made on account of payments made for expenditures before that date but after November 1, 1983. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the- Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may conti- nue 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 expenditure for such item shall be financed out of the proceeds of the Loan, and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Loan. - 22 - SCHEDULE 2 Description of the Project The objectives of the Project are to increase the water availability and power generating capacity of the Borrower and to continue the programs aimed at the institutional strengthening of the Borrower. The Project consists of: Part A: Tasajera Hydroelectric Station Construction and equipping of the Tasajera hydroelectric facilities, including roads and bridges; river diversion works; dam and spillway; intake tower; underground works for power including pressure tunnel, surge tank, penstock tunnel and pen- stock, ancillary tunnels, caverns, tailrace tunnel and tailrace canal; a substation, ancillary works and general accessory ser- vices. Part B: Raw Water Supply Facilities Construction and equipping of the Niquia raw water supply facilities, including roads and bridges; intake tower; under- ground works including pressure tunnel and penstock tunnel; pressure reducing facilities; raw water tank; conduit to treat- ment plant; a substation; ancillary works and general accessory services. Part C: Niquia hydroelectric Station Construction and equipping of the Niquia hydroelectric station, comprising the power station building and related struc- tures and works; a substation; ancillary works and general accessory services. Part D: Transmission Construction and equipping of the 220-ky transmission line between the Tasajera and the existing Barbosa substation and of the 44-ky transmission line between the Niquia substation and the existing Bello substation, including the necessary changes in and additions to the existing substations, ancillary works and general accessory services. - 23 - Part E: Training A program for the training of the Borrower's staff. Part F: Data Processing Network Acquisition, erection and utilization of equipment for the second phase of a computerized data processing network among the Borrower's various offices. The Project is expected to be completed by December 31, 1989. - 24 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each February 15 and August 15 beginning Febrvary 15, 1989 through February 15, 2001 6,325,000 On August 15, 2001 6,375,000 * The figures in this column represent dollar equivalents determined as of the respective dates of withdrawal; see General Conditiits, Section 3.04. - 25 - 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 The interest rate (ex- pressed as a percentage per annum) applicable to the balance outstanding on the Loan on the day of prepayment multiplied by: Not more than three years .18 before maturity More than three years but not .35 more than six years before maturity More than six years but not .65 more than eleven years before maturity More than eleven years but not .88 more than fifteen years before maturity More than fifteen years 1.00 before maturity - 26 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. Goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the 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 competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods offered in such bid; (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 inland freight and other expenditures incidental to the delivery of the goods to the place of their use or installation shall be included. - 27 - B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the proce- dures described in Part A of this Schedule, goods manufactured in Colombia may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Colombia if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Colombia equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or - 28 - (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equiva- lent of $500,000 or more: (a) Before bids are invited, the Borrower shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said 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 bid- ders. (b) After bids have been received and evaluated, the Bor- rower shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and compari- son 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. - 29 - 2. With respect to each contract not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such con- tract, together with the analysis of the respective bids, recom- mendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform the Borrower and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, the Borrower shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Borrower and state the reasons for its determination. - 30 - SCHEDULE 5 Method of Calculating Rate of Return 1. The annual return specified in Section 5.07 (b) of this Agreement will be calculated, in each calendar quarter in respect of the twelve-month period beginning with such quarter and the twelve-month period immediately preceding, by using as the denominator the average between the net current values of the respective fixed assets in operation at the beginning and at the end of each such period and as numerator the operating income of the Borrower for the same period. 2. Any shortfall or overrun in the required annual return for the twelve-month period immediately preceding the quarter in which the calculation is to be made will be carried forward and subtracted or added, *as the case may be, to the numerator used for the forthcoming twelve-month period. 3. "Operating income" will be: (i) in respect of the Power Department, the difference between all revenues from the sale of electricity, and all administrative and operating costs relating thereto (including maintenance and adequate provision for straight-line depreciation on the average gross value of revaluated fixed assets in operation); and (ii) in respect of the Water Supply and Sewerage Department, the difference between all revenues from water and sewerage charges (including amounts collected for water and sewerage connections) and all administra- tive and operating costs relating thereto (including maintenance and adequate provisions for straight-line depreciation on the average gross value of revalued fixed assets in operation). 4. The net current value of fixed assets in operation will be at any given date their gross value less accumulated depreciation to such date, as revalued and depreciated in accordance with paragraphs 5 and 7 below. 5. The gross value of the Borrower's fixed assets in operation and works in progress will be revalued quarterly in accordance with the corresponding variation in the Indice Nacional de Precios al Consumidor - Nivel 1 - published by the Departamento Administrativo Nacional de Estadfstica of the Guarantor, to the last month preceding the quarter in which the calculation is to be made. - 31 - 6. For the purposes of this calculation: (i) the aggregate gross value, as of December 31, 1976, of the Borrower's fixed Power Assets in operation will be fixed at eight thousand forty-four million pesos (Col$8,044,000,000); (ii) the aggregate gross value, as of December 31, 1976, of the Borrower's fixed Power Assets in construction will be fixed at three thou- sand one hundred forty-eight million pesos (Col$3,148,000,000); (iii) the accumulated depreciation on the Power Assets, as of December 31, 1976, in (i) hereof will be fixed at one thousand seven hundred seventy-nine million pesos (Col$1,779,000,000); (iv) the aggregate gross value, as of December 31, 1982, of the Borrower's fixed Water Supply and Sewerage Assets in operation will be fixed at nineteen thousand two hundred two million pesos (Col$19,202,000,000); (v) the aggregate gross value, as of December 31, 1982, of the Borrower's fixed Water Supply and Sewerage Assets in construction will be fixed at two thousand three hundred twenty-three million pesos (Col$2,323,000,000); and (vi) the accumulated depreciation on the Water Supply and Sewerage Assets, as of December 31, 1982, in (iv) hereof will be fixed at four thousand sixty- four million pesos (Col$4,064,000,000). 7. The Borrower will furnish to the Bank during the first quarter of each fiscal year a report on the revaluation of assets through the end of the preceding fiscal year. 8. Depreciation will be charged on a straight-line basis over the estimated useful life of the Borrower's fixed assets. - 32 - SCHEDULE 6 Special Account 1. For the purposes of this Schedule: (a) the term "Categories" means, collectively, Category (1) through (5) as set forth in the table in paragraph 1 of Schedule 1 to this Agreement and the term "Category" means any one of them; and (b) the term "Eligible Expenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Loan allocated from time to time to the Categories in accordance with the provisions of, and in the percentages set forth in, the table in paragraph 1 of Schedule 1 to this Agreement. 2. Payments out of the Special Account shall be made exclu- sively for Eligible Expenditures in accordance with the provi- sions of this Schedule. For each withdrawal, the Account Bank shall debit the Special Account with the dollar equivalent of the amount in pesos or any other currency other than dollars so withdrawn, determined on the basis of the rate of exchange between the dollar and such currency in effect at the date each withdrawal shall have been made. 3. The Bank shall, at the request of the Borrower, withdraw on behalf of the Borrower from the Loan Account and deposit into the Special Account the Initial Deposit. Thereafter and on the basis of requests by the Borrower furnished to the Bank at such inter- vals as the Bank shall specify, the Bank shall further so with- draw from the Loan Account and deposit into the Special Account such amounts as shall be required to replenish the Special Account with amounts equal to payments made out of the Special Account for Eligible Expenditures, but only to the extent that the amount of any such deposit, together with any amount remain- ing on deposit in the Special Account as of the date of such request, shall not exceed in the aggregate the equivalent of the Initial Deposit. Except as the Bank may otherwise agree, each such deposit after the Initial Deposit shall be withdrawn by the Bank from the Loan Account under the respective Category or Cate- gories, and in the respective equivalent amounts, as shall have been justified by the evidence supporting the request for such deposit furnished pursuant to paragraph 4 of this Schedule. - 33 - 4. Prior to or at the time of each request by the Borrower for a deposit by the Bank into the Special Account after the Initial Deposit, the Borrower shall furnish to the Bank in respect of each payment made by the Borrower out of the Special Account such documents and other evidence as the Bank shall reasonably request, showing that such payment was made for eligible expen- ditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, any request for a further deposit into the Special Account may be denied by the Bank (a) when the Bank shall have determined at any time that all further withdrawals can be made directly by the Borrower from the Loan Account in accordance with the provisions of paragraph (a) of Section 2.02 of this Agree- ment, or (b) when the total unwithdrawn amount of the Loan allo- cated to the Categories minus the amount of any outstanding qualified agreement to reimburse entered into by the Bank and of any outstanding special commitment made by the Bank pursuant to Section 5.02 of the General Conditions, with respect to the Cate- gories, shall be equal to the equivalent of twice the amount of the Initial Deposit. Withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the Cate- gories shall follow such procedures as the Bank shall specify by notice to the Borrower and shall, except as the Bank shall other- wise agree, be made only after and to the extent the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice have been or will be utilized in making payments for Eligible Expenditures. 6. If the Bank shall have determined at any time that: (a) any payment out of the Special Account (i) was made for any expenditure or in any amount not eligible pursuant to para- graph 2 of this Schedule, or (ii) was not justified by the evidence furnished pursuant to paragraph 4 of this Schedule, the Borrower shall, promptly upon notice from the Bank and, unless otherwise agreed by the Bank, prior to any further deposit into the Special Account by the Bank, deposit into the Special Account or, if the Bank shall so request, refund to the Bank an amount equal to the amount of such payment or the portion thereof not so eligible or justified; or (b) any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, and - 34 - unless otherwise agreed by the Bank, refund to the Bank such amount then outstanding in the Special Account. 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 day of. 8 . FOR SECRETARY