Colombia - Power Development Finance Project : Loan 2401 - Guarantee Agreement - Conformed

OFFICIAL S LOAN NUMBER 2401 CO 10WYUMENTS Guarantee Agreement (Power Development Finance Project) between REPUBLIC OF COLOMBIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated ,1984 LOAN NUMBER 2401 CO GUARANTEE AGREEMENT AGREEMENT, dated a -t 7 , 1984, between REPUBLIC OF COLOMBIA (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank). WHEREAS: (A) by the Loan Agreement of even date herewith between the Bank and Financiera El4ctrica Nacional S.A. (herein- after called the Borrower) the Bank has agreed to make to the over a loan in varl, - currencies equivalent to one hundred seventy million dollars ($170,000,000), on the terms and condi- tions set forth in the Loan Agreement, but only on condition that the Guarantor agrees to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; (B) the Borrower intends to borrow from lenders out- side Colombia, including the Bank, an amount equivalent to $200,000,000 (hereinafter called Additional External Financing) to assist in the financing of the Project; and (C) the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guaran- tee the obligations of the Borrower under such Agreement; 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 the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 3 to the Loan Agreement (said General Conditions Appli- cable to Loan and Guarantee Agreements, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions and in Section 1.02 of the Loan Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: - 2 - (a) "ICEL" means Instituto Colombiano de Energfa E16ctrica; and (b) "CORELCA" means Corporacion El"ctrica de la Costa Atlantica. ARTICLE II Guarantee Section 2.01. Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guaran- tor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan, and the premium, if any, on the prepayment of the Loan, and the punctual perfor- mance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. ARTICLE III Other Covenants Section 3.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, specific security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto, and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Guarantor, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Guarantor shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other assets, satisfactory to the Bank, of the Guarantor or of - 3 - any entity owned or controlled by, or operating for the account or benefit of, the Guarantor, including gold and other foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions for the Guarantor. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for 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; and (ii) any lien aris- ing in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Guarantor, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Guarantor or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Gua- rantor. Section 3.02. The Guarantor shall authorize, or cause to be authorized, the initiation of any new electricity development project by any of the power companies operating in the electri- city sector in Colombia, only in the event that such projects are economically justified and that the respective power company dis- poses of adequate financing for such purposes and for the carry- ing on of its existing operations. Section 3.03. The Guarantor shall: (a) take, or cause to be taken, all actions necessary to enable the Borrower to prepare and furnish to the Bank the plan referred to in Section 4.11 of the Loan Agreement; and (b) promptly put into effect such plan. Section 3.04. The Guarantor shall take, or cause to be taken, all actions necessary to enable the Borrower to meet its borrowing targets in the Colombian capital market set forth in paragraph (a) of Section 4.12 of the Loan Agreement. Section 3.05. Not later than: (a) April 1 of each year, the Guarantor shall exchange views with the Bank and the Borrower for the purposes of paragraph (b) of Section 4.12 of the Loan Agree- ment; and (b) August 31 of each year, the Guarantor shall ex- change views with the Bank, the Borrower and Interconexion El4ctrica S.A. for the purposes of Section 4.13 (b) of the Loan Agreement. Section 3.06. The Guarantor shall: (a) furnish to the Bank, not later than December 31, 1984, for its review and comments, a proposal for the computation of a price index reflecting the actual variation of the prices of goods and services relevant to the electricity sector; and (b) starting January 1, 1985, compute and publish the variations in the price index referred to in (a) above on a quarterly basis. Section 3.07. The Guarantor shall, promptly as required, take all actions necessary on its part to enable the Power Com- panies to set and maintain its electric tariffs and charges at levels sufficient at all times to fulfill each of the Power Companies' obligations pursuant to Section 4.04 of the Power Financing Agreement. Section 3.08. The Guarantor shall take all action, including the granting of all necessary authorizations, import licenses, foreign exchange permits and all other approvals required under the laws of the Guarantor to ensure the timely procurement of the goods and services required for each Sub-project. Section 3,09. The Guarantor shall, promptly as needed, take all actions necessary or advisable on its part, including the provision of Lunds, to enable the Power Companies punctually to perform their respective obligations (including their financial obligations) under the Power Financing Agreement. Section 3.10. The Guarantor undertakes that the Power Finan- cing Agreement shall be free from any taxes levied by, or in the territory of, the Guarantor or in connection with the execution, delivery or registration thereof. Section 3.11. Without limitation to its other obligations under this Agreement, the Guarantor shall: (a) prepare and fur- nish to the Bank, not later than November 30, 1984, the plans and schemes referred to in sub-paragraph (c) (ii) of Section 2.03 of the Loan Agreement; (b) take, and shall cause ICEL and CORELCA to take, all actions necessary, including the timely provision of budgetary resources, in order to enable such Power Companies to - 5 - carry out such plans and schemes; and (c) take all actions neces- sary, including the timely provision of funds, in order to enable ICEL and CORELCA to make the payments required to service the Sub-loans and FEN loans made to them by the Borrower under the Project. Section 3.12. (a) The Guarantor shall cause ICEL to carry out an administrative reorganization plan based on the recom- mendations of the study on its reorganization carried out by ICEL's Divisi6n de Asesorfa y Control Administrativo, such plan to include the establishment, not later than December 31, 1984, of a financial department (sub-gerencia financiera) and an opera- tions department (sub-gerencia de operaciones), with functions satisfactory to the Bank and adequate staffing. (b) The Guarantor shall cause ICEL: (i) to prepare, not later than August 31, 1984, a preliminary estimate of the current value of ICEL's fixed assets in operation and works in progress in accordance with sound accounting principles; and (ii) there- after, and until another method, satisfactory to the Bank, for the maintenance of value of assets shall have been made applic- able by ICEL, continue to revalue the current value of the assets determined pursuant to (i) above in accordance with paragraphs 5, 6 and 7 of Schedule 2 to the Power Financing Agreement. (c) The Guarantor shall cause ICEL: (i) to carry out, not later than December 31, 1984, a study to determine the valuation of ICEL's fixed assets in operation and works in progress in accordance with terms of reference satisfactory to the Bank; and (ii) for purposes of carrying out the study referred to in (i) above, employ consultants with qualifications and experience sat- isfactory to the Bank. Section 3.13. The Guarantor shall, not later than Septem- ber 30 in each year, furnish to the Bank, for its comments, the updated electricity demand growth projections and the related power investment program on the basis of a study prepared there- for on an annual basis by ISA. Section 3.14. Except as the Guarantor and the Bank shall otherwise agree, the Guarantor, in its capacity as shareholder of the Borrower, shall take all action necessary to ensure that the Borrower shall not declare or pay any cash dividend on account of any of its shares, or repurchase any of its shares of stock for cash. - 6 - ARTICLE IV Representative of the Guarantor; Addresses Section 4.01. The Ministro de Hacienda y Credito Plblico of the Guarantor is designated as representative of the Guarantor for the purposes of Section 11.03 of the General Conditions. Section 4.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Guarantor: Ministerio de Hacienda y Cr6dito Publico Palacio de los Ministerios Plaza San Agusti'n Bogota, Colombia Cable address: Telex: MINHACIENDA 44473 (ITT) Bogota 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) - 7 - IN WITNESS WHEREOF, the parties hereto, acting Lhrough their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the City of Paris, France, as of the day and year first above written. REPUBLIC OF COLOMBIA By S/#L:2aA Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By Authorized Representative 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 198 FOR SECRETARY