Honduras - Energy Sector Structural Adjustment Credit : Credit 2306 - Credit Agreement - 1 - Conformed

Dc C CREDIT NUMBER 2306 HO Development Credit Agreement (Energy Sector Structural Adjustment Credit) between REPUBLIC OF HONDURAS and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 5;, 1991 ( CREDIT NUMBER 2306 HO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated 6booke 6 , 1991 between REPUBLIC OF HONDURAS (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Association has received a letter dated August 26, 1991 from the Borrower describing a program of actions, objectives and policies designed to achieve greater efficiency and higher productivity in the Borrower's energy sector (hereinafter called the Program), declaring the Borrower's commitment to the execution of the Program, and requesting assistance from the Association in the financing of urgently needed imports and services required during such execution; and (B) on the basis, inter alia, of the foregoing, the Association has decided in support of the Program to provide such assistance to the Borrower by making the Credit as hereinafter provided; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the modifications thereof set forth below (the General Conditions) constitute an integral part of this Agreement: (a) Section 2.01, paragraph 9, shall be modified to read: "'Project' means the imports and other activities that may be financed out of the proceeds of the Credit pursuant to the provisions of Schedule 1 to the Development Credit Agreement."; (b) Section 9.06 (c) shall be modified to read: "(c) 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 Association, the Borrower shall prepare and furnish to the Association a report, of such scope and in -2- such detail as the Association shall reasonably request, on the execution of the Program referred to in the Preamble to the Development Credit Agreement, the performance by the Borrower and the Association of their respective obligations under the Development Credit Agreement and the accemplishment of the purposes of the Credit."; and (c) the list sentence of Section 3.02 is deleted. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the rnspective meanings therein set forth and the following additional terms have the following meanings: (a) "Central Bank" means Banco Central de Honduras, the Central Bank of the Borrower; (b) "Contract-Plan" means the contract entered into between the Borrower and ENEE (as such term is hereinbelow defined), establishing the obligations of the parties thereto in order to strengthen the operational efficiency of ENEE (as such term is hereinbelow defined), as approved by Executive Decree No. 5-A-91, dated January 28, 1991; (c) "ENEE" means Empresa Nacional de Energia El4ctrica, the Borrower's power company, established by Decree No. 48, dated February 20, 1957; (d) "First Tranche" means a portion of the Credit not exceeding the equivalent of SDR 15,000,000, to be released by the Association on or after the Effective Date; (e) "OFRAP" means an operational and financial rehabi- litation action plan established by the Borrower for its energy sector, as specified in a letter from the Borrower to the Association dated August 27, 1991; (f) "Lempira" and "L" mean the currency of the Borrower; (g) "NEC" means Comisi6n Nacional de Energia, the National Energy Commission of the Borrower, established by Executive Decree No. 43-91, dated September 8, 1991; (h) "PLP" means a plan established by the Borrower for the liberalization of the petroleum sector, as specified in a letter from the Borrower to the Association dated September 13, 1991; (i) "PURC" means Comisi6n Nacional Supervisora de Servicios Pdblicos, the Public Utilities Regulatory Commission of the Borrower, established by Law No. 85/91, dated July 9, 1991; (j) "Second Tranche" means a portion of the Credit not exceeding the equivalent of SDR 11,250,000, to be released by the Association on or after the date on which the conditions referred to in paragraph 5 of Schedule 1 to this Agreement have been met; (k) "SITC" means the Standard International Trade Classi- fication, Revision 3 (SITC, Rev. 3), published by the United Nations in Statistical Papers, Series M, No. 34/Rev. 3 (1986); and (1) "Third Tranche" means a portion of the Credit, not exceeding the equivalent of SDR 11,250,000, to be released by the Association on or after the date on which the conditions referred to in paragraph 6 of Schedule 1 to this Agreement have been met. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Development Credit Agreement, an amount in various currencies equivalent to thirty-seven million nine hundred and fifty thousand Special Drawing Rights (SDR 37,950,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement. Section 2.03. The Closing Date shall be December 31, 1993 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. -4- (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date and at such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of. the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment and service charges shall be payable semiannually on January 15 and July 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each January 15 and July 15 com- mencing January 15, 2002 and ending July 15, 2031. Each installment to and including the installment payable on July 15, 2011 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever: (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years; and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due con- sideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the -5- Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. (a) The President of the Central Bank is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement ana Article V of the General Conditions. (b) Without limitation or restriction to the foregoing, the Borrower hereby entrusts the Central Bank with responsibility for the preparation of withdrawal applications under the Credit and for the collection of the documents and other evidence to be furnished to the Association in support of such applications; such withdrawal applications shall to the extent practicable be consolidated so as to apply for withdrawal of aggregate amounts of not less than SDR 200,000 equivalent. ARTICLE III rarticular Covenants 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 shall carry out the Project with due diligence and efficiency. (b) The Borrower and the Association shall from time to time, at the request of either party, exchange views on the progress -6- achieved in carrying out the Program and the actions specified in Schedule 4 to this Agreement. (c) Prior to each such exchange of views, the Borrower shall furnish to the Association for its review and comment a report on the progress achieved in carrying out the Program and the actions specified in Schedule 4 to this Agreement, in such detail as the Association shall reasonably request. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. In order to carry out Part B of the Project, the Borrower shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association 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. Section 3.04. (a) The Borrower shall r,aintain or cause to be maintained records and separate accounts adequate to reflect in accordance with consistently maintained sound accounting practices the expenditures financed out of the proceeds of the Credit. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) subject to paragraph (g) of Part I of Schedule 4 to this Agreement in relation to the First Tranche, and to paragraph (g) of Part II of such Schedule in relation to the Second Tranche, furnish to the Association as soon as available, but in any case not later than ninety days after the last withdrawal from the Credit Account has been made under each the First, Second and Third Tranches, a certified copy of the report of the -7- audit by said auditors of the records and accounts in respect of the expenditures financed by the Association under each corresponding First, Second and Third Tranche, of such scope and in such detail as the Association shall have reasonably requested; (iii) furnish tP the Association as soon as available, but in any case not later than four months after the end of each fiscal year, a certified copy of the report of the audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iv) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. (c) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditure, the Borrower shall: (i) maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures; (ii) retain, until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such records and accounts are included in the audits referred to in paragraph (b) of this Section and that the report of each such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during the corresponding audit period, together with the procedures and internal controls involved -8- in their preparation, can be relied upon to support the related withdrawals. ARTICLE IV Additional Event of Suspension Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) that a situation has arisen which s,hall make it improbable that the Program, or a significant part thereof, will be carried out; and (b) that the manual containing the guidelines for the operations of, and investments to be made by, ENEE, to be included in the reforms referred to in Part I (c) of Schedule 4 to this Agreement, shall have been amended, abrogated or waived, without the agreement of the Association. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) that the macroeconomic policy framework of the Borrower is consistent with the objectives of the Program; (b) that the entities, departments and agencies of the Borrower are current in the payment of the bills related to the electricity supplied to them by ENEE after January 1, 1991; (c) that the law establishing PURC shall have been amended to the satisfaction of the Association; and (d) that the regulations of PURC, satisfactory to the Association, shall have been issued. -9- Section 5.02. The date 7 dA'zec 7 </99 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. Except as provided in Section 2.09 (a) of this Agreement, the Secretario de Estado en el Despacho de Hacienda y Cr6dito Pdblico of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Secretaria de Estado en el Despacb de Hacienda y Crddito Pdblico Tegucigalpa, D.C. Honduras Cable address: Telex: HACIENDA 1308 HACIENDA HO Tegucigalpa, Honduras With copies to: Banco Central de Honduras Tegucigalpa, D.C. Honduras Cable address: Telex: BANTRAL 1211-HT BANTRAL Tegucigalpa, Honduras - 10 - For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) or 82987 (FTCC) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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. REPUBLIC OF HONDURAS By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Latin America and the Caribbean - 11 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. Subject to the provisions set forth or referred to in this Schedule, the proceeds of the Credit may be withdrawn from the Credit Account for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required during the execution of the Program and to be financed out of such proceeds, all in accordance w!.th the allocation of the proceeds set forth in the table below (the Table): Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Imported goods 37,500,000 100% of foreign under Part A of expenditures the Project (2) Technical Assistance 450,000 100% under Part B of the Project TOTAL 37,950,000 2. For the purposes of this Schedule, the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods supplied from the territory of any country other than that of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of: (a) expenditures for goods included in the following SITC groups or subgroups, or any successor groups or subgroups under future revisions to the SITC, as designated by the Association by notice to the Borrower: - 12 - GroLR Subgroup Description of Items 112 - Alcoholic beverages 121 - Tobacco, unmanufactured, tobacco refuse 122 - Tobacco, manufactured (whether or not containing tobacco substitutes) 525 - Radioactive and associated materials 667 - Pearls, precious and semi- precious stones, unworked or worked 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), nonirradiated for nuclear reactors 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) 971 - Gold, nonmonetary (excluding gold ores and concentrates) (b) payments made for expenditures prior to the date of this Agreement, except that withdrawals in an aggregate amount not exceeding the equivalent of SDR 7,500,000 may be made on account of payments made for such expenditures before that date but after May 15, 1991; (c) expenditures for goods procured under contracts costing less than $10,000 equivalent; (d) expenditures for goods supplied under a contract which any national or international financing institution or agency other than the Association shall have financed or agreed to finance; - 13 - (e) expenditures for goods intended for a military or para- military purpose or for luxury consumption; and (f) expenditures for crude oil imports in amounts which shall exceed the equivalent of 25% of the amount of the Credit allocated under Category (1) of the Table. 4. Withdrawals for expenditures under contracts for the procurement of goods estimated to cost the equivalent of less than $1,000,000 may be permitted by the Association upon the basis of statements of expenditure under such terms and conditions as the Association shall specify. 5. No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed out of the proceeds of the Credit allocated to Category (1) of the Table after the aggregate of the proceeds of the Credit withdrawn from the Credit Account under Category (1) of the Table and the total amount of such commitments shall have reached the equivalent of SDR 15,000,000, unless the Association shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Association: (a) with the progress achieved by the Borrower in the carrying out of the Program; (b) that the actions described in Part I of Schedule 4 to this Agreement have been taken in form and substance satisfactory to the Association; and (c) that the macroeconomic policy framework of the Borrower is consistent with the objectives of the Program. 6. No withdrawal shall be made and no commitment shall be entered into to pay amounts to or on the order of the Borrower in respect of expenditures to be financed out of the proceeds of the Credit allocated to Category (1) of the Table, after the aggregate of the proceeds of the Credit withdrawn from the Credit Account under Category (1) of the Table and the total amount of such commitments shall have reached the equivalent of SDR 26,250,000, unless the Association shall be satisfied, after an exchange of views as described in Section 3.01 of this Agreement based on evidence satisfactory to the Association: (a) with the progress achieved by the Borrower in the carrying out of the Program; (b) that the actions described in Parts I and II of Schedule 4 to this Agreement have been taken in form and substance satisfactory to the Association; and (c) that the macroeconomic policy framework of the Bo)rower is consistent with the objectives of the Program. -14 7. If, after the exchange of views described in paragraphs 5 and 6 above, the Association shall have given notice to the Borrower that the progress achieved in the carrying out of the Program or the actions taken pursuant to Schedule 4 to this Agreement are not satisfactory, or that the macroeconomic policy framework of the Borrower is not consistent with the objectives of the Program, and, within 90 days after such notice, the Borrower shall not have achieved progress and taken actions satisfactory to the Association, or the Borrower's macroeconomic policy framework continues to be not consistent with the objectives of the Program, then the Association may, by notice to the Borrower, cancel the unwithdrawn amount of the Credit or any part thereof. - 15 - SCHEDULE 2 Description of the Project The objective of the Project is to support the carrying out of the Program. The Project consists of the following parts, subject to such modifications thereof as the Association and the Borrower may agree upon from time to time to achieve such objectives: Part A: Imports Importation of goods in support of the Program. Part B: Technical Assistance The provision of technical assistance for: (a) negotiating with bidders contracts for the exploration of oil and gas in the territory of the Borrower and establishing the monitoring system for such exploration; (b) the carrying out of a study to investigate the inter- fuel substitution in the territory of the Borrower; (c) the implementation of the PLP; and (d) the preparation of draft regulations for environmental protection in oil and gas exploration activities. The Project is expected to be completed by June 30, 1993. - 16 - SCHEDULE 3 Procurement 1. Except as provided in paragraphs 2 and 3 of this Schedule, contracts for the procurement of goods estimated to cost the equivalent of $5,000,000 or more each shall be awarded through international competitive bidding in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines), subject to the following modifications: (a) Paragraph 2.8 of the Guidelines is deleted and the following is substituted therefor: "2.8 Notification and Advertising The international community should be notified in a timely manner of the opportunity to bid. This will be done by advertising invitations to apply for inclusion in a bidder's invitation list, to apply for prequalification, or to bid; such advertisements should be placed in at least one newspaper of general circulation in the Borrower's country and, in addition, in at least one of the following forms: (i) a notice in the United Nations publication, Development Forum, Business Edition; or (ii) an advertisement in a newspaper, periodical or technical journal of wide international circulation; or (iii) a notice to local representatives of countries and territories referred to in the Guidelines, that are potential suppliers of the goods required." (b) The following is added at the end of paragraph 2.21 of the Guidelines: "As a further alternative, bidding documents may require the bidder to state the bid price in a single currency widely used in international trade and specified in the bidding documents." - 17 - (c) Paragraphs 2.55 and 2.56 of the Guidelines are deleted. 2. Contracts for the procurement of goods estimated to cost the equivalent of less than $5,000,000 may be awarded: (a) by purchasers required to follow the Borrower's public procurement procedures for the importation of goods, on the basis of such procedures, provided that such contracts shall be awarded to the lowest evaluated bidder, without taking into account, in the evaluation, financial costs for foreign exchange components, and that such procedures shall have been found acceptable by the Association; (b) by other purchasers, in accordance with established commercial practice, except that direct contracting procedures acceptable to the Association may be used where considered appropriate under paragraph 3.5 of the Guidelines; and (c) by any purchasers, subject to the provisions of paragraph 3 below, in respect of the supply of commodities, on the basis of evaluation and comparison of quotations obtained from more than one supplier. 3. Subject to the prior approval of the Asociation, commonly traded commodities may be procured through organized international commodity markets or other channels of competitive procurement acceptable to the Association. in accordance with procedures acceptable to the Association. 4. With respect to each contract referred to in paragraph 1 of this Schedule, the Borrower shall furnish to the Association, prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids and recommendations for award, a description of the advertising and tendering procedures followed and such other information as the Association shall reasonably request. 5. With respect to each contract referred to in paragraphs 2 and 3 of this Schedule costing the equivalent of more than $1,000,000, the Borrower shall furnish to the Association, prior to the - 18 - submission to the Association of the first application for withdrawal of funds from the Credit Account in respect thereof, such documentation and information as the Association may reasonably request to support withdrawal applications in respect of such contract. 6. The provisions of the preceding paragraph 5 of this Schedule shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. - 19 - SCHEDULE 4 Actions Referred to in Paragraphs 5 (b) and 6 (b) of Schedule 1 to this Agreement I. Actions Referred to in Paragraph 5 (b) of Schedule 1 to this Agreement: (a) a study to investigate the consequences of inter-fuel substitution in the territory of the Borrower, under terms of reference satisfactory to the Association, has been completed and furnished to the Association; (b) guidelines to be applied by PURC for the power sub- sector of the Borrower, satisfactory to the Association, have been issued;- (c) the functions and activities of NEC and PURC are being carried out pursuant to Executive Decree No. 43-91, of September 18, 1991, and Law No. 85/91, of July 9, 1991, respectively, and to the regulations and the guidelines for the power sub-sector issued pursuant thereto; (d) an action plan, containing the reforms to be implemented by the Borrower in the power subsector, based on the results of a study on institutional reforms to be carried out under terms of reference satisfactory to the Association, has been furnished by the Borrower to the Association; (e) progress has been achieved in the implementation of OFRAP, including the Contract-Plan; (f) increases in the electricity tariff have been made so that ENEE's average tariff level not less than 90% of ENEE's long- run marginal costs, provided, however, that no tariff category has been set at a level of less than 80% of ENEE's long-run marginal costs, with the exception of residential consumers of 300 Kwh or less per month; (g) progress has been achieved in the implementation of PLP; (h) a certified copy of the audit report referred to in Section 3.04 (b) (ii) of this Agreement in respect of the expen- ditures financed out of the proceeds of the First Tranche has been furnished to the Association; - 20 - (i) the consultants required to assist the Borrower in: (a) negotiating with bidders contracts for the exploration of oil and gas in the territory of the Borrower; (b) establishing the monitoring system for such exploration; and (c) implementing the PLP, have been hired; and (j) draft regulations to Decree No. 194/84, of the Borrower, dated October 31, 1984, satisfactory to the Association, taking into account the need to protect the environment from the effects of the exploration of oil and gas in the territory of the Borrower, have been furnished to the Association. II. Actions Referred to in Paragraph 6 (b) of Schedule 1 to this Agreement: (a) all subsidies expressly designated for electricity consumption have been eliminated; (b) the functions and activities of NEC and PURC are being carried out pursuant to Executive Decree No. 43-91, of September 18, 1991, and Law No. 85/91, of July 9, 1991, respectively, and to the regulations and the guidelines for the power subsector issued pursuant thereto; (c) the reforms in the power subsector have been implemented by the Borrower and ENEE, pursuant to the action plan referred to in Part I (d) of this Schedule; (d) further progress has been achieved in the implementation of OFRAP, including the Contract-Plan; (e) increases in the electricity tariffs have been made so that ENEE's average tariff level is at least equal to the long-run marginal costs of supplying electricity by ENEE, provided, however, that no tariff category has been set at a level of less than 90% of the long-run marginal cost apnlicable to such category of customer, with the exception of residential consumers of 300 Kwb or less per month; (f) PLP has been implemented; (g) certified copies of the audit reports referred to in Section 3.04 (b) (ii) of this Agreement in respect to the expen- ditures financed out of the proceeds of the First and the Second Tranches have been furnished to the Associaton; - 21 - (h) the regulations referred to in Part I (j) of this Schedule have been issued; and (i) an action plan, based on the results of the study referred to in Part I (a) of this Schedule, has been furnished by the Borrower to the Association. For the purpose of Parts I (f) and II (e) of this Schedule, and unless the Association shall otherwise agree, the following average values (expressed in June, 1991 dollars) shall be utilized as the ENEE's long-run marginal costs of providing electricity: (i) $80 per megawatt hour for low voltage; (ii) $59 per megawatt hour for mid voltage; and (iii) $47 per megawatt hour for high voltage. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY