Honduras - Morazan Dam Emergency Project : Credit 2417 - Credit Agreement - Conformed

CREDIT. NUMBER .2 / o O Development Credit Agreement (Morazin Dan Emergency Project) between REPUBLIC OF HONDURAS and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated , 1992 CREDIT NUMBER 20//- HO DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated -2, 1992, between REPUBLIC OF HONDURAS (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Project will be carried out by Empresa Nacional de Energia E16ctrica (ENEE) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to ENEE the proceeds of the Credit as provided in this Agreement; (C) the Borrower and the Inter-American Development Bank (IDB) have agreed to amend the loan agreement dated January 7, 1992 (the IDB Loan Agreement) in order to modify the Project description and to reallocate an amount equivalent to one million seven hundred thousand dollars ($1,700,000) to assist in financing Part A.2 of the Project on the terms and conditions set forth in a letter agreement (the IDB Amending Letter Agreement) to be entered into between the Borrower and the IDB; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Association and ENEE; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Develop- ment Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. 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 respective meanings therein set forth and the following additional terms have the following meanings: -2- (a) "Decree" means the Borrower's Decree No. 48, dated February 20, 1957 which created ENEE, as amended to the date of this Agreement; (b) "Project Agreement" means the agreement between the Association and ENEE of even date herewith, as the same mEiy be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement; and (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and ENEE pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement. 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 eight million eight hundred thirty thousand Special Drawing Rights (SDR 8,830,000). 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 for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of services required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. The Closing Date shall be September 30, 1994 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 ex-esd the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitiant 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 -3- 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 charges 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 semiannual installments payable on each January 15 and July 15 commencing January 15, 2003 and ending July 15, 2032. Each installment to and including the installment payable on July 15, 2012 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 consideration 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 Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the -4- 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. The Secretario de Estado en el Des7,acho de Hacienda y Cr6dito Pfiblico of the Borrower or the General Manager of ENEE or such person or persons as such Secretario or General Manager shall appoint in writing are designated as representatives of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. 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, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause ENEE to perform in accordance with the provisions of the Project Agreement all the obligations of ENEE therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable ENEE to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend the proceeds of the Credit in dollars to ENEE under a subsidiary loan agreement to be entered into between the Borrower and ENEE, under terms and conditions which shall have been approved by the Association which shall, inter alia, -5- include that ENEE shall: (i) pay to the Borrower a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount so relent and not withdrawn by ENEE from time to time; (ii) pay to the Borrower interest at the rate of seven and three-fifths percent (7.60%) per annum on the principal amount so relent, withdrawn by ENEE and outstanding from time to time; and (iii) repay the principal amount so relent over a period of 20 years from the date of this Agreement, including therein a period of grace of five years. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 1 to the Project Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06 and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, and maintenance of land, respectively) in respect of the Project shall be carried out by ENEE pursuant to Section 2.03 of the Project Agreement. ARTICLE IV Remedies of the Association Section 4.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) ENEE shall have failed to perform any of its obligations under the Project Agreement; (b) As a result of events which have occurred after the date of the Development Credit Agreement, an extraordinary situation shall have arisen which shall make it improbable that ENEE will be able to perform its obligations under the Project Agreement; -6- (c) The Decree shall have been amended, suspended, abrogated, repealed or waived so as to affect in the opinion of the Association, materially and adversely the ability of ENEE to perform any of its obligations under the Project Agreement; (d) The Borrower or any other authority having jurisdiction shall have taken any action for the suspension of ENEE's operations; or (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower to withdraw the proceeds of any loan made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity therefor. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 4.02. Pursuant to Section 7.01 (d) of the General conditions, the following additional events are specified: (a) the event specified in paragraph (a) of Section 4.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Association to the Borrower; -7- (b) any event specified in paragraph (c), or (d) of Section 4.01 of this Agreement shall occur; or (c) the event specified in paragraph (e) (i) (B) of Section 4.01 of this Agreement shall occur, subject to the proviso of paragraph (e) (ii) of that Section. 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) the Subsidiary Loan Agreement has been executed and delivered on behalf of the Borrower and ENEE; and (b) the IDB Amending Letter Agreement has been executed and delivered on behalf of the IDB and the Borrower, or alternative arrangements, satisfactory to the Association, have been made by the Borrower or ENEE for the provision of the funds necessary for Part A.2 of the Project. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by ENEE, and is legally binding upon ENEE in accordance with its terms; (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and ENEE and is legally binding upon the Borrower and ENEE in accordance with its terms; and (c) that the IDB Amending Letter Agreement (or any alternative arrangements referred to in Section 5.01 (b) above) has been duly authorized or ratified by, and is legally binding upon the Borrower in accordance with its terms. Section 5.03. The date 1,2#992- is hereby specified for the purposes of Section 12.04 of the General conditions. -8- Section 5.04. The obligations of the Borrower under Articles III and IV of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. Except as provided in Section 2.09 of this Agreement, the Secretario de Estado en el Despacho de Hacienda y Cr&dito Pfiblico 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 Despacho de Hacienda y Cr6dito P6blico Tequcigalpa, D.C. Honduras Cable address: Telex: HACIENDA 1308 Tequcigalpa, Hacienda HO Honduras 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) -9- 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 Byid 5 Regional Vice President Latin America and the Caribbean - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Ecuivalent) to be Financed (1) Works under 7,655,000 78% Part A.1 of the Project (2) Consultants' 390,000 100% services under Part B of the Project (3) Training under 45,000 100% Part C of the Project (4) Unallocated 740,000 TOTAL 8,830,000 2. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of SDR 441,500, may be made in respect of Categories (1), (2) and (3) of the table in paragraph 1 of this Schedule, on account of payments made for expenditures before that date but after March 31, 1992. - 11 - SCHEDULE 2 Description of the Project The objectives of the Project are to: (i) maintain the structural integrity of the Morazdn dam; (ii) increase the reliability of the power plant's auxiliary electrical system of the Morazin dam; and (iii) strengthen ENEE's emergency preparedness planning and its capacity to monitor the performance of the Morazin dam and manage possible future seepage problems in such dam. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: Rehabilitation of the Morazdn Dam Rehabilitation of the structure of the Morazin dam through: 1. (i) Underground investigation with deep rock borings (about 46,000 linear meters) and corresponding instrumentation, followed by high pressure injection of sealants (about 14,000 metric tons) into the rock mass; (ii) impermeabilization of the power plant sump; and (iii) construction of additional drainage galleries (about 300 meters) to evacuate filtrations of gravity flow, lining of inspection gallery and plugging of the diversion tunnel. 2. Purchase and installation of: (i) additional electrical and mechanical equipment to substantially increase service reliabil4ty of the auxiliary electrical system of the power plant; and (ii) new and complementary instrumentation to monitor foundation pressures and water filtrations. Part B: Technical Assistance Technical assistance to ENEE for: (i) reviewing the design and supervising the execution of the works described in Part A.1 of the Project; (ii) carrying out a structural and electro-mechanical review of the Morazan dam; and (iii) preparing an emergency preparedness and evacuation plan of the MorazAn dam. Part C: Strengthening of ENEE Training of ENEE's staff in: (i) underground investigations; (ii) pressure sealing of foundations; (iii) monitoring of - 12 - hydrostatic foundation pressures and water leakages in high dams; (iv) electrical system stability; and (v) foundation sealing programs abroad. The Project is expected to be completed by March 31, 1994. 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