Conformed Copy - L4344 - National Transmission Grid Project - Guarantee Agreement

Page 1 CONFORMED COPY LOAN NUMBER 4344 TU Guarantee Agreement (National Transmission Grid Project) between REPUBLIC OF TURKEY and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated June 25, 1998 LOAN NUMBER 4344 TU GUARANTEE AGREEMENT AGREEMENT, dated June 25 , 1998, between the REPUBLIC OF TURKEY (the Guarantor) and the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank). WHEREAS (A) the Guarantor and Turkiye Elektrik Iletim ve Uretim A.S. (the Borrower), having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to the Loan Agreement, have requested the Bank to assist in the financing of the Project; and (B) by the Loan Agreement of even date herewith between the Bank and the Borrower, the Bank has agreed to extend to the Borrower a loan in Dollars equal to two hundred seventy million Dollars ($270,000,000) on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as provided in this Agreement; and WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans" of the Bank, dated May 30, 1995 (as amended through December 2, 1997) (the General Conditions) constitute an integral part of this Page 2 Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement and in the Preamble to and Section 1.02 of the Loan Agreement have the respective meanings therein set forth. ARTICLE II Guarantee; Provision of Funds Section 2.01. The Guarantor declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, without limitation or restriction upon any of its other obligations under the Guarantee Agreement, 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 performance of all the other obligations of the Borrower, all as set forth in the Loan Agreement. Section 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guarantor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures required for the carrying out of the Project, to make arrangements, satisfactory to the Bank, promptly to provide the Borrower or cause the Borrower to be provided with such funds as are needed to meet such expenditures. ARTICLE III Other Covenants Section 3.01. The Guarantor shall, from time to time, at the request of either party, exchange views with the Bank with regard to the overall development of the electricity sector and on the progress achieved by the Guarantor in carrying out the strategy for the development of the electricity sector. Section 3.02. The Guarantor shall, acting in conjunction with the Borrower, take all actions required on its part to carry out an action plan, satisfactory to the Bank, to put into effect the independent operation of the transmission grid system in accordance with paragraph 3 of Schedule 5 to the Loan Agreement. Section 3.03. The Guarantor shall, in conjunction with the Borrower, take all actions required on its part: (a) by December 31 of each year, to approve the CPP prepared by the Borrower in accordance with Section 3.03 of the Loan Agreement; (b) to enable the Borrower to maintain electricity prices at least at the minimum level specified in paragraph 4 of Schedule 5 to the Loan Agreement; and (c) to enable the Borrower to monitor and evaluate the progress of the Project in accordance with the provisions of paragraph 6 of Schedule 5 to the Loan Agreement. Section 3.04. The Guarantor shall, acting in conjunction with Turkish Electricity Distribution Corporation (TEDAS), take all actions required on its part: (a) to ensure that TEDAS maintains, at all times, its retail electricity prices at the level of at least US$0.06 per kilowatt hour, net of all taxes and levies, on an annual average basis; and (b) to ensure that TEDAS settles the Borrower