Bolivia - Second Railway Project : Loan 1121 - Loan Agreement - Conformed

CONFORMED COPY LOAN NUMBER 1121 BO Loan Agreement (Second Railway Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE FERROCARRILES DATED JUNE 5, 1975 CONFORMED COPY LOAN NUMBER 1121 BO Loan Agreement (Second Railway Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE FERROCARRILES DATED JUNE 5, 1975 LOAN AGREEMENT AGREEMENT, dated June 5, 1975, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and EMPRESA NACIONAL DE FERROCARRILES (hereinafter called the Borrower). ARTICLE I General Conditions; Definitions Section 1.0 1. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank 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 have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Railways" means the railways entrusted to the Borrower by the Guarantor for operation by the Borrower and includes all railway property, equipment and materials thereof; (b) "Investment Plan" means the Borrower's five-year investment plan covering the period 1975-1979, approved by Resolucidn de Directorio No. 2/75, of the Borrower and Decreto Supremo No. 12346, of April 4, 1975 of the Guarantor, to provide and finance capital goods and services for the rehabilitation, modernization, development, increase in capacity and more effective utilization of the Railways, as the same may be amended from time to time; (c) "Action Program" meais the Borrower's program of measures to achieve quantitative targets in support of the Project as set forth in Exhibit B to Schedule 2 to this Agreement, as such program may be amended from time to time: (d) "Basic Law" means Supreme Decree No. 06909 dated October 6, 1964, and No. 09329 dated July 23, 1970 (referred to also as Decree No. 396 4 of the Revolutionary Government), both of the Guarantor, establishing and organizing the Borrower; (e) "Eastern System" means the Railways connecting Corumbi-Santa Cruz-Yacuiba; and (f) "Western System" means the Railways connecting La Paz - Charana - Oruro - Cochabamba - Aiquile - Rio Mulato - Potosi - Sucre - Tarabuco - Uyuni - Olligue - Villaz6n. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to thirty-two million dollars ($32,000,000). Section 2.02. 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, 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. Section 2.03. Except as the Bank shall otherwise agree, the goods, Works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1978 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. The Borrower shall pay to the Bank a commitment 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 2.06. The Borrower shall pay interest at the rate of eight and one-half per cent (8-1/2%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. 5 Section 2.07. Interest and other charges shall be payable semi-annually on January i and July 1 in each year. Section 2.08. 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. The Borrower shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and railway practices. Section 3.02. In order to assist the Borrower in carrying out the Project, the Borrower shall employ railway consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. 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 indemnity sha1 be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, all goods and services financed out of the proceeds of the Loan shall be used exclusively for the Project until its completion. Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work 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 adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Bank's representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out 6 of the proceeds of the Loan and any relevant records and documents; and (iii) shall furnish to the Bank all such information as the Bank shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services finaaced out of such proceeds. (c) 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. ARTICLE IV Management and Operations of the Borrower Section 4.0 1. The Borrower shall at all times carry on its operations, manage its affairs, maintain its financial position, and plan the future expansion of the Railways all in accordance with appropriate business, financial, engineering and railway practices, under the supervision of experienced and competent management, and with the assistance of adequate, qualified and experienced staff. Section 4.02. The Borrower shall at all times operate and maintain the Railways and make all necessary renewals and repairs thereof, in accordance with appropriate engineering and railway practices. Section 4.03. The Borrower shall at all times maintain its right to carry on its operations, and take all steps necessary to acquire, maintain and renew all rights, powers, privileges, concessions and franchises which are necessary or useful in the conduct of its business and the operation of the Railways. Section 4.04. The Borrower shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 4.05. The Borrower shall: (a) carry out the Investment Plan with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices; (b) periodically review the Investment Plan; and (c) not change the Investment Plan without the agreement of the Guarantor and the Bank. 7 Section 4.06. The Borrower shall take all action necessary to achieve the quantitative targets set forth in Exhibit B to Schedule 2 to this Agreement. ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.02. The Borrower shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of the Borrower and the audit thereof as the Bank shall from time to time reasonably request. Section 5.03. (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 currently 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 satisfactory 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 thereof, solely as security for the payment of the purchase price 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. 8 Section 5.04. The Borrower shall: (a) complete the revaluation of the fixed assets of the Railways, in accordance with appropriate revaluation principles satisfactory to the Bank, and shall cause such assets to be shown in its balance sheet as of December 31, 1975 as so revalued; and (b) promptly thereafter furnish to the Bank a full report on said revaluation prepared by independent auditors acceptable to the Bank. Section 5.05. (a) Except as the Bank shall otherwise agree, the Borrower shall not incur any debt unless the amount of the Borrower's net cash revenue for the Borrower's fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever amount is the greater, shall be not less than 1.25 times the maximum debt service requirements for any succeeding fiscal year on all the debt of the Borrower including the debt to be incurred. (b) For the purpose of this Section: (i) "debt" means all debt of the Borrower including debt guaranteed by the Borrower, maturing by its terms more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred on the date of execution and deliv' ry of the contract or other document providing for such debt; 0 (iii) the term "net cash revenue" means gross operating revenue from all sources, 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 entire fiscal year or twelve-month period to which such revenues relate, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (iv) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (v) whenever in connection with this Section it shall be necessary to value in the currency of the Guarantor debt payable in another currency, such valuation shall be made on the basis of 9 the ralte of exchange at which such other currency is obtainable by the Borrower, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Bank. Section 5.06. Whenever the Borrower's cost level shall rise substantially, the Borrower shall take all steps necessary promptly to increase its tariffs by an amount sufficient to attain the financial targets set forth in Exhibit B to Schedule 2 to this Agreement, it being understood that the calculation of such cost shall include the cost of subsidized food (pulperias) provided by the Borrower to its employees. ARTICLE VI Remedies of the Bank Section 6.01. For the purpose of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (k) thereof: A substantial change in the Basic Law shall have been made without the agreement of the Bank. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof: The event specified in Section 6.01 of this Agreement shall occur. ARTICLE VII Effective Date; Termination Section 7.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01(c) of the General Conditions, namely, that the Borrower has furnished to the Bank certified copies of its audited financial statements for the year 1973 and copies of the audit report covering such statements. Section 7.02. The date September 4, 1975 is hereby specified for the purposes of Section 12.04 of the General Conditions. ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 10 For the Bank: International Bank for Reconstruction and Development 1818 H Stree, N.W. Washington, D.C. 20433 United States of America Cable address: INTBAFRAD Washington, D.C. For the Borrower: Empresa Nacional de Ferrocarriles Casilla 428 La Paz, Bolivia Cable address: ENFE LA PAZ 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 /s/ Adalbert Krieger Regional Vice President Latin America and the Caribbean EMPRESA NACIONAL DE FERROCARRILES By /s/ Gustavo A. M6ndez Torrico Authorized Representative 11 SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan to each Category: Amount of the Loan Allocated (Expressed in Category Dollar Equivalent) (1) Material and equipment for 8,700,000 permanent way, for civil works, for telecommunications and for station installations (2) Rolling stock 8,100,000 (3) Motive power (a) Locomotives 3,300,000 (b) Ferrobuses 600,000 (4) Equipment and spare parts for 2,800,000 rehabilitation of rolling stock and motive power (5) Workshop equipment 1,400,000 (6) Consultants' services 700,000 and training (7) Unallocated 6,400,000 TOTAL 32,000,000 2. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures in the currency of the Guarantor or for goods or services supplied from the territory of the Guarantor; (b) expenditures prior to the date of this Agreement; 12 (c) payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the importation, manufacture, procurement or supply thereof; and (d) expenditures under Category (3)(a) until the Bank has received evidence satisfactory to the Bank that the Borrower has been unable to obtain financing therefor from bilateral sources on reasonable terms and conditions which shall be satisfactory to the Bink. 3. Notwithstanding th/ allocation of an amount of the Loan set forth in the second column of the <able in paragraph I above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance all expenditures in that Category, the Bank may, by notice to the Borrower, reallocate to such Category, to the extent required to meet such 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. 4. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures 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. 13 SCHEDULE 2 Description of the Project The Project consists of: Part A: The Borrower's program for the rehabilitation, modernization, development, increase in capacity and more effective utilization of the Railways, as provided for in the Investment Plan and summarized in Exhibit A to this Schedule, as such Exhibit may be amended from time to time. Part B: The utilization of the services of consultants to assist the Borrower in track maintenance and improvement, maintenance of rolling stock, operations, procurement and warehousing, accounting, costing, computer, statistics, telecommunications, tariffs, training of staff, and establishment of training facilities. 8* * * * The Project is supported by an Action Program designed to achieve quantitative targets described in Exhibit B to this Schedule, as such Exhibit may be modified from time to time, and is expected to be completed by December 31, 1977. 14 EXHIBIT A TO SCHEDULE 2 Summary of Part A of the Project Ways and Works - Telecommunications (a) Rehabilitation, in 1975 and 1976, of about 163 km of track to improve the condition of the track to a level where cyclic maintenance becomes possible, as follows: (i) On the Oruro-Viacha line, between km 151 and km 175: substitution of ties, ballasting and welding of rails; (ii) On the Oruro-Viacha line, between km 175 and km 201: ballasting and welding of rails; (iii) On the Oruro-Viacha line between km 6 and km 31: ballasting and welding of rails; (iv) On the Alto-Viacha line between km 22 and km 42: ballasting and welding of rails; and (v) On the Santa Cruz-Corumbi, line, between km 414 and km 482: consolidation of earth fills, ballasting, substitution of ties, placing and welding of new rails. (b) Purchase and utilization of: (i) New rails for about 68 km of track; (ii) Track materials and turnouts; (iii) About 30 steel bridges for the Uyuni-Ollaigue line; (iv) Equipment for a stone quarry and about 20 ballast-cars; and (v) Earth moving equipment. (c) Reconstruction of the telecommunications system. 15 II. Rolling Stock. Acquisition and utilization of about 300 freigh cars and five passenger cars. III. Motive Power. Acquisition of about six main line diesel electric locomotives (in the 1800 - 2000 HP range), and two ferrobuses of the type now in service. IV. Rehabilitation of Rolling Stock and Motive Power (i) Repair of the 5 diesel electric locomotives damaged in accidents; (ii) Systematic general overhaul of the fleet of about 19 diesel electric main line locomotives and 9 diesel hydraulic locomotives; (iii) Rehabilitation of the 6 steam locomotives now in the Uyuni shops; (iv) Rehabilitation of about 40 passenger cars and about 510 freight cars; (v) Purchase of spare parts and tools and materials needed for such rehabilitation; and (vi) Purchase of spare parts to enlarge the existing permanent stock of spare parts. V. Operations (i) Purchase and installation of scales to weigh freight cars; (ii) Purchase of freight handling equipment; and (iii) Improvement and construction of sidings and other facilities. VI. Workshops (i) Transformation of the Viacha shop into the Borrower's main diesel shop; (ii) Upgrading of the Guaracachi shop so that it may maintain and overhaul the diesel motive power units of the Eastern System; 16 (iii) Improvement of the Oruro shop so that it may carry out routine maintenance and small repair on all diesel motive power units of the Western System; (iv) Reorganization of the Uyuni shop by scaling down the repair of steam locomotives to maintenance operations, and increasing the capacity of the chain-line repair of freight cars; (v) Improvement and enlargement of the Robore shop to allow it to increase its capacity of rehabilitating freight and passenger cars; and (vi) Purchase of machine-tools, tools, and equipment for such shops. 17 EXHIBIT B TO SCHEDULE 2 Action Program The main features of the Action Program are the achievement of quantitative targets in accordance with the table given below: Operations 1975 1976 1977 1978 1979 1. Working ratio (%) 85 85 82 79 78 2. Operating ratio (%) 96 95 95 94 94 3. Availability of mainline diesel locomotives (%) 70 75 80 85 85 4. Average daily run of mainline diesel locomotives (kin) 400 410 425 440 440 5. Availability of freight cars (%) 68 74 80 82 85 6. Average net load 21- 21- 21- 21.1- 21.2- per car (tons)* 17.2 17.4 17.5 17.7 17.9 7. Average daily run per car in service 45- 46- 47.5- 48- 49- (km)* 70 74 77 79 81 8. Net ton-km per 650- 670- 690- 700- 720- wagon-day in use* 850 910 950 985 1,020 9. Wagon turnaround 10.9- 10.9- 10.8- 10.7- 10.6- time (days)* 10.2 10 9.9 9.7 9.6 10. Number of staff (end of year) 6,300 6,300 6,300 6,300 6,300 Rehabilitation 11. Km of track 24 105 84 50 75 12. Number of freight cars 210 300 140 - - 13. Number of coaches 16 20 12 - - 14. Number of diesel locomotives 6 2 - - - 15. Number of ferro- buses 5 1 - - * Respectively for Western and Eastern Systems. 18 For purposes of this Exhibit "working ratio" means working expenses (i.e., operating expenses before depreciation and interest) divided by operating revenues, and "operating ratio" means operating expenses (including depreciation but excluding interest) divided by operating revenues. 19 SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* July 1, 1980 315,000 January 1, 1981 330,000 July 1, 1981 345,000 January 1, 1982 360,000 July 1, 1982 375,000 January 1, 1983 390,000 July 1, 1983 405,000 January 1, 1984 425,000 July 1, 1984 445,000 January 1, 1985 460,000 July 1, 1985 480,000 January 1, 1986 500,000 July 1, 1986 525,000 January 1, 1987 545,000 July 1, 1987 570,000 January 1, 1988 595,000 July 1, 1988 620,000 January 1, 1989 645,000 July 1, 1989 670,000 January 1, 1990 700,000 July 1, 1990 730,000 January 1, 1991 760,000 July 1, 1991 795,000 January 1, 1992 825,000 July 1, 1992 860,000 January 1, 1993 900,000 July 1, 1993 935,000 January 1, 1994 975,000 July 1, 1994 1,020,000 January 1, 1995 1,060,000 July 1, 1995 1,105,000 January 1, 1996 1,155,000 July 1, 1996 1,200,000 January 1, 1997 1,255,000 July 1, 1997 1,305,000 January 1, 1998 1,360,000 July 1, 1998 1,420,000 January 1, 1999 1,480,000 July 1, 1999 1,545,000 January 1, 2000 1,615,000 * To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 20 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 3.05(b) of the General Conditions: Time of Prepayment Premium Not more than three years 1% before maturity More than three years but 2-1/4% not more than six years before maturity More than six years but 4% not more than eleven years before maturity More than eleven years but 5-1/2% not more than sixteen years before maturity More than sixteen years but 7-1/4% not more than twenty-one years before maturity More than twenty-one years 8% but not more than twenty-three years before maturity More than twenty-three years 8-1/2% before maturity 21 SCHEDULE 4 Procurement A. General Procedures 1. Except as provided in Parts A.2, A.3 and A.4 hereof, contracts shall be let under procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in April 1972, as revised in October 1972 (hereinafter called the Guidelines), on the basis of international competitive bidding. 2. Spare parts may be procured on the basis of negotiations with the manufacturer of the equipment in question. 3. Diesel electric locomotives shall be procured after competition among the manufacturers of the units used in Bolivia or in Bolivia's neighboring countries. 4. Contracts for goods estimated to cost less than the equivalent of $100,000, may be awarded after solicitation of quotations from at least three suppliers in Bank member countries (including Switzerland), provided that such contracts shall not exceed in the aggregate the equivalent of $400,000. B. Review of Procurement Decisions by the Bank 1. With respect to all contracts for equipment and materials estimated to cost the equivalent of $100,000 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 documents 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 bidders. (b) After bids have been received and evaluated, the Borrower 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 the reasons for the intended award and shall furnish to the Bank, in sufficient time for its review, a detailed report, on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Bank shall reasonably 22 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. (d) Two conformed copies of the contract shall be furnished 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. 2. With respect to each contract to be financed out of the proceeds of the Loan and 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 contract, together with the analysis of bids, recommendations 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.