El Salvador - Ahuachapan Expansion Project : Loan 1288 - Loan Agreement - Conformed

7'- 1?1 CONFORMED COPY LOAN NUMBER 1288 ES LOAN AGREEMENT (Ahuachap9n Expansion Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEMPA Dated July 28, 1976 LOAN AGREEMENT AGREEMENT, dated July 28, 1976, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEKPA (hereinafter called the Borrower). WHEREAS (A) The Borrower has requested the Bank to assist in the financing of the foreign exchange cost of the Project described in Schedule 2 to this Agreement by making the Loan as hereinafter provided; (B) The Republic of El Salvador (hereinafter called the Guar- antor) has also requested the Bank to provide additional assis- tance towards the financing of the Project under the Interest Sub- sidy Fund for the Third Window established by Resolution No. 75-111 of the Executive Directors of the Bank and by an agreement of even date herewith between the Guarantor and the Bank (hereinafter called the Intermediate Term Loan Agreement) the Bank is agreeing to pro- vide such assistance in an aggregate principal amount equivalent to nine million dollars ($9,000,000) (hereinafter called the In- termediate Term Loan); (C) By a subsidiary loan agreement to be entered into be- tween the Guarantor and the Borrower, the Guarantor will make the proceeds of the Intermediate Term Loan available to the Borrower as provided in the Intermediate Term Loan Agreement; 2 (D) The Borrower and the Bank intend that the proceeds of this Loan and of the Intermediate Term Loan be disbursed pro rata on the basis of 10:3 ratio; (E) Concurrently with this Loan, the Borrower intends to sell part of an issue of its bonds in the principal amount of 025,000,000 (hereinafter called the Bonds) to assist in the fi- nancing of the local costs of its investments, including, inter alia, those of the Project; and WHEREAS the Bank has agreed, on the basis inter alia of the foregoing, to make the Loan to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -3- 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 Guar- antee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said Gen- eral 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 Gene- ral Conditions and in the Preamble to this Agreement have the re- spective meanings therein set forth avAa the following additional terms have the following meanings: (a) "Ley Constitutiva" means the LL Constitutiva of the Borrover set forth in Decreto No. 137, of September 18, 1948, of the Asamblea Legislativa of the Guarantor, establishing and orga- nizing the Borrower, as amended from time to time. (b) "Colones" and "0" mean colones in currency of the Guar- antor. (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Guarantor and the Borrower pursuant to Section 3.02 of the Intermediate Term Loan Agreement. 14 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 million dollars ($30,000,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Sched- ule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrower, for expen- ditures made (or, if the Bank shall so agree, to be made) in re- spect of the reasonable cost of goods, works and services required for the Project and to be financed out of the proceeds of the Loan and in respect of interest and other charges on the Loan. (b) On each of the semi-annual interest payment dates specified in Section 2.07 of this Agreement, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay, on such date, interest and other charges on the Loan accrued and payable on or before the date set forth, and up to the amount allocated, in Schedule 1 to this Agree- ment, as such schedule may be amended from time to time. Section 2.03. Except as the Bank shall otherwise agree- the goods and works 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. -5- Section 2.04. The Closing Date shall be December 31, 1980 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 eighty-five hundredths per cent (8.85%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on February 1 and August 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. -6- 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, engineering, financial and public utilities practices. Section 3.02. In order to assist the Borrower in preparing the detailed engineering for Parts A, B and C (except for the 46 kV line from Guajoyo to Metapan included in the said Part B), of the Project and in carrying out Part D of the Project, the Borrower shall employ engineering consultants acceptable to the Bank upon terms and conditions satisfactory to the Bank. Section 3.03. (a) Before awarding contracts for the generating unit forming Part A of the Project, the Borrower shall determine in consultation with the Bank the optimum capacity of such unit that can be installed at the Ahuachap6n plant without prejudicing the present exploitation plan for the geothermal field. (b) The Borrower shall award the contract for a unit of the optimum capacity determined pursuant to paragraph (a) of this Section. Section 3.04. The Borrower shall take all necessary measures, satisfactory to the Bank, to ensure that the Ahuachap9n plant is operated with due regard to ecological and environmental factors particularly with regard to disposal of geothermal effluents. 7 Section 3.05. The Borrower shall take all necessary measures satisfactory to the Bank to ensure that any development and exploita- tion of the geothermal fields at Berlin, Chinameca and San Vicente are carr4ed out with due regard to ecological and environmental factors. Section 3.06. (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 shall be payable in a currency freely usable by the Borrower to replace or repair such goods. (b) Except as the Bank shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 3.07. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. () The Borrower: (i) shall maintain records adequate to re- cord the progress of the Project (including the cost thereof) and to identify the goods, works and services financed out of the pro- ceeds of the Loan, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph -8- (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 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, works and services financed out of such proceeds. (c) The Borrower shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, prop- erty and equipment of the Borrower and any relevant records and documents. Section 3.08. The Borrower shall take all such action as shall be necessary to acquire as and when needed all such land, and rights in respect of land as shall be required for the construction and operation of the facilities included in the Project. Section 3.09. The Borrower shall duly perform all its obliga- tions under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, the Borrower shall not take or concur in any ac- tion which would have the effect of amending, abrogating, assign- ing or waiving the Subsidiary Loan Agreement or any provision thereof. -9 - 9 - ARTICLE IV Management and Operations of the Borrower Section 4.01. The Borrower shall at all times manage its af- fairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound business, financial and public utility practices and under the supervision of experienced and qualified management. Section 4.02. 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 4.03. The Borrower shall at all times maiiitain its existence and right to carry on operations and shall, except as the Bank shall otherwise agree, take all steps necessary to main- tain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. Section 4.04. Except in 'he normal course of business, the Borrower shall not, without prior consultation with the Bank, sell, transfer, distribute or otherwise dispose of any of its property or assets which shall be required for the efficient conduct of its operations. Section 4.05. The Borrower shall operate and maintain its plants, equipment and property, and from time to time make all necessary renewals and repairs thereof, all in accordance with - 10 - sound engineering standards; and shall at all times operate its plants and equipment and maintain its financial position in accor- dance with sound public utility and business practices. Section 4.06. Except as the Bank shall otherwise agree, the Borrower shall: (i) at intervals of not less than every twelve months prepare and promptly furnish to the Bank a report on the Borrower's management of the Ahuachapin geothermal field; (ii) have such report reviewed by consultants acceptable to the Bank; and (iii) promptly upon its completion, furnish such review to the Bank. - 11 - ARTICLE V Financial Covenants Section 5.01. The Borrower shall maintain records adequate to reflect in accordance with consistently maintained appropriate ac- counting 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 ex- penses and related statements) for each fiscai 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 finan- cial 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. In addition to the provisions of Section 5.02 of this Agreement, the Borrower shall furnish to the Bank, not later than three months after the end of each fiscal year, its unaudited accounts and financial statements for such fiscal year. Section 5.04. (a) The Borrower represents that at the date of this Agreement no lien exists on any of its assets as security for any debt. - 12 - (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 Lcan, 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 provi- sions 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 mturing not more than one year after the date on which it is originally incurred. Section 5.05. (a) Except as the Bank shall otherwise agree, the Borrower shall from time to time effect such adjustments in its rates for the sale of electricity as shall be necessary to pro- vide sufficient revenues to yield an annual rate of return on assets which shall be: (i) not less than 9% until such time as the Borrower shall have revalued its fixed assets in operation in accordance with the provisions of paragraph (b) (iv) of this Section; and - 13 - (ii) not less than 8% thereafter. (b) For the purposes of this Section: (i) the annual rate of return shall be calculated in respect of each fiscal year by relating net income from operations for that year to the average of the net value of fixed assets in operation at the beginning and at the end of that year; (ii) the term "net income from operations" means gross operating revenueb from electric power, less all operating expenses, depreciation and taxes; (iii) the term "operating expenses, depreciation and taxes" includes: direct costs of operation; administrative, overhead and adequate maintenance expenses; straight-line depreciation based on the useful life of major categories of assets; taxes (if any); but does not include interest and other charges on debt; and (iv) the term "net value of fixed assets in operation" means the gross value of such assets, determined in accordance with methods of valuation or reval- uation acceptable to the Bank, less accumulated depreciation. Section 5.06. Without any limitation or restriction on the provisions of Section 5.05 of this A ,reement, the Borrower under- takes to take all steps within its power to maintain the overall average of its rates for the sale of electricity in the territory of the Guarantor at a level not lower than that in force at the date of this Agreement until the Closing Date. Section 5.07. Except as the Bank shall otherwise agree, the Borrower shall not incur any debt if its net revenues for the fiscal year next preceding such incurrence or for a later twelve- month period ended prior to such incurrence, whichever amount is the greater, shall be less than 1.5 times the maximum debt service requirements on all debt (including the debt to be incurred) in any succeeding fiscal year. For the purposes of this Section: (i) debt shall be deemed to be incurred on the date of execution and delivery of a loan agreement providing for such debt or, in the case of a guarantee of debt, on the date of execution and delivery of the agreement providing for such guarantee but only to the extent that the guaranteed debt shall be outstanding; (ii) the term "net revenues" means gross revenues from operations adjusted to take account of rates for the sale of electricity in effect at the time of incurrence of the debt even though they were not in effect during the twelve consecutive months to which such revenues relate, less operating, administrative and overhead - 15 - expenses, including adequate maintenance expenses and provisions for taxes, if any, but before provision for depreciation, interest and other charges on debt; (iii) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (iv) whenever 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 the rate 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 5.08. (a) Except as the Bank shall otherwise agree, the Borrower shall, until the Project has been completed, retain its net internal cash generation in the business for reinvestment in the Project, in power facilities not included therein, or in activities related thereto. (b) For the purposes of this Section, the term "net internal cash generation" means gross revenues from operations less all expenses, including: direct costs of operation; administrative, - 16 - overhead and adequate maintenance expenses; taxes (if any); amor- tization, interest and other charges on debt; but excluding pro- vision for depreciation. - 17 - ARTICLE VI Remedies of the Bank Section 6.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) The Ley Constitutiva, or any provision thereof, shall have been amended, suspended or abrogated so as to materially and adversely affect the management or operation of the Borrower. (b) the Bonds shall have become due and payable prior to the agreed maturity thereof. (c) A default shall have occurred in the performance by the Borrower of its obligations under the Subsidiary Loan Agreement. Section 6.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) The Bonds or any other debt of the Borrower with an original maturity of one year or more shall have become due and payable before its agreed maturity in accordance with the terms thereof. (b) Any event specified in paragraphs (a), (b) and (c) of Section 6.01 of this Agreement shall occur. - 18 - ARTICLE VII Effective Date; Termination Section 7.01. The following events are specified as additional conditions to the effectiveness of the loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) The Borrower shall have duly issued the Bonds, sold an amount thereof of not less than 015,000,000 and received payment therefor. (b) All conditions precedent to the effectiveness of the Intermediate Term Loan Agreement have been fulfilled subject only to the effectiveness of this Agreement. (c) The Asamblea Legislativa of the Guarantor shall have ap- proved an extraordinary budget for the Borrower to carry out the Project. Section 7.02. The following are specified as additional mat- ters, within the meaning of Section 12.02 (c) of the General Con- ditions, to be included in the opinion or opinions to be furnished to the Bank, that the Asamblea Legislativa of the Guarantor has approved an extraordinary budget for the Borrower to carry out the Project. Section 7.03. The date October 28, 1976, is hereby specified for the purposes of Section 12.04 of the General Conditions. - 19 - ARTICLE VIII Addresses Section 8.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: 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 84145 (wUI) For the Borrower: Comisi6n Ejecutiva Hidroel6ctrica del Rlo Lempa Edificio CEL 9a Calle Poniente Entre 15 y 17 Ave. Norte San Salvador, El Salvador, Centroam4rica Cable address: Telex: CEL 20069 CELSAL San Salvador - 20- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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/ Enrique Lerdau Director Country Programs Department Latin America and the Caribbean Regional Office COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEMPA By Is/ Benjamin Valiente Authorized Representative - 21 - SCHEDULE 1 Withdrawal of the Proceeds of this Loan and of the Intermediate Term Loan 1. The table below sets forth the Categories of imported items to be financed out of the proceeds of this Loan and of the Inter- mediate Term Loan, the allocation of amounts of the Loan and of the Intermediate Term Loan to each Category and the percentage of expenditures to be financed out of each Category: Amount of this Loan and of the Intermediate Term Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Equipment and ma- 22,400,000 100% of foreign terials expenditures or 95% of local ex- penditures (ex- factory) (2) Installation and 4,500,000 100% of foreign erection of works expenditures (3) Consultants' ser- 2,300,000 100% of foreign vices expenditures (4) (a) Interest and 3,800,000 Amounts due other charges on the Loan accrued on or before July 31, 1980 - 22 - Amount of this Loan and of the Intermediate Term Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (b) Interest and other charges on the Inter- mediate term Loan accrued on or before July 114, 1980 (5) Unallocated 6,000,000 TOTAL 39,000,000 - 23 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Guarantor and for goods or services supplied from the territory of any country other than the Guarantor; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The di6bursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of expenditures prior to the date of this Agreement. 5. Notwithstanding the allocation of an amount of the Loan and the Intermediate Term Loan or the disbursement percentages set forth in the table in paragraph 1 above, if the Bank has reason- - 24- ably estimated that the amount of the Loan and the Intermediate Term Loar then allocated to any Category will be insufficient to finance all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet such estimated shortfall, proceeds of the Loan and of the Intermediate Term Loan which are then allocated to another Category and which in the opinion of the Bank are not needed to meet other expenditures; and (ii) if such reallocation cannot fully meet the esti- mated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. Except for Category (4), the proceeds of the Loan and of the Intermediate Term Loan shall be disbursed pro rata on the basis of a 10:3 ratio. 7. If the Bank shall have reasonably determined that the procure- ment of any item in any Category is inconsistent with the proce- dures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan or of the Intermediate Term 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 or the Intermediate Term Loan I - 25 - Agreement, by notice to the Borrower, cancel such amount of the Loan and of the Intermediate Term Loan as, in the Bank's reason- able opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the pro- ceeds of the Loan and the Intermediate Term Loan. - 26 - SCHEDULE 2 Description of the Project The Project consists of the following Parts: A) Installation of a third turbo-generator at the geothermal plant at Ahuachap9n. B) (i) Construction of about 39 circuit-km of new 115 kV trans- mission lines and about 20 circuit-km of 46 kV subtrans- mission lines; (ii) Conversion of about 83 circuit-km of 69 kV transmission lines to 115 kV; and (iii) Construction or improvement of about 10 substations, in- cluding the addition of about 150 mega volt-amperes in new transformer capacity to the system. C) The improvement and expansion of the Borrower's communication and control system, including: (i) improvement of the dispatch, communication, automatic load frequency control, data recording and supervisory control systems of the Borrower's hydroelectric power plants; (ii) extension of its microwave system; and - 27 - (iii) supervisory control of the San Rafael Cedros, Santa Ana, Nuevo Cuscatlan and Sonsonate substations, and such other substations as the Bank shall agree. D) (i) Feasibility studies of geothermal plants at Berlin, Chi- nameca and San Vicente, including recommendations for the safe disposal of any effluents during field develop- ment and exploitation; (ii) A study of electricity tariffs. The Project is expected to be completed by July 31, 1980. - 28 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* February 1, 1981 270,000 August 1, 1981 280,000 February 1, 1982 295,000 August 1, 1982 310,000 February 1, 1983 320,000 August 1, 1983 335,000 February 1, 1984 355,000 August 1, 1984 365,000 February 1, 1985 385,000 August 1, 1985 4oo,000 February 1, 1986 415,000 August 1, 1986 435,000 February 1, 1987 455,000 August 1, 1987 475,000 February 1, 1988 500,000 August 1, 1988 515,000 February 1, 1989 540,000 August 1, 1989 565,000 February 1, 1990 590,000 August 1, 1990 620,000 February 1, 1991 640,000 August 1, 1991 675.,000 February 1, 1992 700,000 August 1, 1992 735,000 February 1, 1993 765,000 August 1, 1993 800,000 February 1, 1994 835,000 August 1, 1994 870,000 February 1, 1995 910,000 August 1, 1995 950,000 - 29 - Payment of Principal Date Payment Due (expressed in dollars)* February 1, 1996 990,000 August 1, 1996 1,0Mo,00o February 1, 1997 1,080,000 August 1, 1997 1,130,000 February 1, 1998 1,180,000 August 1, 1998 1,230,000 February 1, 1999 1,290,000 August 1, 1999 1,340,000 February 1, 2000 1,405,000 August 1, 2000 1,465,000 February 1, 2001 1,545,000 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. - 30 - Premiums on Prepayment The following percentages are specified as the premiums pay- able 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 1.05% before maturity More than three years but not 2.10% more than six years before maturity More than six years but not 3.90% more than eleven years before maturity More than eleven years but 5.65% not more than sixteen years before maturity More than sixteen years but not 7.45% more than twenty-one years before maturity More than twenty-one years 8.15% but not more than twenty-three years before maturity More than twenty-three years 8.85% before maturity - 31 - SCHEDULE 4 Procurement A. International Competitive Bidding 1. The goods and works shall be procured under contracts to be awarded in accordance with procedures consistent with those set forth in Part A of the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in August 1975 (hereinafter called the Guidelines), on the basis of international competitive bidding. B. Supplemental Rule on Bid Evaluation and Comparison 1. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally supplied goods, shall be excluded, except to the extent hereinafter provided. Bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally manufactured goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their distribu- tion, use or installation shall be taken into account in the eval- uation of bids in accordance with paragraph 3.7 of the Guidelines for Procurement. 2. For the purpose of evaluating bids for goods included in Category I of the table set forth in paragraph 1 of Schedule 1 to this Agreement, price shall be determined and compared in accor- dance with the following rules: - 32- (a) the term "Central American Bid" means a bid submitted by a manufacturer established in the territories of the member countries of the Central American Common Market for goods manufactured or processed to a substantial extent (as reasonably determined by the Bank) in such territories; any other bid shall be deemed to be a "Non-Central American Bid"; (b) the price under a Central American Bid shall be the sum of the following amounts: (i) the ex-factory price of such goods; and (ii) freight, insurance and other costs of delivery of such goods to the place of their distribution, use or installation; (c) for the purpose of comparing any Non-Central American Bid with any Central American Bid, the price under a Non-Central Amer- ican Bid shall be the sum of the following amounts: (i) the c.i.f. (port of entry) price of such goods; (ii) half the amount of any taxes on the importation of such goods into the territories of the Borrower which generally apply to non-exempt importers, or 15% of the amount specified in (i) above, whichever shall be the lower; and (iii) freight, insurance and other costs of delivery of such goods from their port of entry to the place of their use or installation. - 33 - 3. The invitations to bid shall clearly indicate the margin of preference to be granted. C. Review of Procurement Decisions by Bank 1. With respect to all contracts for civil works and equipment estimated to cost the equivalent of $50,000 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 shall furnish to the Bank, in sufficient time for its review, a detailed report, by the consultants referred to in Section 3.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants and such other information as the Bank shall reasonably 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. -34- (c) The terms and conditions of the contract shall not, with- out the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and before the first ap- plication for withdrawal of funds from the Loan Account in respect of such contract is furnished to the Bank. 2. With respect to each contract to be financed out of the pro- ceeds of the Loan and not governed by the preceding paragraph, the Borrower shall furnish to the Bank, promptly after its execu- tion and before the first application for withdrawal of funds from the Loan Account in respect of such contract is furnished to the Bank, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other infor- mation 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.