Nicaragua - Thermal Power Project : Loan 0154 - Guarantee Agreement - Conformed

LOAN NUMBER 154 NI Supplemental Guarantee Agreement (Thermal Power Project) BETWEEN REPUBLIC OF NICARAGUA AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED NOVEMBER 15, 1956 LOAN NUMBER 154 NI Supplemental Guarantee Agreement (Thermal Power Project) BETWEEN REPUBLIC OF NICARAGUA *A"D INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT DATED NOVEMBER 15, 1956 (6uatranter Agrewmnt AGREEMENT, dated November 15, 1956, between the REPUBLIC OF NiCA RAGITA (hereinaf ter called the Guarantor) and TNTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOP- MENT (hereiniafter called the Bank). ATHEREAS, by an agreement of even date herewith between the Bank and Empresa Nacional de Luz v Fuerza (herein- after called the Borrower), which agreement and the sched- ules therein referred to are hereinafter called the Loan Agreement, the Bank has agreed to make to the Borrower a loan ti various currencies equivalent to one million six hundred thousand dollars ($1,600,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Guarantor agree to guarantee the pay- menit of the principal, interest and other Pharges on such loan and the obligations of the Borrower in respect thereof; and WHEREAS, the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to guarantee the payment of the principal, interest and other charges on snch loan and the obligations of the Borrower in respect thereof; Now THEREFORE, the parties hereto hereby agree as follows: ARTICLE I SECTION 1.01. The parties to this Guarantee Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modifica- tion thereof set forth in Schedule 3 to the Loan Agreement (said Loan Regulatioins No. 4 as so modified being herein- after called the Loan Regulations), with the same force and effect as if they were fully set forth herein. 4 ARTICLE II SECTION 2.01. Without limitation or restriction upon any of the other covenants on its part in this Agreement con- tained, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and the interest and other charges on, the Loan, the principal of and interest on the Bonds, the premium, if any, on the prepayment of the Loan or the redemption of the Bonds, and the punctual performance of all the covenants and agreements of the Borrower, all as set forth in the Loan Agreement and in the Bonds. SECTION 2.02. Without limitation or restriction upon the provisions of Section 2.01 of this Agreement, the Guaran- tor specifically undertakes, whenever there is reasonable cause to believe that the funds available to the Borrower will be inadequate to meet the estimated expenditures re- quired for carrying out 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. SECTION 2.03. Any funds supplied to the Borrower by the Guarantor pursuant to Section 2.02 or otherwise shall be provided under terms and conditions whereby repay- ment of principal and payment of interest and other charges, if required by the Guarantor, shall be met from surplus funds available to the Borrower only after meeting all obligations of the Borrower, including the obligations arising from the carrying out of the Project, the operation, maintenance and expansion of the plants, equipment and property of the Borrower, the building up of an adequate reserve fund, and the maintenance of service on the Loan and on any other long-term indebtedness. 5 ARTICLE III SECTION 3.01. It is the mutual intention of the Guaran- tor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on govern- mental assets. To that end, the Guarantor undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Guarantor as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the creation of any such lien express provision will be made to that effect; provided, however, that the foregoing provi- sions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as secu- rity for the payment of the purchase price of.such property; (ii) any lien on commercial goods to secure a debt maturing not more than one year after the date on which it is orig- inally incurred and to be paid out of the proceeds of sale of such commercial goods; or (iii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. As used in this Section (a) the term "assets of the Guarantor" includes assets of tle Guarantor or of any of its political subdivisions or of any Agency including the Banco Nacional de Nicaragua, and (b) the term " Agency" means any agency or instrumentality of the Guarantor or of any political subdivision of the Guarantor and shall include any institution or organization which is owned or controlled directly or indirectly by the Guarantor or by any political subdivision of the Guarantor or the operations of which are conducted primarily in the interest of or for account of the Guarantor or any political subdivision of the Guarantor. SECTION 3.02. (a) The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish 6 to the other all such information as it shall reasonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall include information with respect to financial and economic condi- tions in the territories of the Guarantor and the interna- tional balance of payments position of the Guarantor. (b) The Guarantor and the Bank shall from time to time exchange views through their representatives with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Guarantor shall promptly inform the Bank of any condition which inter- feres with, or threatens to interfere with, the accomplish- ment of the purposes of the Loan or the maintenance of the service thereof. (c) The Guarantor shall afford all reasonable opportu- nity for accredited representatives of the Bank to visit any part of the territories of the Guarantor for purposes related to the Loan. SECTION 3.03. The principal of, and interest and other charges on, the Loan and the Bonds shall be paid without deduction for, and free from, any taxes or fees imposed under the laws of the Guarantor or laws in effect in its ter- ritories; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, pay- ments under any Bond to a holder thereof other than the Bank when such Bond is beneficially owned by an individual or corporate resident of the Guarantor. SECTION 3.04. This Agreement, the Loan Agreement and the Bonds shall be free from any taxes or fees that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof. SECTION 3.05. The principal of, and interest and other charges on, the Loan and the Ponds shall be paid free from 7 all restrictions imposed under the laws of the Guarantor or laws in effect in its territories. SECTIoN 3.06. The Guarantor covenants that it will not take or permit any of its political subdivisions or any of its agencies or any agency of any political subdivision to take any action which would prevent or interfere with the performance by the Borrower of any of the covenants, agreements and obligations of the Borrower in the Loan Agreement contained, and will take or cause to be taken all reasonable action which shall be necessary in order to enable the Borrower to perform such covenants, agree- ments and obligations. SECTION 3.07. The Guarantor covenants that it will from time to time grant or cause to be granted to the Borrower rates which will provide revenues sufficient: (a) to cover operating expenses, including adequate maintenance and depreciation, taxes, and interest; (b) to meet repayments on long-term indebtedness but only to the extent that such repayments shall exceed provision for depreciation; and (c) to leave a reasonable surplus for financing new invest- ment. ARTICLE IV SECTION 4.01. The Guarantor shall endorse, in accord- ance with the provisions of the Loan Regulations, its guar- antee on the Bonds to be executed and delivered by the Borrower. The Ministro de Hacienda y Credito P'blico of the Guarantor and such person or persons as he shall desig- nate in writing are designated as the authorized representa- tives of the Guarantor for the purposes of Section 6.12 (b) of the Loan Regulations. 8 ARTICLE V SECTION 5.01. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Guarantor: Repiblica de Nicaragua Ministerio de Hacienda y Credito Puiblico Palacio Nacional Managua, Nicaragua Alternative address for cablegrams and radiograms: Hacienda Managua, Nicaragua For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington 25, D. C. United States of America Alternative address for cablegrams and radiograms: Intbafrad Washington, D. C. SECTION 5.02. The Ministro de Hacienda y Credito Pu'blico of the Guarantor is designated for the purposes of Section 8.03 of the Loan Regulations. SECTION 5.03. For the purposes of the Guarantee Agree- ment (Thermal Power Project), dated July 8, 1955, between the Guarantor and the Bank, paragraph (c) of Section 5.02 of Loan Regulations No. 4 of the Bank, dated February 15, 1955, is hereby amended to read as follows: " (c) A default shall have occurred in the performance of any other covenant or agreement on the part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the Bonds or under the Loan 9 Agreement dated Novemb. 15, 1956, the Guarantee Agreement of even date therewith, or the Bonds therein provided for."; and the term "Loan Regulations" as used for the purposes of said Guarantee Agreement shall mean Loan Regulations No. 4 of the Bank, dated February 15, 1955, as hereby amended. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Guarantee Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF NICARAGUA By JULIO C. MORALES M. Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By W. A. B. ILIFF Vice President