Honduras - Petroleum Exploration Promotion Project : Loan 1861 - Loan Agreement - Conformed

TMTCIAL LOAN NUMBER 1861 110 Loan Agreement (Petroleum Exploration Promotion Project) between REPUBLIC OF HONDURAS and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1980 LOAN NUMBER 1861 HO LOAN AGREEMENT AGREEMENT, dated 45- , 1980, between REPUBLIC OF HONDURAS (her2nafter called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). 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 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 and in the Prea-tble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DGMH" means "Direcci6n General de Minas e Hidrocar- buros", the General Directorate of Mines and Hydrocarbons of the Borrower and such term includes any successor thereto; (b) "CONSUPLANE" means "Consejo Superior de Planificaci6n Econ6mica", the Economic Planning Council of the Borrower and such term includes any successor thereto; and (c) "Ministerio" means "Secretaria de Estado en el Despacho de Economia", the Ministry of Economy of the Borrower. 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 three million dollars ($3,000,000). -2- 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 The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Bank, 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 irn 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, procurement of the goods and equipment to be financed out of the proceeds of the Loan, shall be procured in accordance with local procurement procedures satisfactory to the Bank. Section 2.04. The Closing Date shall be December 31, 1983 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to t'he 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 twenty-five hundredths per cent (8.25%) per annum on the principal amount of the Loan withdrawn and outstanding from t-ime to time. Section 2.07. Interest and other charges shall be payable semiannually on March 1st and September 1st 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: (a) through DGMH, Parts A, B, C and D of the Project; (b) through Ministerio, Part E.1; and (c) through CONSUPLANE, Part E.2, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and petroleum exploration practices, and - 3 - shall provide, promptly as needed, the funds, staff, facilities, services and other resources required for the purpose. Section 3.02. (a) In order to assist the Borrower in carrying out the Project, the Borrower shall employ consultants and experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. (b) In addition, the Borrower shall employ, in adequate numbers, qualified counterpart personnel to work with the consul- tants and experts referred to in paragraph (a) above. 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 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: (i) all goods and services financed out of the proceeds of the Loan shall be used exclusively for the Project until its completion; and (ii) all proceeds obtained from selling the index tapes and reports prepared under the Project shall be recorded in a separate account and be used exclusively until December 31, 1985 by DGMH to finance surveys and studies in the energy sector. Section 3.04. (a) The Borrower shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and work schedules for the Pro- ject, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) The Borrower: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (in- cluding its cost and the benefits to be derived from it), to identify the goods and services finauced out of the proceeds of the Loan, and to disclose their use in the Project; and (ii) shall furnish to the Bank quarterly and annual reports on the execution of the Project containing all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the priceeds of the Loan and the goods and services financed out of such proceeds. -4- (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, the Borrower shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reason- ably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Borrower and the Bank of their respec- tive obligations under the Loan Agreement and the accomplishment of the purposes of the Loan. (d) The Borrower shall enable the Bank's representatives to examine all facilities, installations, sites, works, property and equipment of the Borrower and its agencies necessary for the Project and any relevant data, studies, records and documents. Section 3.05. (a) The Borrower shall, not later than March 31, 1981, carry out the studies included under Part E of the Project. (b) Promptly upon its completion, the Borrower shall furnish to the Bank for its review and comment a copy of each of the studies included under the Project and a statement of the Bor- rower's proposed actions resulting therefrom. Section 3.06. The Borrower shall: (a) not later than Decem- ber 31, 1980, furnish to the Bank for comment: (i) the results of the review of the Borrower's legislative instruments for the petroleum sector, to be carried out under Part A.2 of the Project, and the proposed revisions to such legislative instruments result- ing from such review; and (ii) the proposed petroleum accounting a-nd auditing procedures to be established under Part A.4 of the Project; (b) to the extent needed to promote petroleum exploration in the Borrower's territory, revise such legislative instruments taking into account the recommendations resulting from such review and the Bank's comments thereon; and (c) establish such accounting and auditing procedures after having afforded the Bank a reasonable opportunity to comment thereon, and thereafter maintain such procedures. -5- ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defiaed), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the allocation, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges- on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other char, ,s on, the Loan by an equivalent lien on other public assets ccisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any, lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. (a) The Borrower shall maintain or cause to be maintained records adepuate to reflect in accordance with -6- consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower respotzible for carrying out the Project or any part thereof. (b) As part of the foregoing, the Borrower shall establish and maintain for DGMH separate accounts, including the one refer- red to in Section 3.03 (b) of this Agreement, to be used exclu- sively for the Project and shall cause to be registered in such accounts all receipts and payments made for or in connection with the Project. (c) The Borrower shall: (i) have the accounts referred to in paragraph (b) above for each fiscal year audited, in accord- ance with appropriate 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 four months after the end of each such year, (A) certified copies of such accounts 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 the audit thereof as the Bank shall from time to time reasonably request. .Section 4.03. Starting not later than October 1, 1980 the Borrower shall carry out a program, satisfactory to the Bank, aimed at improving the administrative organization of its energy sector. ARTICLE V Effective Date; Termination Section 5.01 The date gcyo , is hereby speci- fied for the purposes of Section 12.04 of the General Conditions. ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. - 7 - Section 6.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Secretaria de Hacienda y Credito Pi'blico Tegucigalpa, D.C. Honduras Cable address: HACIENDA Tegucigalpa Honduras 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 64145 (WUI) IN WITNESS WHEREOF, the ;arties 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. REPUBLIC OF HONDURAS Authorized Representative -8- INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By,O - Regional Vice President Latin America and the Caribbean -9- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Consultants' 1,590,000 100% of foreign services expenditures (2) Equipment and 110,000 100% of for- materials eign expendi- tures and 80% of local ex- penditures (3) Computer 490,000 100% of forcign processing expenditures (4) Training 30,000 100% of foreign expenses expenditures (5) Studies under 120,0' 0 100% of for- Part E of the eign expendi- Project tures (6) Unallocated 660,000 TOTAL 3,000,000 - 10 - 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the territory of any country other than the Borrower; 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 disbursement percentages have been calculated in com- pliance 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 withdrawals shall be made in respect of payments made for expen- ditures prior to the date of this Agreement, except that with- drawals, in an aggregate amount not exceeding the equivalent of $350,000, may be made in respect of Categories (1) and (2) on account of payments made for such expenditures before that date but after March 1, 1980. 5. Notwithstanding the allocation of an amount of the Loan or the disbursement percentages set forth in the table in para- graph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Bank may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the 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; and (ii) if such realloca- tion cannot fully meet the estimated 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. If the Bank shall have reasonably determined that the procurement of any item in any Category is inconsistent with - 11 - 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. - 12 - SCHEDULE 2 Description of the Project The purposes of the Project are to assist the Borrower in strengthening DGMH, reviewing its petroleum laws, establishing appropriate bidding procedures for oil permits and improving its energy planning capacity and to support the Borrower's efforts to accelerate oil exploration by attracting experienced oil com- panies. Part A: 1. Organization, compilation and interpretation of geologi- cal and geophysical information and related specialized studies. 2. Review of the legislative instruments of the Borrower for the petroleum sector and preparation of a model contract and model bidding procedures, for participation of oil companies in exploration and production activities in Honduras. 3. Review of procedures for negotiating oil permits with oil companies and monitoring their work. . 4. Establishment of a modern petroleum accounting and auditing system for DGMH. Part B: Training of selected management personnel and professional staff of DGMH in petroleum exploration techniques, laboratory procedures and related activities through on-the-job training, and seminars and intensive courses abroad. Part C: Computer processing of: (a) seismic profiles in order to improve offshore geologic interpretations; (b) LANDSAT remote sensing imagery; and (c) digitized seismic lines data (index tapes). Part D: Acquisition and utilization of office and laboratory equip- ment and of laboratory materials for DGMH. - 13 - Part E: 1. Study and evaluation of the Borrower's current petroleum pricing and taxation practices. 2. Review of studies being carried out by the Borrower on alternate energy sources for meeting the Borrower's future needs in the energy field. The Project is expected to be completed by June 30, 1983. - 14 - SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each March 1 and September 1 beginning March 1, 1986 through September 1, 2000 100,000 * 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. - 15 - 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 before maturity 1.25% More than three years but not more than six years before maturity 2.50% More than six years but not more than eleven years before maturity 4.55% More than eleven years but not more than sixteen years before maturity 6.60% More than sixteen years but not more than eighteen years before maturity 7.40% More than eighteen years before maturity 8.25% INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day of , 19ra. FOR SECRETARY