El Salvador - Second Rio Lempa Hydroelectric Project : Loan 0221 - Loan Agreement - Conformed

LOAN NUMBER 221 ES Loan Agreement (Second Rio Lempa Hydroelectric Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEMPA DATED FEBRUARY 20, 1959 LOAN NUMBER 221 ES Loan Agreement (Second Rio Lempa Hydroelectric Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND COMISION EJECUTIVA HIDROELECTRICA DEL RIO LEMPA DATED FEBRUARY 20, 1959 I AGREEMENT, dated February 20, 1959, between INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and COMISION EJECUTIVA HIDROELECTRICA DEL Rio LEMPA (hereinafter called the Bor- rower). ARTICLE I Loan Regulations SECTION 1.01. The parties to this Loan Agreement accept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modification thereof set forth in Schedule 3 to this Agreement (said Loan Regulati -ns No. 4 as so modified being hereinafter called the Loan Regulations), with the same force and effect as if they were fully set forth herein. ARTICLE II The Loan SECTION 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in this Agreement set forth or referred to, an amount in various currencies equivalent to three million dollars ($3,000,000). SECTION 2.02., The Bank shall open a Loan Account on its books in the name of the Borrower and shall credit to such Account the amount of the Loan. The amount of the Loan may be withdrawn from the Loan Account as pro- vided in, and subject to the rights of cancellation and sus- pension set forth in, the Loan Regulations. SECTION 2.03. 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charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not so withdrawn from time to time. Such commit- 4 ment ebarge shall alerl e froi a (late si xty davs after the date of this Agreement to be respective dates on which amount s shial be withdrawnby 1the Borrower from tle Loanl S(-eoint as provided in Article IV of the. Lonn Regilations or shall be ancelled pursuant to Article V of tlie oan egu lations. SEeTION 2.04. Tfie Borrower slail pay interest at the rate of five and tlree-fourths per ceut ( ei ) per ainin on the prinlcipal amonIt of the Loan so withdrawi and outstanding fron time to time. SeCTTON 2.05. Exce,pt as the Bank aud the Borrower shall otherwise agree, the chaIge payable for special coni- iitmeiits etered iinto by the Bank at tle request of tle Borrowver psnant to Section 4.02 of the Loan Regulations sI hall Ibe at 11e raite of one-hal (0f o oe per ce t (½ of l'X ) per annm on ite pricipa anounlt of any suih special collinit- mn 1outstanling from timne to time. SenIoN 2.06. Tnterest and other charges shall be pay- ablIe semi-anually 0n January 15 and July 15 in (aea year. SECTION 2.07. The Borvower shal repay tie principa] of tihe Loan in accordanice with tie aiortiza.tion schedule set fortlh in Sehedile 1 to this Agrement. ARTICLE III Use of Proceeds of the Loan SEeno3 3.01. Th( Borrower shall apply the proceeds of the Loan exclusivelv lo finaning tie cost of goods required to CIrry out the Project described in Schedule 2 to this Agreement. Tie speciefi goods to be financed out of the procceds ot tlie Loan and tie metods and procedures for )rocureii(nt of sucli grods shall be determinied by agree- ment between tie Bank ad tie Borrower, subject to niodi- ication by furtier agreement between them. 5 SECTION 3.02. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall cause all goods financed out of the proceeds of the Loan to be imported into the territories of the Guarantor and there to be used exclusively in the carrying out of the Project. ARTICLE IV Bonds SECTION 4.01. The Borrower shall execute and deliver Bonds representing the principal amount of the Loan as provided in the Loan Regulations. SECTION 4.02. The Presidente of the Borrower and such. person or persons as he shall appoint in writing are desig- nated as authorized representatives of the Borrower for the purposes of Section 6.12 (a) of the Loan Regulations. ARTICLE V Particular Covenants SECTION 5.01. (a) The Borrower shall carry out the Proj- ect with due diligence and efficiency and in conformity with. sound engineering, financial and public utility practices. (b) Except as the Bank and the Borrower shall other- wise agree, the Borrower shall employ suitably qualified and competent engineering consultants and contractors for the carrying out of the Project. The selection of the engi- neering consultants and the nature and scope of their responsibilities shall be the subject of agreement between the Bank and the Borrower. (c) The Borrower shall furnish to the Bank, promptly as they are prepared, the plans and specifications for the Project and any material modifications subsequently made therein, in such detail as the Bank shall from time to time request. (d) The Borrower shall maintain records adequate to identify the goods financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the 6 progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the opeirations and financial condition of the Borrower; shall enable the Bank's representatives to inspect the Project, the goods and any relevant records and documents; and shall furnish to the Bank all such informa- tion as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the goods, and the operations and financial condition of the Borrower. SECTION 5.02. (a) The Bank and the Borrower shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shal reasonably request with regard to the general status of the Loan. (b) The Bank and the Borrower 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 Borrower shall promptly inform the 3ank 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. SECTION 5.03. The Borrower undertakes that, except as the Bank shall otherwise agree, if any lien shall be created on any assets of the Borrower as security for any debt, such lien will i)so facto equally and ratably secure the pay- ment of the principal of, and interest and other charges on, the Loan and the Bonds, and that in the cre,ation of any such lion express provision will be made to that effect; provided, however, that the foregoing provisions of this Section shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security 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 originally 7 incurred and to be paid out of the proceeds of sale of such coninercial goods; or (iii) any lien arising in the ordinary course of banking transactions anld securing a debt matur- in not more than one year after its date. SECTION 5.04. The Borrower shall pay or cause to be paid all taxes or fees, if any, imposed under the laws of the Guarantor or laws in effect in the territories of the Guarantor on or in connection with the execution, issue, delivery or registration of this Agreement, the Guarantee Agreement or the Bonds, or the payment of principal, inter- est or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxation of, or fees upon, payments under any Bond to a holder thereof other than the Bank when such Bond is bieneficially owned by an individnal or corporate resident of the Guarantor. SECTION 5.0. Tile Borrower shaill pay or cause to be paid all taxes and fees, if any, imposed under the laws of the country or countirles in whose currencY the Loan and the Bonds are payable or laws ill effect in the territories of such country or countries on or in connection with the execution, issue, delivery or registration of this Agree- luent, the Guarantee Agreement or the Bonds. SECTION 5.06. Except as ,hall be otherwise agreed between the Bank and the Borrower, the Borrower shall insure or cause to be insured the goods financed out of the l)roceeds of the Loan against risks incident to their pur- chase and importation into the territories of the Guarantor. Such insurance shall be consistent with sound commercial practice and shall be payable in dollars or in the currency in which the cost of the goods insured thereunder shall be payable. SECTION 5.07. (a) The Borrower shall at all times main- tain its existence and right to carry on operations and shall, 8 except as the Bank shall otherwise agree, take all steps necessary to maintain and renew all rights, powers, privi- leges and franchises which are necessary or useful in the conduct of its business. (b) The Borrower shall operate and maintain its plants, equipment and property, anl from time to time make all necessary renewals and repairs thereof, all ii accordance with sound engineering standards; and shall at all times operate its plants and equipment and maintain its financial position in accordance with sound business and public utility practices. (c) The Borrower shall not, without the consent of the Bank, sell or otherwise dispose of all or substantially all of its property and assets or all or substantially all the property included in the 'Project or any plant included therein, unless the Borrower shall first redeem and pay, or make adequate provision satisfactory to the Bank for redemption or payment of, all of the Loan which shall then be outstanding and unpaid. SECTION 5.08. The Borrower, in accordance with the principles presently set forth in the law eiating it, cove- nants that it will take all steps necessary to earn revenues sufficient: (a) to cover operating- expenses, including taxes if any, adequate maintenance, depreciation and interest; (b) to meet repaynients on long-term indebtedness but only to the extent that such repayments shall exceed provision for depreciation; and (c) to leave a surplus for financing a reasonable portion of planned expansion. SECTION 5.09. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall not incur debt unless its net revenue for the fiscal year next preceding such incurrence or for a. later twelve-month period ended prior to such incurrence, whichever is the greater, together with 753f of the annual net revenues reasonably estimated to be obtained from the works under construction and the works to be comstructed with The piroceeds of the proposed 9 new debt wie scl works are in full prodluct1ion shall be not less than 1.5 times the maximum debt service require. ment for any succeding fiscal year on all d,bt, ineluding the debt to be incurred. For the purposes of this Section: (a) Tie term "debt" slall nean all indebtedness of the Borrower maturing by its teris more than one vear after the date on which it is ineurred; (b) Debt shall be deeined to have been incurred (i) in the case of a 1.oan from the Guarantor on the date on which the decree of the Legislative Assenibly of the Guarantor granting sucli loan shall enter into foree and effeet as pro- vided in sueh decree; and (ii) in the ease of a loan from a source other than the Guarantor on the date of execution and deliverv of the contract providing for such loan; (c) The term "not revenues" sliall mean gross revenues from all sonrees, adjusted to take account of rates il vffect at the time of the caleilation even though they were not in effeet during suelh fisal year or twelve-moøntih period, less all operating and administrative expenses, ineluding provision for taxes, if any, it before provision covering depreciation, interest and other iarges on debt; (d) The term '"debt service requi,eirent" shall nean the aggregate aiont of amorti.zation (ineluding sinking fund payments, if any) interest and otier c(arges on delt; and (e) The equivalent in currenev of the Guarantor of amounts of debt payalble in auv otler (irency shall be determined on the basis ol the rate of exchange whic on tlhe date of caleulation is available to thle Boirr-ower for lihe purehase of such other currenev for debt service. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event s>eeified in paragraph1 (a), paragraph (b), paragraph (e) or paragrapli (f) of Seetion 5.02 of the Loan Regulations shall occur. aid sliall 10 continue for a period of thirty days, or (ii) if any event specified in paragraph (e) of Section 5.02 of the Loan Reg- nlations shal occu- and sliall Contiluem for a perio( of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subseqcueilt time during the continuance thereof, the Bank, at its option, may declare the principal of the Loan and of all the Bonds then out- standing to be due and payable immediately, and upon any such declaration sueli principal shall become due and pay- able immuediately, anything in this Agreement or in the Bonds to the contrary notwithstanding. ARTICLE VII Effective Date; Termination SiCTIoN 7.01. The following event is speciffed as an additional condition to the effectiveness of this Agreement within Ie meaning of Section 9.01 (a) (ii) of the Loan Regulations: all ieessary co»pote and governmental action shall have been taken lo eonvert, on terrms and condi- tions satisfactoryv to the Gariiantor, the Bank and tbc Bor- rower, (a) the Guarantor's local eurreney contriltions made to t iBorrower up lo October 31, 1958, an(d amounting to 11,840,435.41 Salvadoroan coloies and (b) all such con- tributions to be made thereafter pursuant to legislative decrees nmnbers 198(3 and 1.987 of December 1955, into an equity contribiition of ihe Onarantor to the Borrower's capital. SECTION 7.02. The following is specified as an additional matter witbin the meaing of Section 9.02 (e) of the Loan Regulations to be ineluded iii the legal opinion or opinions to be furnished to the Bank: tbat there has been] duly and validly taken all corporate and goverimental action neces- sary to convert, on terms and conditions satisfactory to the Guarantor, the Bank and the Borrower, (a) the Guaran- tor's local currency contributions made to the Borrower up to October 31, 1958, and amounting to 11,840,435.41 Salva- dorean colones, and (b) all such contributions to be made I 11 thereafter pursuant to legislative decrees numbers 1986 and 1987 of December 1933, into an equity contribution of the Guarantor to the Borrower's capital. SECTION 7.03. A date ninety clays after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the Loan Regulations. ARTICLE VIII Miscellaneous SECTION 8.01. The Closing Date shall be December 31, 1961. SECTIoN 8.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Borrower: Comisi6n Ejecutiva Hidroel'ctrica del Ro Lempa Edificio Duefias San Salvador, El Salvador Alternative address for cablegrams and radiograms: CEL San Salvador 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(. 12 IN WITNESS WHEREOF, the. parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respective name's and delivered 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 W. A. B. ILIFF Vice President CoMIsIoN EJECUTIvA HIDROELECTRICA DEL Rio LEMPA By ENRIQUE R. LIMA Authorized Representative 13 SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* Jan. 15, 1962 $ 33,000 July 15, 1962 34,000 Jan. 15, 1963 35,000 July 15, 1963 36,000 Jan. 15, 1964 38,000 July 15, 1964 39,000 Jan. 15, 1965 40,000 July 15, 1965 41,000 Jan. 15, 1966 42,000 July 15, 1966 43,000 Jan. 15, 1967 44,000 July 15, 1967 46,000 Jan. 15, 1968 47,000 July 15, 1968 48,000 Jan. 15, 1969 50,000 July 15, 1969 51,000 Jan. 15, 1970 53,000 July 15, 1970 54,000 Jan. 15, 1971 56,000 July 15, 1971 57,000 Jan. 15, 1972 59,000 July 15, 1972 61,000 Jan. 15, 1973 62,000 July 15, 1973 64,000 Jan. 15, 1974 66,000 July 15, 1974 68,000 Jan. 15, 1975 70,000 July 15, 1975 72,000 Jan. 15, 1976 74,000 July 15, 1976 76,000 Jan. 15, 1977 78,000 July 15, 1977 80,000 Jaa. 15, 1978 83,000 July 15, 1978 85,000 Jan. 15, 1979 88,000 July 15, 1979 90,000 Jan. 15, 1980 93,000 July 15, 1980 95,000 Jan. 15, 1981 98,000 July 15, 1981 101,000 Jan. 15, 1982 104,000 July 15, 1982 107,000 Jan. 15, 1983 110,000 July 15, 1983 113,000 Jan. 15, 1984 116,000 * To the extent that any part of the Loan is repayable in a currency other than dollars (see Loan Regulations, Section 3.02), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. 14 Premiums on Prepayment and Redemption The following percentages are specified as the premiums payable on repayment in advance of maturity of any part of the principal amount of the Loan pursuant to Section 2.05 (b) of the Loan Regulations or on the redemption of any Bond prior to its maturity pursuant to Section 6.16 of the Loan Regulations: Time of Prepayment or Redemption Premium Not more than 3 years before maturity. . 1/2 of 1%0 More than 3 years but not more than 6 years before maturity.............. 1170 More than 6 years but not more than 11 years before maturity............. 1% % More than 11 years but not more than 16 years before maturity ........... 21% More than 16 years but not more than 21 years before maturity............ 3 % More than 21 years but not more than 23 years )efore maturity ..... 4%o More than 23 years before maturity 5%o 15 SCHEDULE 2 Description of Project The Project consists of: (a) an addition to the existing Guayabo hydroelectric plant; (b) the sealing off of the presenp.t seepage in the vicinity of the Puente Viejo dam at Lake Giiija by means of grouting, further excavation of the outlet channel and construction of an earth dike; and (c) an extension of the Borrower's transmission system. The works to be financed out of the proceeds of the Loan are: (1) The installation of a fourth turbo-generator of 15 MW capacity in an addition to the existing under- ground power house of the Guayabo hydroelectric plant with the attendant intake, surge chamber, tail- race tunnel and substation; and (2) Construction of a new 115 kv transmission line from San Salvador to Santa Ana, a distance of about 60 kilometers, with an expansion to the substation at San Salvador and construction of a new substation at Santa Ana. SCHEDULE 3 Modification of Loan Regulations No. 4 For the purposes of this Agreement the provisions of Loan Regulations No. 4 of the Bank, dated June 15, 1956, shall be deemed to be modified by deleting Section 2.02 thereof.