Nicaragua - Rio Tuma Hydroelectric Project : Loan 0259 - Loan Agreement - Conformed

LOAN NUMBER 259 NI Loan Agreement (Rio Tuma Hydroelectric Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE LUZ Y FUERZA DATED JUNE 22, 1960 LOAN NUMBER 259 NI Loan Agreement (Rio Tuma Hydroelectric Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND EMPRESA NACIONAL DE LUZ Y FUERZA DATED JUNE 22, 1960 ,wan Agreemnt AGREEMENT, dated June 22, 1960, between INTERNA- TIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (here- inafter called the Bank) and EMPRESA NACIONAL DE Luz Y FUERZA (hereinafter called the Borrower). ARTICLE I Loan Regulations; Special Definitions SECTION 1.01. The parties to this Loan Agreement ac- cept all the provisions of Loan Regulations No. 4 of the Bank dated June 15, 1956, subject, however, to the modi- fications thereof set forth in Schedale 3 to this Agreement (said Loan Regulations 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. SECTION 1.02. Except where the context otherwise re- quires, the following terms have the following meanings wherever used in this Agreement or in any Schedule there- to: (a) The term "First Loan Agreement" means the loan agreement dated July 8, 1955, between the Bank and the Borrower. (b) The term "Second Loan Agreement'" means the sup- plemental loan agreement dated November 15, 1956, be- tween the Bank and the Borrower. (c) The term "First Guarantee Agreement" means the guarantee agreement dated July 8, 1955, between the Guar- antor and the Bank. (d) The term "Second Guarantee Agreement" means the supplemental guarantee agreement dated November 15, 1956, between the Guarantor and the Bank. 4 (e) The term "this Agreement" shall be deemed to in- clude the Loan R/egulations. 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 twelve million five hundred thousand dollars ($12,500,000). 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 The amount of the Loan may be withdrawn from the Loan Account as pro- vided in, and subject to the rights of cancellation and sus- pension set forth herein, and in the Loan Regulations.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 com- mitment charge shall accrue from a date sixty days after the date of this Agreement to the respective dates on which amounts shall be withdrawn by the Borrower from the Loan Account as provided in Article IV of the Loan Reg- ulations or shall be cancelled pursuant to Article V of the Loan Regulations. SECTION 2.04. The Borrower shall pay interest at the rate of six per cent (60) per annum on the principal amount of the Loan so withdrawn and outstanding from time to time. SECTION 2.05. Except as the Bank and the Borrower shall otherwise agree, the charge payable for special com- mitments entered into by the Bank at the request of the Borrower pursuant to Section 4.02 of the Loan Regula- tions shall be at the rate of one-half of one per cent ( of 1% ) per annum .on the principal amount of any such special commitments outstanding from time to time. SECTION 2.06. Interest and other charges shall be pay- able semi-annually on April 1 and October 1 in each year. SECTION 2.07. The Borrower shall repay the principal of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement. ARTICLE III Use of Proceeds of the Loan SECTION 3.01. The Borrower shall apply the proceeds of the Loan exclusively to financing the cost of goods re- quired to carry out the Project described in Schedule 2 to this Agreement. The specific goods to be financed out of the proceeds of the Loan and the methods and pro- cedures for procurement of such goods shall be deteimined by agreement between the Bank and the Borrower, sub- ject to modification by further agreement between them. 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 General Manager (Gerente General) of the Borrower acting jointly with such other person or 6 persons as the Borrower shall appoint in writing are des- ignated as authorized representatives of the Borrower for the purposes of Section 6.12 (a) of the Loan Regula- tions. ARTICLE V Particular Covenants SECTION 5.01. (a) The Borrower shall carry out, oper- ate and maintain the Project with due diligence and effi- ciency and in conformity with sound engineering, finan- cial and public utility practices. (b) To assist it during the period of construction of the Project the Borrower shall employ engineering consultants and other experts acceptable to, and to an extent and upon terms and conditions satisfactory to, the Bank and the Borrower. (c) Except as the Bank and the Borrower shall other- wise agree, all works included in the Project shall be con- structed by contractors satisfactory to the Bank and the Borrower. (d) Upon request from time to time by the Bank, the Borrower shall promptly furnish to the Bank the plans and specifications for the Project and any material modi- fications subsequently made therein, in such detail as the Bank shall request. (e) 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 progress of the Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condi- tion of the Borrower; shall enable the Bank's representa- tives to inspect the Project, the goods and any relevant records and documents; and shall furnish to the Bank all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, 7 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 fur- nishi to the other all such iAformation as it shall reason- ably 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 Bank of any condition which interferes with, or threatens to interfere with, the accom- plishment of the purposes of the Loan or the maintenance of the service thereof. (e) The Borrower undertakes that, if any action shall be proposed to be taken for a change in the Borrower's rate structure for the sale of electricity resulting in a change in the level of revenues of the Borrower, the Bor- rower shall inform the Bank of such proposal and, before the proposed action is taken, shall afford the Bank all op- portunity whieh is reasonably practicable in the circum- stances to exchange views with res)ect thereto. 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 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 crea- tion of any such lien express provision will be made to that effect; provided, however, that the foregoing pro- visions 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 S 8 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 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 secur- ing a debt maturing not more than one year after its date. SECTION 5.04. Except as the Bank and the Borrower shall otherwise agree, the Borrower shall not incur any long-term indebtedness if thereby the proportion of long- term indebtedness to equity would exceed a ratio of 2 to 1. For the purposes of this Section the following terms shall have the meanings hereinafter set forth: (a) The term "long-term indebtedness" shall mean debt maturing by its terms more than one year after the date on which it is originally incurred. Whenever for pur- poses of this Section it shall be necessary to value in Nicaraguan currency long-term indebtedness payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is, at the time such valuation is made, obtainable for the purposes of servicing such debt. (b) The term "equity" shall include capital and surplus determined in accordance with sound accounting practices. It shall also include such advances made by the Guarantor to the Borrower as are to be serviced from surplus funds available to the Borrower only after meeting all obliga- tions of the Borrower, including the obligations arising from the carrying out of the Project, the operation, main- tenance and expansion of the plants, equipment and prop- erty of the Borrower, the building up of an adequate re- serve fund, and the maintenance of service on the Loan and on any other long-term indebtedness. SECTION 5.05. 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 Guar- 9 antor on or in connection with the execution, issue, de- livery or registration of this Agreement, the Guarantee Agreement or the Bonds, or the payment of principal, in- terest or other charges thereunder; provided, however, that the provisions of this Section shall not apply to taxa- tion of, or fees upon, payments 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 5.06. The Borrower shall pay or cause to be paid all taxes and fees, if any, imposed under the laws of the country or countries in whose currency the Loan and the Bonds are payable or laws in effect in the territories of such country or countries on or in connection with the execution, issue, delivery or registration of this Agree- ment, the Guarantee Agreement or the Bonds. SECTION 5.07. (a) The Borrower shall at all times main- tain its existence and right to carry on operations and shall, except as the Bank shall otherwise agree, maintain and renew all rights, powers, privileges and franchises owned by it and necessary or useful in the operation of its business. (b) 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 sound engineering standards; and shall at all times manage its affairs, operate its plants and equipment and maintain its financial position in accordance with sound business and public utility practices. (c) The Borrower undertakes that, until such time as the Project shall have been completed, it will not, without the consent of the Bank, directly or indirectly at any time (i) declare or pay to the Guarantor any sums of money by way of profits or (ii) undertake or execute any major 10 projects other than the Project or make any major addi- tions to its plant and other properties, unless at such time the Borrower has set aside and made available in a special reserve fund currency of the Guarantor sufficient to cover expenditures which will not be covered out of the pro- ceeds of the Loan and which will be required for carrying out the Project. SECTION 5.08. The Borrower shall not, without the con- sent of the Bank, sell or otherwise dispose of all or sub- stantially all of its property and assets or all or substan- tially all the property included in the Project or any plant the cost of which is financed in whole or in part out of the proceeds of the Loan, 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 5.09. (a) Except as shall be otherwise agreed between the Bank and the Borrower, the Borrower shall insure or cause to be insured with responsible insurers all goods financed with the proceeds of the Loan. Such insurance shall cover such marine, transit and other haz- ards incident to purchase and importation of the goods into the territories of the Guarantor and to delivery thereof to the site of the Project, and shall be for such amounts as shall be consistent with sound commercial practice. Such insurance shall be payable in dollars or in the currency in which the cost of the goods in,ured thereunder shall be payable. (b) In addition, the Borrower shall insure against such risks and in such amounts as shall be consistent with sound public utility and business practices. SECTION 5.10. The Borrower shall from time to time take all steps necessary or desirable to obtain such ad- justments in its rates for the sale of electricity as may 11 be necessary to provide revenues sufficient to (a) cover all its operating costs including taxes, adequate mainte- nance and depreciation, and interest; (b) meet amortiza- tion of long-term indebtedness insofar as this is not cov- ered by provision for depreciation; and (c) create a sur- plus sufficient to cover a reasonable part of the costs of further expansion of its facilities. ARTICLE VI Remedies of the Bank SECTION 6.01. (i) If any event specified in paragraph (a), paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of the Loan Regulations shall occur and shall continue for a period of thirty days, or (ii) if any event specified in paragraph (c) of Section 5.02 of the Loan Reg- ulations or in Section 6.02 of this Agreement for the pur- poses of Section 5.02(j) of the Loan Regulations shall oc- cur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, then at any subsequent time during the continu- ance thereof, the Bank, at its option, may declare the prin- cipal of the Loan and of all the Bonds then outstanding to be due and payable inunediately, and upon any such dec- laration such principal shall become due and payable im- nediately, anything in this Agreement or in the Bonds to the contrary notwithstanding. SECTION 6.02. For the purposes of Section 5.02(j) of the Loan Regulations, the following additional events are specified: (a) a change in the Charter of the Borrower shall have been made without the Bank's consent; and (b) the right of the Borrower to obtain funds under the arrangements referred to in Section 7.01 (d) shall have been suspended or terminated. 12 ARTICLE VII Effective Date; Termination SECTION 7.01. The following events are specified as ad- ditional conditions to the effectiveness of this Agreement within the meaning of Section 9.01(a) (ii) and Section 9.01(b) (ii) of the Loan Regulations: (a) any action necessary to enable the Borrower to em- ploy the engineering consultants and other experts referred to in Section 5.01(b) of this Agreement shall have been taken and h consultants and experts shall have been employed; (b) all necessary corporate and governmental action shall have been taken to convert, on terms and conditions satis- factory to the Guarantor, the Bank and the Borrower, the Guarantor's loans and advances made to the Borrower up to May 1, 1960, and amounting to about 24,888,154 Nic- araguan c6rdobas into an equity contribution of the Guar- antor to the Borrower's capital; (c) appropriate legislative or other action of the Guar- antor satisfactory to the Bank shall have been taken for provision to the Borrower of not less than 4,606,000 Nic- araguan c6rdobas to be made available to the Borrower during the fiscal year 1960-1961 as an equity contribution of the Guarantor to the Borrower's capital; and (d) arrangements satisfactory to the Bank shall have been made for the provision of funds to the Borrower (in addition to the Loan and the funds referred to in para- graph (c) of this Section) in an aggregate amount of not less than $3,642,000 or the equivalent thereof in currency of the Guarantor, to be made available to the Borrower as required for the carrying out of the Project. 13 SECTION 7.02. The following are specified as additional matters, within the meaning of Section 9.02(e) of the Loan Regulations, to be included in the opinion or opinions to be furnished to the Bank: (a) that all action necessary to enable the Borrower to employ the engineering consultants and other experts re- ferred to in Section 5.01(b) of this Agreement has been legally and validly taken; (b) that there has been duly and validly taken all cor- porate and governmental action necessary to convert, on terms and conditions satisfactory to the Guarantor, the Bank and the Borrower, the Guarantor's loans and ad- vances made to the Borrower up to May 1, 1960, and amounting to about 24,888,154 Nicaraguan c6rdobas into an equity contribution of the Guarantor to the Borrower's capital; (c) that there has been duly and validly taken all cor- porate and governmental action for provision to the Bor- rower of not less than 4,606,000 Nicaraguan c6rdobas dur- ing the fiscal year 1960-1961 as an equity contribution of the Guarantor to the Borrower's capital; and (d) that the action taken to make the arrangements re- ferred to in paragraph (d) of Section 7.01 has been legally and validly taken. SECTION 7.03. A date 90 days after the date of this Agreement is hereby specified for the purposes of Section 9.04 of the Loan Regulations. 14 ARTICLE VIII Miscellaneous SECTION 8.01. The Closing Date shall be June 30, 1965. SECTION 8.02. The following addresses are specified for the purposes of Section 8.01 of the Loan Regulations: For the Borrower: Empresa Nacional de Luz y Fuerza Managua, Nicaragua Alternative address for cablegrams and radiograms: Enaluf 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: lutbafrad Washington, D. C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Loan Agreement to be signed in their respec- 15 tive names 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 EMPRESA NACIONAL DE Luz Y FUERZA By ENRIQUE DELGADO EDUARDO MONTIEL Authorized Representatives S6 16 SCHEDULE 1 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars) * October 1, 1965 $166,000 April 1, 1966 171,000 October 1, 1966 176,000 April 1, 1967 181,000 October 1, 1967 187,000 April 1, 1968 192,000 October 1, 1968 198,000 April 1, 1969 204,000 October 1, 1969 210,000 April 1, 1970 216,000 October 1, 1970 223,000 April 1, 1971 229,000 October 1, 1971 236,000 April 1, 1972 244,000 October 1, 1972 251,000 April 1, 1973 258,000 October 1, 1973 266,000 April 1, 1974 274,000 October 1, 1974 282,000 April 1, 1975 291,000 October 1, 1975 299.000 April 1, 1976 308,000 October 1, 1976 318,000 April 1, 1977 327,000 October 1, 1977 337,000 April 1, 1978 347,000 October 1, 1978 358,000 April 1, 1979 368,000 October 1, 1979 379,000 April 1, 1980 391,000 October 1, 1980 402,000 April 1, 1981 414,000 October 1, 1981 427,000 April 1, 1982 440,000 October 1, 1982 453,000 April 1, 1983 467,000 October 1, 1983 480,000 April 1, 1984 495,000 October 1, 1984 510,000 April 1, 1985 525,000 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 pur- poses of withdrawal. 17 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 three years before ma- turity ............................. 1/2 %f 1 More than three years but not more than six years before maturity ...... 1% More than six years but not more than eleven years before maturity ....... 2% More than eleven years but not more than sixteen years before maturity .. 3 More than sixteen years but not more than twenty-one years before maturity 4 More than twenty-one years but not more than twenty-three years before maturity .......................... .5% More than twenty-three years before maturity ......................... 76% 18 SCHEDULE 2 Description of the Project The Project consists of: (a) the Mancotal dam and Centroamerica hydroelectric plant; (b) transmission line from plant to Managua; (c) new administration and main- tenance headquarters in Managua; (d) additions to and improvement of the Borrower's distribution system; and (e) miscellaneous transportation, communication and main- tenance equipment for the Borrower's system. (a) Mancotal Dam and Centroamerica Hydroelectric Plant This part of the Project will consist of an earth and rockfill dam on the Tuia river, about 46 meters high and 360 meters long, and a dike in the left abutment about 500 meters long; a reservoir of about 410 million cubic meter capacity and a morning-glory type spillway; a head- race canal and tunnel about 6.7 kilometers long feediig two turbine-generators of about 50 megawatt total capa- city; a step-up substation and necessary access roads to Jinotega, Sebaco and the Interanmericaii Highway. (b) Transmission Line The transmission facilities will consist of the following: about 75 miles of 138 kilovolt transmission line from the above plant to Managua and a step-down substation at Managua; and sub-transmission lines and substations to serve Jinotega, Matagalpa and other intervening towns. (c) Administration and Maintenance Headquarters A new building will be constructed at a suitable site con- venient for the use of the Borrower. 19 (d) Borrower's Distribution System The Borrower's distribution system will be expanded and improved and for this purpose equipment such as con- ductors, insulators, transformers and protective devices will be used. (e) Miscellaneous Equipment 1\iscellaneous transportation, communication andl main- tenance equipment will be acquired and will be used for maintenance and expansion of the Borrower's system. 20 SCHEDULE 3 Modifications 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 as follows: (a) Section 2.02 shall be deleted. (b) The first five lines of Section 5.02 shall read as fol- lows: "Section 5.02. Suspension by the Bank. If any of the following events shall have happened and be continuing, the Bank may at any time or from time to time by notice to the Borrower suspend in whole or inl part the right of the Borrower to make with- drawals from the Loan Account:" (c) Paragraph (c) of Section 5.02 shall read as follows: "(c) A default shall have occurred in the )erform- ance of any other covenant or agreement on th, part of the Borrower or the Guarantor under the Loan Agreement, the Guarantee Agreement or the ionds or under the First Loan Agreement, the First Goar- tee Agreement, the Second Loan Agreement, the Second Guarantee Agreement or the bonds therein provided for." (d) The last paragraph of Section 5.02 shall read as fol- lows: "The right of the Borrower to make withdrawals from the Loan Account shall continue to be sus- pended in whole or in part, as the case may be, until the event or events which gave rise to such suspen- sion shall have ceased to exist or until the Bank shall have notified the Borrower that the right to make withdrawals has been restored, whichever is 21 the earlier; provided, however, that in the case of any such notice of restoration, the right to make withdrawals shall be restored only to the extent and subject to the conditions specified in such notice, and no such notice shall affect or impair any right, power or remedy of the Bank in respect of any other or subsequent event described in this Section." (e) Section 9.03 shall read as follows: " Section 9.03. Effective Date. Notwithstanding the provisions of Section 8.01, except as shall be other- wise agreed by the Borrower and the Bank, the Loan Agreement shall come into force and effect on the date upon which the Bank dispatches to the Borrower and the Guarantor notice of its acceptance of the evidence required by Section 9.01." (f) Paragraph 14 of Section 10.01 shall read as follows: "14. The term 'external debt' means any debt pay- able in any medium other than currency of the Guar- antor, whether sueb debt is or may become payable absolutely or at the option of the creditor in such other medium." S