LOAN NUMBER 2179 PEDOCUMENTS

Loan Agreement

(Sixth Power Project)

between

INTERNAIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

and

ELECTROLIMA S.A.

and

CORPORACION FINANCIERA BE DESAROLLO S.A. - COFIDE

Dated . 77/ , 1982

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

LOAN NUMBER 2179 PE

LOAN AGREEMENT

AGREEMENT, dated 7drrye- le , 1982, betweenINTERNATIONAL BANK FOR REC NSTRUCTION AND DEVELOPMENT (here'n-after called the Bank) and ELECTROLIMA S.A. (hereinafter calledthe Borrower).

WHEREAS (A) the Borrower has requested the Bank to assistin the financing of the Project described in Schedule 2 to thisAgreement by making the Loan as hereinafter provided;

(B) Part A of the Project will be carried out by the Bor-rower or any successor thereto, Part B of the Project will becarried out by Empresa Electricidad del Peru S.A. or any succes-sor thereto (hereinafter called ELECTROPERU), and Part C of theProject will be carried out by Energia Hidroelectrica Andina(HIDRANDINA) S.A. or any successor thereto (hereinaft r calledHIDRANDINA). The Borrower will make available to ELECTROPERU andHIDRANDINA the proceeds of the Loan allocated for purposes of thecarrying out of Parts B and C of the Project, respectively, ashereinafter provided;

(C) CORPORACION FINANCIERA DE DESARROLLO S.A. - COFIDE(hereinafter called COFIDE) has participated in the negotiationof this Agreement and has represented to the Bank that it hasdischarged all of its other responsibilities as financial agentof the Borrower pursuant to the Decreto Legislativo No. 5 of theRepublic of Peru published in El Peruano on December 31, 1980;and

WHEREAS the Bank has agreed, on the basis inter alia of theforegoing, to make the Loan available to the Borrower upon theterms and conditions set forth hereinafter and in the Projectagreements of even date herewith between the Bank and ELECTROPERUand HIDRANDINA respectively;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all theprovisions of the General Conditions Applicable to Loan andGuarantee Agreements of the Bank, dated October 27, 1980, with

-2-

the same force and effect as if they were fully set forth herein(said General Conditions Applicable to Loan and Guarantee Agree-ments of the Bank being hereinafter called the General Condi-tions).

Section 1.02. Wherever used in this Agreement, unless thecontext otterwise requires, the several terms defined in theGeneral Conditions and in the Preamble to this Agreement have therespective meanings therein set forth:

(a) "ELECTROPERU Subsidiary Loan Contract" means the con-tract referred to in Section 3.01 (b) (i) of this Agreement;

(b) "IIIDRANDINA Subsidiary Loan Contract" means thecontract referred to in Section 3.01 (b) (ii) of this Agreiment;

(c) "Subsidiary Loan Contract" means any one of thecontracts referred to in paragraphs (a) and (b) of this Sectionand "Subsidiary Loan" means the loan provided for under aSubsidiary Loan Contract;

(d) "ELECTROLIMA'S Charter" means the public deed No. 506,dated August 24, 1906, incorporating the company, and the termincludes the estatutos thereof adopted under such public deed, asamended by public deed No. 3393, dated December 6, 1976, and asfurther amended thereafter solely to increase the capital social;

(e) "ELECTROPERU's Charter" means the Guarantor's Legisla-tive Decree No. 41, published in El Peruano on March 5, 1981, asamended by the Guarantor's Legislative Decree No. 61, publishedin El Peruano on March 25, 1981, as further amended by the Gua-rantor's Legislative Decree No. 157 published in El Peruano onJune 15, 1981, and the term includes all legal provisions men-tioned or referred to in Article 5 of such Decree No. 41 and suchprovisions of the Guarantor's Legislative Decree No. 40, pub-lished in El Peruano on March 5, 1981, as are applicable to theGuarantor's electric power subsector; and "Estatutos" means thepublic deed incorporating ELECTROPERU as approved by DecretoSupremo, 007-EM/SG dated May 13, 1981, published in El Peruano onMay 18, 1981 and registered by the Registro Mercantil of theRegistros Publicos de Lima on July 16, 1981;

(f) "HIDRANDINA'S Charter" means the public deed No. 1417,dated November 22, 1946, incorporating the company, and the term

-3-

includes the estatutos thereof, adopted under such public deed,as amended as of October 10, 1973, and as further amended there-after solely to increase the capital social;

(g) "Entity" means any one of ELECTROPERU or HIDRANDINA;

(h) "Subsidiary" means any company, including filiales andsubsidiarias, of which a majority of the outstanding voting stockor other proprietary interest is owned or effectively controlledby the Borrower or an Entity, and the term includes any companyof which a majority of the outstanding voting stock or otherproprietary interest is owned or effectively controlled by anyone or more Subsidiaries or by the Borrower or such Entity, asthe case may be, and one or more Subsidiaries.

(i) "Prior Project" means the Project described inSchedule 2 to the Loan Agreement for Loan 2018-PE (PowerEngineering Project) between the Bank and ELECTROPERU datedAugust 19, 1981, and "Prior Loan Agreement" means such Loanagreement, as amended from time to time;

(j) "Credito Pulblico" means Direccion General de CreditoPU'blico (General Directorate of Public Credit) of the Guarantor'sMinistry of Economy, Finance and Commerce;

(k) "Mantaro Transfer Scheme" means a project which willsupply additional pc 'er to the Guarantor's central-northinterconnected power system and water to Lima, increasing thewater discharge in the Rimac basin by diverting water theretofrom the Mantaro basin. The water so diverted will be used toincrease energy production in the existing hydro-plants, todevelop a new hydro plant in Sheque with an initial generatingcapacity of about 300 MW and to increase the supply of drinkingwater to Lima;

(1) "Association Contract" means the contract (Contrato deAsociacion en Participacion) dated September 30, 1981, betweenELECTROPERU and the Borrower and Servicio de Agua Potable yAlcantarillado de Lima - SEDAPAL, as approved by the Guarantor'sSupreme Decree 031-81-EM/DGE, entered into by the aforesaid par-ties for purposes of the carrying out of all the activities ofsuch parties related to the Mantaro Transfer Scheme;

-4-

(m) "Mayush Hydro Project" means a pxcect, the feasibility

of which is being studied under the Prior Loan Agreement, which

will consist of the construction of a plant of about 130 MW

generating capacity and which was described in Part C.2 of the

Prior Project as consisting of a 40 MW plant and referred to

therein as Cahua II;

(n) "ELECTROPERU Project Agreement" means the Project

Agreement between the Bank and ELECTROPERU of even date herewith,

as amended from time to time; and "HIT'ANDINA Project Agreement"

means the Project Agreement between the Bank and HIDRANDINA of

even date herewith, as amended from time to time; and, in both

cases, the term includes all agreements supplemental to the

respective Project Agreement and all Schedules thereco;

(o) "Project Agreement" means any one of the Project Agree-

ments referred to in paragraph (n) above;

(p) "1215 Loan Agreement" means the agreement between the

Guarantor and the Bank dated September 20, 1976, as amended from

time to time, and the term includes all Schedules and agreements

supplemental thereto;

(q) "Master Plan" means the plan for future generation and

transmission additions to the overall electric power system of

the Guarantor prepared under the 1215 Loan Agreement and updated

pursuant to Section 4.05 of the Prior Loan Agreement; and

(r) "Enterprise" means any one of the Borrower or

ELECTROPERU or HIDRANDINA, and "Enterprises" means all of them

collectively.

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

eighty-one million two hundred thousand dollars ($81,200,000).

Section 2.02. The amount of the Loan may be withdrawn from

the Loan Account in accordance with the provisions of Schedule 1

-5-

to this Agreement, as such Schedule may be amended from time totime by agreement between the Borrower and the Bank, for expendi-tures made (or, if the Bank shall so agree, to be made) in re-speci.- of the reasonable cost of goods and services required forthe Project and to be financed out of the proceeds of the Loan.

Section 2.03. Except as the Bank shall otherwise agree, pro-curement of the goods and civil works required for Part A and ofgoods required for Part B of the Project and to be financed outof the proceeds of the Loan shall be governed by the provisionsof Schedule 4 to this Agreement.

Section 2.04. The Closing Date shall be June 30, 1987 orsuch later date as the Bank shall establish. The Bank shallpromptly notify the Borrower and the Guarantor of such laterdate.

Section 2.05. Not later than the Effective Date, the Bor-rower shall pay to the Bank a fee equivalent to one million twohundred thousand dollars ($1,200,000). The fee shall be payablein such currency or currencies as the Bank shall specify. In theevent that the Bank shall not have received full payment of thefee by the Effective Date, the Bank shall, on behalf of theBorrower, withdraw from the Loan Account and pay to itself theamount required for the full payment of the fee in the currencyor currencies specified for the purpose.

Section 2.06. The Borrower shall pay to the Bank a commit-ment charge at the rate of three-fourths of one per cent (3/4 of1%) per annum on the principal amount of the Loan not withdrawnfrom time to time.

Section 2.07. The Borrower shall pay interest at the rate ofeleven and three-fifths per cent (11-3/5%) per annum on the prin-cipal amount of the Loan withdrawn and outstanding from time totime.

Section 2.08. Interest and other charges shall be payablesemiannually on May 1 and November 1 in each year.

Section 2.09. The Borrower shall repay the principal amountof the Loan in accordance with the amortization schedule set

forth in Schedule 3 to this Agreement.

-6-

Section 2.10. The Board of Directors of ELECTROPERU and theBoard of Directors of HIDRANDINA, or the person or personsauthorized by each of them, are designated as representatives ofthe Borrower for the purposes of taking any action required orpermitted to be taken under the provisions of Section 2.02 ofthis Agreement and Article V of the General Conditions, inrespect of Parts B and C of the Project, respectively.

ARTICLE III

Execution of the Project

Section 3.01. The Borrower shall carry out Part A of theProject and cause ELECTROPERU and HIDRANDINA to carry out Parts Band C of the Project, respectively, with due diligence andefficiency and in conformity with appropriate administrative,financial and engineering practices.

(b) For purposes of the preceding paragraph the Borrowershall enter with:

(i) ELECTROPERU, into a Subsidiary Loan Contract(hereinafter called the ELECTROPERU SubsidiaryLoan Contract) whereby ELECTROPERU will borrowfrom the Borrower, for purposes of carrying outPart B of the Project, the proceeds of the Loanallocated from time to time to Categories (5) and(6) of the table set forth in Part 1 of Schedule 1to this Agreement (hereinafter called the Table);and

(ii) HIDRANDINA, into a Subsidiary Loan Contract(hereinafter called the HIDRANDINA Subsidiary LoanContract) whereby HIDRANDINA will borrow from theBorrower, for purposes of carrying out Part C ofthe Project, the proceeds of the Loan allocatedfrom time to time to Category (7) of the Table.

(c) Except as the Bank shall otherwise agree, the terms andconditiorn of each Subsidiary Loan Contract shall be satisfactoryto the Bank, and shall include the following:

-7-

(i) all provisions of this Agreement and the GeneralConditions concerning repayment of principal of,and payment of interest and other charges on, theLoan, shall apply mutatis mutandis to the repay-ment of the principal of, and to payments ofinterest and other charges on, each SubsidiaryLoan;

(ii) each withdrawal from the Loan Account for purposesof the carrying out of Part B or Part C of theProject made pursuant to Section 2.10 of thisAgreement shall be deemed a disbursement in re-spect of the corresponding Subsidiary Loan underthe applicable Subsidiary Loan Contract; and

(iii) each payment to the Borrower under each SubsidiaryLoan Contract shall be made sufficiently in ad-vance of the applicable payment date under thisAgreement, so as to enable the Borrower to utilizethe proceeds of such payment to discharge in atimely fashion its obligations under this Agree-ment.

(d) The Borrower shall exercise its rights under the ELEC-TROPERU Subsidiary Loan Contract and the HIDRANDINA SubsidiaryLoan Contract in such manner as to protect the interests of theGuarantor, the Bank and the Borrower and to accomplish the pur-poses of the Loan. Except as the Bank shall otherwise agree, theB3rrower shall not assign, amend, abrogate or waive any of suchSubsidiary Loan Contracts or any provision thereof.

Section 3.02. (a) In order to assist the Borrower in thesupervision of Part A (2) of the Project and in the carrying outof Part A (3), Part A (4), Part A (5) and Part A (6) (b), (c),and (e) of the Project, the Borrower shall employ consultantswhose selection, qualifications, experience and terms and condi-tions of employment shall be satisfactory to the Bank in accor-dance with principles and procedures described in the "Guidelinesfor the Use of Consultants by World Bank Borrowers and by theWorld Bank as Executing Agency" published by the Bank in August1981, and in Part E of Schedule 4 to this Agreement.

-8-

(b) The Borrower shall cooperate fully with such consul-tants in the performance of their services for the Project andmake available to them all information relevant to the Project.

(c) The Borrower shall cause such consultants promptly tofurnish to the Bank, in such number as the Bank shall reasonablyrequest, copies of the documents prepared by them for theProject, including reports and drafts thereof, plans, designs,specifications, work schedules and estimates of costs.

(d) With respect to the evaluation and putting into effectof the recommendations and other conclusions contained in anydocument prepared by the consultants for purposes of the carryingout of Part A (3), Part A (4) and Part A (5) of the Project, theBorrower shall, during the carrying out of such Parts of theProject and upon their completion, exchange views with the Bankon said recommendations and conclusions.

Section 3.03. (a) The Borrower undertakes to insure, or makeadequate provision for the insurance of, the imported goods to befinanced out of the proceeds of the Loan against hazards incidentto the acquisition, transportation and delivery thereof to theplace of use or installation, and for such insurance any indem-nity shall be payable in a currency freely usable by the Borrowerto replace or repair such goods.

(b) The Borrower shall cause all goods and servicesfinanced out of the proceeds of the Loan to be used exclusivelyfor the purposes of the Project.

Section 3.04. (a) The Borrower shall, not later than twomonths after the completion of the feasibility study included inPart B.2 (i) of the Prior Project, appoint a board of consultantsunder terms of reference satisfactory to the Bank who will re-view, from a safety viewpoint, the design for the dam and relatedstructure, to be constructed under Part A (2) of the Project.These consultants shall, during the carrying out of such Part ofthe Project, also review, from a safety viewpoint, the worksbeing carried out under such Part of the Project.

(b) The Borrower shall, before issuing tender documents tothe prospective bidders for the carrying out of Part A (2) of theProject, afford the Bank a reasonable opportunity to comment on

9-

the findings and conclusions of the studies included in Part B.2of the Prior Project.

Section 3.05. The Borrower shall take all such steps asshall be necessary on its part to ensure that the findings andrecommendations of the studies to be carried out under Part A(3), Part A (4) and Part C of the Project are appropriatelyintegrated with the conclusions of ELECTROPERU's studies for theMaster Plan.

Section 3.06. (a) The Borrower shall furnish to the Bank,promptly upon their preparation, the plans, specifications,reports, contract documents and construction or work, as the casemay be, and procurement schedules for Part A of the Project, andany material modifications thereof or additions thereto, in suchdetail as the Bank shall reasonably request.

(b) The Borrower: (i) shall maintain records and pro-cedures, including separate accounts for Part A of the Project,adequate to record and monitor the progress of Part A of theProject (including its cost and the benefits to be derived fromit), to identify the goods and services financed out of the pro-ceeds of the Loan, and to disclose their use in Part A of theProject; (ii) shall enable the Bank's representatives to visitthe facilities and construction sites included in Part A of theProject and to examine the goods financed out of the pr, -eeds ofthe Loan and any relevant records and documents; and (iii) shallfurnish to the Bank at regular intervals all such information asthe Bank shall reasonably request concerning Part A of the Proj-ect, its cost and, where appropriate, the benefits to be derivedfrom it, the expenditure of the proceeds of the Loan and thegoods and services financed out of such proceeds.

(c) Upon the award by the Borrower of any contrace forgoods, works or services to be financed out of the proceeds ofthe Loan, the Bank may pub-lsh a description thereof, the nameand nationality of the party to whom the contract was awarded andthe contract price.

(d) The Borrower shall enable the Bank's representatives toexamine all plants, installations, sites, works, buildings,property and equipment of the Borrower and any relevant recordsand documents.

-10-

(e) Promptly after completion of Part A 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 theBorrower and the Bank, the Borrower shall prepare and furnish to

the Bank a report, of such scope and in such detail as the Bankshall reasonably request, on the execution and initial operationof Part A (1) and Part A (2) of the Project, their cost and thebenefits derived and to be derived from them, the performance bythe Borrower and the Bank of their respective obligations underthe Loan Agreement and the accomplishment of the purposes of theLoan.

Section 3.07. Notwithstanding the obligations of the Bor-rower in respect of the carrying out of Part A (5) of the Project

in this Agreement contained, the Borrower acknowledges that thelegal relationships between ELECTROPERU, Servicio de Agua Potable

y Alcantarillado de Lima - SEDAPAL and the Borrower in respectthereof are governed by the Association Contract. Consequently,

the Borrower shall exchange views with ELECTROPERU and SEDAPALduring the execution of the study included in such Part of the

Project, shall make available to ELECTROPERU and SEDAPAL all

reports and draft reports, and all documentation in support

thereof, originated in such study and shall reflect the cost of

carrying out such study in its books as part of the Borrower'scontribution to the Mantaro Project pursuant to the AssociationContract.

ARTICLE IV

Management and Operations of the Jorrover

Section 4.01. The Borrower shall at all times manage its

affairs, maintain its financial position, plan its future

expansion and carry on its operations in accordance with

ELECTROLIMA's Charter and with appropriate administrative,

business, financial, engineering, and public utility practices

under the supervision of experienced and competent management

assisted by experienced and competent staff in adequate numbers.

Section 4.02. (a) The Borrower shall at all times take all

steps necessary to maintain its legal existence and right tocarry on operations, including, without limitation, Part A of the

Project, and shall, except as the Guarantor and the Bank may

- 11 -

otherwise agree, take all steps necessary to acquire, maintain

and renew such licenses, consents, franchises or other rights as

may be necessary or useful for its operations (including such

Part of the Project).

(b) The Borrower shall take all such action, including the

provision of funds and resources, as shall be necessary to ensure

that its facilities, equipment and property are adequately

operated and maintained, and where applicable, repaired and

renewed.

(c) Except as the Guarantor and the Bank shall otherwise

agree, the Borrower shall not sell, lease, transfer or otherwise

dispose of any of its property or assets which shall be an impor-

tant requirement for the efficient operation of its business and

undertaking, including Part A of the Project.

Section 4.03. The Borrower shall take and cause to be taken

all action as shall be required to ensure that its operations,including Part A of the Project, are carried out in conformitywith appropriate pollution control and ecological standards.

Section 4.04. The Borrower shall take out and maintain withresponsible insurers, or make other provisions satisfactory to

the Bank for, insurance against such risks and in such amounts as

shall be consistent with appropriate practices.

Section 4.05. Without limiting the generality of the preced-

ing Sections the Borrower shall, under arrangements satisfactory

to the Bank, cause the dam and related structures constructedunder Part A (2) of the Project to be periodically inspected bythe board of consultants referred to in Section 3.04 (a) of this

Agreement in accordance with sound engineering practices in order

to determine whether there are any deficiencies in the condition

of such structures, or in the quality and adequacy of maintenance

or methods of operations of the same, which may endanger their

safety. To this end, the Borrower shall propose to the Bank

appropriate arrangements for the Bank's review no later than oneyear before the expected completion of such structures.

Section 4.06. The Borrower shall cause any Subsidiary it may

create or establish to observe and perform the obligations of the

Borrower under this Agreement to the extent to which such obliga-

- 12 -

tions shall or can be applicable thereto, as if such obligationswere binding upon such Subsidiary.

Section 4.07. (a) The Borrower shall, not later thanDecember 31, 1982, set forth a plan of activities aiming atimproving its current demand forecasting, based on the studyincluded in Part A.4 (b) of the Project described in Schedule 2to the 1215 Loan Agreement.

(b) The Borrower shall, starting on December 31, 1982,furnish to the Bank for comment a 10-year demand forecast, andupdate it annually thereafter.

ARTICLE V

Financial Covenants

Section 5.01. The Borrower shall maintain records adequateto reflect in accordance with consistently maintained appropriateaccounting practices its operations and financial condition.

Section 5.02. The Borrower shall: (i) have its accounts,including the accounts referred to in Section 3.06 (b) (i) ofthis Agreement, and financial statements (balance sheets, state-ments of income and expenses and related statements) for eachfiscal year audited, in accordance with appropriate auditingprinciples consistently applied, by independent auditors accept-able 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 eachsuch year, (A) certified copies of its financial statements andof the accounts referred to in Section 3.06 (b) (i) of thisAgreement, for such year as so audited and (B) the report of suchaudit by said auditors, of such scope and in such detail as theBank shall have reasonably requested; and (iii) furnish to theBank such other information concerning the accounts and financialstatements of the Borrower and the audit thereof as the Bankshall from time to time reasonably request.

Section 5.03. (a) The Borrower represents that at the dateof this Agreement no lien exists on any of its assets as securityfor any debt except as otherwise currently reported to the bankor stated in writing.

- 13 -

(b) The Borrower undertakes that, except as the Bank shallotherwise agree: (i) if the Borrower shall create any lien on anyof its assets as security for any debt, such lien will equallyand ratably secure the payment of the principal of, and interestand other charges on, the Loan, and in the creation of any suchlien express provision will be made to that effect, at no cost tothe Bank; and (ii) if any statutory lien shall be created on anyassets of the Borrower as security for any debt, the Borrower

shall grant, at no cost to the Bank, an equivalent lien satisfac-tory to the Bank to secure the payment of the principal of, andinterest and other charges on, the Loan; provided, however, thatthe foregoing provisions of this paragraph shall not apply to:(A) any lien created on property, at the time of purchase there-of, solely as security for the payment of the purchase price ofsuch property; or (B) any lien arising in the ordinary course ofbanking transactions and securing a debt maturing not more thanone year after the date on which it is originally incurred.

Section 5.04. Except as the Guarantor and the Bank shallotherwise agree:

(a) the Borrower shall take all necessary steps, includingfiling applications with the Guarantor for tariff adjustments, soas (i) to yield adequate rates of return for each calendar yearstarting in 1982, calculated in accordance with Part B of theSchedule to the Guarantee Agreement; and (ii) to permit theGuarantor to comply with Section 3.05 of the Guarantee Agreement;

(b) the Borrower shall, within the first month of eachcalendar quarter, review the adequacy of its tariffs to producean adequate annual return for the year in question and shallfurnish to the Bank the results of such review; and

(c) if any such review shows that the Borrower would notearn an adequate annual return required for the year in question,the Borrower shall apply for an adjustment of its tariffsaccordingly.

Section 5.05. Except as the Bank shall otherwise agree, theBorrower shall not incur:

(a) any long-term debt, unless its net revenues for thefiscal year next preceding such incurrence or for a latertwelve-month period ended prior to such incurrence, whichever

- 14 -

amount is the greater, shall be not less than 1.5 times the

maximum long-term debt service requirement for any succeeding

fiscal year on all long-term debt, including the long-term debt

to be incurred. For the purposes of this paragraph:

(i) the term "long-term debt" shall mean all debt of

the Borrower maturing by its terms more than oneyear after the date on which it is incurred;

(ii) the term "net revenues" shall mean gross revenues

adjusted to take account of the Borrower's rates

in effect at the time of the incurrence of long-

term debt even though they were not in effect dur-ing the fiscal year or twelve-month period to

which such revenues relate, less operating andadministrative expenses, but before provision cov-

ering depreciation of costs and provision for

other non-cash expenses required by laws or regu-

lations of the Guarantor, interest and other char-

ges on long-term debt; and

(iii) the term "debt service requirement" shall mean the

aggregate amount of amortization (including sink-ing fund payments, if any), interest and other

charges on long-term debt;

(b) any short-term debt, unless the aggregate of all

short-term debt incurred by the Borrower, including the short-

term debt t) be incurred but deducting, to the extent the Bank is

satisfied therewith, cash and the cash value of negotiable

instruments held by the Borrower, is equal to or less than

one-sixth (1/6) of the operating, maintenance and administrative

expenses (excluding depreciation and other non-cash provisions)of the Borrower for the twelve-month period preceding such incur-

rence. For the purpose of this paragraph the term "short-termdebt" means all debt of the Borrower for money borrowed, includ-

ing bank overdrafts, maturing by its terms on demand or less than

one year after the date on which it was incurred.

For the purposes of this Section, debt shall be deemed to be

incurred on the date of execution and delivery of a contract,loan agreement or other instrument providing for such debt; pro-

vided, however, (i) that in the case of a loan contract or agree-

ment or other instrument providing for a short-term debt or for

- 15 -

the modification of its terms of payment, debt shall be deemed tobe incurred on the date, and to the extent, the amount of suchdebt has become outstanding pursuant to such contract, agreementor instrument, and (ii) that in the case of guarantee of debt,debt shall be deemed to be incurred on the day the agreementguaranteeing such debt has been entered into but only to theextent that the guaranteed debt is outstanding.

Section 5.06. Section 4.08 of the agreement between the Bankand the Borrower dated September 20, 1976 (5th Power Project) is

hereby deleted, and the provisions of Sections 4.05 and 4.06 ofsuch agreement are hereby replaced by the provisions of Sections5.04 and 5.05 of this Agreement.

ARTICLE VI

Remedies of the Bank

Section 6.01. For the purposes of Section 6.02 of the Gen-eral Conditions, the following additional events are specifiedpursuant to paragraph (k) thereof:

(a) the Borrower or any Entity shall have failed to performany of its respective obligations under a Subsidiary Loan Con-tract;

(b) an Entity shall have failed to perform any of its obli-gations under the corresponding Project Agreement;

(c) an extraordinary situation shall have arisen whichshall make it improbable that any of ELECTROPERU or HIDRANDINAwill be able to perform its obligations under the ELECTROPERUProject Agreement or the HIDRANDINA Project Agreement, respec-tively;

(d) the Guarantor or any other authority having jurisdic-tion shall have taken any action for the dissolution or disestab-lishment of ELECTROPERU or for the suspension of its operations,or the Borrower or ELECTROPERU shall have passed any resolutionfor its respective dissolution or liquidation;

(e) (i) subject to subparagraph (ii) of this paragraph:

- 16 -

(A) the Guarantor or any other authority havingjurisdiction shall have taken any action forthe dissolution or disestablishment ofHIDRANDINA or for the suspension of itsoperations, or

(B) HIDRANDINA shall have passed any resolutionfor its dissolution or liquidation;

(ii) subparagraph (i) of this paragraph shall not applyif the Guarantor establishes to the satisfactionof the Bank that other legal entity or entities,acceptable to the Bank, has or have been assignedfunctions, powers and responsibilities equivalentto those set forth in the Charter with respect toHIDRANDINA and in HIDRANDINA's By-laws;

(f) any action or proceeding shall have been taken by anEntity or by others whereby any of the assets of such Entityshall or may be distributed among its creditors; and

(g) a change in (A) ELECTROPERU's Charter or its Estatutosor ELECTROLIMA's Charter or HIDRANDINA's Charter or (B) thelegislation of the Guarantor, shall have occurred which shallmaterially and adversely affect the ability of the Borrower orELECTROPERU or HIDRANDINA to carry out its respective covenants,agreements and obligations set forth in the Loan or ProjectAgreement, as the case may be.

For the purposes of this paragraph the term "change in thelegislation of the Guarantor" shall mean any change (including,but without limitation, any amendment or repeal of, or failure tocarry out or enforce, any such legislation) in the entire body oflegislation of the Guarantor (including, but without limitation,all constitutional provisions, statutes, laws, legislativedecrees, decree-laws, executive decrees, including SupremeDecrees, and regulations, and any other legal provisions of asimilar nature) directly or indirectly relating to the carryingon of the business of any of the Enterprises and the deter-mination and adjustment of the rates for the sale of electricityof any of the Enterprises.

- 17 -

Section 6.02. For the purposes of Section 7.01 of the Gen-eral Conditions, the following additional events are specifiedpursuant to paragraph (h) thereof:

(a) any event specified in paragraph (a) or (b) of Section6.01 of this Agreement shall occur and shall continue for a per-iod of 60 days after notice thereof shall have been given by theBank to the Borrower;

(b) any event specified in paragraph (d) or (e) or (f) ofSection 6.01 of this Agreement shall occur; and

(c) any event specified in paragraph (g) of Section 6.01 ofthis Agreement shall occur and shall continue for a period of 30days after notice thereof shall have been given by the Bank tothe Borrower.

ARTICLE VII

Effective Date; Termination

Section 7.01. The following events are specified as addi-tional conditions to the effectiveness of the Loan Agreementwithin the meaning of Section 12.01 (c) of the General Condi-tions:

(a) that this Agreement has been duly registered by CreditoPiblico; and

(b) that the ELECTROPERU Project Agreement has been exe-cuted and delivered on behalf of the Bank and ELECTROPERU and theHIDRANDINA Project Agreement has been executed and delivered onbehalf of the Bank and HIDRANDINA, and that each such executionand delivery have been duly authorized or ratified by all neces-sary governmental and corporate action.

Section 7.02. The following are specified as additionalmatters, within the meaning of Section 12.02 (c) of the GeneralConditions, to be included in the opinion or opinions to be fur-nished to the Bank:

- 18 -

(a) that this Agreement has been registered by CrfditoPublico; and

(b) that the ELECTROPERU Project Agreement has been dulyauthorized or ratified by, and executed and delivered on behalfof ELECTROPERU and the HIDRANDINA Project Agreement has been dulyauthorized or ratified by, and executed and delivered on behalfof HIDRANDINA, and are legally binding upon ELECTROPERU andHIDRANDINA, severally, in accordance with their respective terms.

Section 7.03. The date 620113/82 , is hereby speci-fied for the purpose of Section 12.04 of the General Conditions.

ARTICLE VIII

Addresses

Section 8.01. The following addresses are specified for thepurposes of Section 11.01 of the General Conditions:

For the Bank:

International Bank forReconstruction and Development

1818 H Street N.W.Washington, D.C. 20433United States of America

Cable address: Telex:

INTBAFRAD 440098 (ITT)Washington, D.C. 248423 (RCA) or

64145 (WUI)

For the Borrower:

ELECTROLIMA, S.A.Jirdn Lima 261Lima 1, Peru

Cable address: Telex:

LIGHT 39420057

- 19 -

IN WITNESS WHEREOF, the parties hereto, and COFIDE in therole described in the Preamble of this Agreement, acting throughtheir representatives thereunto duly authorized, have caused this

Agreement to be signed in their respective names in the Districtof Columbia, United States of America, as of the day and yearfirst above written.

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

ByRegional Vice President

Latin America and the Caribbean

ELECTROLIMA S.A.

ByAuthorized Representative

CORPORACION FINANCIERA DE DESARROLLO S.A.-COFIDE

ByAuthorized Representative

By/ Authorized Representative

- 20 -

SCHEDULE 1

Withdrawal of the Proceeds of the Loan

1. The table below sets forth the Categories of items to befinanced out of the proceeds of the Loan, the allocation of theamounts of the Loan to each Category and the percentage ofexpenditures for items so to be financed in each Category:

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Goods for 28,700,000 100% of for-Part A (1) eign expendi-of the ditures andProject 100% of ex-

factory costof local ex-

penditures

(2) Civil works 9,700,000 30%(ex-cludingamounts wiheld as per-formanceguarantees)for Part A(1) (a),Part A (1)(b) andPart A (2)

(3) Goods and 2,300,000 100% of for-fellowships eign expendi-for Part A tures(6) of theProject

(4) Consultants' 6,000,000services forPart A (2) ofthe Project

- 21 -

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

under Sections3.02 and 3.04(a) of thisAgreement,Part A (3),Part A (4),Part A (5),and Part A (6)of the Project

(a) Procured 100% of for-abroad eign expendi-

tures

(b) Locally 90% of localprocured expenditures

(5) Goods and fellow- 2,700,000 100% of for-ships for Part B eign expendi-(2) of the Project tures

(6) Consultants' 6,300,000services forPart B of theProject

(a) Procured 100% of for-abroad eign expendi-

tures

(b) Locally 90% of localprocured expenditures

(7) Consultants' 2,500,000services forPart C of theProject

- 22 -

Amount of theLoan Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(a) Procured 100% of for-abroad eign expendi-

tures

(b) Locally 90% of localprocured expenditures

(8) Fee under 1,200,000 Amount dueSection 2.05of this Agree-ment

(9) Unallocated 21,800,000

TOTAL 81,200,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures inthe currency of any country other than the Guarantor and forgoods or services supplied from the territory of any countryother than the Guarantor; and

(b) the term "local expenditures" means expenditures in thecurrency of the Guarantor or for goods or services supplied fromthe territory of the Guarantor.

3. The disbursement percentages have been calculated in compli-ance with the policy of the Bank that no proceeds of the Loanshall be disbursed on account of payments for taxes levied by, orin the territory of, the Guarantor on goods or services, or onthe importation, manufacture, procurement or supply thereof; tothat end, if the amount of any such taxes levied on or in respectof any item to be financed out of the proceeds of the Loandecreases or increases, the Bank may, by notice to the Borrower,increase or decrease the disbursement percentage then applicable

- 23 -

to such item as required to be consistent with the aforementionedpolicy of .the Bank.

4. Notwithstanding the provisions of paragraph 1 above, nowithdrawals shall be made:

(a) in respect of payments made for expenditures prior tothe date of this Agreement, except that withdrawals in an aggre-gate amount not exceeding the equivalent of $1,000,000 may bemade in respect of Categories (4) and (6) on account of paymentsmade for such expenditures before that date but after Septem-ber 30, 1981, to the extent such expenditures have been incurredfor purposes of Part A (5) or B (1) of the Project, or both;

(b) on account of expenditures for Part A (2) of the Proj-ect unless the Bank and the Borrower have approved the findingsand conclusions of the studies included in Part B.2 of the PriorProject and the Bank has been furnished with evidence satisfac-tory to the Bank that the carrying out of Part A (2) of the Proj-ect will be consistent with such approval;

(c) in respect of payment made for expenditures under Cate-gory (5), or (6), or (7) unless !vidence satisfactory to the Bankhas been furnished to the Bank showing that the correspondingSubsidiary Loan Contract has been executed on behalf of the Bor-rower and the applicable Entity, including an opinion or opinionssatisfactory to the Bank of counsel acceptable to the Bank show-ing on behalf of the Borrower and such Entity that such Subsid-iary Loan Contract has been duly authorized and ratified, andexecuted on behalf of the Borrower and such Entity, and islegally binding thereupon in accordance with its terms; and

(d) on account of expenditures for Part C of the Project,unless evidence satisfactory to the Bank has been furnished tothe Bank that the Mayush Project is justified under the MasterPlan.

5. Notwithstanding the allocation of an amount of the Loan orthe disbursement percentages set forth in the table in paragraphI above, if the Bank has reasonably estimated that the amount ofthe Loan then allocated to any Category will be insufficient tofinance the agreed percentage of all expenditures in that Cate-gory, the Bank may, after consulting with the Borrower: (i)reallocate to such Category, to the extent required to meet the

-24-

estimated shortfall, proceeds of the Loan which are then allo-cated to another Category and which in the opinion of the Bankare not needed to meet other expenditures, and (ii) if such real-location cannot fully meet the estimated shortfall, reduce thedisbursement percentage then applicable to such expenditures inorder that further withdrawals under such Category may continueuntil all expenditures thereunder shall have been made.

6. If the Bank shall have reasonably determined that the pro-curement of any item in any Category is inconsistent with theprocedures set forth or referred to in this Agreement, no expen-ditures for such item shall be financed out of the proceeds ofthe Loan and the Bank may, without in any way restricting or lim-iting any other right, power or remedy of the Bank under the LoanAgreement, by notice to the Borrower, cancel such amount of theLoan as, ir. the Bank's reasonable opinion, represents the amountof such expenditures which would otherwise have been eligible forfinancing out of the proceeds of the Loan.

- 25 -

SCHEDULE 2

Description of the Project

Part A: To be carried out by the Borrower

(1) Borrower's 1982-1986 Distribution Program

(a) Construction of new substations and expansion andimprovement of existing substations, totalling about 19in number, with an aggregate of about 390megavolt-ampere of additional transformer capacity, andequipping thereof as required.

(b) Construction of about 700 circuit kilometers of asingle or double circuit, 60 kV or 10 kV, as the casemay be, distribution lines.

(c) Acquisition and installation of about 1,700 10,000/220 V transformers and equipment as required.

(d) Installation of about 400 circuit kilometers of singleor double circuit 220 V urban distribution lines andstreet lighting equipment as required.

(e) Domiciliary connection to about 130,000 new clients.

(f) Acquisition and utilization of equipment to improvethe Borrower's communications system and auxiliaryservices.

(2) Yuracmayo Dam

Construction of an earth dam about 44 meters high atYuracmayo in the Rimac river forming a reservoir of about 45million cubic meters, a concrete spillway, a valve chamber, andacquisition and installation of related operation and controlequipment.

(3) Huinco Hydro Plant Expansion

(a) Studying the feasibility of, and (b), if warranted,preparation of final design and tender documents for,

- 26 -

addition of a fifth 60 megawatt unit to the existing240 megawatt Huinco plant.

(4) Salto Bajo Scheme

Studying (i) the alternatives for the use of the hydropotential downstream from the Huinco plant mentioned in (3) above(the Salto Bajo Scheme) and (ii) the selection of one alternativeand the feasibility thereof.

(5) Mantaro Transfer Scheme

Studying and preparation of the final design and preparationof tender documents for the expansion of the Transandean Tunneland the modifications to the Marcapomacocha Canal, both as partof the overall preparatory studies and activities required forthe carrying out of the Mantaro Transfer Scheme.

(6) Enhancement of the Borrower's training facilities andtraining of the Borrower's staff, and strengthening of theBorrower's administrative and technical procedures

(a) Relocation and renewal of the Borrower's trainingcenter and acquisition and utilization of equipmenttherefor.

(b) Up-dating of teaching material and methodology.

(c) Training of instructors.

(d) A program of fellowships for the Borrower's staff.

(e) A program of technical assistance to strengthen theBorrower's administrative and technical proceduresincluding procurement methods, inventory control systemand distribution planning.

Part B: To be carried out by ELECTROPERU

(1) Mantaro Transfer Scheme

Studying and preparation of the final design, preparation oftender documents and the remainder of the preparatory studies andactivities required for the carrying out of the Mantaro Transfer

- 27 -

Scheme, other than those referred to in Part A (5) of theProject.

(2) Training

(a) Execution of a training program for instructors whowill train ELECTROPERU's staff in fields such as plantoperation and maintenance, distribution networkmaintenance and testing of measurement equipment.

(b) Strengthening of ELECTROPERU's training center, andacquisition and utilization of equipment therefor.

(c) A program of fellowships for ELECTROPERU's staff.

(3) Technical Assistance

A program of technical assistance for ELECTROPERU tostrengthen its financial planning capability.

Part C: To be carried out by HIDRANDINA

Mayush Hydro Project

After completion of Part C.2 of the Prior Project,preparation of the final design and tender documents therefor.

The Project is expected to be completed by December 31,1986.

- 28 -

SCHEDULE 3

Amortization Schedule

Payment of PrincipalDate Payment Due (expressed in dollars)*

On each May I and November 1

beginning November 1, 1986through November 1, 1998 3,125,000

On May 1, 1999 3,075,000

* The figures in this column represent dollar equivalentsdetermined as of the respective dates of withdrawal; seeGeneral Conditions, Section 3.04.

- 29 -

Premiums on Prepayment

The following percentages are specified as the premiumspayable on repayment in advance of maturity of any portion of theprincipal amount of the Loan pursuant to Section 3.04 (b) of theGeneral Conditions:

Time of Prepayment Premium

Not more than three yearsbefore maturity 2.05%

More than three years but notmore than six years beforematurity 4.10%

More than six years but notmore than eleven yearsbefore maturity 7.50%

More than eleven years but notmore than fifteen yearsbefore maturity 10.25%

More than fifteen yearsbefore maturity 11.60%

- 30 -

SCHEDULE 4o

Procurement

A. International Competitive Bidding

1. Except as provided in Part C hereof, goods and civil worksshall be procured under contracts awarded in accordance withprocedures consistent with those set forth in the current editionof the "Guidelines for Procurement under World Bank Loans and IDACredits" published by the Bank in March 1977 (hereinafter calledthe Guidelines), on the basis of international competitivebidding as described in Part A of the Guidelines.

2. For goods and works to be procured on the basis of inter-national competitive bidding, and in addition to the requirementsof paragraph 1.2 of the Guidelines, the Borrower shall prepareand forward to the Bank as soon as possible, and in any event notlater than 60 days prior to the date of availability to thepublic of the first tender or prequalification documents relatingthereto, as the case may be, a general procurement notice, insuch form and detail and containing such information as the Bankshall reasonably request; the Bank will arrange for the publica-tion of such notice in order to provide timely notification toprospective bidders of the opportunity to bid for the goods andworks in question. The Borrower shall provide the necessaryinformation to update such notice annually so long as any goodsor works remain to be procured on the basis of international com-petitive bidding.

3. Bidders for the works included in Part A (2) of the Projectshall be prequalified as described in paragraph 1.3 of Part A ofthe Guidelines.

4. For the purposes of evaluation and comparison of bids forthe supply of goods to be procured on the basis of internationalcompetitive bidding: (i) bidders shall be required to state intheir bid the c. and f. (port of entry) price for the importedgoods, or the ex-factory price or off-the-shelf price of othergoods offered in such bid; (ii) customs duties and other importtaxes levied in connection with the importation, or the sales andsimilar taxes levied in connection with the sale or delivery,pursuant to the bid, of the goods shall not be taken into accountin the evaluation of the bids; and (iii) the cost oftransportation

- 31 -

insurance, inland freight and other expenditures incidental tothe delivery of the goods to the place of their use or installa-tion shall be included.

B. Preference for Domestic and Regional Manufacturers

In the procurement of goods in accordance with the proce-dures described in Part A of this Schedule, goods manufactured inPeru or in a country which is a party to the Cartagena Agreementor to any other regional trade agreement, to which the Guarantoris a party and which is acceptable to the Bank (the CartagenaAgreement and any such other regional agreement hereinaftercalled the Regional Agreement), may be granted a margin of pref-erence in accordance with, and subject to, the following provi-sions:

1. All bidding documents for the procurement of goodsshall clearly indicate any preference which will be granted, theinformation required to establish the eligibility of a bid forsuch preference and the following methods and stages that will befollowed in the evaluation and comparison of bids.

2. After evaluation, responsive bids will be classified inone of the following four groups:

(a) Group A: bids offering goods manufactured in Peruif the bidder shall have established to the satis-faction of the Borrower and the Bank that the man-ufacturing cost of such goods includes a valueadded in Peru equal to at least 20% of theex-factory bid price of such goods.

(b) Group B: all other domestic bids.

(c) Group C: bids offering goods manufactured in acountry other than Peru which is a party to theRegional Agreement.

(d) Group D: bids offering goods manufactured else-where.

3. In order to determine the lowest evaluated bid of eachgroup, all evaluated bids in each group shall first be comparedamong themselves, without taking into account customs duties and

- 32 -

other import taxes levied in connection with the importation, and

sales and similar taxes levied in connection with the sale or

delivery, pursuant to the bids, of the goods. Such lowest evalu-

ated bids shall then be compared with each other, and if, as a

result of this comparison, a bid from group A or group B is the

lowest, it shall be selected for the award.

4. If, as a result of the comparison under paragraph 3

above, the lowest bid is a bid from group C or group D, all group

C and group D bids shall be further compared with the lowest

evaluated bid from group A after adding to the evaluated bid

price of the imported goods offered in each group C and group D

bid, for the purpose of this further comparison only, an amount

equal to: (i) the amount of customs duties and other import taxes

which a non-exempt importer would have to pay for the importation

of the goods offered in such group C bid or group D bid; or (ii)

15% of the c. and f. bid price of such goods if said customs

duties exceed 15% of such price. If either the group A bid or the

group C bid is the lowest, it shall be selected for the award.

5. If, as a result of the further comparison under paragraph

4 above, a bid from group D is the lowest, and provided there are

taxes actually payable for the importation of goods offered in

the lowest evaluated bid from group C, as determined under para-

graph 3 above, all group D bids shall be finally compared with

such lowest evaluated bid from group C, after adding to the c.

and f. bid price of goods to be imported offered in each group D

bid, for the purpose of this final comparison only, an amount

equal to the smaller of (i) the positive difference, if any,

between the amount of customs duties and other import taxes which

would actually be payable for the importation of goods offered in

such group D bid and for the importation of goods offered in

group C bid, or (ii) 15% of the c. and f. price of goods to be

imported offered in such group D bid. If the lowest bid in such

comparison is the group C bid, it shall be selected for the

award; if not, the lowest evaluated bid from group D, as deter-

mined under paragraph 3 above, shall be selected for the award.

6. The detailed technical evaluation shall be performed only on

the lowest responsive offer in each group.

- 33 -

C. Other Procurement Procedures

1. Contracts for communication equipment, special workshop andlaboratory equipment and computer software and teaching materialsfor Part A (1) (f), Part A (6) (b) and Part B (2) of the Project,may be awarded following evaluation and comparison of proposalsrequested from not less than three qualified suppliers from notless than three countries and territories eligible under theGuidelines, but only to the extent each contract so awarded isestimated to cost not more than the equivalent of $150,000, isawarded to the lowest evaluated proposal evaluated and comparedwith other proposals in accordance with criteria and proceduresset forth in Part A of such Guidelines and the aggregate of thecontracts so awarded does not exceed the equivalent of$1,500,000.

2. Contracts for civil works under Part A (1) of the Project,including installation of equipment acquired thereunder, shall beawarded after competitive bidding locally advertised and applyingfor bid evaluation and comparison the same criteria and proce-dures to be used in respect of international competitive biddingin accordance with the Guidelines.

D. Review of Procurement Decisions by the Bank

1. Review of prequalification. The Borrower shall, beforequalification is invited, inform the Bank in detail of the proce-dure to be followed, and shall introduce such modifications insaid procedure as the Bank shall reasonably request. The list ofprequalified bidders, together with a statement of their qualifi-cations and of the reasons for the exclusion of any applicant forprequalification shall be furnished by the Borrower to the Bankfor its comments before the applicants are notified of the Bor-rower's decision, and the Borrower shall make such additions to,deletions from, or modifications in, the said list as the Bankshall reasonably request.

2. Review of invitations to bid and of proposed awards andfinal contracts:

With respect to all contracts for goods and civil worksestimated to cost the equivalent of $200,000 or more:

-34 -

(a) Before bids are invited, the Borrower shall furnish tothe Bank, for its comments, the text of the invitations to bidand the specifications and other bidding documents, together witha description of the advertising procedures to be followed forthe bidding, and shall make such modifications in the said docu-ments or procedures as the Bank shall reasonably request. Anyfurther modification to the bidding documents shall require theBank's concurrence before it is issued to the prospectivebidders.

(b) After bids have been received and evaluated, theBorrower shall, before a final decision on the award is made,inform the Bank of the name of the bidder to which it intends toaward the contract and shall furnish to the Bank, in sufficienttime for its review, a detailed report on the evaluation andcomparison of the bids received, and such other information asthe Bank shall reasonably request. The Bank shall, if itdetermines that the intended award would be inconsistent with theGuidelines or this Schedule, promptly inform the Borrower andstate the reasons for such determination.

(c) The terms and conditions of the contract shall not,without the Bank's concurrence, materially differ from those onwhich bids were asked or prequalification was invited.

(d) Two conformed copies of the contract shall be furnishedto the Bank promptly after its execution and prior to the submis-sion to the Bank of the first application for withdrawal of fundsfrom the Loan Account in respect of such contract.

3. With respect to each contract not governed by the precedingparagraph, the Borrower shall furnish to the Bank, promptly afterits execution and prior to the submission to the Bank of thefirst application for withdrawal of funds from the Loan Accountin respect of such contract, two conformed copies of such con-tract, together with the analysis of the respective bids, recom-mendations for award and such other information as the Bank shallreasonably request. The Bank shall, if it determines that theaward of the contract was not consistent with the Guidelines orthis Schedule, promptly inform the Borrower and state the reasonsfor such determination.

4. Before agreeing to any material modification or waiver ofthe terms and conditions of a contract, or granting an extension

- 35 -

of the stipulated time for performance of such contract, orissuing any change order under such contract (except in cases ofextreme urgency) which would increase the cost of the contract bymore than 20% of the original price, the Borrower shall informthe Bank of the proposed modification, waiver, extension orchange order and the reasons therefor. The Bank, if it determinesthat the proposal would be inconsistent with the provisions ofthis Agreement, shall promptly inform the Borrower and state thereasons for its determination.

E. Procurement of Consultant Services

1. Consultants whose services are to be employed for purposesof Section 3.02 (a) of this Agreement and Section 2.02 (a) ofeach of the Project Agreements shall be selected after invitingproposals from a short list of firms or individuals. Such shortlist will be sent to the Bank for approval and the invitations tobe issued will, in each case, set forth the criteria to be takeninto account for the selection of the individual or firm to whichthe contract will be awarded. Such criteria will be determinedfrom time to time by agreement between the Bank and the Enter-prise in question, and will take price into account in accordancewith methods and procedures satisfactory to the Bank.

2. Although under certain circumstances, as described in theGuidelines referred to in Section 3.02 (a) of this Agreement, theBank may consider the possibility of asking proposals from asingle firm or individual, extended lists will not be used forasking proposals.

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 Z 7iL.. day of i, 198

FOR SECRETARY