Gef Trust Fund Grant Number Tf 052141 Hr
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CONFORMED COPY
LOAN NUMBER 7198 HR
GEF TRUST FUND GRANT NUMBER TF 052141 HR
Loan Agreement
(Energy Efficiency Project)
between
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
and
HRVATSKA ELEKTROPRIVREDA D.D.
Dated November 10, 2003
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LOAN NUMBER 7198 HR
GEF TRUST FUND GRANT NUMBER TF 052141 HR
LOAN AGREEMENT
AGREEMENT, dated November 10, 2003, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and HRVATSKA ELEKTROPRIVREDA D.D. (HEP), a power company established under the laws of the Republic of Croatia (the Borrower).
WHEREAS: (A) Republic of Croatia (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of Part A of the Project;
(B)by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan;
(C)by an agreement of even date herewith (the GEF Trust Fund Grant Agreement), the Bank, acting as the implementing agency of the Global Environment Facility (GEF) has agreed to make a grant (the GEF Trust Fund Grant) to the Guarantor in the amount of seven million Dollars ($7,000,000) to assist in financing Parts B, C and D of the Project on the terms and conditions set forth in the GEF Trust Fund Grant Agreement;
(D) Part A of the Project will be carried out by HEP ESCO with the Borrower’s assistance and, as part of such assistance, the Borrower will make the proceeds of the loan provided for in Article II of this Agreement (the Loan) available to HEP ESCO, as set forth in this Agreement; and
WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
General Conditions; Definitions
Section 1.01.The “General Conditions Applicable to Loan and Guarantee Agreements for Fixed-Spread Loans” of the Bank, dated September 1, 1999, (the General Conditions) constitute an integral part of this Agreement.
Section 1.02.Unless the context otherwise requires, the several terms defined in the General Conditions, the Preamble to this Agreement and the GEF Trust Fund Grant Agreement have the respective meanings therein set forth and the following additional terms have the following meanings:
(a)“Beneficiaries” and “Beneficiary” mean collectively the individual energy end users and individually the individual energy end user meeting the Eligibility Criteria (hereinafter defined) for assistance under the Project;
(b)“Co-financing Bank” means a commercial bank duly established and operating in the Republic of Croatia, selected, in accordance with the criteria and procedures set forth in the PIP, to arrange a commercial loan facility for co-financing Energy Saving Investments under Part A of the Project;
(c)“Eligibility Criteria” means the criteria adopted by the Borrower and HEP ESCO (hereinafter defined) and included in the PIP (hereinafter defined), for selection of Beneficiaries and Energy Saving Investments (hereinafter defined) under the Project;
(d) “Energy Performance Service Contract” means a contract to be entered into between HEP ESCO and a Beneficiary, the content and terms and conditions of which are set forth in the PIP (hereinafter defined), as the same may be amended from time to time, and such term includes all schedules to any Energy Performance Service Contract;
(e)“Energy Saving Investment” means an energy saving investment eligible for financing with proceeds of the Loan under Energy Performance Service Contract, in accordance with the Eligibility Criteria;
(f)“Energy Service Providers” means commercial enterprises duly registered and operating in the Republic of Croatia and benefiting from commercial loans from Participating Banks (as such terms is defined in Section 1.02 (o) of the GEF Trust Fund Grant Agreement) under Part C of the Project for Energy Saving Investments meeting Eligibility Criteria;
(g)“Environmental Management Framework” means the framework, satisfactory to the Bank, prepared and adopted by the Borrower and included in the PIP (hereinafter defined), describing the environmental mitigation, monitoring and institutional measures for the Project, including the guidelines for environmental screening and assessment of Energy Saving Investments;
(h)“Financial Monitoring Report” means each report prepared in accordance with Section 4.02 of this Agreement;
(i)“HEP ESCO” means Energy Service Company of HRVATSKA ELEKTROPRIVREDA d.d., established pursuant to Statement on Establishment of March 14, 2002, and registered in the commercial court of Zagreb on April 24, 2002;"
(j)“HEP ESCO Project Implementation Agreement” means the agreement to be entered into between the Borrower and HEP ESCO pursuant to the provisions of paragraph 5 of Schedule 4 to this Agreement;
(k)“Partial Credit Guarantee Facility” means the guarantee facility provided under Part C of the Project;
(l)“PIP” means the Project Implementation Plan adopted by HEP (with respect to implementation of Parts A, B and D of the Project) and HBOR (with respect to implementation of Part C of the Project), setting forth rules and regulations for implementation of the Project, as the same may be amended from time to time with the agreement of the Bank; and
(m)“Special Account” means the account referred to in Section 2.02 (b) of this Agreement.
ARTICLE II
The Loan
Section 2.01.The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount equal to four million four hundred thousand Euro (EUR4,400,000), as such amount may be converted from time to time through a Currency Conversion in accordance with the provisions of Section 2.09 of this Agreement.
Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Bank shall so agree, to be made) in respect of: (i) the reasonable cost of goods and works required for carrying out Energy Saving Investment under Part A of the Project and to be financed out of the proceeds of the Loan; and (ii) the front-end fee referred to in Section 2.04 of this Agreement and any premium in respect of an Interest Rate Cap or Interest Rate Collar payable by the Borrower in accordance with Section 4.04 (c) of the General Conditions.
(b)The Borrower may open and maintain in Euro a special deposit account, in a commercial bank, on terms and conditions satisfactory to the Bank, including appropriate protection against set off, seizure and attachment.
Section 2.03.The Closing Date shall be June 30, 2010, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date.
Section 2.04. (a) The Borrower shall pay to the Bank a front-end fee in an amount equal to forty-four thousand Euro (EUR44,000). The Borrower agrees that on or promptly after the Effective Date, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amount of such fee.
Section 2.05. The Borrower shall pay to the Bank a commitment charge on the principal amount of the Loan not withdrawn from time to time, at a rate equal to: (i) eighty-five one-hundredths of one percent (0.85%) from the date on which such charge commences to accrue in accordance with the provisions of Section 3.02 of the General Conditions to but not including the fourth anniversary of such date; and (ii) seventy-five one-hundredths of one percent (0.75%) thereafter.
Section 2.06.The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to the Variable Rate; provided, that upon a Conversion of all or any portion of the principal amount of the Loan, the Borrower shall, during the Conversion Period, pay interest on such amount in accordance with the relevant provisions of Article IV of the General Conditions.
Section 2.07.Interest, commitment and other charges shall be payable semiannually in arrears on April 15 and October 15 in each year.
Section 2.08. (a) Subject to the provisions of paragraph (b) of this Section, the Borrower shall repay each Disbursed Amount in semiannual installments to be payable on each April 15 and October 15, the first such installment to be payable on the ninth (9th) Interest Payment Date following the Maturity Fixing Date for said Disbursed Amount and the last such installment to be payable on the twentieth (20th) Interest Payment Date following the Maturity Fixing Date for said Disbursed Amount. Each installment except for the last one shall be equal to one-twelfth (1/12) of said Disbursed Amount. The last installment shall be equal to the remaining outstanding amount of said Disbursed Amount.
(b)Notwithstanding the provisions of paragraph (a) of this Section, if any one or more installments of principal of any Disbursed Amount would, pursuant to the provisions of such paragraph (a), be payable after October 15, 2019, the Borrower shall also pay on such date the aggregate amount of all such installments.
(c)The Bank shall notify the Borrower and the Guarantor of the amortization schedule for each Disbursed Amount promptly after the Maturity Fixing Date for said Disbursed Amount.
(d)Notwithstanding the provisions of paragraphs (a) through (c) of this Section, in the event of a Currency Conversion of all or any portion of a Disbursed Amount to an Approved Currency, the amount so converted in said Approved Currency that shall be repayable on any Principal Payment Date occurring during the Conversion Period, shall be determined by the Bank by multiplying such amount in its currency of denomination immediately prior to said Conversion by either: (i) the exchange rate that reflects the amounts of principal in said Approved Currency payable by the Bank under the Currency Hedge Transaction relating to said Conversion; or (ii) if the Bank so determines in accordance with the Conversion Guidelines, the exchange rate component of the Screen Rate.
Section 2.09.(a) The Borrower may at any time request any of the following Conversions of the terms of the Loan in order to facilitate prudent debt management:
(i)a change of the Loan Currency of all or any portion of the principal amount of the Loan, withdrawn or unwithdrawn, to an Approved Currency;
(ii)a change of the interest rate basis applicable to all or any portion of the principal amount of the Loan from a Variable Rate to a Fixed Rate, or vice versa; and
(iii)the setting of limits on the Variable Rate applicable to all or any portion of the principal amount of the Loan withdrawn and outstanding by the establishment of an Interest Rate Cap or Interest Rate Collar on said Variable Rate.
(b)Any conversion requested pursuant to paragraph (a) of this Section that is accepted by the Bank shall be considered a “Conversion”, as defined in Section 2.01 (7) of the General Conditions, and shall be effected in accordance with the provisions of Article IV of the General Conditions and of the Conversion Guidelines.
(c)Promptly following the Execution Date for an Interest Rate Cap or Interest Rate Collar in respect of which the Borrower has requested that the premium be paid out of the proceeds of the Loan, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and pay to itself the amounts required to pay any premium payable in accordance with Section 4.04 (c) of the General Conditions up to the amount allocated from time to time for such purpose in the table in paragraph 1 of Schedule 1 to this Agreement.
ARTICLE III
Execution of the Project
Section 3.01.(a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under this Agreement, shall cause HEP ESCO to carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate financial, administrative, engineering, and environmental practices, and shall take or cause to be taken all action, including provision of funds, facilities, services and other resources, necessary or appropriate to enable HEP ESCO to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance.
(b)Without limitation upon the provisions of paragraph(a) of this Section and except as the Bank and the Borrower shall otherwise agree, the Borrower shall cause HEP ESCO to carry out Part A of the Project in accordance with the Implementation Program set forth in Schedule 4 to this Agreement.
(c)The Borrower shall relend the proceeds of the Loan to HEP ESCO (the Subsidiary Loan) under the HEP ESCO Project Implementation Agreement to be entered into between the Borrower and HEP ESCO, under terms and conditions which shall have been approved by the Bank, including, but not limited to, the conditions for HEP ESCO to carry out Part A of the Project in accordance with the provisions set forth in paragraph 5 of Schedule 4 to this Agreement.
(d)The Borrower shall exercise its rights under the HEP ESCO Project Implementation Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, the Borrower shall not assign, abrogate or waive the HEP ESCO Project Implementation Agreement or any provision thereof.
Section 3.02.Except as the Bank shall otherwise agree, procurement of the goods and works required for Part A of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 3 to this Agreement.
Section 3.03.For the purposes of Section 9.08 of the General Conditions and without limitation thereto, the Borrower shall:
(a)prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than six (6) months after the Closing Date or such later date as may be agreed for this purpose between the Borrower and the Bank, a plan for the future operation of the Project; and
(b)afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan.
ARTICLE IV
Financial Covenants
Section 4.01.(a) The Borrower shall, and shall cause HEP ESCO to maintain a financial management system, including records and accounts, and prepare financial statements, all in accordance with accounting standards acceptable to the Bank, consistently applied, adequate to reflect its operations and financial condition and to register separately the operations, resources and expenditures related to Part A of the Project.
(b)The Borrower shall, and shall cause HEP ESCO to:
(i)have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) and the records and accounts for the Special Account for each fiscal year audited, in accordance with auditing standards acceptable to the Bank, consistently applied, by independent auditors acceptable to the Bank;
(ii)furnish to the Bank as soon as available, but in any case not later than six (6) months after the end of each such year, (A) certified copies of the financial statements referred to in paragraph (a) of this Section, for such year as so audited, and (B) an opinion on such statements and report of such audit, by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and
(iii)furnish to the Bank such other information concerning such records, accounts, and financial statements, and the audit thereof, and concerning said auditors, as the Bank may from time to time reasonably request.
(c)For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditures the Borrower shall and shall cause HEP ESCO to:
(i)maintain or cause to be maintained, in accordance with paragraph (a) of this Section, records and separate accounts reflecting such expenditures;
(ii)retain, until at least one (1) year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;
(iii)enable the Bank’s representatives to examine such records; and
(iv)ensure that such records and accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.
Section 4.02.(a) Without limitation upon the Borrower’s and HEP ESCO’s progress reporting obligations set forth in Schedule 4 to this Agreement, the Borrower shall cause HEP ESCO to prepare and furnish to the Bank a Financial Monitoring Report (FMR), in form and substance satisfactory to the Bank, which: