Loan Agreement. (Gas Sector Development Project - Bolivia-Brazil Gas Pipeline) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT.

Transcription

1 Public Disclosure Authorized CONFORMED COPY LOAN NUMBER 4265-BR Loan Agreement Public Disclosure Authorized (Gas Sector Development Project - Bolivia-Brazil Gas Pipeline) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and Public Disclosure Authorized TRANSPORTADORA BRASILEIRA GASODUTO BOLÍVIA-BRASIL S/A Dated December 17, 1998 LOAN NUMBER 4265-BR LOAN AGREEMENT Public Disclosure Authorized AGREEMENT, dated December 17, 1998, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and TRANSPORTADORA BRASILEIRA GASODUTO BOLÍVIA-BRASIL S/A (the Borrower). WHEREAS (A) the Federative Republic of Brazil (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the project described in Schedule 2 to this Agreement (the Project), have requested the Bank to assist in the financing of the Project; (B) the Project is the Brazilian section of the project for the construction of an integrated gas pipeline extending from a point near the city of Rio Grande, in Bolivia, to or near the city of Campinas, in Brazil, and then to the city of Porto Alegre, in Brazil, with a lateral line from the city of Campinas to the city of Guararema, in Brazil, including conduits, compressors, meters, valves and other appurtenant facilities, such pipeline to be about 3,150 kilometers long and to have a gas transportation capacity of about 30 million cubic meters per day (the Bolivia-Brazil Gas Pipeline Project); (C) for the purposes of ensuring the feasibility of the carrying out and operation of the Bolivia-Brazil Gas Pipeline Project, agreements were entered into and will be entered into, as described in Schedule 6 to this Agreement, to govern the supply of natural gas, the carrying out of the Bolivian section of the Bolivia-Brazil

2 Gas Pipeline Project, the transportation of such gas in the Bolivian and Brazilian territories, and the undertakings of the shareholders of the Borrower in respect of their equity and other financing contributions to the Borrower; (D) for purposes of financing the carrying out of the Project, the Borrower intends: (i) to contract from: (I) the Inter-American Development Bank (IDB) a loan (the IDB Loan) in an amount of $240,000,000 equivalent on the terms and conditions set forth in an agreement (the IDB Loan Agreement) to be entered into between the Borrower and IDB; (II) the Corporación Andina de Fomento (CAF) a loan in an amount of $80,000,000 equivalent (the CAF Loan) on the terms and conditions set forth in an agreement (the CAF Loan Agreement) to be entered into between the Borrower and CAF; (III) the European Investment Bank (EIB) a loan in an amount of $60,000,000 equivalent (the EIB Loan) on the terms and conditions set forth in an agreement (the EIB Loan Agreement) to be entered into between the Borrower and EIB; and (IV) certain financial institutions, through Petróleo Brasileiro S.A. - PETROBRAS (Petrobras), loans in an aggregate amount of up to $417,000,000 equivalent (the Other Loans), as required for the Project, on the terms and conditions set forth in contractual arrangements (the Petrobras Lending Arrangements) to be entered into by the Borrower and Petrobras and, when applicable, such financial institutions; and (ii) to issue non-convertible bonds, with the partial guarantee of the Bank, in an amount of up to $180,000,000 equivalent (the Bond Issue), as required for the Project; (E) the Guarantor, through its Minister of Mines and Energy: (i) delivered to the Bank a letter, dated November 26, 1997 (the Policy Letter), describing, inter alia, the Guarantor s plan to implement its program for fuels price deregulation and the guidelines for the implementation of the Guarantor s Law No. 9478, of August 6, 1997 (the Hydrocarbons Law), and expressing the Guarantor s commitments regarding the authorization for the operation of the Project, the Guarantor s participation in the capital of the Borrower and the carrying out with the Bank of a mid-term review to assess progress of the actions to be taken under the Policy Letter; and (ii) will employ consultants (the Oil and Gas Sector Consultants) for the purposes of assisting the Guarantor in the carrying out of the studies and training activities required for the initial implementation of the provisions of the Hydrocarbons Law, such consultants services to be financed under Loan 3376-BR, provided pursuant to the Loan Agreement between the Bank and Petrobras, dated October 26, 1992, as amended; (F) the Bank has been authorized by the Government of Bolivia, through its letter dated November 12, 1997, to visit, from time to time, the Bolivian territory for purposes related to the Bolivia-Brazil Gas Pipeline Project; (G) Petrobras, through the letter sent to the Bank on November 25, 1997 (the Petrobras Letter), in its capacity as the contractor in charge of the construction of the gas pipeline in the Bolivian section of the Bolivia-Brazil Gas Pipeline Project, has undertaken to comply with certain obligations regarding the carrying out of such section of the Bolivia-Brazil Gas Pipeline Project, including the carrying out of the plans, issued in September 1997 (or any amendment to such plans, satisfactory to the Bank) for the implementation of environmental protection measures and development of indigenous population in connection with the carrying out of such section; (H) 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; 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 The General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans of the Bank, dated May 30, 1995, with the modification of Section 6.03 thereof set forth below (the General Conditions) constitute an integral part of this Agreement:

3 Section Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) at any time, the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project s costs to be financed out of the proceeds of the Loan, or (c) at any time, the Bank determines, with respect to any contract to be financed out of the proceeds of the Loan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement or the execution of such contract, without the Borrower having taken timely and appropriate action satisfactory to the Bank to remedy the situation, and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (d) at any time, the Bank determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (e) after the Closing Date, an amount of the Loan shall remain unwithdrawn from the Loan Account, or (f) the Bank shall have received notice from the Guarantor pursuant to Section 6.07 with respect to an amount of the Loan, the Bank may, by notice to the Borrower and the Guarantor, terminate the right of the Borrower to make withdrawals with respect to such amount. Upon the giving of such notice, such amount of the Loan shall be cancelled. Section Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) Brazil EMP means the environmental management plan, issued in July 1997 (or any amendment thereto satisfactory to the Bank), which provides for the implementation of environmental protection measures in connection with the execution of the Project, including ecological compensation projects to be carried in accordance with the contractual arrangements referred to in Section 3.03 (d) of this Agreement; (b) Brazil IPDP means a plan, satisfactory to the Bank, to be issued pursuant to Section 7.01 (h) of this Agreement (or any amendment thereto satisfactory to the Bank), for the development of the indigenous population affected or to be affected by the carrying out of the Project; (c) Brazil TCO Capacity means the capacity of TBG to transport on behalf of Petrobras the TCO; (d) Brazil TCQ Capacity means the capacity of TBG to transport on behalf of Petrobras the TCQ; (e) Charter means the Borrower s charter, approved by its shareholders on April 18, 1997, and amended on June 25, 1997, and as may be amended from time to time with the agreement of the Bank; (f) Environmental Auditor means the firm referred to in Section 3.03 (b) (ii)of this Agreement; (g) Environmental Supervision Firm means the firm referred to in Section 3.03 (b) (i) of this Agreement; (h) Special Account means the account referred to in Section 2.02 (b) of this Agreement; (i) TCO means the quantity of up to six million cubic meters of gas per day in excess of the TCQ; (j) TCQ means the minimum quantity of gas per day which YPFB is obligated to sell and deliver to Petrobras pursuant to the Natural Gas Supply Agreement referred to in paragraph 1 of Schedule 6 to this Agreement;

4 (k) Vegetation Management Plan means the plan referred to in Section 3.05 (c) of this Agreement; and (l) YPFB means Yacimientos Petrolíferos Fiscales Bolivianos, the Bolivian state oil and gas company. ARTICLE II The Loan Section 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 one hundred and thirty million Dollars ($130,000,000). Section (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 the reasonable cost of the works required for Part B of the Project and to be financed out of the proceeds of the Loan. (b) The Borrower may, for the purposes of Part B of the Project, open and maintain in Dollars 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. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 5 to this Agreement. Section The Closing Date shall be December 31, 2000 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section (a) 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 LIBOR Base Rate plus LIBOR Total Spread. (b) For the purposes of this Section: (i) Interest Period means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date. of this (ii) Interest Payment Date means any date specified in Section 2.06 Agreement. (iii) LIBOR Base Rate means, for each Interest Period, the London interbank offered rate for six-month deposits in Dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum. (iv) LIBOR Total Spread means, for each Interest Period: (A) one half of one percent (1/2 of 1%); (B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank s outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum. (c) The Bank shall notify the Guarantor and the Borrower of LIBOR Base Rate

5 and LIBOR Total Spread for each Interest Period, promptly upon the determination thereof. (d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.05, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months notice to the Guarantor and the Borrower of the new basis. The basis shall become effective on the expiry of the notice period unless the Guarantor or the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan. Section Interest and other charges shall be payable on March 15 and September 15 in each year. Section The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Execution of the Project Section The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate technical, engineering, financial, administrative and environmental practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the Project. Section Except as the Bank shall otherwise agree, procurement of the works required for Part B of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agreement. Section The Borrower shall: (a) carry out, as provided therein, the Brazil EMP and the Brazil IPDP with due diligence and efficiency and in accordance with appropriate environmental and social practices, and shall provide, promptly as needed, the funds and other resources required therefor; (b) employ, during the execution of the Brazil EMP and the Brazil IPDP: (i) a firm, with experience and qualifications satisfactory to the Bank (the Environmental Supervision Firm), under terms of reference satisfactory to the Bank, for purposes of assisting the Borrower in the supervision of the carrying out of such EMP and IPDP; and (ii) a firm, with experience and qualifications satisfactory to the Bank (the Environmental Auditor), for purposes of: carrying out independent audits of the compliance by the Borrower of its obligations under such EMP and IPDP; (c) furnish to the Bank, every two months during the execution of the Brazil EMP and the Brazil IPDP: (i) the report of the Environmental Supervision Firm, of such scope and in such detail as the Bank shall reasonably request, on the progress in the carrying out of such EMP and IPDP, and (ii) the opinion of the Environmental Auditor on the compliance by the Borrower of its obligations under such EMP and IPDP; and (d) not later than January 31, 1999, enter, under terms and conditions satisfactory to the Bank, into the contractual arrangements required for purposes of the carrying out of the ecological compensation programs under the Brazil EMP. Section Without limitation to the provisions of Section 9.07 (a) (iii) of the General Conditions, the Borrower shall, not later than April 30, August 31 and December 31 of each year during the execution of the Project, furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the progress in the carrying out and operation (if applicable) of the Project during the immediately preceding four-month period.

6 Section The Borrower shall: (a) prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank, not later than January 31, 1999, a plan for the future operation of the Project; (b) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan; (c) furnish to the Bank, not later than January 31, 1999, a plan, satisfactory to the Bank, for the maintenance within the right-of-way of the Bolivia-Brazil Gas Pipeline Project of trees, grasses and other natural vegetation (the Vegetation Management Plan); and (d) not later than twelve months after the date of this Agreement, evidence that it has entered into contractual arrangements with the entity in charge of transporting gas in the Bolivian section of the Bolivia-Brazil Gas Pipeline Project to govern the relationship between the Borrower and such entity in the operation of their respective sections of such Project. Section The Borrower shall, not later than April 30, 1999, send requests for proposals, satisfactory to the Bank, to a short-list, acceptable to the Bank, of potential arrangers for the Bond Issue. ARTICLE IV Financial Covenants Section (a) The Borrower shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition and to register separately the operations, resources and expenditures related to the Project. (b) The Borrower shall: (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 appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year: (A) certified copies of the financial statements referred to in paragraph (a) above for such year as so audited; and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof as the Bank shall from time to time reasonably requested. (c) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall: records and (i) maintain, in accordance with paragraph (a) of this Section, accounts reflecting such expenditures; (ii) retain, until at least one 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

7 (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 The Borrower shall, not later than October 1 of each year, furnish to the Bank financial projections, demonstrating, to the satisfaction of the Bank, that it has the financial resources required to carry out and/or operate the Project and to comply with its debt service requirements and other financial obligations under the Project. Section (a) The Borrower shall not declare and pay dividends to its shareholders unless it: (i) is in full compliance with its Project-related financial obligations; (ii) has demonstrated availability of sufficient financial resources to comply with all its Project-related financial obligations after such dividend payment; and (iii) has cumulative net profits or unencumbered cash flow at least equal to the amount of the proposed dividend payment, distributable in accordance with Brazilian law. (b) The Borrower shall not, without the prior approval of the Bank, acquire the shares of its subscribed capital, nor reduce the amount of its subscribed capital, provided that such approval by the Bank shall not be refused if the Borrower reasonably demonstrates that such acquisition or reduction will not have a material adverse effect on the Borrower s financial condition. Section (a) The Borrower shall not incur any debt in addition to the debt to be contracted for the Project as described in WHEREAS (D) in the Preamble to this Agreement and for financing compressor stations necessary in order to enable the transportation of 30,000,000 cubic meters per day of natural gas: (i) unless the sum of the Borrower s net cash flow and unencumbered liquid assets, projected in accordance with the provisions of Section 4.02 of this Agreement, for the fiscal year in which such debt is incurred and for each fiscal year thereafter, shall be at least 1.5 times the estimated maximum debt service requirements of the Borrower for any succeeding fiscal year on all debt of the Borrower, including the debt to be incurred; or (ii) if after the incurrence of such debt the Borrower s ratio of debt to equity shall be greater than 67 to 33. (b) For the purposes of this Section: (i) The term net cash flow means the difference between: and net (A) the sum of revenues from all sources related to operations, non-operating income; and (B) the sum of all expenses related to operations including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt. (ii) The term net non-operating income means the difference between: operations; and incurred in above. (A) (B) revenues from all sources other than those related to expenses, including taxes and payments in lieu of taxes, the generation of the revenues referred to in (A) (iii) other tradeable operations. (iv) The term liquid assets means cash, marketable securities and financial instruments not required for the Borrower s The term debt means any indebtedness of the Borrower (other than

8 subordinated debt and liabilities related to the Brazil TCO Capacity) of the Borrower maturing by its terms more than one year after the date on which it is originally incurred, but not including the portion of such debt falling due in the current fiscal year. (v) Debt shall be deemed to be incurred: (A) providing for of payment on the date instrument; and under a loan contract or agreement or other instrument such debt or for the modification of its terms of such contract, agreement or providing for (B) under a guarantee agreement, on the date the agreement such guarantee has been entered into. (vi) The term equity means the sum of the total unimpaired paid-up capital, retained earnings, subordinated debt, liabilities related to the funding of the Brazil TCO Capacity, and reserves of the Borrower not allocated to cover specific liabilities. Section For the purposes of Sections 4.02 and 4.04 of this Agreement, the term debt service requirements means the aggregate amount of repayments (including sinking fund payments, if any) of, and interest and other charges on, debt. Section The Borrower shall: ARTICLE V Other Covenants (a) carry on its operations and conduct its affairs in accordance with the Charter and appropriate administrative, financial, commercial, gas transportation and environmental practices (including the Vegetation Management Plan), under the supervision of qualified and experienced management assisted by competent staff in adequate numbers; (b) at all times operate and maintain its plants, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with appropriate engineering, financial, gas transportation and environmental practices; and (c) take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section Without limitation to the provisions of Section 5.01 (c) of this Agreement, the Borrower shall, not later than six months after the Effective Date, furnish to the Bank a report describing the risks that may affect the Borrower s assets, and recommending the insurance coverage applicable to such risks. ARTICLE VI Remedies of the Bank Section Pursuant to Section 6.02 (l) of the General Conditions, the following additional events are specified: (a) Any of the parties to any of the agreements referred to in Schedule 6 to this Agreement (or to any amendment, assignment or other agreement referred to in Section 7.01 (a) of this Agreement) shall have failed to perform any of its obligations thereunder, and such failure has affected or may in the future affect, in the opinion of the Bank, materially and adversely the carrying out or the operation of the Bolivia-Brazil Gas Pipeline Project. (b) The Bond Issue shall not have been fully subscribed by September 30, 1999, or such later date as the Bank may agree, provided that the Bank shall not

9 exercise its rights under this paragraph if (i) at any time before such date, either the Bank and the Borrower shall agree that it is not financially justified for the Borrower to raise funds through the Bond Issue or the Guarantor establishes that the Bond Issue would be inconsistent with the Guarantor s strategy for market access, and (ii) the Borrower, not later than September 30, 1999, establishes to the satisfaction of the Bank that it has obtained from other sources an amount of up to $180,000,000 equivalent as required for the Project, under terms and conditions consistent with the obligations of the Borrower under this Agreement. (c) (i) Subject to subparagraph (ii) of this paragraph: (A) the right of the Borrower to withdraw the proceeds of the IDB Loan, the CAF Loan, the EIB Loan or any of the Other Loans shall have been suspended, canceled or terminated in whole or in part, pursuant to the terms of the respective agreement providing therefor, or shall have thereof. (B) any such loan or any bond issued pursuant to the Bond Issue become due and payable prior to the agreed maturity (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Bank that adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. (d) Petrobras shall have failed to comply with any of its undertakings under the Petrobras Letter, and such failure has affected or may in the future affect, in the opinion of the Bank, materially and adversely the carrying out of the Bolivia-Brazil Gas Pipeline Project. (e) The Guarantor shall have failed to comply with its obligations set forth in paragraphs 10, 11 and 13 of the Policy Letter. Section Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) The Borrower shall have failed to perform any of its obligations under any of the agreements referred to in Schedule 6 to this Agreement to which the Borrower is a party, and such failure (i) has affected or may in the future affect, in the opinion of the Bank, materially and adversely the carrying out or the operation of the Bolivia-Brazil Gas Pipeline Project, and (ii) shall continue to exist for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. (b) Any event specified in paragraph (c) (i) (B) of Section 6.01 of this Agreement shall occur, subject to the proviso of paragraph (c) (ii) of that Section. (c) Any event specified in paragraph (e) of Section 6.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VII Effective Date; Termination Section The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section (c) of the General Conditions: (a) the agreements referred to in paragraphs 4 through 10 of Schedule 6 to this Agreement, under terms and conditions which shall be substantially consistent with those set forth in the term sheets for such agreements, sent to the Bank on September 22, 1997, (or any amendment, assignment or agreement, consistent with the objectives of the Bolivia-Brazil Gas Pipeline Project, which may affect or replace any of the agreements referred to in paragraphs 1, 2 and 3 of Schedule 6 to this Agreement), have been entered into by the respective parties thereto;

10 (b) all conditions (except those requiring the effectiveness of this Agreement) precedent to the right of the Borrower to make withdrawals under the IDB Loan Agreement, the CAF Loan Agreement, the EIB Loan Agreement and the Petrobras Lending Arrangements have been fulfilled; (c) the Environmental Supervision Firm and the Environmental Auditor have been employed; (d) the Oil and Gas Sector Consultants have started to provide consulting services to the Guarantor; (e) the Borrower has engaged the key technical, administrative and financial staff required to enable the Borrower to carry out the Project and comply with its obligations under this Agreement; (f) (g) the Brazil IPDP has been issued; this Agreement has been registered with the Central Bank of Brazil. Section The following is specified as additional matters, within the meaning of Section (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank: (a) that the Charter and the agreements referred to in Schedule 6 to this Agreement (or any amendment, assignment or other agreement which may affect or replace any of the agreements referred to in paragraphs 1, 2 and 3 of such Schedule) are in full force and effect and are valid and binding to the respective parties thereto; and (b) Brazil. that this Agreement has been validly registered with the Central Bank of Section The date March 20, 1999 is hereby specified for the purposes of Section of the General Conditions. ARTICLE VIII Representative of the Borrower; Addresses Section The Director Superintendent of the Borrower is designated as representative of the Borrower for the purposes of Section of the General Conditions. Section The following addresses are specified for the purposes of Section of the General Conditions: For the Borrower: Transportadora Brasileira Gasoduto Bolivia-Brasil S/A Praia do Flamengo 200, 25( andar Rio de Janeiro, RJ Brazil With copies to: SEAIN - Secretaria de Assuntos Internacionais Ministério do Planejamento e Orçamento Esplanada dos Ministérios, Bloco K - 5º andar Brasília, D.F. Brazil For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W.

11 Washington, D.C United States of America Cable address: Telex: INTBAFRAD (MCI) or Washington, D.C (MCI) IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Shahid Javed Burki Regional Vice President Latin America and the Caribbean TRANSPORTADORA BRASILEIRA GASODUTO BOLIVIA-BRASIL S/A By /s/ Cesar Dias Ramos Authorized Representative SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Category of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to such Category and the percentage of expenditures for items so to be financed in such Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollars) to be Financed Works under Part B 130,000,000 72% of the Project TOTAL 130,000, Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement. SCHEDULE 2 Description of the Project The objective of the Project is to develop a gas market in the south and southeast regions of Brazil through the construction of a gas pipeline. The Project consists of the following parts, subject to such modifications thereof as the Bank and the Borrower may agree upon from time to time to achieve such objective: Part A: Northern Leg Construction of the section of the main trunkline of the Bolivia-Brazil Gas Pipeline Project extending from the city of Corumbá to the city of Campinas, with a diameter of 32 inches, and of a lateral line from the city of Campinas to the city of Guararema, with a diameter of 24 inches, with an aggregate extension of about 1,400

12 kilometers, including conduits, compressors, meters, valves and other appurtenant facilities. Part B: Southern Leg Construction of the section of the line of the Bolivia-Brazil Gas Pipeline Project extending from the city of Campinas to the city of Porto Alegre, with a diameter of 24 to 16 inches and an extension of about 1,180 kilometers, including conduits, compressors, meters, valves and other appurtenant facilities. * * * The Project is expected to be completed by June 30, SCHEDULE 3 Amortization Schedule Date Payment Due Payment of Principal (Expressed in Dollars)* September 15, ,765,000 March 15, ,880,000 September 15, ,000,000 March 15, ,120,000 September 15, ,245,000 March 15, ,370,000 September 15, ,505,000 March 15, ,640,000 September 15, ,780,000 March 15, ,925,000 September 15, ,070,000 March 15, ,225,000 September 15, ,385,000 March 15, ,545,000 September 15, ,715,000 March 15, ,885,000 September 15, ,065,000 March 15, ,245,000 September 15, ,435,000 March 15, ,630,000 September 15, ,830,000 March 15, ,035,000 September 15, ,455,000 * The figures in this column represent the amount in Dollars to be repaid, except as provided in Section 4.04 (d) of the General Conditions. SCHEDULE 4 Procurement of Works Part A: International Competitive Bidding Works under Part B of the Project shall be procured in accordance with the provisions of Section I of the Guidelines for Procurement under IBRD Loans and IDA Credits published by the Bank in January 1995 and revised in January and August 1996 (the Guidelines), under contracts awarded in accordance with the provisions of Section II of the Guidelines and paragraph 5 of Appendix 1 thereto, including the following provisions: (a) Prequalification Bidders shall be prequalified in accordance with the provisions of paragraphs

13 2.9 and 2.10 of the Guidelines. (b) Dispute Review Board Each contract estimated to cost $50,000,000 equivalent or more shall include the provisions for a dispute review board set forth in the standard bidding documents for works referred to in paragraph 2.12 of the Guidelines. (c) Notification and Advertising The invitation to prequalify or bid for each contract estimated to cost $10,000,000 equivalent or more shall be advertised in accordance with the procedures applicable to large contracts under paragraph 2.8 of the Guidelines. Part B: Review by the Bank of Procurement Decisions 1. Procurement Planning Prior to the issuance of any invitations to prequalify for bidding or to bid for contracts, the proposed procurement plan for the Project shall be furnished to the Bank for its review and approval, in accordance with the provisions of paragraph 1 of Appendix 1 to the Guidelines. Procurement of all works under Part B of the Project shall be undertaken in accordance with such procurement plan as shall have been approved by the Bank, and with the provisions of said paragraph Prior Review The procedures set forth in paragraphs 2 and 3 of Appendix 1 to the Guidelines shall apply to all contracts for works under Part B of the Project. 1. For the purposes of this Schedule: SCHEDULE 5 Special Account (a) the term eligible Category means the Category set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term eligible expenditures means expenditures in respect of the reasonable cost of works required for Part B of the Project and to be financed out of the proceeds of the Loan allocated to the eligible Category in accordance with the provisions of Schedule 1 to this Agreement; and (c) the term Authorized Allocation means the amount of $17,000,000 to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the respective Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify. (ii) Prior to or at the time of each such request, the Borrower shall

14 furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the eligible Category, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account: (a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; (b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b) (ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Accounts; (c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or (d) once the total unwithdrawn amount of the Loan allocated to the eligible Category, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions, shall equal the equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Category shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Bank shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank: (A) provide such additional evidence as the Bank may request; or (B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount. (c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Accounts. (d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for

15 cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. SCHEDULE 6 Contractual Framework 1. Natural Gas Supply Agreement, dated August 16, 1996, between YPFB and Petrobras, whereby, inter alia (a) YPFB agreed to sell and deliver to Petrobras, and Petrobras agreed to purchase and receive the TCQ; (b) YPFB granted to Petrobras an irrevocable option, with preference over third parties, to purchase up to 30 million cubic meters of gas per day, to the extent that the quantities of gas in addition to the TCQ are not required to meet demands in the Bolivian domestic market and such quantities of gas are available; and (c) Petrobras will pay an amount equivalent to $81,000,000 for the advance purchase of an option to have the exclusive right to use pipeline capacity to have transported the TCO. 2. Advance Payment Contract, dated August 16, 1996, between Petrobras and YPFB, whereby Petrobras has agreed to provide $280,000,000 towards execution of the Bolivian portion of the Bolivia-Brazil Gas Pipeline Project, such funds to be reimbursed with interest to Petrobras through a credit for gas transportation tariff charges that would otherwise become payable by Petrobras to the entity in charge of transporting gas in the Bolivian section of the Bolivia-Brazil Gas Pipeline Project to fund pipeline transportation services. 3. Engineering, Procurement and Construction Turnkey Contract, dated as of September 4, 1996, between Petrobras and YPFB, providing for the carrying out by Petrobras, on a turnkey basis, of the Bolivian portion of the Bolivia-Brazil Gas Pipeline Project, for a fixed price of $350,000, TBG Shareholders Agreement, to be entered into by the Borrower s shareholders, setting forth the terms and conditions of each shareholder s interest in the Borrower and the governance thereof. 5. TBG Shareholders Funding Agreement, to be entered into by the Borrower s shareholders, setting forth the terms and conditions for the funding of the Borrower by such shareholders with an aggregate amount equivalent to $310,000,000, through equity subscriptions and subordinated debt, and any commitments and arrangements to fund certain cost overruns that may be incurred by the Borrower in the construction of the pipeline. 6. Brazil TCO Funding Agreement, to be entered into by Petrobras and the Borrower, pursuant to which Petrobras will provide the Borrower with $302,000,000 for the advance purchase of an option whereby Petrobras has the exclusive right to use pipeline capacity to have transported the TCO. 7. Overrun Funding Arrangements, to be entered into by the Borrower under which the Borrower will be provided with up to $200,000,000 to fund cost overruns in excess of the amount of cost overruns to be funded by the Borrower s shareholders pursuant to the TBG Shareholders Funding Agreement referred to in paragraph 5 above. 8. Construction Management Agreement, to be entered into by the Borrower and Petrobras, whereby Petrobras, through its Engineering Services Superintendency, will provide construction supervision, construction coordination and construction management services in respect of the Project. 9. Brazil TCQ Agreement, to be entered into by YPFB, the Borrower and Petrobras, setting forth the terms and conditions under which the Borrower will transport gas for Petrobras using the Brazil TCQ Capacity. 10. Brazil TCO Agreement, to be entered into by YPFB, the Borrower and Petrobras, setting forth the terms and conditions under which the Borrower will transport gas for Petrobras using the Brazil TCO Capacity.

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