LOAN AGREEMENTKRAGUJEVAC DISTRICT HEATING PROJECT BETWEEN REPUBLIC OF SERBIA AND EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT("Off. Herald of RS - Treaties", No. 14/2021) |
EXECUTION VERSION
(Operation Number 52593)
Dated 2 July 2021
EXECUTION VERSION
TABLE OF CONTENTS
ARTICLE I - STANDARD TERMS AND CONDITIONS; DEFINITIONS |
2 |
Section 1.01. Incorporation of Standard Terms and Conditions |
2 |
Section 1.02. Definitions |
2 |
Section 1.03. Interpretation |
3 |
ARTICLE II - PRINCIPAL TERMS OF THE LOAN |
3 |
Section 2.01. Amount and Currency |
3 |
Section 2.02. Other Financial Terms of the Loan |
3 |
Section 2.03. Drawdowns |
5 |
ARTICLE III - EXECUTION OF THE PROJECT |
5 |
Section 3.01. Other Affirmative Project Covenants |
5 |
ARTICLE IV - SUSPENSION; ACCELERATION; CANCELLATION |
7 |
Section 4.01. Suspension |
7 |
Section 4.02. Acceleration of Maturity |
7 |
ARTICLE V - EFFECTIVENESS |
8 |
Section 5.01. Conditions Precedent to Effectiveness |
8 |
Section 5.02. Conditions Precedent to First Drawdown of Tranche 1 |
8 |
Section 5.03. Conditions Precedent to Commitment of Tranche 2 |
8 |
Section 5.04. Legal Opinions |
9 |
Section 5.05. Termination for Failure to Become Effective |
9 |
ARTICLE VI - MISCELLANEOUS |
9 |
Section 6.01. Notices |
9 |
SCHEDULE 1 - DESCRIPTION OF THE PROJECT |
1 |
SCHEDULE 2 - CATEGORIES AND DRAWDOWNS |
1 |
LOAN AGREEMENT
AGREEMENT dated 2 July 2021 between REPUBLIC OF SERBIA represented by Mr. Siniša Mali, Minister of Finance of the Republic of Serbia, on behalf of the Government as representative of the Republic of Serbia (the "Borrower") and EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT (the "Bank").
PREAMBLE
WHEREAS, the Bank has been established to provide financing for specific projects to foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative in certain countries committed to and applying the principles of multiparty democracy, pluralism and market economics;
WHEREAS, the Borrower intends to implement the Project as described in Schedule 1 which is designed to assist in the (1) decommissioning of old coal boilers from the district heating system in the City of Kragujevac (the "City"), (2) installation of new natural gas based hot water boilers, with a total capacity of 110MW, (3) remediation of the ash disposal site and (4) supervision of the Project;
WHEREAS, the Project will be carried out by the Borrower, acting through the Ministry of Environmental Protection (the "MEP"), and Energetika d.o.o. Kragujevac (the "Project Entity"), a limited liability company registered under the laws of the Republic of Serbia and fully owned by the Republic of Serbia;
WHEREAS, the Borrower has requested assistance from the Bank in financing part of the Project;
WHEREAS, the Bank has arranged or is in the process of arranging technical cooperation funds on a grant basis in an estimated amount of EUR 276,000 to assist the Project Entity with appraisal of the Project.
WHEREAS, the Bank has agreed on the basis of, inter alia, the foregoing to make a loan to the Borrower in the amount of up to EUR 18,000,000 (eighteen million Euros), divided into two Tranches, subject to the terms and conditions set forth or referred to in this Agreement dated the date hereof and in the project agreement dated the date hereof 1between the Republic of Serbia, represented by the Minister of Environmental Protection of the Republic of Serbia, on behalf of the Government as representative of the Republic of Serbia, the Project Entity and the Bank (the "Project Agreement" as defined in the Standard Terms and Conditions).
NOW, THEREFORE, the parties hereby agree as follows:
EXECUTION VERSION
Article I
STANDARD TERMS AND CONDITIONS; DEFINITIONS
Section 1.01. Incorporation of Standard Terms and Conditions
All of the provisions of the Bank’s Standard Terms and Conditions dated 1 October 2018 are hereby incorporated into and made applicable to this Agreement with the same force and effect as if they were fully set forth herein (the "Standard Terms and Conditions").
Section 1.02. Definitions
Wherever used in this Agreement (including the Preamble and Schedules), unless stated otherwise or the context otherwise requires, the terms defined in the Preamble have the respective meanings given to them therein, the terms defined in the Standard Terms and Conditions have the respective meanings given to them therein and the following terms have the following meanings:
"Borrower’s Authorised Representative" |
means the Minister of Finance. |
"Enforcement Policy and Procedures" |
means the Bank’s Enforcement Policy and Procedures dated 4 October 2017. |
"Fiscal Year" |
means the Borrower’s fiscal year commencing on 1 January of each year. |
"Tranche" |
means either of Tranche 1 or Tranche 2, as the context requires. |
"Tranche 1" |
means the maximum principal amount of the loan provided for in Section 2.01(b)(1) (Amount and Currency) of this Agreement or, as the context may require, the principal amount thereof from time to time outstanding. |
"Tranche 2" |
means the maximum principal amount of the loan provided for in Section 2.01(b)(2) (Amount and Currency) of this Agreement or, as the context may require, the principal amount thereof from time to time outstanding. |
"Tranche 2 Commitment Date" |
means the date on which the Bank gives a Tranche 2 Notice to the Borrower in accordance with the conditions described in Section 2.01(c)(2) of this Agreement. |
"Tranche 2 Notice" |
means a notice delivered by the Bank to the Borrower pursuant to the conditions described in Section 2.01(c)(2) of this Agreement. |
EXECUTION VERSION
Section 1.03. Interpretation
In this Agreement, a reference to a specified Article, Section or Schedule shall, except where stated otherwise in this Agreement, be construed as a reference to that specified Article or Section of, or Schedule to, this Agreement.
Article II
Section 2.01. Amount and Currency
(a) The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, the amount of up to EUR 18,000,000 (eighteen million Euros).
(b) The Loan shall consist of two Tranches, as follows:
(1) Tranche 1 in the amount of up to EUR 14,000,000 (fourteen million Euros); and
(2) Tranche 2 in the amount of up to EUR 4,000,000 (four million Euros).
(c) Notwithstanding anything to the contrary expressed or implied in this Agreement:
(1) Tranche 1 is committed from the date of the effectiveness of this Agreement; and
(2) Tranche 2 is uncommitted and will become committed only upon the Bank’s determining in its absolute discretion, no later than 31 December 2022, that it is prepared to make Tranche 2 available, provided the following conditions precedent are fulfilled, in form and substance satisfactory to the Bank:
(A) the Bank shall have received a written request for the commitment of Tranche 2;
(B) the technical environmental and social due diligence on Part 2 of the Project by the Bank and its external consultants has been completed, and revised Environmental and Social Action Plan has been agreed, in a manner satisfactory to the Bank; and
(C) the Bank shall have notified the Borrower in writing that Tranche 2 has been committed.
Section 2.02. Other Financial Terms of the Loan
(a) The Minimum Drawdown Amount shall be EUR 100,000, provided that no more than 10 Drawdowns shall be made.
(b) The Minimum Prepayment Amount shall be EUR 1,000,000.
(c) The Minimum Cancellation Amount shall be EUR 1,000,000.
(d) The Interest Payment Dates shall be 25 April and 25 October of each year.
(e) (1) The Borrower shall repay Tranche 1 in 25 equal (or as nearly equal as possible) semi-annual instalments on 25 April and 25 October of each year, with the first Loan Repayment Date of Tranche 1 being 25 October 2024 and the last Loan Repayment Date of Tranche 1 being 25 April 2037.
EXECUTION VERSION
(2) Notwithstanding the foregoing, in the event that (i) the Borrower does not draw down the entire Tranche 1 amount prior to the first Loan Repayment Date of Tranche 1 specified in this Section 2.02.(e)(1), and (ii) the Bank extends the Last Availability Date of Tranche 1 specified in Section 2.02.(f)(1) below to a date which falls after such first Loan Repayment Date of Tranche 1, then the amount of each drawdown made on or after the first Loan Repayment Date of Tranche 1 shall be allocated for repayment in equal amounts to the several Loan Repayment Dates of Tranche 1 which fall after the date of such drawdown (with the Bank adjusting the amounts so allocated as necessary so as to achieve whole numbers in each case). The Bank shall, from time to time, notify the Borrower of such allocations.
(3) The Borrower shall repay Tranche 2 in 25 equal (or as nearly equal as possible) semi-annual instalments on 25 April and 25 October of each year, with the first Loan Repayment Date of Tranche 2 being on the first Interest Payment Date falling immediately after the third anniversary of the date of the Tranche 2 Commitment Date and the last Loan Repayment Date of Tranche 2 being the twenty fifth Interest Payment Date following the first Loan Repayment Date for Tranche 2.
(4) Notwithstanding the foregoing, in the event that (i) the Borrower does not draw down the entire Tranche 2 amount prior to the first Loan Repayment Date of Tranche 2 specified in Section 2.02.(e)(3), and (ii) the Bank extends the Last Availability Date specified in Section 2.02.(f)(2) below to a date which falls after such first Loan Repayment Date of Tranche 2, then the amount of each Drawdown made on or after the first Loan Repayment Date of Tranche 2 shall be allocated for repayment in equal amounts to the several Loan Repayment Dates of Tranche 2 which fall after the date of such Drawdown (with the Bank adjusting the amounts so allocated as necessary so as to achieve whole numbers in each case). The Bank shall, from time to time, notify the Borrower of such allocations.
(f) (1) The Last Availability Date of Tranche 1 shall be the third anniversary of the date of this Agreement, or such later date that the Bank may in its discretion establish in accordance with the Standard Terms and Conditions and notify to the Borrower. Any extension of the Last Availability Date of Tranche 1will be effected through the means of exchange of letters between the Bank and the Borrower.
(2) The Last Availability Date of Tranche 2 shall be the third anniversary of the Tranche 2 Commitment Date, as described in Section 2.01(c) of this Agreement, or such later date that the Bank may in its discretion establish in accordance with the Standard Terms and Conditions and notify to the Borrower. Any extension of the Last Availability Date of Tranche 2 will be effected through the means of exchange of letters between the Bank and the Borrower.
(g) The rate of the Commitment Charge shall be 0.5% per annum. The Commitment Charge shall accrue from (i) the date sixty (60) days after the date of this Agreement for Tranche 1 and (ii) the Tranche 2 Commitment Date for Tranche 2.
(h) (A) The rate of the Front-end Commission shall be payable in accordance with the terms of the Standard Terms and Conditions and shall be in an amount of (i) EUR 140,000 for Tranche 1 and (ii) EUR 40,000 for Tranche 2; and
EXECUTION VERSION
(B) The Bank shall, on behalf of the Borrower, be entitled to draw down from the Available Amount of each of Tranche 1 and Tranche 2, on the Effective Date for Tranche 1 and on the Tranche 2 Commitment Date, or (at the Bank’s option), within seven (7) days of each such dates, respectively, and pay to itself the amounts of the above Front-end Commission with respect to Tranche 1 and Tranche 2, respectively, and such amounts shall be due and payable on such respective dates.
(i) The Loan is subject to a Variable Interest Rate. Notwithstanding the foregoing, the Borrower may, as an alternative to paying interest at a Variable Interest Rate on all or any portion of the Loan then outstanding, elect to pay interest at a Fixed Interest Rate on such portion of the Loan in accordance with Section 3.04(c) of the Standard Terms and Conditions.
Section 2.03. Drawdowns
The committed Available Amount of each of Tranche 1 and Tranche 2 may be drawn down from time to time in accordance with the provisions of Schedule 2 to finance (1) expenditures made (or, if the Bank so agrees, to be made) in respect of the reasonable cost of goods, works and services required for the Project, and (2) the Front-end Commission due and payable in relation to Tranche 1 or Tranche 2, respectively.
Article III
Section 3.01. Other Affirmative Project Covenants
In addition to the general undertakings set forth in Articles IV and V of the Standard Terms and Conditions, the Borrower shall, unless the Bank otherwise agrees:
(a) Acting through the MEP, delegate to the Project Entity the day-to-day management of the Project, including, but not limited to, the consolidated financial and procurement management;
(b) Acting through the Ministry of Mining and Energy, prepare and adopt a National Energy and Climate Plan prior to 1 March 2022.
(c) Acting through the MEP, perform all of its obligations under the Project Agreement, including without limitation its obligations relating to:
(1) the establishment and operation, together with the Project Entity, of a project implementation unit as provided for in Section 2.03 of the Project Agreement;
(2) the procurement of goods, works and services from the Project as provided for in Section 2.04 of the Project Agreement;
(3) the environmental and social matters as provided for in Section 2.05 of the Project Agreement;
(4) the employment and use of consultants to assist in the implementation of the Project as provided for in Section 2.06 of the Project Agreement;
(5) together with the Project Entity, the maintenance of procedures, records and accounts, preparation, auditing and submission to the Bank of financial statements and furnishing to the Bank any other relevant information relating to the Project or the Project Entity’s operations as provided for in Section 3.01 of the Project Agreement;
EXECUTION VERSION
(d) Acting through the MEP, cause the Project Entity to perform all of its obligations under the Project Agreement, including without limitation its obligations relating to:
(1) the establishment and operation, together with the Borrower, acting through the MEP, of a project implementation unit as provided for in Section 2.03 of the Project Agreement;
(2) the environmental and social matters as provided for in Section 2.05 of the Project Agreement;
(3) the preparation and submission of reports on matters relating to the Project and to the Project Entity’s operations as provided for in Section 2.08 of the Project Agreement;
(4) together with the Borrower, acting through the MEP, the maintenance of procedures, records and accounts, preparation, auditing and submission to the Bank of financial statements and furnishing to the Bank any other relevant information relating to the Project or the Project Entity’s operations as provided for in Section 3.01 of the Project Agreement;
(5) the compliance with all covenants regarding financial and operational aspects of the Project and the Project Entity as provided for in Section 3.02 and 3.03 of the Project Agreement;
(6) ensuring that all goods, works and services financed out of the proceeds of the loan for the Project to be used exclusively for the purposes of the Project;
(e) Take, or cause to be taken, all additional action necessary to provide adequate funds for the completion of the Project;
(f) Exempt from VAT and customs duties (all goods, works and services (including consultancy services)), procured by the Borrower acting through the MEP or the Project Entity for the Project and financed from the proceeds of the Loan or any technical cooperation funds made available by the Bank, or provide for their reimbursement; and
(g) Provide or cause to be provided, when requested, all governmental licenses, approvals or consents required for the financing and carrying out of the Project by the Project Entity, and for carrying on of the Project Entity’s business, including all approvals and licenses necessary to ensure that the Project Entity is granted rights of way and other land use rights necessary for carrying out the Project.
Article IV
SUSPENSION; ACCELERATION; CANCELLATION
Section 4.01. Suspension
The following are specified for purposes of Section 7.01(a)(xvii) of the Standard Terms and Conditions:
(a) The legislative and regulatory framework applicable to the district heating sector in the territory of the Borrower shall have been amended, suspended, abrogated, repealed or waived in a manner that would have a material adverse effect on the Project or the ability of the Borrower and/or the Project Entity to perform their obligations under this agreement or the Project Agreement;
(b) The Statutes shall have been amended, suspended, abrogated, repealed or waived in a manner that would have a material adverse effect on the Project or the ability of the Project Entity to perform its obligations under the Project Agreement; or
EXECUTION VERSION
(c) Control of the Project Entity shall have been transferred to a party other than the Borrower, unless the Bank has given its prior written approval to such transfer.
Section 4.02. Acceleration of Maturity
The following is specified for purposes of Section 7.06(f) of the Standard Terms and Conditions:
Any of the events specified in Section 4.01(a) and Section 4.01(b) of this Agreement shall have occurred and continued without remedy for thirty (30) days after notice thereof has been given by the Bank to the Borrower. For the avoidance of doubt, the occurrence of the event specified in Section 4.01(c) of this Agreement shall constitute an immediate Event of Acceleration in accordance with Section 7.06 of the Standard Terms and Conditions.
Article V
Section 5.01. Conditions Precedent to Effectiveness
The following are specified for purposes of Section 9.02(c) of the Standard Terms and Conditions as additional conditions to the effectiveness of this Agreement and the Project Agreement:
(a) The project implementation unit has been established by the Borrower and the Project Entity with adequate resources and suitably qualified personnel, in form and substance satisfactory to the Bank, and is operational; and
(b) The execution of the Project Agreement by the duly authorised parties thereto;
(c) Ratification of this Agreement by the Parliament of the Republic of Serbia and publication of such ratification in the Official Gazette of the Republic of Serbia.
Section 5.02. Conditions Precedent to First Drawdown of Tranche 1
The following is specified as an additional condition to the first Drawdown of Tranche 1 under this Agreement:
The Borrower, acting through the MEP, shall have appointed an independent engineer to supervise the Project construction works.
Section 5.03. Conditions Precedent to Commitment of Tranche 2
Always subject to Section 5.01 of this Agreement and Section 9.02 of the Standard Terms and Conditions, the Bank shall determine in its sole discretion whether to make Tranche 2 available to the Borrower. Such determination by the Bank shall also be subject to the prior fulfilment, in form and substance satisfactory to the Bank, of the following conditions precedent:
(a) the technical environmental and social due diligence on Part 2 of the Project by the Bank and its external consultants has been completed, and the revised Environmental and Social Action Plan has been agreed, in a manner satisfactory to the Bank; and
(b) the Bank shall have received, in form and substance satisfactory to the Bank, any other conditions precedent the Bank may reasonably require, at the sole discretion of the Bank at the time the Tranche 2 Notice is delivered by the Bank in accordance with Section 2.01(c)(2) hereof.
Once the Bank has received satisfactory evidence as contemplated above and has determined in its sole discretion to make the Tranche 2 available to the Borrower, it shall deliver a Tranche 2 Notice in accordance with Section 2.01(c)(2) hereof.
EXECUTION VERSION
Section 5.04. Legal Opinions
(a) For purposes of Section 9.03(a) of the Standard Terms and Conditions, the opinion shall be given on behalf of the Borrower by the Ministry of Justice and shall confirm that the Loan Agreement has been duly authorised or ratified by and delivered on behalf of the Borrower and constitute valid and legally binding obligations of the Borrower, enforceable in accordance with their terms.
(b) For purposes of Section 9.02(b) of the Standard Terms and Conditions, the Borrower, acting through the MEP, shall provide an opinion issued by the Ministry of Justice on its behalf, which shall confirm that the Project Agreement has been duly authorised and delivered on behalf of the Borrower and constitute valid and legally binding obligations of the Borrower, enforceable in accordance with their terms.
(c) For purposes of Section 9.03(c) of the Standard Terms and Conditions, the opinion shall be given on behalf of the Project Entity by the head of legal department of the Project Entity and shall confirm that the Project Agreement has been duly authorised and executed and deliver by the Project Entity and constitutes valid and legally binding obligations of the Project Entity, enforceable in accordance with its terms.
Section 5.05. Termination for Failure to Become Effective
The date 180 days after the date of this Agreement is specified for purposes of Section 9.04 of the Standard Terms and Conditions.
Article VI
Section 6.01. Notices
The following addresses are specified for purposes of Section 10.01 of the Standard Terms and Conditions:
For the Borrower:
Ministry of Finance of Republic of Serbia
Kneza Milosa 20
11000, Belgrade
Serbia
Attention: Minister of Finance
Fax: + 381 11 361 8961
EXECUTION VERSION
For the Bank:
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN
United Kingdom
Attention: Operation Administration Department/Operation No. 52593
Telephone: +44 20 7338 6000
Email: oad@ebrd.com
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorised representatives, have caused this Agreement to be signed in six copies in the English language and delivered on the day and year first above written.
REPUBLIC OF SERBIA
By: ______________________________
Name: Mr. Siniša Mali
Title: Minister of Finance
EUROPEAN BANK
FOR RECONSTRUCTION AND DEVELOPMENT
By: ______________________________
Name: Mr. Matteo Colangeli
Title: Director, Regional Head of Western Balkans
EXECUTION VERSION
DESCRIPTION OF THE PROJECT
The Project involves the modernisation of the City’s district heating system and replacement of its current coal-fired generation plant, which will enable a complete phase-out of coal from the City’s district heating supply. The Project will substantially reduce or eliminate emissions of sulphur oxides and particulate matter, decrease CO2 emissions and substantially improve energy efficiency of the system. The environmental and social benefits are associated with the overall improvement in the quality and reliability of heating services, reduction in fuel consumption and air/land/underground water pollution as well as heat and water losses. The Project will also address a major environmental issue related to ash and slag disposal.
The Project consists of the following Parts, subject to such modifications thereof as may be agreed between the Bank and the Borrower in writing:
Part 1 (to be financed by Tranche 1): 1) decommissioning of old coal boilers from the district heating system in the City, 2) installation of new natural gas-based hot water boilers, with a total capacity of 110MW, 3) supervision of works by an independent engineer. The works are expected to commence shortly after signing of the Loan Agreement. Part 1 is expected to be completed by the end of 2023.
Part 2 (to be financed by Tranche 2): remediation of the ash disposal site located at the Project Entity and engagement of suitably qualified consultants to assist in Procurement and Project implementation support, and supervision of construction works. The Part 2 (and the related Tranche 2) is subject to further due diligence which is expected to be finalised by the end of 2021. To the extent it proceeds, Part 2 would be expected to be completed by the end of 2024.
EXECUTION VERSION
CATEGORIES AND DRAWDOWNS
1. The table below sets forth the categories of items to be financed out of the proceeds of Tranche 1 and Tranche 2, the allocation of the amounts of the Tranche 1 and Tranche 2 to each category, and the percentage of expenditures for items to be financed in each category.
2. For the avoidance of doubt, no Drawdown shall be made until and unless this Agreement has become effective and, in the case of Tranche 2, such Tranche has been committed, in each case in accordance with this Agreement.
3. Notwithstanding the provisions of paragraph 1 above, no Drawdown shall be made in respect of expenditures incurred prior to the date of this Agreement.
4. The Bank shall be entitled to draw down on behalf of the Borrower and pay to itself, as and when due, the Front-end Commission in respect of each of Tranche 1 and Tranche 2 as contemplated by Section 2.03 of this Agreement.
Category |
Amount of the Loan (EUR) |
% of Expenditures to be financed |
Category 1 |
|
|
(1) Civil Works (including contingencies) |
13,260,000 |
100% |
(2) Support in supervision of works |
600,000 |
100% |
(3) Front-end Commission |
140,000 |
100% |
Total Part 1/Tranche 1: |
14,000,000 |
|
Category 2 |
|
|
(1) Civil Works (including contingencies) |
3,610,000 |
100% |
(2) Support in project implementation and supervision of works |
350,000 |
100% |
(3) Front-end Commission |
40,000 |
100% |
Total Part 2/Tranche 2: |
4,000,000 |
|