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LOAN AGREEMENT

RURAL ELECTRIFICATION PROJECT

BETWEEN

INDONESIA AND CANADA

THIS AGREEMENT MADE IN DUPLICATE
THE ｉｾ＠

DAY OF OC.T0{3€RJ

1978.

BETWEEN:

THE GOVERNMENT OF CANADA
herein represented by the Secretary of State
for External Affairs acting through the
President of the Canadian International

Development Agency
(hereinafter referred to as "Canada");

AND:

THE GOVERNMENT OF THE REPUBLIC OF INDONESIA
(hereinafter referred to as "Indonesia " ).

WHEREAS Indonesia wishes to secure a development loan for a rural
electrification project as described in Annex "A" to this Agreement;
AND WHEREAS Canada is willing to make a development loan available for
this purpose on the terms and conditions provided herein;
NOW THEREFORE the Parties hereto agree as follows:

ARTICLE I
The

Loan

Section 1.01

Canada shall make available to Indonesia on the terms and conditions
hereinafter set forth a Loan in an amount not to exceed twenty-three
million five hundred thousand Canadian dollars ($23,500,000).
Section 1.02
Canada shall open on its books a Loan Account in the name of Indonesia
and shall credit to such Account the full amount of the Loan.

Withdrawals,

payments and disbursements may be made from the Loan Account in accordance
with the provisions of this Agreement.
Section 1. 03
This Loan shall be free from interest, commitment or service charges.

- 2 Section 1.04
Repayment of the principal amount of the Loan shall be made in eighty (80)
semi-annual instalments of two hundred and ninety-three thousand seven
hundred and fifty Canadian dollars ($293,750.00) each, due and payable on
March 31 and September 30 in each succeeding year commencing on March 31,
1989 and ending on September. 30, 2029.

Section 1.05
Indonesia shall have the right to prepay the principal amount in whole
or in part on any date without notice to Canada.

The amount of any such

prepayment shall be applied to the instalments of the principal then
remaining payable in the reverse order of their maturity.
Section 1.06
All payments as set forth herein shall be made by Indonesia in Canadian
dollars to the Receiver General for Canada, and shall be deemed to have
been paid when received by the Receiver General for Canada.
Section 1.07
The principal of the Loan shall be paid to Canada without any deductions
whatsoever and more particularly shall be free from any taxes, charges or
other restrictions imposed under the laws of Indonesia and those in effect
in its territories or administrative, political or judicial divisions or
subdivisions.
Section 1.08
The Parties agree that they will negotiate, at the request of either

Indonesia or Canada, concerning acceleration of payments to the Receiver
General for Canada required to be made under this Agreement at any time
after six (6) months before the first payment of the principal becomes
due and payable.

Indonesia and Canada shall mutua lly determine whether

such a n accel eration should take place on the basi s of the capacity of
Indonesia to service a more rapid liquidation of its obligations in the

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light of its internal and external financial and economic position.

- 3 -

ARTICLE II
Use of the Loan
Section 2. 01

Except as may otherwise be specifically agreed to by Canada, the proceeds
of the Loan shall be used by Indonesia exclusively for the purchase of
agreed goods and services as described in Annex "A", and the procedures
for their procurement and payment shall be those set forth in Annex "B".
Each Annex shall be subject to such subsequent modifications as may be
agreed upon between Canada and Indonesia.
Section 2.02
Conditions Precedent to Disbursements for the Project
Prior to disbursements under the Loan, or to the issuance by Canada of
documentation pursuant to which disbursements will be made for the Project,
Indonesia will, except as the Parties may otherwise agree in writing,
furnish to Canada in form and substance satisfactory to Canada:
a)

A signed agreement between Indonesia and Bank Rakyat Indonesia (BRI)
whereby Indonesia agrees to make available to BR! on the same financial
terms and conditions as those set forth herein, that amount of loan
funds required by the Directorate General of Cooperatives (DGC) of the
Department of Trade and Cooperatives, acting on behalf of the
individual cooperatives, to carry out their part of the Project.

b)

Signed agreements between BR! and the individual cooperatives whereby
the BR! agrees to channel to the cooperatives project funds on the
same financial terms and conditions as those by which BR! received

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such funds with the exception of the addition by BR! of a reasonable
service charge.

- 4 -

Section 2.03
Services, materials and equipment to be financed from the proceeds of the
Loan shall be used exclusively to carry out the Project;

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the goods and

services procured in Canada and financed from the Loan shall have an
overall Canadian content of not less than sixty-six and two-thirds percent
(66 2/3%) unless otherwise agreed to by Canada.
Services, materials and equipment contracted for prior to the effective
date of this Agreement may not be financed out of the proceeds of the Loan
except as may otherwise be agreed to by Canada.
Section 2.04
Proceeds from the Loan shall not be used by Indonesia to meet the cost of
any taxes, fees or Customs duties imposed directly or indirectly by
Indonesia on any services, materials or equipment required for the Project.
Proceeds from the Loan shall also not be used by Indonesia to meet the
costs of fees and commissions paid by Canadian firms to local agents and
representatives in respect of services, materials and equipment financed
out of the proceeds of the Loan.
Section 2.05
Indonesia shall immediately notify Canada of any payment it receives for
loss or damage to commodities or materials in transit under an insurance
policy or otherwise.

Unless otherwise agreed to by Canada and Indonesia,

Indonesia shall use such proceeds to replace the commodities or materials
or portion thereof with like goods from a Canadian source.
ARTICLE III
Withdrawals of Proceeds of Loan

(
Section 3.01

Withdrawals shall be deemed to occur on the dates on which payments are
made by Canada either directly to Indonesia or its designated agent, or to
a firm or banking institution in respect of goods and services supplied
under this Agreement.

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- 5 -

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Section 3.02
Subject to the conditions and limitations set forth herein, Indonesia
shall be entitled to withdrawals from the Loan Account in such amounts
as required to meet the costs of the goods, services, freight and insurance
which are eligible for financing as the costs become due and payable in
accordance with Annex "B".
Section 3.03
Indonesia, or its designated agent, shall provide Canada with a copy of
each contract or purchase order for the procurement of services, materials
and equipment in respect of which any withdrawal is to be made, and a copy
of each irrevocable Letter of Credit issued under this Agreement.
Section 3.04
Withdrawals from the Loan Account may be made in favour of such persons
or agencies as may be designated by Indonesia and agreed to by Canada.
Section 3. 05
Indonesia or its designated agent shall furnish or cause to be furnished to
Canada such documents and other evidence in support of the Letter(s) of
Credit as Canada may reasonably request, such evidence to be sufficient in

form and substance to establish that the amounts to be withdrawn are
properly related to the purpose of the Project.
ARTICLE IV
Cancellation and Suspension
Section 4.01
Indonesia may, by sixty (60) days' written Notice to Canada, cancel all or
any part of the Loan not withdrawn by Indonesia prior to the giving of such

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Notice and not required to meet outstanding financial obligations to
suppliers or firms incurred under the Loan.

- 6 -

Section 4.02
If any of the following events occur, Canada may suspend in whole or
in part the right of Indonesia to make withdrawals under the Loan

Agreement, or declare the principal outstanding due and payable
immediately and cancel that part of the Loan not previously withdrawn:
(a)

a default by Indonesia in the payment of principal or
in any other payments or repayments required under this
Agreement and the Annexes hereto;

(b)

a default on the part of Indonesia in the performance of
any undertakings under this Agreement;

(c)

any extraordinary situation which renders it impossible
for Indonesia to perform its obligations under this Agreement.

Section 4.03
If the full amount of the Loan is not connnitted by Indonesia as outlined
in Annex "A" by December 1983, the balance will be cancelled by sixty (60)
days' written notice from Canada and the final instalment or instalments
of the repayment to be made shall be reduced accordingly.
ARTICLE V
General Undertakings
Section 5.01
Indonesia shall ensure that the project is carried out, operated and
maintained with due diligence and efficiency and in conformity with
sound engineering construction and financial practices.
Section 5.02
Canada and Indonesia shall cooperate fully to ensure that the purpose
of the Loan will be accomplished, and each shall furnish to the other
all such information as shall reasonably be requested with regard to
the general status of the Loan.

Indonesia shall inform Canada as soon

- 7 as possible of any condition or contingency which interferes with,
or threatens to interfere with, the accomplishment of the Project
or any matter or thing in connection therewith.
Section 5 . 03
Indonesia shall afford accredited representatives of Canada all
reasonable opportunities to visit any part of the territories of
Indonesia for the purpose related to this Loan Agreement.
Section 5.04
This Agreement and any Annexes thereto shall be free from any taxes,
fees or other charges that may be imposed under the laws of Indonesia
and those in effect in its t erritories or administrative, political
or judicial divisions or subdivisions in conne ction with the execution,
issue, deli very and registration thereof.
Se ction 5.05
It is unders tood and agree d by Indonesia and Canada that the Artic l e s
of this Agreement and Annexes "A", "B", and "C" there to all form an
integral part of the present Agreement.
Se ction 5.06
For the purpose of this Agreement and Annexes thereto, Indonesia shall
include any agent or agents authorized by and on behalf of Indones i a
with regard to its rights, duties and obliga tions herein.
ARTICLE VI
Communications
Section 6.01
Any communications or documents given, made or sent by either Indonesia
(

or Canada purs uant t o this Agr eement or any Annex ther e to sha ll be in
writ ing and shall be deemed to have been duly given, made or sent to
t he pa rty t o which i t is a ddres sed a t the time of it s de liver y by hand,

- 8 -

mail, telegram, cable or radiogram at its respective addresses, namely:
For Indonesia :

The Ministry of Foreign Affairs
Jalan Pejambon 6-8
Jakarta, Indonesia
Cable Address : Deplu, Jakarta
and/or
Bank Indonesia
Jalan Kebon Sirih 82-84
Jakarta, Indonesia
Cable Address: Delegasi, Jakarta
and/or
Directorate General for International
Monetary Affairs
Department of Finance
Jalan Lapangan Banteng Timur 2-4
Jakarta, Indonesia
Cable Address: DITMON, Jakarta

For Canada:

The President
Canadian International Development Agency
Place du Centre
200 rue Principale

Hull, P.Q.
Canada KIA OG4
Cable Address:

CIDA HULL

Section 6.02
Any one of the Parties hereto may, by written notice to the other Party
hereto, change the address to which any notice or request intended for
the Party so giving such notice shall be addressed.
Section 6. 03
All communications and documents pertaining to this Agreement shall be
in the English or French language .
ARTICLE VII
Simultaneous Execution of Agreement

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Section 7.01
This Agreement may be simultaneously executed in several counterparts,
each of which so executed shall be deemed to be an original.

- 9 Section 7.02
This Agreement and the Annexes attached hereto, which form part of
this Agreement, may be amended from time to time upon agreement of the
Parties concerned.

Amendment to the main body of the Agreement shall

be executed by a formal amendment signed by the authorized representatives.
However, amendments to the Annexes may be by an exchange of letters
between Indonesia and Canada.

IN WITNESS WHEREOF the Parties hereto have caused to be subscribed
the signature of their authorized representatives at Jakarta as of
the day and the year first above written.

SIGNED ON BEHALF OF THE GOVERNMENT
OF THE REPUBLIC OF INDONESIA

Signed
M. Panggabean
Minister of Foreign Affairs ad interim

SIGNED ON BEHALF OF THE
GOVERNMENT OF CANADA

Signed
Glen Shortliffe
Ambassador

ANNEX "A"

RURAL ELECTRIFICATION PROJECT
1.0

Description of the Project
The Canadian International Development Agency (CIDA) and the
United States Agency for International Development (USAID) have
agreed to assist the Government of Indonesia in establishing
rural electrification cooperatives similar to the USAID program
in the Philippines, which was based on the 42 year experience of
the Rural Electrification Administration (REA) in the United States.
The report of the National Rural Electrification Cooperative
Association (NRECA) Study team, published in May 1976, concluded
that there were many densely populated rural areas which could
support non-profit, consumer-owned electric utilities but were
beyond the reach of the national power grid system of the Indonesian
Electricity Authority, Perusahaan Umum Listrik Negara (PLN).

The

Government of Indonesia selected three sites at Central Lampung,
Sumatra; Lombok, Nusa Tenggara; and Luwu, Sulawesi for the
development of non-profit member-owned electrical cooperatives.
CIDA has agreed to provide loan funds for the purchase of equipment
for the three diesel generating stations required of these sites
and grant aid funds to cover the cost of a Canadian consulting
firm which will coordinate the work with a USAID consultant
responsible for the electricity distribution systems.
2.0

Purpose of the Loan
Without limiting the generality of the Agreement, the proceeds of
the loan may be used by Indonesia or its agent to pay the Canadian
dollar costs of the following:
2.1

Equipment and Material
The manufacture and installat ion of diesel generating equipment
compl ete with transformers, control panels, fuel treatment

- 2 equipment, spare parts, auxillary equipment etc. as specified
by the Canadian Consultant and to be installed at three rural
electrification sites.
2.2

Ocean Freight and Insurance Charges
Ocean freight and marine insurance charges are eligible
items for financing from the proceeds of the loan.

All

freight arrangements shall be strictly bound by the
requirements to maintain the project schedule.
2.3

Services and Training
The provision of technical services and training normally
required for this type of equipment as specified by the
Canadian Consultant.

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ANNEX "B"

PROCUREMENT AND PAYMENT PROCEDURES
1.0

Procurement Procedures
1.1

The Directorate General of Cooperatives (DGC) shall be the
designated agent for the Government of Indonesia.

1. 2

On the basis of tendering and contract documents prepared
by a Canadian engineering consultant on behalf of the DGC,
tenders shall be invited for the supply of equipment and
materials required at each project site, from a representative
list of Canadian suppliers.

1.3

The list will be supplied by CIDA.

A copy of each invitation to tender shall be forwarded by the
DGC to the Canadian International Development Agency (CIDA).

1.4

Each Canadian supplier invited to tender shall be instructed:
1.4.1

to send a copy of his tender to CIDA at the same time
as the tender is forwarded to the DGC;

1.4.2

to include with the copy of the tender sent to CIDA,
a completed Canadian Content form;

1.4.3

that a copy of the Declaration of Canadian Content
form is not to accompany the tender submitted to the
DGC with the exception of the information contained
in Item Seven (7) of the Canadian Content form;

1.4.4

to include in its tender the following notation:
"We certify that the goods ordered hereby are for
export.

The invoiced price shall exclude Sales Tax

and refundable Customs Duty and Excise Tax paid on the
goods or on parts, and components incorporated in the
goods.

The goods are covered by Canadian International

Development Agency project number 472/00706".

- 2 1.5

Material and equipment prices shall be requested "Cost plus
insurance plus freight" (CIF) at an Indonesian port of entry
designated by DGC and the Canadian Consultant, and make
explicit the basic cost to shipside at a Canadian port,
insurance costs, and the costs of shipping from Canada to
Indonesia.

The supplier shall be responsible for arranging

freight and insurance as required through a shipping forwarder
acceptable to CIDA.
1.6

On items of sole source prices are to be negotiated; and

1.7

The DGC and Canadian Consultant, after analysing the tenders,
shall obtain the prior concurrence of CIDA before awarding
procurement contracts.

2.0

Payment Procedures
2.1

Bank Indonesia shall, when the contract is awarded, open
through a Canadian bank Letters of Credit in favour of
Canadian suppliers.

2.2

CIDA shall confirm to the Canadian bank that the bank will
be reimbursed by Canada from the development loan funds,
upon receipt of evidence of services having been rendered
or shipments having been made under and in conformity with
the terms of Letters of Credit opened by Bank Indonesia.

2.3

All banking charges incurred by Bank Indonesia in connection
with the opening of Letters of Credit through a Canadian bank
will be reimbursed by Canada from the development loan funds.
Any interest charges that may be payable by Bank Indonesia
to a Canadian bank in the event of that bank advancing funds
to meet payments to Canadian contractors will also be reimbursed
by Canada from the development loan funds.

- 2 4.0

Indemnify and save harmless, at no cost to the Loan Account,
Canada or its personnel engaged in the performance of duties in
connection with the Loan from any civil liability arising from

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any claims resulting from:
4.1

injury or death of any such personnel during the performance
of duties relative to the Loan;

4.2

injury or death of any person arising from the work of the
project; and

4.3

property damage arising from the work of the project .

These

provisions will not relieve any such personnel of Canada
from liability for any grossly negligent, fraudulent or
criminal act.
5.0

Arrange for adequate insurance for losses or damage to the
equipment and materials during transit in Indonesia from shipside
to the project site.

If any part of the lost or damaged equipment

and materials is pre-financed for replacement out of the Loan fund
pending settlement of insurance claims , on settlement of such
claims the amounts will be deposited to the account of the Loan
fund and will be paid in Canadian dollars.

6.0

Be responsible for the preparation and submission of claims to
Canadian suppliers for incomplete shipments, and for the preparation
and submission for insurance claims in the event of losses or
damage to material and equipment while in transit.

7.0

Be responsible for the costs of demurrage or damage resulting
from failure to provide proper berthing and/or clearances.

ANNEX "C"

RESPONSIBILITIES OF THE GOVERNMENT
OF THE REPUBLIC OF INDONESIA
With respect to equipment, materials and services provided from Canada,
Indonesia will:
1.0

Arrange with Indonesia Customs officials to properly clear through
Indonesian Customs free of import, customs and other duties and
taxes, all equipment and materials required to support and undertake
the implementation of the project.
suppliers and their
ｰ･ｲｳｯｾｮｬ＠

Indonesia will exempt Canadian

(other than personnel who are citizens

or permanent residents of Indonesia) from, or bear the costs of, any
taxes, duties, fees, levies and other impositions . imposed under its
laws and regulations or the laws and regulations in effect in its
territories or any political subdivision.
2.0

Provide at no cost to the Loan Account local material and labour
to permit the Canadian Consultant to implement the project.

Details

of facilities and services requirements shall be subject to the
terms of individual contracts.
3.0

Provide:
3. 1

All Indonesian permits, licences and other such documents required
to enable Canadian personnel to carry out their respective
responsibilities in Indonesia;

3.2

All export and exit permits required for the return of any of
the material, equipment or effects (including personal effects)
which are the property of or are provided by the Government
of Canada, the suppliers or individual Canadians employed on

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the provision of services under this Agreement; and
3.3

Access to those parts of Indonesia required to enable Canadian
personnel to carry out their responsibilities in Indonesia.

- 3 -

2.4

Advance mobilization payments may be made to the Canadian
suppliers provided these are required under and in conformity
with the terms of the purchase contracts.

2.5

After purchase contracts are issued and Letters of Credit
are in place with the Canadian bank, CIDA will issue Confirming
Purchase Orders to the Canadian suppliers.

Canadian suppliers

will be instructed by CIDA that they should not begin any
project-related activities until the contract, Letter of Credit,
and CIDA Confirming Purchase Orders are in place.
2.6

Letters of Credit shall be in place within ninety (90) days
of the signing of contracts.

If there is any delay in issuing

Letters of Credit beyond ninety (90) days and if contract
costs increase as a result, the GOI will be responsible for
all such contract costs which exceed approved loan funds as
provided for in this Loan Agreement.
2.7

Statements of disbursements will be prepared by Canada and
forwarded to Bank Indonesia on a quarterly basis.