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A.I.D. Loan Number
Projec= Number

PROJECT
LOAN AGREEMENT
BETWEEN
THE REPUBLIC OF INDONESIA
and the
UNITED STATES OF AMERICA
for
RURAL ELECTRIFICATION

vated:

May 6, 1978

497-T-052
497-0267

RURAL ELECTRIFICATION PROJECT

TABLE OF CONTENTS
Page No.
Article 1
Article 2 :
Section
Article 3 :
Section
Section

The Agreement
The Project
2.1 Definition of Project
Financing
3.1 The Loan
3.2 Borrower Resources for the
Project
Section 3.3 Project Assistance Completion
Date
Article 4 : Loan Terms
Section 4.1 Interest

Section 4.2 Repayment
Section 4.3 Application Currency, and
Place of Payment
Section 4.4 Prepayment
Section 4.5 Renegotiation of Terms
Section 4.6 Termination of Full Payment
Article 5 : Conditions Precedent To Disbursement
Section 5.1 First Disbursement
Section 5.2 Additional Disbursement for
the National Perusahaan Uurum
Listrik Negara (PLN) Subprojects
Section 5 o3 Additional Disbursement for
the Cooperative Subprojects
Section 5.4 Notification
Section 5.5 Terminal Dates for Conditions
Precedent
Article 6 : Special Covenants
Section 6.1 Project Evaluation
Section 6.2 Project Service Areas
Section 6.3 Environmental Assessment

Section 6.4 Service Rates
Section 605 Accounting Records
Section 6.6 Power Use
Section 6.7 Trained Personnel
Section 6.8 Relending Terms
Section 6.9 Rights in Land
Section 6.10 Banking Services
Section 6.11 Supervisory Group
Section 6.12 Project Development Office
Article 7 : Procurement Source
Section 7.1 Foreign Exchange Costs
Section 7.2 Local Currency Costs

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Table of Contents (Cont'd)
Page Noo
Article 8 : Disbursements
Section 8.1 Disbursements for Foreign
Exchange Costs
Section 8.2 Disbursement for Local
Currency Costs
Section 8.3 Other Forms of Disbursement
Section 8.4 Rate of Exchange

Section 8.5 Date of Disbursement
Article 9 : Miscellaneous
Section 9.1 Investment Guaranty
Project Approval
Section 9.2 Communications
Section 9.3 Representatives
Section 9.4 Standard Provision Annex

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Amplified Description of Rural Electrification Project

Annex 1

Project Loan Standard Provision Annex

Annex 2

Aol.D. Project No. 497-0267
Project Loan Agreement
Dated

May 6, 1978

Between
The Republic of Indonesia ("Borrower")
And
The United States of America, acting through the
Agency for International Development ("A.I.D.").
Article 1:

The Agreement

The purpose of this Agreement is to set out the understandings of the parties named above ("Parties") with respect
to the undertaking by the Borrower of the Project described
below, and with respect to the financing of the Project by
the Parties.
Article 2:

The Project

SECTION 2.1.

Definition of Project .

The Project, which

is further described in Annex 1, will consist of assisting the
Borrower in its program to provide electric power to rural
residents of Indonesia at a price the large majority thereof

can afford; to assist such rural residents in wiring their
homes and utilizing the electricity; and to promote the use
of electricity in rural areas for productive enterprise such
as irrigation, small industry, commercial establishments and
for health services such as potable water and clinics.

- 2 -

Within the limits of the above definition of the
Project, elements of the amplified description stated in
Annex 1 may be changed by written agreement of the authorized
representatives of the Parties named in Section 9.3, without
formal amendment of this Agreement o
Article 3:

Financing

SECTION 3.1.

The Loan.

To assist the Borrower to meet

the costs of carrying out the Project, A.I.D o, pursuant to the
Foreign Assistance Act of 1961, as amended, agrees to lend the
Borrower under the terms of this Agreement not to exceed thirty
million United States ("U.S.") dollars ($30,000,000) ("Loan").
The aggregate amount of disbursements under the Loan is ref erred
to as "Principal."
The Loan may be used to finance foreign exchange
costs, as defined in Section 7.1, and local currency costs, as
defined in Section 7.2, of goods and services required for the
Project.
SECTION 3.2.
(a)

Borrower Resources for the Project o

The Borrower agrees to provide or cause to be

provided for the Projec t all funds, in addition to the Loan,
and all other resources required to carry out the Project
effectively and in a timely manner.
(b)

The resources provided by Borrower for the Project

will be not less than the equivalent of twenty million eight
hundred thousand U.S. dollars ($20,800,000) including
costs borne on an "in-kind" basis.

- 3 SECTION 3.3.

Project Assistance Completion Date

(a) The "Project Assistance Completion Date" ("PACD"),
which is

May 6,

1983, or such other date as the Parties may

agree in writing, is the date by which the Parties estimate
that all services financed under the Loan will have been furnished for the Project as contemplated in this Agreement.
(b) Except as A.I.D. may otherwise agree in writing,
A.I.D. will not issue or approve documentation which would
authorize disbursement of the Loan for services performed subsequent to the PACD or for goods furnished for the Project, as
contemplated in this Agreement, subsequent to the PACD.
(c) Requests for disbursement, accompanied by necessary
supporting documentation prescribed in Project Implementation
Letters, are to be received by A.I.D. or any bank described in
Section 8.1 no later than nine (9) months following the PACD,
or such other period as A.I . D. agrees to in writing.

After

such period, A.I.D., giving notice in writing to the Borrower,
may at any time or times reduce the amount of the Loan by all
or any part thereof for which requests for disbursement,
accompanied by necessary supporting documentation prescribed
in Project Implementation Letters , were not received before
the expiration of said period.
Article 4:

Loan Terms

SECTION 4.1.

Interest.

The Borrower will pay to A.I.D.

interest which will accrue at the rate of two percent (2%) per

. ,.

- 4 annum for t en years following the date of the first disbursement hereunder and a t the rate of three percent (3%) per annum
thereafte r on the outstanding balance of Principal and on any
due and unpaid interest.-:.,,· Interest on the outstanding balance
will accrue from the date (as defined in Section 8.5) of each
respective disbursement, and will be payable semiannually.

The

first payment of inter es t will be due and payable no later t han
six (6) months after t he first disbursement hereunder, on a
date t o be specified by A.I .D.
SECTION 4.2.

Repaymen t.

The Borrower will repay to A.I. D.

the Principal within thirty (30) years from the date of the
first disbursement of the Loan in forty-one (41) approximately
equal semiannual insta l lments of Principal and interest.

The

first installment of Principal will be payable nine and one - half
(9-1/2) years after the date on which the first interest payment is due in accordance with Section 4.1.

A.I.D. will provide

the Borrower with an amortizacion schedule in accordance with
this Section afte r the final disbursement under the Loan.
SECTION 4.3 .

Application, Currency, and Pl ace of Payment o

All payments of inte r est and Principal hereunder will be made
in U.S o Dollars and wil l be applied first to the payment of
interest due and t hen t o the repayment of Principal. Except as
Aol.D. may otherwis e specify in writing, payments will be made
to the Controller, Office of Financial Management, Agency for
International Deve lopment, Washington, D.C., 20523, U.S.A., and

- 5 -

will be deemed made when received by the Off ice of Financial
Management.
SECTION 4.4 o

Prepayment.

Upon payment of all interest

and any refunds then due, the Borrower may prepay, without
penalty, all or any part of the Principal.

Unless A.I.D. other-

wise agrees in writing, any such prepayment will be applied to
the installments of Principal in the inverse order of their
maturity.
SECTION 4o5o
(a)

Renegotiation of Terms.

The Borrower and A.I.D. agree to negotiate, at such

time or times as either may request, an acceleration of the
repayment of the Loan in the event that there is any significant
and continuing improvement in the internal and external economic
and financial position and prospects of Indonesia, which enable
the Borrower to repay the Loan on a shorter schedule.
(b)

Any request by either Party to the other to so nego-

tiate will be made pursuant to Section 9.2,

and will give the

name and address of the person or persons who will represent
the requesting Party in such negotiations.
(c)

Within thirty (30)days after delivery of a request

to negotiate, the requested Party will communicate to the
other, pursuant to Section 9.2, the name and address of the
person or persons who will represent the requested Party in
such negotiations.

- 6 (d)

The representatives of the Parties will meet to

carry on negotiations no later than thirty (30) days after
delivery of the requested Party's communication under subsection
(c).

The negotiations will take place at a location mutually

agreed upon by the representatives of the Parties, provided that,
in the absence of mutual agreement, the negotiations will take
place at the office of Borrower's Minister of Finance in
Indonesia.
SECTION 4.6.

Termination on Full Payment.

Upon payment

in full of the Principal and any accrued interest, this
Agreement and all obligations of the Borrower and A.I.D

0

under

it will cease.
Article 5:

Conditions Precedent to Disbursement

SECTION 5.1.

First Disbursement.

Prior to the first

disbursement under the Loan, or to the issuance by A.I oD. of
documentation pursuant to which disbursement will be made, the
Borrower will, except as the Parties may otherwise agree in
writing, furnish to A.I.D. in form and substance satisfactory
to A. I.D . :
(a)

An opinion of the Minister of Justice that this

Agreement has been duly authorized and/or ratified by, and
executed on behalf of, the Borrower, and that it constitutes
a valid and legally binding obligation of the Borrower in
accordance with all of its terms;

- 7 -

··.

(b) A statement of the names of the persons holding or
acting in the office of the Borrower specified in Section 9.3,
and a specimen signature of each person specified in such statement .
SECTION 5.2.

Additional Conditions Precedent to Disburse-

ment for Perusahaan Umum Listrik Negara (PLN) Subprojects.
Prior to disbursement under the Loan, or to the issuance by
A.I.D . of documentation pursuant to which disbursement will be
made for the PLN subprojects, the Borrower will, except as the
Parties may otherwise agree in writing, furnish to A.I.D. in
form and substance satisfactory to A.I.D.:
(a) A signed agreement between the Borrower and PLN previously approved by A.I.D. whereby the Borrower agrees either
to lend to PLN on the same financial terms and conditions as
those set forth herein, with the addition of a reasonable service
fe e, tha t amount of loan funds required for PLN to carry out its
part of the Project, or, in the alternative, to transfer such
loan funds to PLN as an equity contribution;
(b) An implementation plan approved by A.I.D. which will include:

(1) a time-phased schedule of proposed Project actions;

(2) an organizational plan for the design, construction and operation of the Project; (3) a personnel training plan; and (4) a
planned program to promote the use of electricity in the PLN froj ec t s ervice areas;

(c) A schedule of service rates and other costs, previously
approved by A. I . D., to be charged by PLN to its customers which

- 8 -

will include but not limited to all construction costs, house
wiring loan costs and monthly service rates; and
(d)

A schedule for the evaluation program referred to in

Section 6.1.
SECTION 5.3.

Additional Conditions Precedent to Disburse-

ment for the Cooperative Subprojects.

Prior to disbursement

under the Loan, or to the issuance by A.I.Do of documentation
pursuant to which disbursement will be made for the cooperative
subprojects, the Borrower will, except as the Parties may otherwise agree in writing, furnish to A.I.D. in form and substance
satisfactory to A.I.D.:
(a)

A signed agreement between the Borrower and the Bank

Rakyat Indonesia (BRI) previously approved by Aol . D. whe reby the
Borrower agrees to lend to the BRI on the same financial t erms
and conditions as those set forth herein that amount of loan
funds required for DGC and the cooperatives to carry out their
part of the Project;
(b)

Signed agreements previously approved by A.I.D.

between the BRI and the cooperatives whereby the BRI agrees to
on-lend to the cooperatives the following designated funds on
the same financial terms and conditions as those by which the
BRI received such funds with the exception of the addition by
BRI of a reasonable service charge:
i.

That portion of the AoloDo loan funds received

f rom the Borrower for the purpose of assisting the cooperatives

- 9 in carrying out their part of Project; and
ii.

The rupiah funds loaned by the Borrower to BRI

for the purpose of assisting the cooperatives in carrying out
their part of the Project.
(c) An A.I.D. approved implementation plan including:
(1) a time-phased schedule of proposed Project actions;
(2) an organizational plan for Project design, construction and
operation; (3) a personnel training plan; and (4) a planned
program to promote the use of electricity in the DGC Project
service area;
(d)

Evidence of the organization of three rural electric

cooperatives by the DGC pursuant to the laws of Indonesia vested
with powers to buy and sell and generate electricity, to borrow
and lend money, to buy materials and construct facilities
necessary to provide electric service, to insure against liability and to have and hold such other powers and authorities as
may be provided for or given to public electric utility companies
under the applicable laws of Indonesia;
(e)

Evidence that satisfactory arrangements have been

ma.de to finance the required generating capacity for locations
in the outer islands;
(f)

Establishment by Borrower of a Supervisory Group to

supervise the rural electric cooperatives through the life of
the Project;

- 10 -

(g)

Establishment by Borrower of a Project Development

Office (PDQ) to implement the Project o
(h)

A schedule for the evaluation program ref erred to in

Section 6.1.
SECTION 5.4.

Notification o When A.I.D. has determined

that the conditions precedent specified in Sections 5.1, 5.2 and
5.3 have been met, it will promptly notify the Borrower.
SECTION S.5 o

Terminal Dates for Conditions Precedent.

If all of the conditions specified in Section 5.1 have not been
met within 90 days from the date of this Agreement, or such
later date as A.I.D. may agree to in writing,
ａＮｉ

ｾ ｄＮＬ＠

at its

option, may terminate this Agreement by written notice to
Burrower.
Art.icltt.• 6:

Special Covenants

SECTION 6.1.

Project Evaluation.

The Parties agree to

ｾｵｴ｢ｬｩｳｨ＠

an evaluation program as an integral part of the

Project.

Except as the Parties otherwise agree in writing, the

program will include, during the implementation of the Project
aad at one or more points thereafter:
(a)
t

ivL'

Evaluation of progress toward attainment of the object

,t the Project;

(b)

ｉ､･ｮｴｩｦ｣｡ｾｯ＠

and evaluation of problem areas or
which may inhibit such attainment;

｣ｯｮｾｴｲ｡ｩｳ＠

(c)

Assessment of how such information may be used to

help overcomi:: such problems, in this or other projects; and

- 11 -

(d) Evaluation, to the degree feasible, of the overall
development impact of the Project.
SECTION 6.2.

Project Service Areas.

Borrower agrees

that Project service areas for both the PLN and cooperative
projects shall be selected by a procedure acceptable to A.I.D.
and shall be verified as being financially viable, economical,
and socially and environmentally feasible pursuant to studies
approved by A.I.D.
SECTION 6.3.

Environmental Assessment.

Borrower agrees

that the recommendations and findings of an environmental
assessment to be performed by A.I.D. in cooperation with PLN
and DGC will be incorporated into the Project design where
feasible.
SECTION 6.4.

Service Rates.

Borrower agrees that PLN

will not increase any of the service rates or other charges set
forth in the schedule referred to in Section 5.2 (c) without
prior consultation between Borrower and A.I.D. on the new rate
schedule.
SECTION 6.5.

Accounting Records.

Borrower agrees that

PLN shall keep separate cost accounting records for each of the
service areas included in this Project for three years following
the PACD.
SECTION 6.6.

Power Use.

Borrower agrees that PLN and

DGC shall take necessary measures to encourage the use of
electricity in the Project service areas by reducing connec-

- 12 -

tion charges, by funding a program to finance connection
charges and house wiring costs, promoting industrial and
agricultural use of electricity in the areas and by such other
actions as may be advisable to achieve the aforesaid purpose.
SECTION 6.7.

Trained Personnel.

Borrower agrees that

Lhe DGC shall take steps to assure that the PDO and the
cooperative staffs are provided \vith qualified personnel who
are properly trained to implement the Project.
SECTION 6.8.
none

u.:

Relending

Borrower agrees that
ｔ･ｲｾＮ＠

the agreements referred to in Stction 5 3 will be

modif ie