Board Resolution No. 041/2011

BOARD RESOLUTION NO. 041/2011 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES APPLICATION FOR CONCESSIONAL EXTRAORDINARY CREDIT TO THE NATIONAL ELECTRICITY COMPANY FOR AN AMOUNT OF Bs1,227,205,000.-

SEEN: The Political Constitution of the State promulgated on February 7, 2009. Law No. 1670 of the Central Bank of Bolivia (BCB) of October 31, 1995. The General State Budget for the 2010 management period (PGE-2010). Law No. 050 of October 9, 2010 on Modifications to the PGE – 2010. Law No. 062 of November 28, 2010 approving the General State Budget for the 2011 management period (PGE – 2011). Supreme Decree No. 29644, of July 16, 2008. Supreme Decree No. 267, of August 26, 2009. Ministerial Resolution of the Ministry of Hydrocarbons and Energy No. 147/11, of April 6, 2011. The Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget for the 2010 and 2011 management periods, approved by Board Resolution of the Central Bank of Bolivia No. 23/2011, of February 22, 2011, and modified by Board Resolutions No. 26/2011, No. 27/2011, and No. 30/2011, of March 2, 18, and 22, 2011. The Board Resolution of the National Electricity Company No. 003/2011, of March 3, 2011. The Board Resolution of the National Electricity Company No. 004/2011, of April 5, 2011. The Board Resolution of the National Electricity Company No. 005/2011 of April 11, 2011. The notes from the National Electricity Company CBGGN-3235/11 and CBGGN-3464/11, of March 21 and 24, 2011. The notes from the National Electricity Company CBGGN-4020/11 and CBGGN-4021/11 of April 6, 2011. The notes from the National Electricity Company CBGGN-3549/11 of March 28, 2011; CBGGN-3866/11 of April 1, 2011; CBGGN-3984/11 and CBGGN-4030/11 of April 6, 2011. The Report from the Economic Policy Advisory BCB-APEC-SSMF-INF-2011-07 of April 4, 2011. The reports from the Monetary Operations Management BCB-GOM–SOSP–DCE-INF-2011-3 of April 7, 2011. The report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-112, of April 7, 2011. Act No. 016/2011 corresponding to the Extraordinary Meeting of the BCB Board of Directors on April 8, 2011. The notes from the Presidency of the Central Bank of Bolivia BCB-PRES-CE-2011-351 and BCB-PRES-CE-2011-352 of April 8, 2011. The note from the National Electricity Company CBGGN-4231/11 of April 11, 2011. The note from the Acting President of the Central Bank of Bolivia and the Minister of Hydrocarbons and Energy BCB-PRES-CE-2011-353 MHE-2037 DESP-0682 of April 12, 2011. The note from the Acting President of the Central Bank of Bolivia BCB-PRES-CE-2011-365 of April 13, 2011. The note from the Ministry of Economy and Public Finance MEFP/VTCP/DGCP/UEPS-0627/2011 of April 13, 2011. The note from the Acting President of the Central Bank of Bolivia BCB-PRES-CE-2011-368 of April 14, 2011. The note from the Acting President of the Central Bank of Bolivia BCB-PRES-CE-2011-373 of April 15, 2011. The note from the Ministry of Economy and Public Finance MEFP/VTCP/DGCP/UEPS-0637/2011 of April 15, 2011. The Report from the Monetary Operations Management BCB-GOM-SOSP-DCE-INF-2011-6 of April 15, 2011. The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-128 of April 15, 2011.

CONSIDERING: That the Political Constitution of the State (CPE), approved by Referendum on January 25, 2009, and promulgated on February 7, 2009, establishes in article 158, paragraph I, numeral 10 that the Plurinational Legislative Assembly has, among other attributions, the power to approve the contracting of loans that commit the general revenues of the State.

That article 322 of the CPE establishes that the Plurinational Legislative Assembly will authorize the contracting of public debt when the capacity to generate income to cover the principal and interest is demonstrated, and the most advantageous conditions in terms of rates, terms, amounts, and other circumstances are technically justified; and it states that public debt will not include obligations that have not been expressly authorized and guaranteed by the Plurinational Legislative Assembly.

That the PGE-2010 approved according to what is established by article 158 numeral 11 of the Political Constitution of the State, in its article 41 establishes that: “The Central Bank of Bolivia is authorized to grant an extraordinary credit up to the equivalent of $US1,000,000,000.- (One Billion 00/100 United States Dollars), in favor of National Strategic Public Enterprises under concessional conditions, with the exclusive object of financing productive investment projects within the framework of the country's food and energy security; for this effect, the Central Bank of Bolivia is exempted from the application of articles 22 and 23 of Law No. 1670 of October 31, 1995” referred to the prohibition of granting credits to the Public Sector and the need to document through negotiable public debt securities issued by the TGN, respectively.

That Law No. 050 in its article 8 establishes that within the framework of article 41 of the PGE –2010, the BCB is authorized to grant ENDE an extraordinary credit of up to Bs5,715,400,000.- under concessional conditions with the object of financing productive investment projects and/or making capital contributions to its subsidiary companies, for which the Central Bank of Bolivia is exempted from the application of articles 22 and 23 of Law No. 1670 of October 31, 1995.

That within the framework of paragraph I of article 41 referred to and according to what is established by numeral 10, paragraph I of article 158 and 322 of the Political Constitution of the State, ENDE is authorized to contract the aforementioned credit with the BCB.

That article 8 of the aforementioned Law establishes that the Ministry of Hydrocarbons and Energy, through Ministerial Resolution, must justify to the BCB that the use and destination of the resources of the credit to be acquired by ENDE are of national priority within the framework of the National Development Plan and that future flows will be used for the payment of the credit indicated in this article.

That in article 19 of the aforementioned Law, it is determined to release ENDE from the application of articles 33 and 35 of Law No. 2042 on Budgetary Administration. Consequently, ENDE is not subject to what is provided by the Regulation for the Registration of the Start of Credit Operations, approved by the Ministry of Economy and Public Finance, through Ministerial Resolution No. 525 of October 22, 2007, and modified through Ministerial Resolution No. 318 of August 26, 2009.

That Law No. 62 approves the General State Budget for the 2011 management period (PGE-2011) and, through its article 13, modifies article 8 of Law No. 50, providing that, within the framework of article 41 of the PGE-2010, the BCB is authorized to grant ENDE an extraordinary credit of up to Bs4,879,000,000.- (Four Billion Eight Hundred Seventy-Nine Million 00/100 Bolivianos), with the object of financing productive investment projects and/or making capital contributions to its subsidiary companies, under concessional conditions; for which the BCB is exempted from the application of Articles 22 and 23 of Law No. 1670.

That within the framework of paragraph I of article 13 of Law No. 62 and according to what is established by numeral 10, paragraph I of article 158 and of article 322 of the CPE, ENDE is authorized to contract the credit with the BCB.

That article 13 of Law No. 62 which modifies article 8 of Law No. 50, establishes that the Ministry of Hydrocarbons and Energy, through Ministerial Resolution, must justify to the BCB that the use and destination of the resources of the credit to be acquired by ENDE is of national priority within the framework of the National Development Plan and that future flows will be used for the payment of the credits indicated in that article.

That article 14 of Law No. 62 establishes that for the contracting and execution of concessional extraordinary credits, the validity of article 19 of Law No. 50 is extended for the 2011 management period.

That Supreme Decree No. 29644 has the object of establishing the legal nature of ENDE, as a national strategic and corporate public enterprise.

Supreme Decree No. 267, of August 26, 2009, modifies article 4 of Supreme Decree No. 29644 and approves the Statutes of ENDE.

That the Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget for the 2010 and 2011 management periods, approved by Board Resolution of the Central Bank of Bolivia No. 023/2011 and modified by Board Resolutions No. 026/2011, No. 027/2011, and No. 030/2011 has the object of regulating the granting of credits by the BCB in favor of the EPNEs, within the framework of what is provided in the PGE-2010, modified by Law No. 50, and the PGE-2011 approved by Law No. 62.

That by Ministerial Resolution No. 147/11 the Ministry of Hydrocarbons and Energy justifies to the BCB the following aspects: 1) It determines that according to the National Development Plan, the execution of the Project “Emergency Plan for Electricity Supply to the SIN” is of national priority and will be executed by ENDE, for which it will request a credit of Bs1,227,205,000.00 from the BCB and that future flows will be used for the payment of the credit; 2) It confirms the technical feasibility of the aforementioned project; 3) It determines that according to the economic and financial evaluation of the project, the payment capacity of the credit contracted with the BCB is ensured. Likewise, that the available profits generated by ENDE's subsidiary companies will be used to pay the debt that said company will contract with the BCB for the Execution of the Emergency Plan; 4) That the MHE will authorize the disbursement requests that ENDE makes to the BCB in accordance with the Credit Contract to be signed, committing through the Vice Ministry of Electricity and Alternative Energies to monitor the execution of the credit resources.

That the Board Resolution of ENDE No. 003/2011 approves the Investment Plan and the Disbursement Schedule of the requested credit resources and in annex F1 the Financial Report GAF-DIR-001/2011 is included with the General Investment Plan and the Disbursement Schedule, which contemplates the breakdown in national and foreign currency.

That the Board Resolution of ENDE No. 004/2011 approves the update of the Investment Plan and the Disbursement Schedule of the credit resources that were approved by article 2 of Board Resolution No. 003/2011, which are attached to said Resolution, and states that month 1 (one) is counted from the effective realization of the first disbursement.

That through notes CBGGN-3235/11 and CBGGN-3464/11 ENDE sends to the Ministries of Hydrocarbons and Energy (MHE) and of Planning and Development, Board Resolution No. 003/2011 and the Investment Plan of the resources destined for the execution of the project called “Emergency Plan for Electricity Supply of the SIN”.

That through notes CBGGN-4020/11 and CBGGN-4021/11 ENDE sends to the MHE and the Ministry of Planning and Development, Board Resolution No. 004/2011 and the updated Investment Plan of the resources.

That through notes CBGGN-3549/11, CBGGN-3866/11 and CBGGN-3984/11 and CBGGN-4030/11 ENDE requests a credit from the BCB of Bs1,227,205,000.- for the execution of the Emergency Plan for Electricity Supply to the SIN and offers as guarantee the automatic debit of ENDE accounts opened at the BCB.

That the Economic Policy Advisory (APEC) in its Report BCB-APEC-SSMF-INF-2011-07, concludes that the credit of Bs1,277.2 million requested by ENDE is within the amount provided in the Base Monetary Program of the 2011 management period, which was incorporated in the Execution Decision of the Fiscal – Financial Program signed with the MEFP on February 9, 2011. Likewise, it states that with respect to the impact of the credit requested by ENDE on the 2011 Base Monetary Program, the disbursement of the requested credit will not affect the compliance with the variables subject to measurement in said Program.

That the Monetary Operations Management states in its report BCB-GOM–SOSP–DCE-INF-2011-3, that the financial conditions to be established must respect the concessional nature of the credit within the framework of current regulations, in addition to ensuring the recovery of the credit in the shortest possible time and it pronounces on the methodology to calculate the discount rate of the present value and the degree of concessionality and the financial conditions of the credit.

That the Legal Affairs Management in the scope of its competence, concludes that the request made through notes CBGGN-3549/11; CBGGN-3866/11; CBGGN-3984/11 and CBGGN-4030/11 by ENDE for the granting of a credit of Bs1,227,205,000.- is within the framework of the referred norms and has complied with the presentation of the required documents in article 2 of the Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget - 2010 and 2011 management periods, so it corresponds to consider the credit request by the BCB Board of Directors by two-thirds of the votes of the members present in the meeting.

That the BCB Board of Directors through Act No. 016/2011 in virtue of articles 13 and 14 of the PGE 2011 approved by Law No. 62 of November 28, 2010, of the Ministerial Resolution of the Ministry of Hydrocarbons and Energy 147/11 of April 6, 2011, and of what is established by the BCB Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget 2010 and 2011 management periods, determined to accept the credit request in Bolivianos up to the amount of Bs1,227,205,000.-, for a term of 20 years with a principal grace period of 5 years with interest payments computable from the first disbursement, at an annual interest rate of 0.86%, setting the deadline for disbursements until April 30, 2013.

That in the aforementioned Act, the Board determined not to accept the guarantees offered by the National Electricity Company, proceeding to request the issuance of Treasury Bonds to the Ministry of Economy and Public Finance according to article 4 numeral 3) of the BCB Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget 2010 and 2011 management periods.

That through notes BCB-PRES-CE-2011-351 and BCB-PRES-CE-2011-352 the Acting President of the BCB communicates to the General Manager of ENDE and the Minister of Hydrocarbons and Energy the decision of the Board of Directors of the Issuing Entity of April 8, 2011, referred to the conditions for the granting of a concessional extraordinary credit to the National Electricity Company.

That the ENDE Board of Directors through Resolution No. 005/2011 resolves to have no observations to the conditions of the Concessional Credit approved by the BCB Board of Directors, described in note BCB-PRES-CE-2011-351.

That through note BCB-PRES-CE-2011-353 MHE-2037 DESP-0682 the Acting President of the BCB and the Minister of Hydrocarbons and Energy communicate to the Minister of Economy and Public Finance that according to the Regulation for the Granting of Credit to National Strategic Public Enterprises within the framework of the General State Budget 2010 and 2011 management periods, the Board of Directors of the Central Bank of Bolivia, has considered and approved, in favor of the National Electricity Company (ENDE), the concessional credit request of Bs1,227,205,000.- for the implementation of the “Emergency Plan for Electricity Supply to the SIN”; however, said Board has not accepted the guarantee offered by said Company, so in order to facilitate the signing of the contract and make effective the credit required by ENDE, according to what is provided in article 4 numeral 3 of the aforementioned Regulation, the issuance of the list of Treasury Bonds that will constitute the guarantee of the obligations contracted by ENDE is requested from the MEFP. To this effect, a detail of the amounts and maturity dates of the required bonds is attached.

That the Acting President of the BCB in note BCB-PRES-CE-2011-365 sends a copy of the Act of the BCB Board of Directors Meeting No. 016/2011 and attaches the Company's Payment Schedule, with the object of having the list of the Bonds that serve as guarantee for the credit.

That the Minister of Economy and Public Finance in note MEFP/VTCP/DGCP/UEPS-0627/2011 attaches the relationship with the serial numbers of the Non-Negotiable Treasury Bonds, that this State portfolio commits for the credit operation to be carried out within the framework of article 13 of Law No. 062. With respect to this, the Ministry of Economy and Public Finance will issue and deliver the corresponding Treasury Bonds to the BCB, immediately after each disbursement that the BCB makes in favor of ENDE, according to the disbursement schedule to be agreed in the BCB-ENDE-MHE Credit Contract.

That in note BCB-PRES-CE-2011-368 the Acting President of the BCB ratifies the agreement that the issuance and delivery of the Treasury Bonds be carried out once the Central Bank of Bolivia requests said issuance to the Ministry of Economy and Public Finance, accompanying ENDE's disbursement request, the authorization of the relevant Ministry, and the disbursement order of the credit by the Central Bank of Bolivia. Upon receiving the Bonds, the disbursement to ENDE's account, opened at the Bank for this effect, will be operationalized simultaneously.

That the note from the Acting President of the Central Bank of Bolivia BCB-PRES-CE-2011-373 in which it communicates to the Ministry of Economy and Public Finance that at the request of ENDE, the Payment Schedule of the Company referred to in note BCB-PRES-CE-2011-365 is replaced. In this note, it is informed that the conditions of the credit do not change the payment dates to be made by ENDE nor the payment amounts to principal of each bond, and it requests that the MEFP confirm if the numbers of the Bonds appearing in the Relationship of Serial Numbers of the Non-Negotiable Treasury Bonds attached to note MEFP/VTCP/DGCP/UEPS-0627/2011 are maintained.

That by note MEFP/VTCP/DGCP/UEPS-0637/2011 in response to notes BCB-PRES-CE-2011-368 and BCB-PRES-CE-2011-373 the Ministry of Economy and Public Finance communicates that it has no observations to the simultaneous procedure agreed and confirms that the numbers of the Bonds appearing in the Relationship of Serial Numbers of the Non-Negotiable Treasury Bonds attached to note MEFP/VTCP/DGCP/UEPS-0627/2011 are maintained.

That the Monetary Operations Management in the Report BCB-GOM-SOSP-DCE-INF-2011-6 concludes that prior to receiving the Bonds and making effective the disbursement, a coordination process with the TGN on the integrity of the Titles must be carried out, which includes a review before their issuance, which can take a couple of days and depends on the operation of the issuer itself.

That in the aforementioned Report, the GOM states that with Law 1670 in force, the Monetary Operations Management considers the application of Article 25 of said law in its entirety, for the effective realization of the bonds granted in favor of the BCB, prior to legal confirmation, and that it has no objections to the procedure described in Letter BCB-PRES-CE-2011-368 and accepted by the MEFP through its letter MEFP/VTCP/DGCP/UEPS – 0637/2011, with respect to the issuance of the Bonds and the disbursement to ENDE's account.

That the Report BCB-GAL-SANO-INF-2011-128 states that the nature of the Non-negotiable Bonds to be issued in favor of the BCB prior to each of the disbursements committed according to the disbursement plan, does not allow the BCB free negotiability of them, but only the effective realization of their collection, exclusively at the maturity of their term and solely for the purpose of covering in case, the unpaid sum by ENDE.

Additionally, it states that each disbursement will be made once the bonds are issued and delivered, according to what is provided in the contract to be signed with ENDE, which is concordant with the applicable Regulation.

That the Legal Affairs Management in the referred Report, concludes that consequently of what is exposed, within the legal framework described, the MEFP is authorized to issue bonds as guarantee and backing for the credit operation that the BCB will make in favor of ENDE, having committed their issuance and delivery to the BCB, for the purposes of the disbursements to be made; and that the bonds to be issued will be delivered prior to the effective disbursements that are made according to the schedule established by the BCB and accepted by ENDE. These bonds are Non-negotiable, therefore they can only be subject to effective realization or collection at their maturity, which must be related to the payment date of the different installments of the credit to be granted to ENDE.

That in virtue of what is provided in article 44 of Law No. 1670, the BCB Board of Directors is the competent instance to authorize the granting of the extraordinary credit in favor of ENDE in order to comply with what is expressly disposed in the PGE-2010 and applicable legal provisions to the case.

That article 6 of the Regulation for the Granting of Credit to National Strategic Public Enterprises in the Framework of the General State Budget - 2010 and 2011 Management establishes that the BCB Board of Directors, considering the technical and legal reports, will consider the credit request and in its case approve it, through the favorable vote of two-thirds of its members present in the Board of Directors meeting, issuing the corresponding Resolution; and it will instruct the elaboration and subsequent signing of the contract by the President of the BCB, prior to review and approval by the Board of Directors.

THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Approve within the framework of articles 13 and 14 of Law No. 062 of November 28, 2010, which approves the PGE- 2011, of the antecedents and provisions described above, the granting of a concessional extraordinary credit to ENDE under the following terms and conditions: Currency: Bolivianos. Total Credit Amount: Bs1,227,205,000.- (One billion two hundred twenty-seven million two hundred five thousand 00/100 Bolivianos) Term: 20 years Grace Period: On principal 5 years, with annual interest payments from the first disbursement Annual Interest Rate: 0.86% (zero point eighty-six percent) Guarantee: Treasury Bonds Deadline for Disbursements: Until April 30, 2013 Payment Plan: Annual

Article 2.- Authorize the President of the BCB to sign the contract with the National Electricity Company under the terms of this Resolution.

Article 3.- The Presidency and the General Management are in charge of the execution and