Board Resolution No. 099/2011

BOARD RESOLUTION NO. 099/2011 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES CONCESSIONAL EXTRAORDINARY CREDIT TO THE NATIONAL ELECTRICITY COMPANY FOR AN AMOUNT OF Bs1,233,422,855.-

SEEING: 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, modifying 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. 289, of September 9, 2010. Supreme Resolution No. 4990 of January 14, 2011. The note from the National Electricity Company 2011CB-CA-GGN-8/4-11 of August 3, 2011. The Regulation for the Concession 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, No. 30/2011, and No. 097/2011 of March 2, 18, and 22, and August 9, 2011. The Ministerial Resolution of the Ministry of Hydrocarbons and Energy No. 318-11 of August 3, 2011. The Board Resolution of the National Electricity Company No. 017/2011, of July 26, 2011. The notes from the National Electricity Company cited: CB-CA-GGN-7/36-11, CB-CA-GGN-7/34-11, and CB-CA-GGN-7/37-11, all dated July 26, 2011.

//2. B.R. No. 099/2011 The Report from the Economic Policy Advisory BCB-APEC-SSMF-INF-2011-020 of August 9, 2011. The reports from the Monetary Operations Management BCB GOM-SOSP-DCE-INF-2011-11 of August 9, 2011. The report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-276, of August 9, 2011. Act No. 040/2011 corresponding to the Ordinary Meeting of the BCB Board of Directors on August 9, 2011. The notes from the Presidency of the Central Bank of Bolivia BCB-PRES-CE-2011-750 and BCB-PRES-CE-2011-751 of August 9, 2011. The note from the National Electricity Company, note CB-CA-GGN-8/10-11 of August 10, 2011, to which Ministerial Resolution 327-11 of August 9, 2011, from the Ministry of Hydrocarbons and Energy, and ENDE Board Resolution No. 018/2011 of August 10, 2011, are attached. The note from the Acting President of the Central Bank of Bolivia and the Minister of Hydrocarbons and Energy BCB-PRES-CE-2011-755 MHE-3977 DESP-15930 of August 10, 2011. The note from the Ministry of Economy and Public Finance MEFP/VTCP/DGCP/UEPS-1271/2011 of August 12, 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 others, the attribute 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 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 as 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 cash 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 in the Regulation for the Registration of 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 Article 322 of the CPE, ENDE is authorized to contract the credit with the BCB.

//4. B.R. No. 099/2011 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 cash 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.

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

That by Supreme Resolution No. 4990, Mr. Jhonny Nelson Caballero Vargas is appointed as Acting General Manager of ENDE.

That the Regulation for the Concession 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, No. 030/2011, and No. 097/2011, has the object of regulating the granting of credits by the BCB in favor of NSPEs, 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 note CB-CA-GGN-8/4-11, the National Energy Company (ENDE) presents the request for a concessional credit of Bs1,233,422,855.- for the execution of the project named “Immediate Power Addition Plan – Modal Capital Contributions to the Subsidiary Company Valle Hermoso S.A.”, to which effect it sends the corresponding documentation and offers as guarantee the automatic debit of ENDE accounts opened at the BCB.

That by Ministerial Resolution No. 318-11, 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 projects of the “Immediate Power Addition Plan – Modal Capital Contribution to the subsidiary company Valle Hermoso S.A.” are of national priority and will be executed by the Electric Company Valle Hermoso S.A. through the capital contribution that ENDE will make, for which the latter will request a credit from the BCB of Bs1,233,422,855.-, whose amount will be destined to the referred projects and that future cash flows, expressed in the profits that ENDE receives from its participation in Valle Hermoso S.A., will be used for the payment of the credit; 2) It confirms the technical feasibility of the execution of the “Immediate Power Addition Plan – Modal Capital Contribution to the subsidiary company Valle Hermoso S.A.”, as stated in Report MHE-DGE No. 0044/2011, issued by the Vice Ministry of Electricity and Alternative Energies; 3) It determines that according to the economic and financial evaluation of the “Immediate Power Addition Plan – Modal Capital Contribution to the subsidiary company Valle Hermoso S.A.”, contained in report DGAA No. 0317/2011, issued by the General Directorate of Administrative Affairs, the payment capacity of the credit to be contracted with the BCB is ensured. Without prejudice to the above and additionally, it is determined that the available profits generated by ENDE's subsidiary companies will be used for the payment of the debt that said company will contract with the BCB for the execution of the referred project; and 4) It authorizes the disbursement requests that ENDE makes to the BCB, according to the Credit Contract that is signed between said entities, committing, through the Vice Ministry of Electricity and Alternative Energies, to monitor the execution of the credit resources.

That ENDE Board Resolution No. 017/2011 approves the Investment Plan and the Disbursement Schedule of the credit resources to be granted by the BCB, with a breakdown of expenditure in national and foreign currency.

That by notes CB-CA-GGN-7/36-11, CB-CA-GGN-7/34-11, and CB-CA-GGN-7/37-11, all dated July 26, 2011, through which ENDE sends to the Ministries of Economy and Public Finance, Hydrocarbons and Energy, and Development Planning a copy of Board Resolution No. 017/2011 (Simple photocopies), and the Disbursement Schedule and Payment Plan of the project “Immediate Power Addition Plan – Modal Capital Contributions to the Subsidiary Company Valle Hermoso S.A.”

That the Economic Policy Advisory (APEC) in its Report BCB-APEC-SSMF-INF-2011-20, concludes that the credit of Bs1,233,422,855 is part of the credit of Bs4,879,000,000.- amount provided in the Monetary Program of the 2011 management, 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 Monetary Program, the disbursement of the requested credit will not affect the fulfillment of the variables subject to measurement in said Program.

That the Monetary Operations Management points out in its report BCB-GOM–SOSP–DCE-INF-2011-11, 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, within its competence and in compliance with clause c) of Article 5 of the Regulation for the Concession of Credit to National Strategic Public Enterprises within the framework of the General State Budget - 2010 and 2011 Management Periods, concludes that the request made by ENDE, through note CB-CA-GGN-8/4-11, for the granting of a credit of Bs1,233,422,855.-, falls within what is provided by current regulations, having complied with the presentation of the documents required in Article 2 of the Regulation for the Concession of Credit to National Strategic Public Enterprises within the framework of the General State Budget - 2010 and 2011 Management Periods, therefore, it will correspond to the BCB Board of Directors to consider the referred credit request, by two-thirds of the votes of the members present in the meeting.

That the BCB Board of Directors, through Act No. 040/2011, based on Articles 13 and 14 of the PGE 2011 approved by Law No. 62 of November 28, 2010, the Ministerial Resolution of the Ministry of Hydrocarbons and Energy No. 318-11 of August 3, 2011, and what is established by the BCB Regulation for the Concession of Credit to National Strategic Public Enterprises within the framework of the General State Budget for the 2010 and 2011 Management Periods, and on the basis of the Reports BCB-APEC-SSMF-INF-2011-020 from the Economic Policy Advisory, BCB-GOM-SOSP-DCE-INF-2011-11 from the Monetary Operations Management, and BCB-GAL-SANO-INF-2011-276 from the Legal Affairs Management, the Board of Directors of the Central Bank of Bolivia has determined to accept the credit request for the amount of Bs1,233,422,855.- (One billion two hundred thirty-three million four hundred twenty-two thousand eight hundred fifty-five 00/100 Bolivianos), for a term of 20 years, a grace period on principal of five years with interest payable from the first disbursement, an annual interest rate: 1.05% (one point zero five percent), setting the deadline for disbursements until December 27, 2012.

That in the referred 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 Concession of Credit to National Strategic Public Enterprises within the framework of the General State Budget for the 2010 and 2011 Management Periods.

That by notes BCB-PRES-CE-2011-750 and BCB-PRES-CE-2011-751, 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 August 9, 2011, regarding the conditions for the granting of a concessional extraordinary credit to the National Electricity Company for the “Energy Supply Project to the Huanuni Mining Center”.

That the ENDE Board, through Resolution No. 018/2011, attached to note CB-CA-GGN-8/10-11, 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-2011-750.

That by note BCB-PRES-CE-2011-755 MHE-3977 DESP-15930, 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 Concession of Credit to National Strategic Public Enterprises within the framework of the General State Budget for the 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 request for a concessional credit of Bs1,233,422,855.- for the “Immediate power addition plan – Modal Capital Contributions to the Subsidiary Company Valle Hermoso S.A.”; however, the referred 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 Minister of Economy and Public Finance in note MEFP/VTCP/DGCP/UEPS-1271/2011 attaches the list 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. Regarding 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 that is agreed upon in the BCB-ENDE-MHE Credit Contract.

That by 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 provided in the PGE-2010 and applicable legal provisions in the case.

That Article 6 of the Regulation for the Concession of Credit to National Strategic Public Enterprises within 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, if appropriate, approve it, through the favorable vote of two-thirds of its members present in the Board 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.

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 concession of a concessional extraordinary credit to ENDE under the following terms and conditions:

//8. B.R. No. 099/2011 Currency: Bolivianos. Total Credit Amount: Bs1,233,422,855.- (One billion two hundred thirty-three million four hundred twenty-two thousand eight hundred fifty-five 00/100 Bolivianos). Term: 20 years. Grace Period: On principal five years with interest payable from the first disbursement. Annual Interest Rate: 1.05% (one point zero five percent). Disbursement Deadline: Until December 27, 2012. Payment Plan: Annual.

Article 2.- Authorize the President of the BCB to sign the loan 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 compliance with this Resolution.

La Paz, August 16, 2011

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Marcelo Zabalaga Estrada

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Rolando Marín Ibáñez Hugo Dorado Araníbar

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Gustavo Blacutt Alcalá Rafael Boyán Téllez