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Guarantee Agreement (Second Power Project) between Australia and the International Bank for Reconstruction and Development relating to a Loan from the Bank to the Government of Papua New Guinea [1974] PITSE 3 (12 June 1974)

GUARANTEE AGREEMENT (SECOND POWER PROJECT) BETWEEN AUSTRALIA AND THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT RELATING TO A LOAN FROM THE BANK TO THE GOVERNMENT OF PAPUA NEW GUINEA

[GUARANTEE AGREEMENT]

(New York, 12 June 1974)

ENTRY INTO FORCE: 27 DECEMBER 1974

AGREEMENT, dated June 12, 1974, between AUSTRALIA (hereinafter called the Guarantor) and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank).

WHEREAS by the Loan Agreement of even date herewith between the Bank and the Government of Papua New Guinea (hereinafter called the Borrower) the Bank has agreed to make to the Borrower a loan in various currencies equivalent to ten million eight hundred thousand dollars ($10,800,000), on the terms and conditions set forth in the Loan Agreement, and in the Project Agreement of even date herewith between the Bank and the Papua New Guinea Electricity Commission (hereinafter called ELCOM), but only on condition that the Guarantor agree to guarantee the obligations of the Borrower in respect of such loan as hereinafter provided; and

WHEREAS the Guarantor, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed so to guarantee such obligations of the Borrower;

NOW THEREFORE the parties hereto hereby agree as follows:

Article I

General conditions; Definitions

Section 1.01

The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank dated 31 January 1969 with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 4 to the Loan Agreement (said General Conditions Applicable to Loan and Guarantee Agreements, as so modified, being hereinafter called the General Conditions).

Section 1.02

Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions, in Section 1.02 of the Loan Agreement and in Section 1.01 of the Project Agreement, have the respective meanings therein set forth.

Article II

Guarantee

Section 2.01

Without limitation or restriction upon any of its other obligations under the Guarantee Agreement, the Guarantor hereby unconditionally guarantees, as primary obligor and not as surety merely, the due and punctual payment of the principal of, and interest and other charges on, the Loan and the premium, if any, on the prepayment of the Loan prior to its maturity, all as set forth in the Loan Agreement.

Article III

Other Covenants

Section 3.01

(a) It is the mutual intention of the Guarantor and the Bank that no other external debt shall enjoy any priority over the Loan by way of a lien on public assets.

(b) To that end the Guarantor (i) represents that at the date of this Agreement no lien exists on any public assets as security for any external debt except as otherwise disclosed in writing by the Guarantor to the Bank, and (ii) undertakes that, except as the Bank shall otherwise agree, if any such lien shall be created, it will ipso facto equally and ratably, and at no cost to the Bank secure the payment of the principal of, and interest and other charges on, the Loan and in the creation of any lien express provision will be made to that effect. The Guarantor shall promptly inform the Bank of the creation of any such lien and, within the limits of its constitutional powers, the Guarantor will make the foregoing undertaking effective with respect to liens or assets of the States and Territories of the Guarantor and their agencies (including local governing authorities).

(c) The foregoing representation and undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien created by the Reserve Bank of Australia or the Commonwealth Trading Bank of Australia on any of their assets in the ordinary course of their banking business to secure any indebtedness maturing not more than one year after its date.

Section 3.02

The Guarantor covenants that it will not take any action which would prevent or interfere with the performance by the Borrower of its obligations contained in the Loan Agreement or by ELCOM of its obligations contained in the Project Agreement.

Section 3.03

The Guarantor and the Bank agree that only such changes may be made in the Project as shall be mutually acceptable.

Article IV

Consultation and Information

Section 4.01

The Guarantor and the Bank shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end the Guarantor and the Bank shall from time to time, at the request of either party: (i) exchange views through their representatives with regard to the performance of their respective obligations under the Guarantee Agreement and other matters relating to the purposes of the Loan; and (ii) furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. On the part of the Guarantor, such information shall include information with respect to financial and economic conditions in the territories of the Guarantor, including its balance of payments, and the external debt of the Guarantor, of any of its political subdivisions and of any agency of the Guarantor or of any such political subdivision.

Section 4.02

(a) The Guarantor shall promptly inform the Bank of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the maintenance of the service thereof.

(b) The Guarantor shall afford all reasonable opportunity for accredited representatives of the Bank to visit any part of the territories of the Guarantor and, insofar as it is within its powers, those of the Borrower, for purposes related to the Loan.

Article V

Taxes and Restrictions

Section 5.01

The principal of, and interest and other charges on, the Loan shall be paid without deduction for, and free from, any taxes imposed under the laws of the Guarantor or laws in effect in its territories.

Section 5.02

The Guarantee Agreement, the Loan Agreement and the Project Agreement shall be free from any taxes that shall be imposed under the laws of the Guarantor or laws in effect in its territories on or in connection with the execution, issue, delivery or registration thereof.

Section 5.03

The payment of the principal of, and interest and other charges on, the Loan shall be free from all restrictions, regulations, controls or moratoria of any nature imposed under the laws of the Guarantor or laws in effect in its territories.

Article VI

Representative of the Guarantor; Addresses

Section 6.01

The Treasurer of the Guarantor is designated as representative of the Guarantor for the purposes of Section 10.03 of the General Conditions.

Section 6.02

The following addresses are specified for the purposes of Section 10.01 of the General Conditions:

For the Guarantor:
The Secretary
Department of the Treasury
Parkes ACT 2600
Australia

Cable address:

TREASURY
Canberra

For the Bank:

International Bank for Reconstruction and Development
818 H Street NW
Washington DC 20433
United States of America

Cable address

INTBAFRAD
Washington DC

IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written.