CONFORMED COPY
LOAN NUMBER 1301 PO
GUARANTEE AGREEMENT
(Sixth Power Project)
between
REPUBLIC OF PORTUGAL
and
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
Dated September 24, 1976


GUARANTEE AGREEMENT
AGREEMENT, dated September 24, 1976, between REPUBLIC OF POR-
TUGAL (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 Electricidade de Portugal - Empresa Pfblica (herein-
after called the Borrower) the Bank has agreed to make to the Bor-
rower a loan in various currencies equivalent to thirty-six million
dollars ($36,000,000), on the terms and conditions set forth in
the Loan Agreement, 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 enter-
ing 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 T
General Conditions; Definitions
Section 1.01. The parties to this Agreement accept all the
provisions of the General Conditions Applicable to Loan and Guar-
antee Agreements of the Bank dated March 15, 1974, with the same
force and effect as if they were fully set forth herein (said
General Conditions Applicable to Loan and Guarantee Agreements
being hereinafter called the General Conditions).
Section 1.02. Wherever used in this Agreement, unless the con-
text otherwise requires, the several terms defined in the General
Conditions have the respective meanings therein set forth.


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ARTICLE II
Guarantee; Provision of Funds
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 and the punctual performance of
all the other obligations of the Borrower, all as set forth in the
Loan Agreement.
Section 2.02. Without limitation or restriction upon the pro-
visions of Section 2.01 of this Agreement, the Guarantor specifically
undertakes, whenever there is reasonable cause to believe that the
funds available to the Borrower will be inadequate to meet the es-
timated expenditures required for the carrying out of the Project,
to make arrangements, satisfactory to the Bank, promptly to pro-
vide the Borrower or cause the Borrower to be provided with such
funds as are needed to meet such expenditures.


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ARTICLE III
Other Covenants
Section 3.01. (a) It is the policy of the Bank, in making
loans to, or with the guarantee of, its members not to seek, in
normal circumstances, specific security from the member concerned
but to ensure that no other external debt shall have priority over
its loans in the allocation, realization or distribution of foreign
exchange held under the control or for the benefit of such member.
To that end, if any lien shall be created on any public assets
(as hereinafter defined), as security for any external debt, which
will or might result in a priority for the benefit of the creditor
of such external debt in the allocation, realization or distribution
of foreign exchange, such lien shall, unless the Bank shall other-
wise agree, ipso facto and at no cost to the Bank, equally and
ratably secure the principal of, and interest and other charges on,
the Loan, and the Guarantor, in creating or permitting the creation
of such lien, shall make express provision to that effect; provided,
however, that, if for any constitutional or other legal reason
such provision cannot be made with respect to any lien created on
assets of any of its political or administrative subdivisions, the
Guarantor shall promptly and at no cost to the Bank secure the
principal of, and interest and other charges on, the Loan by an
equivalent lien on other public assets satisfactory to the Bank.
(b) The foregoing 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 arising in the ordinary course of banking trans-
actions and securing a debt maturing not more than one year after
its date.
(c) As used in this Section, the term "public assets" means
assets of the Guarantor, of any political or administrative sub-
division thereof and of any entity owned or controlled by, or
operating for the account or benefit of, the Guarantor or any such
subdivision, including assets held by any institution performing
the functions of a central bank or exchange stabilization fund, or
similar functions, for the Guarantor.
Section 3.02. The Guarantor shall from time to time take or
cause to be taken all action necessary to enable the Borrower (i)
to obtain the revenues provided for in Section 5.02 of the Loan
Agreement, and (ii) to put into effect revised rates for the sale
of electricity in accordance with the provisions of Section 5.05
of the Loan Agreement.
Section 3.03. Except as the Bank shall otherwise agree, the
Guarantor shall not amend the Charter in a way which would modify
the Borrower's scope of business.


IN WITNESS WHEREOF, the parties hereto, acting through their
representatives thereunto duly authorized, have caused this Agree-
ment to be signed in their respective names in the District of
Columbia, United States of America, as of the day and year first
above written.
REPUBLIC OF PORTUGAL
By /s/ Joao Hall Themido
Authorized Representative
INTERNATIONAL BANK FOR
RECONSTRUCTION AND DEVELOPMENT
By /s/ M.P. Benjenk
Regional Vice President
Europe, Middle East and North Africa