Project Finance: Practical Case Studies

missioned a dispatch study to determine how competitive TermoEmcali would be com-
pared to other power sources. The study concluded that TermoEmcali would reduce the
dependence of the Colombian power system on hydrology and thereby reduce the volatili-
ty of power prices.

Engineering, procurement and construction (EPC) contracts

The project company entered into fixed-price, turnkey construction contracts, to a total value
of US$124.1 million, with two Bechtel affiliates, Bechtel Overseas Corporation (the onshore
contractor) and Bechtel International Corporation (the offshore supplier). The EPC contracts
are split between the onshore contractor and the offshore contractor to take advantage of a
provision in Colombian tax law that allows imported equipment to be leased, and therefore
allows tax deductions for lease payments to the offshore contractor. The performance oblig-
ations and liabilities of both contract parties are guaranteed by Bechtel Power Corporation.
Following a three-month interim notice-to-proceed period that commenced on 24 December
1996, the contractors were given a full notice to proceed on 31 March 1997. They committed
themselves to completing the project in 22 months. The contractors had an unlimited obliga-
tion to achieve mechanical completion, which entailed installing all components and systems
required by the EPC contract, and preparing the plant to begin performance testing.
Liquidated damages totalling up to 40 per cent of the EPC price were payable for schedule
delays and performance deficiencies, which were defined in the EPC contract in terms of net

TERMOEMCALI, COLOMBIA

Exhibit 3.3

Project contract structure

US Collateral Agent

The banks Issues 144A notesFunding Corp.

Emcali TermoEmcali

Bechtel

Overseas

Leaseco

Bechtel

International

Using

Westinghouse

equipment

SPC Bechtel

Stewart &

Stevenson

Ecopetrol

• gas supply


• gas transport

CorfiPacifico

(Equity/Div)

Note proceeds/repayment

Note

proceeds/

Equity repayment

bridge Equity/Div

Lease payment

Lease

O&M Turbines

service

Purchase

price

Onshore

EPC

Gas Fee

Gas

purchase

price

Electricity

Tariff

Equity/Div

Repayment of W/C facility

<60% 40%>

Deposit of excess amount

DSR LOC

Contract LOC

60% of W/C

repayment after 3 years