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Folder Title: Electric Power Project - Austria - Loan 0102 - P037349 - Negotiations - Volume 2

Folder ID: 1516658

Project ID: P037349

Dates: 3/3/1954 - 7/1/1954

Fonds: Records of the Europe and Central Asia Regional Vice Presidency

ISAD Reference Code: WB IBRD/IDA ECA

Digitized: 12/18/2018

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1516658A1995-199 Other # 7 Box # 193704B

Electric Power Project - Austria - Loan 0102 - P037349- Negotiations-DECLASSIFIED Vlm

WBG Archives

USA PATENT No. 4a461MAOZ ZN'U.. A.

L.*

C ONFID ENTIA LForm No. 60 International Bank for Reconstruction and Development

(8-53) STAFF LOAN COMMITTEE 3A

FROM: Office of the Secretary DATE:June 30, 1)54Secretary, Staff Loan Committee

NOTICE OF MEETING

A meeting of the Staff Loan Committee will be held on J , Ju.y 6at 1JMu ar , in Room 1005.

AGENDA

Thc Codt ill consi der th at>)v-e M mo'-a nnx 10//8

"Aus~ ri : Pop d to of 1" ilion" dated June 3 , 54.

DISTRIBUTION

President General Counsel (2)Vice President Director, Economic Staff (2)Assistant to President Treasurer (2)Director, Department of Operations - Director, Technical Assistance

Asia and Middle East (2) and Liaison Staff

Director, Department of Operations -Europe, Africa and Australasia (3)

Director, Department of Operations - SecretaryWestern Hemisphere (2) Director, Public Relations

Director, Department of Technical Operations (2) Files

-nlc heclor

CUTF IDE'1TIAL

SLC/O/687June 30, 1954

STAFF LOAN 0U0 'EITTEE

Iiemorandum from Department of OperationsEurope, Africa and Australasia

AUSTRIA -- PROPOSED LOA! OF $12 MILLION

1. Drafts of the following documents are attached:

a. President's Report and Recommendations.

b. Loan Agreement,

c. Guarantee Agreement,

d. Letter from the Austrian Ambassador in Washington to theBank concerning an exception under the negative pledge clauseof the Guarantee Agreement.

e. Letter from the Bank to the Austrian Ambassador in Washingtonconcerning the manner of disbursement and repayment of Swissfrancs.

f. Letter from the 3ank to the Austrian Ambassador in Washingtonconcerning disbursements under Section 3.01 of Loan RegulationsNo. 4.

g. Letter from the Austrian Elektrizit'tswirtschafts-A.G. regardingtheir financial policies.

2. The 3conoric Report on Austria was considered by the Staff LoanCommittee on April 27, 1954 (SLC/o/665). Only minor changes have beenmade in the text prepared for the Executive Directors and it is thereforenot proposed to circulate it again to the Committee.

3. A Report by the Technical Operations Department entitled "Appraisalof the Reisseck-Kreuzeck Project in Austria" was di tribut d to the Committeeon April 22, 1954. eese e p.A i I C

h. The Comnitteets attention is drawn to the following points in thedraft Loan AGreement:

a. Terms of the Loan.

The loan is in Italian lire and Swiss francs equivalent to $12million for 25 years with a 5 year period of grace. The interestrate has still to be fixed.

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b. Disbursement.

The loan is primarily intended to cover local expenditure.The Bank will reimburse the Borrowers periodically, probablymonthly, for 45' of the cost of goods that have been paid forin the currency of the guarantor as from January 1, 1954(Schedule 3, Subsection e).

c. Security.

Section 5.03 provides for the conclusion of an Austrian-Italian power contract satisfactory to the Dank, and itsassignment to the Bank. Section 5.04 provides for themortgage on the Reisseck-Kreuzeck properties.

d. Trustee,

Section 5.08 contains provisions permitting the Bank toappoint a trustee and to assign the security for the loanto the trustee for the benefit of all bondholders.

5. In the draft Guarantee Agreement attention is drawn to the followingpoints in the negative pledge clause:

a. Political Subdivisions.

In view of the Federal Constitution of Austria and theautonomous rights of the states under it, the negativepledge clause (Section 3.01) is in the form used forAustralia in which the guarantor undertakes to cover theassets of political subdivisions "within the limits of itsconstitutional power".

b. Certain Nationalized Enterprises.

In view of the positive security the Borrowers are to giveus, it is proposed that the Bank will agree under the negativepledge clause to except assets of those nationalized enter-prises which are organized and managed essentially like theBorrowers.

6. It is proposed to circulate papers to the Executive Directorsimmediately after the Staff Loan Comittee's Meeting. It is not proposedto send them the letters concerning disbursement and repayment of Swissfrancs, disbursements under Section 3.01 of the Loan Regulations No. h andthe financial policies of the Verbundgesellschaft, as these matters areeither covered in the President's Report and Recommendations or not directlylinked with the Loan Agreement.

EnclosuresV. Umbricht

APPROVED: S. R. CopeAssistant Director

REPORT AND RECOIH fDATIu.S OF THE PRESIDENT TO TIE EECUTIVE DIRECTORSON A LOAN TO TVE USTEC 2ICHISCIE 7LEKTRIZITXTS TSCHAFTSA.GO AND

UST7S9RRE"ICHISC1E DRAUKRIT-4ir-RK;1 A.G*

1. I submit the following report and recommendations on theapplication of the Usterreichische Tlektrizitgtswirtschafts- A.G.and the Usterreichische Draukraftwerke A.G. for a loan in Italianlive and Swiss francs equivalent to $12 million.

PARr I - HISTORICAL

2. The initial discussions between the Bank and Austrian representativesconcerning a possible loan for the Reisseck-Kreuzeck hydro-electric powerproject took place in 1952. When it appeared that a basis for a loan mightexist, two members of the staff visited Austria in August 1953, to studythe econoic situation and to obtain information on the electric powerprogram and the Rieisseck-Kreuzeck project. After consideration of theirfindings the Bank decided that it would be possible to proceed further andmake a technical examination of the project and explore ways and means ofsetting up the loan, A Bank mission visited Austria in November andDecember 1953 with this object.

3, The Bank decided that it would be desirable to grant the loan inEuropean currencies and this necessitated certain preliminary negotiationsregarding the use of Italian lire and Swiss francs. 1hen these matters hadbeen satisfactorily settled the Austrian Government and the electricitycompanies concerned were invited to send negotiators to Washington.

4. Negotiations began in Tashington on Hay 10, 1954, with representativesof the Government and the prospective borrowers, and agreement has beenreached in the form in which I now present the draft Loan and GuaranteeAgreements. The Austrian Ambassador in ashington will sign both the Loanand the Guarantee Agreements.

PART II - DCSCRIPTION OF THE6 LOAN

The Borrowers

5. The Usterreichische Elektrizitgtswirtschafts-A.G. and theUsterreichische Draukraftwerke A.G. would be co-borrowers. They arepublicly owned companies. The Federal Law of 1947 which nationalizedthe poiser industry of Austria provides for special companies jointlyowned by the Federal Government and the Federal Provinces of Austria, inorder to own and operate the larger generating stations in the country.The Usterreichische Draukrai'twerke A.G. is one of these companies. Itis constructing the Rpeisseck-Kreuzeck project. The same law establishedthe Usterreichische Elektrizit~tswirtschafts-A.G. usually referred to as

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the Verbundgesellschaft. This company, which is wholly owned by theFederal Government, was established to guide Austrian power development,to construct, own and operate a high tension transmission system inter-connecting the plants of the special companies with the provincial net-works and also to act as the Government's trustee for the shares whichit owns in the special companies. As the Federal 31overnment holds over50 of the shares of the special companies, the Verbundesellschaft isin effect in full control of these coxpanies and hence of the major partof the Austrian power industry.

The Guarantor

6. The loan would be guaranteed by the Republic of Austria.

Purpose of the Loan

7. The purpose of the loan would be to assist in the financing of theReisseck-Kreuzeck hydro-electric power project. Approximately IP2.2 millionof the proceeds of the loan would be used to pay for imported equipmentwhile the remainder would be used to cover local expenditure on the projectwithin Austria as from January 1, 1954. The justification for this procedureis given in Part IV.

Amount

8. The loan would be in Italian lire and Swiss francs equivalent to$12 million.

Terms

9. The loan would be for 25 years, amortized by semi-annual paymentsbeginning July 15, 1959, which are calculated to retire the entire loan bymaturity by July 15, 1979, as set out in Schedule 1 of the proposed LoanAgreement.

10. The loan would bear interest, including 1% commission, at therate of per annum. The dates for the payment of interest and othercharges would be July 15 and January 15 of each year.

11. There would be a commitment charge of 3/h% per annum.

Security

12, The loan would be secured by an original first mortgage on theReisseek-Kreuzeck properties and by an assignment of all rights and claimsfor payment from a power contract for the sale and delivery of electricenergy by the Verbundgesellschaft to two Italian electric power companies,the Societa Adriatica di Elettricita of Venice and Societa Edison of Hilan.

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PART III - DESC4iPTICN 07 THE PaOJ;ECT

13. The project would consist of the completion of the Reisseck-Kreuzeck hydro-electric development in Southern Austria (British zone),which is now under construction, and of the export of power to Italy.The potential power in a number of lakes and small streams located highin the Reisseck and Kreuzeck hountains which rise on each side of theValley of the Moell River, would be harnessed to produce annually about321 million kilowatt hours, 147 million kwh of which would be availablein the wintertime. This energy would be produced in two power stations:of 104,000 kw located on the I'.oell River and of 8,000 kw located on theReisseck Mountains about 700 meters above the lioell 1Rivcr Valley. TheRiekenbach power station would operate on a head of 260 meters and theKolbnitz station on a head of 1,771 meters. The storage capacity of fourlakes in the Reisseck Mountains would be increased by the construction offour dams which would provide a net storage capacity of 18 million cubicmeters. Other reservoirs would provide additional storage of 325,000cubic meters. In the summer when there is ample water available, a pumpingstation requiring 27 million kwh for operation would pump water up to thehighest reservoirs in the Reisseck ountains. The water would be releasedin the winter to produce 27 to 28 million kwh of ntertime energy. Thisefficiency would be possible because the pumping station would pump from502 meters higher than the Kolbnitz generating station on the Ioell River.This pumping would be profitable because the energy used would be cheap summerenergy and that sold would be high priced winter energy.

14. Construction of the project was started in 1947. At the end of1953 the project was about 30% completed and partially in operation. Thecompleted part consists of the Kolbnitz station with 24,000 kw of theultimate 104,000 kw installed and operating with water diverted from smallstreams in the Reisseck liountains. The part of the project remaining tobe completed and partially financed by the 3ank would consist of storagereservoirs on the Reisseck Mountains; the diversion works, tunnels andother works necessary to bring the water from the storage reservoirs ofthe Reisseck ountains and small streams on both the Reisseck and Kreuzeckiiountains to the Kolbnitz power station on the h-oell River; the installationof 80,000 kw of additional generating capacity in this station and the con-struction of the Rieckenbach station and the pumping plant.

Justification of the Project

15. The project is a part of the general expansion program of theVerbundgesellschaft iihich is necessary in order to ensure that electricgenerating capacity keeps pace with the demand for power. The Verbundge-sellschaft estimates that its total sales, including exports, will increasefrom about 3,280 million kwh in 1954 to about 5,500 million kwh in 1963 oran average of about 7, per year during the period. This can be regarded asa reasonable estimate. The sale of part of the povier to Italy is particularlysuited to Italy's need which is for winter power.

PART IV - APPRAISAL OF LOAN

16. A technical report entitled "Appraisal of the iLeisseck-KreuzeckProject in Austria" (T.O. 51a), dated June 29, 1954, is attached asAppendix I and a report entitled "The E3conoPy of Austria" (E.A. 37a),dated June 18, 1954, is attached as Appendix II.

Austria's Political Situation

17. For eight years the four Allies have been conducting negotiationswith the object of reaching agreement on a State Treaty which would laydown the terms on which an independent Austria could be reconstituted.So far these efforts have been unsuccessful, although a large number ofconcessions have been made by the occupying powers to Austria. In themeantime, Austria remains occupied, although the Government can legislatefor the whole country and administer national laws throughout the fourzones, The Allied High Commission has a right to veto laws, but the veto,to be effective, has to be unanimous. It has not been used since 1049and there is no cause to assume that the extensive political and economicpower now vested in the Austrian Government will be curtailed anew by theAllied High Commission. Although the immediate prospect for unrestrictedsovereignty may perhaps still be uncertain, the continued absence of aState Treaty, though still a cloud on Austria's status, should no longerbe regarded as an obstacle to a loan.

18. An element of risk does exist, of course, in the partialoccupation of the country by the Soviet Union. Although in the last yearthere has been a trend towards considerable relaxation of restrictions inthe Soviet Sector, there is naturally no guarantee that this trend mightnot some day be reversed. Indeed the Soviet Zone Commander, like theCommanders of each of the other occupied zones in Austria, has the powerto enjoin restrictive measures on his zone for so-called "security reasons".Soviet threats that such measures reight be reimposed have only very recentlybeen voiced again. Whether these threats will result in an actual deterior-ation of the situation in the Soviet Zone of Austria or entail more far-reaching repercussions is difficult to judge at this stage. But in anyevent, it is more than likely that any action on the part of the SovietUnion which could bring the creditworthiness of Austria into question wouldat the same time have implications extending far beyond the situation inAustria itself.

The Austrian Econony

19. At the end of the war Austria's economic situation was extremelygrave. The task of protecting the population from hunger and cold wasbeyond the capacity of what was left of the economic system. Since thattime Austria, with the help of external aid, has been working to re-establishan adequate level of production and consumption, to stabilize the financial

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and monetary situation and to balance her international accounts. By1953 these objectives had been achieved and the United States ForeignOperations Administration was able to end economic aid to Austria inJanuary of this year. The amount of U. S. aid received by Austria was$960 million, or sufficient to finance almost half of total investmentduring the period.

20. These successes were not easily achieved, nor were they obtainedwithout a price. After 1945 there was a severe inflation and an eight-fold increase in the price level and it was not until 1952 that theGovernment's efforts to stabilize the schilling were successful. In theearly part of the reconstruction period there were large deficits in thebalance of payments which were met by external aid. In the first twoyears of the existence of EPU Austria had a steady monthly deficit. Butafter the re-establishment of monetary stability in 1952 there was agreat improvement in the foreign exchange position. In July of that yearAustria achieved her first EPU surplus and, apart from a short period atthe beginning of 1953, she has had a surplus ever since. At the presenttime Austria's accounting surplus in EPU is ,P1l8 . 6 million, which is,:48.6 million above her quota. Altogether in 1953 the balance of paymentsclosed with a current surplus of i71.5 million, a great contrast to previousyears.

21. Although the continuation of such a favorable position is not tobe expected, the achievement of a balance of payments surplus demonstratesthat Austria is now capable of living within her income -- even though itbe at a level of investment and employment which is not generally regardedas satisfactory. Hence it is easy to understand the importance attachedby the Austrian Uovernment to encouraging an inflow of capital, for thiswould enable dore stic economic activity and employment to be increasedwithout endangering the balance of payments.

22. Austria needs long-term external capital if she is to develop herresources, particularly of hydro-power, without great delays Until thisyear she was able to use U. S. aid for development. Austrian internalsavings, although they have shown a marked recovery since the stabilizationof the schilling, are not yet sufficient to cover all the investment re-quirements, in power and other fields, which are desirable. Moreover, theabsence of an internal capital market renders the problem of obtaininglong-term capital even more difficult. For this reason Austria hasapproached the 3ank for a loan.

Reasons for a Local Expenditure Loan

23. The bulk of a loan for Reisseck-Kreuzeck is destined to coverlocal expenditure -- the direct import requirements are small, at mostabout :2.2 million equivalent. The total cost of the project is estimatedto be 34 million equivalent, of which about W10 million has already beenprovided from Austrian resources and disbursed; another '12 million will

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be made available from Austrian resources and $12 million is expectedto come from the Bank loan.

24. There are a number of circumstances in the present case whichjustify the Bank making a loan in foreign exchange to cover part of thelocal cost of the project. First, the borrowers have insufficient re-sources of their own to complete the construction of the project, whichis already well under way. A delay in carrying it out would render itunnecessarily expensive and entail considerable economic drawbacks; therewould be no convenient source of power for export to Italy and there wouldhave to be additional fuel imports to make up for the loss of po'x'er avail-able for Austria. If a Bank loan were limited to financing the import ofcapital goods required for the project, it would not only be substantiallysmaller than would be justified on creditworthiness grounds, but it wouldbe much below the borrower's needs. Further, the project will producedirect foreign earnings through the export of power to Italy, and Austriawill thus obtain a long-term source of foreign income. The loan will alsobe secured by the lire proceeds from the power export contract with theItalian companies, the rights of which will be assigned to the Bank. Thiswill make the loan self-liquidating for its lire component, In thesecircumstances, and bearing in the mind that the expenditure of the schillingcounterpart of the loan within Austria will increase money incomes andexpenditure and thus lead indirectly to an increase in imports, it is, inny opinion, appropriate to extend a loan in foreign exchange to cover ex-penditure in local currency.

Currencies to be Lent

25. The original intention was that the Bank loan for Reisseck-Kreuzeckshould be made entirely in lire and should thus stand on a wholly self-liquidating basis through the sale of power from Austria to Italy and theassignment of the sales contract to the Bank. For various reasons theItalian Government could not release as much as W12 million equivalent in18% lire for Reisseck-Kreuzeck; they agreed, however, to make the equivalentof !6 million available. The Bank then decided to disburse the other $6million equivalent in Swiss francs from the proceeds of the Bank's borrowingin Switzerland.

26. The Bank has been able to reach a special understanding with theSwiss authorities, whereby the latter agree to the transfer to, and re-transfer by Austria of up to 25 million Swiss francs (equivalent of $6million) via EPU or any other Swiss-Austrian payments agreement in forceat the time. This arrangerent is embodied in an exchange of letters (Appendix V

27. The European currencies, in which the loan will be disbursed,will thus consist of $6 million in lire and ,6 million in Swiss francs.The utilization of the lire amount has been the subject of a directAustrian-Italian understanding, which includes a very welcome lire releaseof ,1.2 million equivalent transferable without restriction, The Swiss

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francs disbursed during the first 12 months will be transferred toAustria on the basis of 50'J in free Swiss francs, which are to be re-paid in free Swiss francs, and 50' through the European PaymentsUnion, which are to be repaid through EPU or through any subsequentAustrian-Swiss payments agreements.- In a year's time the Bank willreview the disbursement procedure for the Swiss franc part of the loanin the light of developments in EPU and, particularly, of Austria'screditor position within EPU, and of her overall financial situation.

Prospects for Repayment of the Loan

28. Apart from the war period the only interruption of payments onAustria's external debt occurred in 1932 when the transfer of debt pay-ments was suspended for a year. This was the result of the severeforeign exchange crisis which followed the failure of the Creditanstalt.But in view of the extreme difficulty of this period for Austria, theprompt resumption of transfer as soon as it was possible and the success-ful negotiation of a debt agreement after World War II, the Austrian debtrecord can be regarded as satisfactory.

29. Austria's present external debt is unusually low at approximatelylO2 million. It is less than a third of the prewar debt even in moneyterms so that, taking into account the fall in the value of money andthe rise in Austria's national income, the reduction in the real burdenof external debt has been even greater. Service payments on the debtin the peak year are only 2% and 3% of annual foreign exchange earningsso that even if the debt were substantially increased it would still notbe an important factor in the total balance of payments.

30. Austria can therefore certainly be regarded as creditworthy foradditional external debt, Although, like most small countries, Austria'seconomic fortunes depend largely upon the course of world trade, she shouldhave little difficulty in servicing her external debt in any circumstanceswhich it is at present reasonable to contemplate. In addition the Bankwill be able to rely, for the repayment of the lire portion of the proposedloan, upon the lire proceeds of a power contract between the Verbundge-sellschaft and two Italian power companies. The rights to the proceedsof this contract will be assigned to the Bank as security for the loan,

PART V - LEGAL INSTRUENTS AND LEGAL AUTHORITY

31. A draft Loan Agreement is attached as Appendix III. A draftGuarantee Agreement is attached as Appendix IV.

32. The draft Loan Agreement differs in a number of respects fromthe standard form. The principal differences relate to the mortgage andthe assignment securing the loan, and to the reimbursement, in Swiss francsand Italian lire, of the Borrowers' local expenditures under the loan.Attention is directed to the following:

a. Section 5.03 provides for the conclusion of a contract,satisfactory to the Bank,for the sale of electric energyby the Verbundgesellschaft to the Italian companies, and

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for the assignment of the Verbundgesellschaft'srights to payment under this contract to the Bankas security for the loan,

b. Section 5.04 provides for a mortgage on the Reisseck-Kreuzeck properties.

c. In view of the Bank's positive security the draft LoanAgreement contains no all-embracing negative pledgeclause. Section 5.05 is designed to preclude thecreation of liens on the aeisseck-Kreuzeck propertiesranking in priority to, or in equality with, the Bank'smortgage.

d. The Loan Agreement contains provisions permitting theBank to appoint a trustee and to assign the security forthe loan to the trustee for the benefit of all bondholders.

e. The Bank would be entitled to suspend withdrawals orpremature the loan if, in addition to the normal eventsof default, there was any default under the mortgage orthe assignment.

f. Section 7.01 contains the conditions to the effectivenessof the Loan Agreemenb. These include the conclusion ofa satisfactory power contract with the Italian coipaniesand its assignment, and the execution of the mortgage.

g. Paragraphs (b) and (e) of Schedule 3 to the Loan Agreementamend the Loan Regulations so as to permit disbursementsin Swiss francs and Italian lire on account of local ex-penditures for the project.

33. The draft Guarantee Agreement follows the standard form, exceptthat in view of the Federal Constitution of Austria and the autonomousrights of the Austrian states under it, the negative pledge clause(Section 3.01) is in the form used for Australia in which the guarantorundertakes to cover the assets of its political subdivisions "within thelimits of its constitutional powers." Moreover, in view of the positivesecurity the Borrowers are to give us, it is proposed that the Bank willagree under the negative pledge clause to except assets of those nationalizedenterprises which are organized and managed essentially like the Borrowers.A draft letter containing this agreement is attached as Appendix VI.

34. An existing law authorizes the Austrian Government to guaranteethe loan,

for the assignment of the erbundgesellschaft'srights to payment under this contract to the Bankas security for the loan.

b. Section 5.04 provides for a mortgage on the Reisseck-Kreuzeck properties.

c. In view of the Bank's positive security the draft LoanAgreement contains no all-embracing negative pledgeclause. Section 5.05 is designed to preclude thecreation of liens on the Reisseck-Kreuzeck propertiesranking in priority to, or in equality with, the Bank'smortgage,

d. The Loan Agreement contains provisions permitting theBank to appoint a trustee and to assign the security forthe loan to the trustee for the benefit of all bondholders.

e. The Bank would be entitled to suspend withdrawals orpremature the loan if, in addition to the normal eventsof default, there was ar default under the mort-age orthe assignment.

f. Section 7.01 contains the conditions to the effectivenessof the Loan Agreement. These include the conclusion ofa satisfactory power contract with the Italian companiesand its assignment, and the execution of the mortgage.

g. Paragraphs (b) and (e) of Schedule 3 to the Loan Agreementamend the Loan Regulations so as to permit disbursementsin Swiss francs and Italian lire on account of local ex-penditures for the project.

33. The draft Guarantee Agreement follows the standard form, exceptthat in view of the Federal Constitution of Austria and the autonomousrights of the Austrian states under it, the negative pledge clause(Section 3.01) is in the form used for Australia in which the guarantorundertakes to cover the assets of its political subdivisions "within thelimits of its constitutional powers." Moreover, in view of the positivesecurity the Borrowers are to give us, it is proposed that the Bank willagree under the negative pledge clause to except assets of those nationalizedenterprises which are organized and managed essentially like the Borrowers.A draft letter containing this agreement is attached as Appendix VI.

34. An existing law authorizes the Austrian Government to guaranteethe loan.

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PART VI - COMPLIANCE WITH ARTICLES OF AGREE11ENT

35. The report of the Committee provided for in Article III,Section 4(iii) of the Articles of Agreement of the Bank is attachedas Appendix VII.

36. I am satisfied that the proposed loan complies writh theArticles of Agreement of the Bank.

PART VII - RECOiENDATIONS

37, I recommend that the Bank make a loan to the DsterreichischeMlektrizitatswirtschafts-A.G. and to the Usterreichische Draukraftwerke A.G.as co-borrowers in the amount of $12 million, or the equivalent in othercurrencies, to be guaranteed by the Republic of Austria, for a total termof twenty-five years with interest (including commission) at perannum, and on such other terms as are specified in the form of the Loan andGuarantee Agreements attached hereto@.

Eugeno R. Black

Washington, D. C.

F ,# Oppenheimer MAR J oConfidential Draft WBG ARCIVEi(Subject to change)June 28, 1954

Loan Number

LOAN AGEEENT

(Reissek-K.reuzek Project)

between

I1MRNATIONAL BANK FOR RECONSTRUCTIONAN DEVEWPIENT

and

MSTFRIEICHISCE EIEKTRIZITTS-ORTSCHAFTS..AKT~l ESELLSCHAFT (VERUNDGESELLSCHAFT)

and

OSTEREICHISCHE DRAUKRAFMERWE &KT=aESELLSCHAFT

Dated

LOAN AGREENENT

kGREELENT, dated , between ITERNATIONAL BhNK

FOR RECONSTRUCTION AND DEVELOPENT, party of the first part (herein-

after called the Bank), and OSTERREICRISCfE ELEKTRIZITTSJIRTSCH{FTS.

AKTIENGESELISCHAFT (VERBUNDIGESELLSdUAFT) and OSTERREICHISIE

DRAUKRAF'TERKE AKTIENGESELICHFT, parties of the second part

(hereinafter collectively called the Borrowers).

ARTICLE I

Loan Regulations; Special Definitions

Section 1.01. The parties to this Loan Agreement accept all

the provisions of Loan Regulations No. 4 of the Bank dated October 15,

1952, subject, however, to the modifications thereof set forth in

Schedule 3 to this Agreement (such Loan Regulations No. 4 as so

modified being hereinafter called the Loan Regulations), with the

same force and effect as if they were fully set forth herein.

Section 1.02. Except where the context otherwise requires,

the following terms have the following meanings wherever used in this

Agreement or any Schedule to this Agreement-

(a) The term "Verbundgesellschaft" means Osterreichische

Elektrizitatsvirtechafts-Aktiengesellschaft (Verbundgesellsehaft), a

company organized and existing under Federal Law of the Guarantor of

March 26, 1947, No. 81 (2. Verstaatlichungsgesetz).

(b) The term "Draukraftwerke" means Osterreichische

Draukraftwerke aktiengesellschaft, a company organized and existing

under such Federal Law No. 81.

(c) The term "SADE" shall mean Societ Adriatica di Elettriciti,

a company organized and existing under the laws of the Republic of Italy ard

having its principal office in Venice.

(d) The term "Edison" shall mean Societg Edison, a company

organized and existing under the laws of the Republic of Italy and having

its principal office in Milan.

(e) The term "Assignment" shall mean the assignment provided

for in Section 5.03 (b) of this Agreement.

(f) The term "Mortgage" shall mean collectively the original mort-

gage, and any supplementQl mortgage, created pursuant to Section 5.04 (a)

of this Agreement.

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ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrowers, on

the terms and conditions in this Agreement set forth or referred to,

an amount in vtrius currencitez equivc lent to twelve

million dollars (i12,000,000).

Section 2.02. The Bank shall open a Loan Account on its books

in the name of the Borrowers and shall credit to such Account the

amount of the Loan. The amount of the Loan may be withdrawn from the

Loan Account as provided in, and subject to the rights of cancellation

and suspension set forth in, the Loan Regulations.

Section 2.03. The Borrowers shall pay to the Bank a commitment

charge at the rate of three..quarters of one per cent (3/4 of U") per

annum on the principal amount of the Loan not so withdrawn from time

to time.

The date specified for the purposes of Section 2.02 of the Loan

Regulations is Oeptcabcr 5.- 1954 or the Effective Date, whichever

shall be the earlier.

Section 2.04. The Borrowers shall pay interest at the rate of

per cent (jo) per annum on the principal amount

of the Loan so withdrawn and outstanding from time to time.

Section 2.05. Except as the Bank and the Borrowers shall

otherwise agree, the charge payable for special commitments entered

into by the Bank at the request of the Borrowers pursuant to

Section 4.02 of the Loan Regulations shall be at the rate of

4 -

one half of one per cent (1/2 of V.,) per annum on the principal amount

of any such special commitments outstanding from time to time.

Section 2.06. Interest and other charges shall be payable

semi-annually on JTnury 15 -nd July 15 in each yecr.

Section 2.07., The Borrowers shall repay the principal of

the Loan in accordance with the amortization schedule set forth in

Schedule 1 to this Agreement.

-5-

ARTICLE III

Use of Proceeds of the Loan

Section 3.01. The Borrowers shall apply the proceeds of the

Loan exclusively to financing the cost of goods required to carry

out the Project described in Schedule 2 to this Agreement. The

specific goods to be financed out of the proceeds of the Loan shall

be determined by agreement between the Bank and the Draukraftwerke,

subject to modification by further agreement between them.

Section 3.02. The Borrowers shall use or cause to be used

all goods financed in whole or in part out of the proceeds of the

Loan exclusively in the carrying out of the Project.

- 6 -

ARTICLE IV

Bonds

Section 4.01. The Borrowers shall execute and deliver Bonds

representing the principal amount of the Loan as provided in the Loan

Regulations.

Section 4.02. If and as the Bank shall from time to time request,

any of the Bonds shall, in addition to the provisions prescribed by the

Loan Regulations, contains

(a) provisions satisfactory to the Bank to the effect that

the Assignment and the Mortgage will equally and ratably

secure the payment of the principal of, interest, premium,

if any, on prepayment or redemption, and other charges, on

the Loan and any of such Bonds, and

(b) in the event the Bank shall propose to assign the Assignment

or the Mortgage or both to a trustee or trustees or similar

fiduciary or fiduciaries as contemplated in Sections 5.08

and 5.09 hereof, provisions satisfactory to the Bank to the

effect that any rights or powers of any holder of the Bonds

under the Assignment or the Mortgage or both may be exercised

by such trustee or trustees or fiduciary or fiduciaries.

Section 4.03. Any two members of the managing board (Vorstand)

of the Verbundgesellschaft signing jointly on behalf of the Verbundgesell-

schaft and any two members of the managing board (Vorstand) of the

Draukraftwerke signing jointly on behalf of the Draukraftwerke are

designated as authorized representatives of the Borrowers for the

purposes of Section 6.12 (a) of the Loan Regulations.

-7-

ARTICLE V

Particular Covenants

Section 5.01. (a) The Borrowers shall carry out the Project

with due diligence and efficiency and in conformity with sound

engineering and financial practices.

(b) The Borrowers shall promptly furnish to the Bank, as the

Bank may from time to time request, the plans and specifications for

the Project and any material modifications subsequently made therein.

(c) The Borrowers shall maintain records adequate to identifyin whole or in part

the goods financed/out of the proceeds of the Loan, to disclose the use

thereof in the Project, to record the progress of the Project (including

the cost thereof) and to reflect in accordance with consistently main-

tained sound accounting practices the financial condition and operations

of the Borrowers; shall enable the Bank's representatives to inspect

the Project, the goods and any relevant records and documents; and

shall furnish to the Bank all such information as the Bank shall reason-

ably request concerning the expenditure of the proceeds of the Loan,

the Project, the goods, and the financial condition and operations of

the Borrowers.

Section 5.02. (a) The Bank and the Borrowers shall cooperate

fully to assure that the purposes of the Loan will be accomplished.

To that end, each of the parties hereto shall furnish to any other

such party all such information as such other party shall reasonably

request with regard to the general status of the Loan.

-8-

(b) The Bank and the Borrowers shall from time to time exchange

views through their representatives with regard to matters relating to

the purposes of the Loan and the maintenance of the service thereof. The

Borrowers 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.

Section 5.03. (a) As soon as practicable after the date of this

Agreement the Verbundgesellschaft shall enter into an agreement or agree-

ments in form and substance satisfactory to the Bank with SADE and Edison

providing for the sale and delivery by the Verbundgesellschaft to SADE

and Edison of electric energy and the payment therefor by SADE and Edison.

The Verbundgesellschaft shall duly perform all its obligations under such

agreement or agreements; and shall not agree to any modification or

change of such agreement or agreements without the prior consent of the

Bank.

(b) As soon as practicable after the date of this Agreement the

Verbundgesellschaft shall assign to the Bank all rights to and claims for

payments from SADE and Edison that the Verbundgesellschaft will have under

the agreement or agreements referred to in Section 5.03 (a) hereof. Such

assignment shall be an assignment on account of payment (Abtretung

zahlungshalber) within the meaning thereof under the laws of the Guarantor,

shall equally and ratably secure payment of the principal of, interest,

premium, if any, on prepayment or redemption, and other charges on, the

Loan and the Bonds, and shall be in form and substance satisfactory to the

Bank.

(c) The Verbundgesellschaft shall take all such steps and execute

and deliver all such documents as the Bank may from time to time reasonably

request or as may from time to time be required in order to render or

- 9 -

maintain the Lssignment valid and enforceable.

(d) No delay in exercising, or omission to exercise, any right or

power accruing to the Bank under the Assignment or under the Mortgage shall

affect or impair any obligation of the Borrowers under the Loan Agreement.

Section 5.04. (a) As soon as practicable after the date of this

Agreement the Draukraftwerke shall execute and deliver to the Bank an original

first mortgage in form and substance satisfactory to the Bank covering the

properties set forth under the entry number 213 in the land register of the

district Obervellach (Grundbuchs - Einlage: 213, Katastralgemeinde

Zandlach; Gerichtsbezirk Obervellach). The Draukraftwerke shall from time

to time acquire all immovable properties the acquisition of which is

required for the completion and continued operation of the Project; and

shall, as the Bank may from time to time request, as soon as practicable

after the receipt of such request, execute and deliver to the Bank such

supplemental first mortgage or mortgages in form and substance satisfactory

to the Bank as may be required in order to give the Bank a first mortgage

or first mortgages covering the properties which shall have been acquired

in accordance rith this subsection at the date of such request. In the

event the par value of the currency of the Guarantor is reduced or the

foreign exchange value of the currency of the Guarantor has, in the opinion

of the Bank, depreciated to a significant extent, the Draukraftwerke shall

from time to time promptly upon the Bank's request execute and deliver to the

Bank such additional supplemental first mortgage or mortgages in form and sub-

stance satisfactory to the Bank as may be required to make the aggregate amount

in the currency of the Guarantor for which all mortgages created hereunder

may be recordable

- 10 -

or may have been recorded equivalent to the aggregate amount in currencies

other than the currency of the Guarantor required for the payment of princi-

pal of, and interest on, the Loan and the Bonds, calculated on the basis of

such reduced par value or depreciated foreign exchange value respectively,

and for the purpose of such calculation the par value or the foreign exchange

value of the currency of the Guarantor in terms of any such other currency

shall be as reasonably determined by the Bank.

All such mortgages shall equally and ratably secure payment of the

principal of, interest, premium, if any, on prepayment or redemption, and

other charges on, the Loan and the Bonds.

(b) Except as the Bank shall otherwise agree, the Draukraftwerke shall

report to the Bank at intervals of six months all property acquired in accord-

ance with subsection (a) hereof which the Draukraftwerke shall have acquired

during the preceding six months' period and which has not theretofore been

covered by the ortgage.

(a) The Draukraftwerke shall duly record, register and file and

re-record, re-register and re-file the Mortgage in every jurisdiction for

which the Bank may from time to time request any such recordation, registra-

tion or filing or where such recordation, registration or filing may be neces-

sary or desirable in order to render or maintain the Mortgage a valid and

enforceable first lien.

The Bank shall have the right to record and re-record the Mortgage in

the appropriate land register (Grundbuch) at any time after the execution and

delivery of the Mortgage.

(d) Whenever the Bank shall so request after the execution and

delivery of any supplemental mortgage, the Draukraftwerke shall within 30

days after the date of such request furnish to the Bank an opinion or

opinions of counsel acceptable to the Bank that such supplemental mortgage

- 11 -

has been duly authorized or ratified by, and executed and delivered on behalf

of, the Draukraftwerke and that it constitutes a valid and enforceable first

lien in accordance with its terms.

(e) The Draukraftwerke shall take all such other steps and execute

and deliver all such other documents as the Bank may from time to time

reasonably request or as may from time to time be required in order to render

or maintain the Mortgage a valid and enforceable first lien.

Section 5.05. Except as the Bank shall otherwise agree, the Draukraft-

werke shall not sell, or otherwise dispose of, or permit the creation as aecu-

rity for debt or otherwise of any lien (other than the Ibrtgage), ranking in

priority to or Zi Paagg vrith the ortgage, on any of the properties covered

by the original mortgage created, or on any of the properties acquired, in

accordance with Section 5.04 (a) hereof a

Section 5.06. The Borroweja shall pay or cause to be paid all taxes

or fees, if any, imposed under the laws of the Guarantor or laws in effect

in the territories of the Guarantor on or in connection with the execution,

issue, delivery or registration of this Agreement, the Guarantee Agreement,

the Bonds, the Mortgage or the Assignment, or the payment of principal,

interest, premium, if any, on prepayment or redemption, or other charges

under this Agreement or the Bonds; provided, however, that the provisions of

this Section shall not apply to taxation of, or fees upon, payments under any

Bond to a holder thereof other than the Bank when such Bond is beneficially

owned by an individual or corporate resident of the Guarantor.

Section 5.07. The Borrowers shall pay or cause to be paid all taxes

and fees, if any, imposed under the laws of the country or countries in whose

currency the Loan and the Bonds are payable or laws in effect in the terri-

tories of such country or countries on or in connection with the execution,

issue, delivery or registration of this Agreement, the Guarantee Agreement,

the Bonds, the Mortgage or the Assignment.

- 12 -

Section 5.08. The Verbundgesellschaft agrees to the re-assignment

by the Bank, at any time, of all rights or powers that the Bank may have

under the Assignment to a trustee, or trustees, or a similar fiduciary or

fiduciaries, for the equal and ratable benefit of all holders of the Loan

and the Bonds. The Verbundgesellschaft shall take all such steps and execute

and deliver all such documents as the Bank may from time to time request or

as may from time to time be required in order to render or maintain such

re-assignment valid and enforceable.

Section 5.09. The Draukraftwerke agrees to the assignment by the Bank,

at any time, of the Pvortgage to a trustee, or trustees, or a similar ficu-

ciary or fiduciaries, for the equal and ratable benefit of all holders of the

Loan and the Bonds. The Draukraftwerke shall take all such steps and execute

and deliver all such documents as the Bank may from time to time reasonably

request or as may from time to time be required in order to render or main-

tain such assignment of the ortgage valid and enforceable.

Section 5.10. In the event the Bank shall appoint a trustee or

trustees or a fiduciary or fiduciaries for the purposes contemplated in

Sections 5.08 and 5.09 hereof, the Borrowers shall pay all costs and expenses

incidental to such appointment or appointments or arising out of the exercise

by such trustee or trustees or fiduciary or fiduciaries of his or their

functions.

Section 5.11. In the event the Bank shall request any Bonds con-

taining the provisions referred to in Section 4.02 (b) hereof, the Borrowers

shall promptly upon the Bank's request furnish the Bank an opinion or

opinions satisfactory to the Bank of counsel acceptable to the Bank that

such Bonds will constitute valid and binding obligations of each of the

Borrowers and of the Guarantor in accordance with their terms.

- 13 -

Section 5.12.(a) Each of the Borrowers shall at all times

maintain its existence and right to carry on operations and shall,

except as the Bank shall otherwise agree, acquire, maintain and renew

all rights, powers, privileges and franchises necessary or useful in

the operation of its business.

(b) Each of the Borrowers shall maintain its plants, equipment

and property and from time to time make all necessary renewals and

repairs thereof, all in accordance with sound business and engineering

standards; and shall at all times operate its plants and equipment

and maintain its financial position in accordance with sound business,

financial and public utility standards.

-14 -

ARTICLE VI

Remedies of the Bank

Section 6.01. (1) If any event specified in paragraph (a),

paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of

the Loan Regulations shall occur and shall continue for a period

of thirty days, or (ii) if any event specified in paragraph (c) of

Section 5.02 of the Loan Regulations shall occur and shall continue

for a period of sixty days after notice thereof shall have been

given by the Bank to any of the Borrowers, then at any subsequent

time during the continuance thereof, the Bank, at its option, may

declare the principal of the Loan and of all the Bonds then out-

standing to be due and payable immediately, and upon any such

declaration such principal shall become due and payable immediately,

anything in this Agreement or in the Bonds to the contrary

notwithstanding.

- 15 -

ARTICIE VII

Effective Date; Termination

Section 7.01. The following events are specified as additional

conditions to the effectiveness of this Agreement within the meaning

of Section 9.01 (c) of the Loan Regulations:

(a) The Verbundgesellschaft shall have entered into the agree-

ment or agreements provided for in Section 5.03 (a) hereof;

(b) The Verbundgesellschaft shall have made the Assignment;

(c) SADE and Edison shall have notified the Bank of their

approval of the Assignment. Such notice shall be in form and substance

satisfactory to the Bank;

(d) All such governmental actions shall have been taken and all

such governmental consents shall have been obtained as may be required

to make the agreement or agreements provided for in Section 5.03 (a)

hereof and the A signment valid and enforceable under the laws of the

Republic of Italy;

(e) The Draukraftwerke shall have executed and delivered to the

Bank the original mortgage provided for in Section 5.0/4 (a) hereof;

(f) The Verbundgesellschaft shall have obtained all such releases,

in form and substance satisfactory to the Bank, as are required to enable

the Verbundgesellschaft to make the Assignment;

(g) The Draukraftwerke shall have obtained all such releases, in

form and substance satisfactory to the Bank, as are required to enable

the Draukraftwerke to execute and deliver the Mortgage.

(h) The Bank, the Guarantor and the Borrowers shall have agreed

upon a form of registered Bond and a form of coupon Bond containing

- 16 -

the provisions referred to in Section 4.02 (a) hereof.

Section 7.02. The following are specified as additional matters,

within the meaning of Section 9.02 (d) of the Loan Regulations, to be

included in the opinion or opinions to be furnished to the Bank:

(a) that the agreement or each of the agreements, as the case

may be, provided for in Section 5.03 (a) hereof has been

duly authorized or ratified by, and executed and delivered

on behalf of, the Verbundgesellchaft, SADE, and Edison

and constitutes a valid and binding obligation of each of

the parties thereto in accordance with its terms.

(b) that the Assignment has been duly authorized or ratified by,

and executed and delivered on behalf of, the Verbundgesell-

schaft and is valid and binding in accordance with its terms.

(c) that the governmental actions and consents referred to in

Section 7.01 (d) hereof have been validly taken or given,

as the case may be, and that they have been duly authorized

or ratified by the appropriate organ or organs.

(d) that the original mortgage provided for in Section 5.04 (a)

hereof has been duly authorized or ratified by, and executed

and delivered on behalf of, the Draukraftwerke and constitutes

a valid and binding first lien in accordance with its terms.

(e) that the releases referred to in Section 7.01 (f) and (g) here-

of have been duly authorized or ratified by, and executed

and delivered on behalf of, each of the creditors in question

and constitute valid and binding releases.

Section 7.03. November 15, 1954 is hereby specified for the

purposes of Section 9.04 of the Loan Regulations.

ARTICLE VIII

Kiscellaneous

Section 8.01. The Closing Date shall be March 31, 1959.

Section 8.02. The following addresses are specified for the

purposes of Section 8.01 of the Loan Regulations:

For the Verbundgesellschaft:

Osterreichische Elektrizitatswirtschafts -Aktiengesellschaft (Verbundgesellschaft),

Wien 1Am Hof 2Austria

For the Draukraftwerke:

Osterreichische DraukraftwerkeAktiengesellschaft

KlagenfurtBaumbacbplatz0.2Austria

For the Bank:

International Bank forR3construction and Develo m'ent

1818 H Street, N. U.

Washington 25, D. C.United Statesi of America

Section 8.03. All obligations of the Borrowers under this

Agreement end the Bonds, unless such obligations shall have been ex-

pressly undertaken by only one of the Borrowers expressly named herein,

shall be joint and several, and the obligation of either of them to

comply with any provision of this Agreement is not subject to any prior

notice to, demand upon or action against, the other. No extension of

time or forbearance given to either of the Borrowers in respect of the

performance of any of its obligations under this Agreement or the Bonds,

- 18 -

and no failure of the Bank or of any holder of the Bonds to give any

notice or to make any demand or protest whatsoever to either of the

Borrowers, or strictly to assert any right or pursue any remedy against

either of them in respect of this tgreement, the Bonds, the Mortgage or

the Asrignment, and no failure by either of the Borrowers to comply

with any requirement of any law, regulation or order, shall in any way

affect or impair any obligation of the other Borrower under this Agree-

ment or the Bonds.

IN WITNESS !HERECF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Loan

Agreement to be signed in their respective names and delivered in

the District of Columbia, United States of America, as of the day

and year first above written.

INTEP'T IONAL B!NK FORRECONSMTRUCTION AD DEVELOPMENT

By _ _ _ _ _

&STERREICIiISCHE ELEKTRIZITATSWIRTSHAFTS-AYTIENGESELLSCHAFT (V RBUNDGESEI .LSCHAFT)

By_

tSTERREICHISCHE DR U?R.AFTJErKEAKTIENGESELLSCI! FT

By_

- 19 -

SCHEDULE 1

Amortization Schedule

PrincipalPayment of Amount OutstandingPrincipal After Each Payment(expressed (expressed in

Date Payment Due in dollars)* dollars)*

January 15, 1959 - $ 12,000,000July 15, 1959 $ 176,ooo 11,82,000January 15, 1960 180,OOO 11,644,000July 15, 1960 185,000 11,459,000January 15, 1961 189,000 11,270,000July 15, 1961 193,000 11,077,000January 15, 1962 198,000 10,879,000July 15, 1962 203,000 10,676,000January 15, 1963 208,000 10,468,000July 15, 1963 213,000 10,255,000January 15, 1964 218,000 10,037,000July 15, 1964 223,000 9,814,000January 15, 1965 228,000 9,586,000July 15, 1965 233,000 9,353,000January 15, 1966 239,000 9,114,000July 15, 1966 245,000 8,869,000January 15, 1967 250,000 8,619,oooJuly 15, 1967 256,000 8,363,000January 15, 1968 263,000 8,100,000July 15, 1968 269,000 7,831,000January 15, 1969 275,000 7,556,OO0July 15, 1969 282,000 7,274,000January 15, 1970 288,000 6,986,oooJuly 15, 1970 295,000 6,691,oooJanuary 15, 1971 302,000 6,389,000July 15, 1971 309,000 6,o8ooooJanuary 15, 1972 317,000 5,763,oooJuly 15, 1972 324,000 5,439,000January 15, 1973 332,000 5,107,000July 15, 1973 340,000 4,767,000January 15, 1974 348,000 4,419,000July 15, 1974 356,000 4,063,000January 15, 1975 365,ooo 3,698,000July 15, 1975 373,000 3,325,000January 15, 1976 382,000 2,943,000July 15, 1976 391,000 2,552,000January 15, 1977 401,000 2,151,000July 15, 1977 41o,ooo 1,741,000January 15, 1978 420,000 1,321,000July 15, 1978 430,000 891,000January 15, 1979 44,000 451,000July 15, 1979 451,000 -

* To the extent that any part of the Loan is repayable in a currencyother than dollars (see Loan Regulations, Section 3.02), the figuresin these columns represent dollar equivalents determined as forpurposes of withdrawal.

- 20 -

Premiums on Prepayment and Redemption

The following percentages are specified as the premiums

payable on repayment in advance of maturity of any part of the

principal amount of the Loan pursuant to Section 2.05 (b) of the

Loan Regulations or on the redemption of any Bond prior to its

maturity pursuant to Section 6.16 of the Loan Regulations:

Time of Prepayment or Redemption Premium

Not more than 5 years before maturity 1/2%

More than 5 years but not more than10 years before maturity 2%

More than 10 years but not more than15 years before maturity 1 1/2%

More than 15 years but not more than20 years before maturity 2%

More than 20 years before maturity 2 1/2%

SCHEDULE 2

Description of the Project

1. The Project consists of the completion of the Reisseck-Kreuzeck

Hydroelectric Development and of the export of electric energy to Italy.

When completed the Reisseck-Kreuzeck development will have an installed

capacity of 112,000 kw in two power stations; one containing 104,000 kw

and one, 8,000 kw.

2. The parts of the development already completed consist of the

necessary intakes, tunnels, penstocks, a small regulating reservoir

(Gondelwiese) end other works required to bring water from several

small streams on the Reisseck Mountains to the partially completed

power station located on the M611 River, known as the Kolbnitz power

station, in which two generating units with a total generating capacity

of 24,000 kw have been installed.

3. Completion of the Reisseck-Kreuzeck development will consist of:

k. The following construction work on the Relsseck Mountains:

1. A storage scheme utilizing 4 natural lakes, Grosse

Mhldorfersee, Kleine ,1hldorfersee, Radlsee and

Hochalpensee, situated at an elevation ranging from

2,390 to 2,284 meters above sea level, the net storage

capacity of which will be increased to 18 million

cubic meters by the construction of 4 dams;

2. The construction of the Zandlacher reservoir on the

Hieckenbach (Riecken Creek) at an elevation of about

1,553 meters above sea level which will have a net

storage of 100,000 cubic meters;

-22-

3. Eleven -intake works on various streams;

4. About 12 kilometers of non-pressure tunnels:

5. About 540 meters of pressure tunnels;

6. about 7 kilometers of tunnels in which pipelines and

transport facilities will be constructed;

7. About 13 kilometers of pressure pipe;

8. A surge chamber with an overflow at elevation 2,380

meters above sea level;

9. A high pressure penstock with diameters ranging from

.95 to 1.4 meters extending from the surge chamber

about 4.3 kilometers to the Kolbnitz power station;

10. The Rieckenbach power station situated about 1,300

meters above sea level in which will be installed one

Francis type turbine operating on a head of 225 meters

End one 3 phase, 50 cycle, 8,000 kw generator (at .8

power factor) with conventional auxiliaries;

11. The Hattelberg pumping station located at 1,110 meters

above sea level in which will be installed two centri-

fugal pumps each capable of pumping .45 cubic meters of

water per second against a maximum head of about 1,107

meters powered by two synchronous motors each of about

8,200 H.P.

B. The following construction work on the Kreuzeck Mountains:

1. 12 intake works;

2. About 1.0 kilometers of covered canals;

3. About 21.0 kilometers of non-pressure tunnels;

4. About 3.0 kilometers of pressure pipe;

5. A regulating reservoir (Rosswiese) with a capacity of

185,000 cubic meters;

6. A penstock with diameter ranging from 1.10 to 1.60 meters,

about 1.6 km long from the Rosswiese regulating reservoir

to the Kolbnitz power station.

C. The expansion of the Kolbnit& power station and the installa-

tion of:

1. 2 single jet, horizontal pelton turbines to operate on

a head of 1,770 meters at 750 r.p.m., and two three phase,

50 cycle 20,000 kw generators (at .8 power factor) with

conventional auxiliaries;

2. 2 two jet horizontal Pelton turbines to operate on a

head of 575 meters at 500 r.p.m. and two 3 phase, 50 cycle

20,000 kw generators (at .8 power factor) with conventional

auxiliaries;

3. 4 transformers 10/110 kv, 25,000 kva each, one transformer

110/30 kv, 10,000 kva and one transformer 10/30 kv, 600 kva;

4. An outdoor switch yard with at least two collecting

bars and four outgoing lines.

D. A 10 kv transmission line about 3.5 km long connecting the

Kolbnitz power station with the Hattelberg pumping station

&nd the Rieckenbach power station.

SCHEDULE 3

Modifications of Loan Regulations No. 4

For the purposes of this Agreement, the provisions of Loan

Regulations No. 4 of the Bank, dated October 15, 1952, shall be deemed

to be modified as follows:

(a) The term "Borrower" shall mean the Borrowers; except that

as used in Sections 5.02 (d), (e), (f), (i), 7.01 and 7.02

such term shall mean the Borrowers or either of them.

(b) The first two sentences of Section 3.01 shall read as

follows:

"The Draukraftwerke shall use reasonable efforts to

purchase goods with the currencies of the countries from

which such goods are acquired. The proceeds of the Loan

shall, to the extent that the Bank shall so elect, be with-

drawn from the Loan Account in the several currencies in

which goods are paid for; except that with respect to goods

paid for in the currency of the Guarantor or acquired from

sources within the territories of the Guarantor such with-

drawals may, to the extent that the Bank shall so elect,

be made in the currency of the Swiss Confederation or in

the currency of the Republic of Italy or both."

(c) Section 3.04 shall read as follows:

"Currency in Vlhich Commitment Charge is Payable. The

commitment charge shall be payable fifty per cent (5C%)

in the currency of the Republic of Italy and fifty per

cent (50%) in the currency of the Swiss Confederation.

- 25,-

Such currencies shall be valued in terms of the

currency in which thie Loan is denominated as the

Bank shall reasonably determine."

(d) The following paragraph shall be added to Section 3.05:

" If a withdrawal is a pplied for on account of expendi-

tures in the currency of the Guarantor, the value of

the currency of the Guarantor in terms of the currency

or currencies to be withdrawn shall be as reasonably

determined by the Bank."

(e) Section 4.01 shall read as follows:

"Uithdrawal from the Loan Account. The Borrowers shall

be entitled, subject to the provisions of these Regula-

tions, to withdmw from the Lcan lccount:

(a) (i) Such amounts as shall be required by the

Borrowers to reimburse them for the reason-

able cost of goods that have neither been

paid for in the currency of the Guarantor nor

been acquired from sources within the

territories of the Guarentor;

(ii) if the Bank shall so agree, such amounts as

shall be required by the Borrowers to meet

the reasonable cost of such goods; and

(b) Such amounts as shall be r cquired by the Borrowers

toisiriburse them for forty-five per cent (45%)

(or such other percentages as the Bank may from

time to time agree to) of the reasonable cost of

- 26 -

goods that have been paid for in the currency of

the Guarantor or acquired from sources within the

territories of the Guarantor.

Except as shall be otherwise agreed between the Bank and

and the Borrowers, no withdrawals shall be made on account of

expenditures before January 1, 1954."

(f) Section 5.02 (b) shall read as follows:

"tA default shall have occurred in the payment of principal

or interest or any other payment required under any other

loan agreement between the Bank and either of the Borrowers

or under any loan agreement or under any guarantee agreement

between the Guarantor and the Bank."

(g) Section 5.02 (c) shall read as follows:

"A default shall have occurred in the performance of any

other covenant or agreement on the part of the Borrowers

or either of them or the Guarantor under the Loan Agreement,

the Guarantee Agreement, the Bonds, the Assignment or the

Mortgage."

(h) The following two new subparagraphs shall be added after

subparagraph (c) of Section 6.11:

"(d) Bonds not containing the provisions contemplated in

Section 4.02 (a) of the Loan Agreement may be exchanged

rithout charge to the Bank for Bonds containing such

provisions.

(e) Bonds not containing the provisions contemplated in

Section 4.02 (b) of the Loan Agreement may be exchanged

without charge to the Bank for Bonds containing such

provisions."

- 27 -

(i) The second sentence of Section 7.02 shall read as follows:

"Such obligations shall not be subject to any prior notice to,

or demand upon or action against the Borrower or to any prior

notice to or demand upon the Guarantor with regard to any

default by the Borrower, and shall not be impaired by any of

the following: any extension of time, forbearance or con-

cession given to the Borrower; any assertion of, or failure to

assert, or delay in asserting, any right or remedy against the

Borrower or in respect of any security for the Loan; any modifi-

cation or amplification of the provisions of the Loan Agreement

contemplated by the terms thereof; any failure of the Borrower

to comply with any requirement of any law, regulation or order

of the Guarantor or of any political subdivision or agency of

the Guarantor."

(j) Paragraph (a) and paragraph (j) of Section 7.04 shall read as

follows:

"(a) Any controversy between the Bank and the Borrowers or

either of them or between the Guarantor and the Bank

and any claim by any such party against any other such

party arising under the Loan Agreement, the Guarantee

Agreement or the Bonds which shall not be determined by

agreement of the parties shall be submitted to arbitra-

tion by an Arbitral Tribunal as hereinafter provided."

(j) The provisions for arbitration set forth in this Section

shall be in lieu of any other procedure for the determina-

tion of controversies between the parties to the Loan

Agreement and Guarantee Agreement or any claim by any such

party against any other such party arising thereunder or

28

under the Bonds; provided, however, that nothing herein

shall be deemed to preclude the Bank or any holder of Bonds

from exercising, or instituting any legal or equitable

action to enforce, any right or claim arising out of or

pursuant to the Mortgage or the Assignment, and submis-

sion to arbitration hereunder shall not be deemed to be

a condition precedent or in any way to prejudice such

exercise or enforcement of any such right or claim."

(k) The following two new sub-paragraphs shall be added after sub-

paragraph (20) of Section 10.01.

"(21) The term "?iortgage" shall have the meaning set forth

in Section 1.02 of the Loan Agreement.

(22) The term "Assignment" shall have the meaning set

forth in Section 1.02 of the Loan Agreement."

FORM No. 7 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Mr. V. Umbricht DATE: June 28, 1954

FROM: J. H. Collier

SUBJECT: Conditions to be fulfilled before the Reisseck-Kreuzeck loanbecomes effective.

1. There are the normal provisions of sections 9.01 and 9.02 of LoanRegulations No,4 concerning the authorization and ratification of theLoan and Guarantee Agreements, legal opinions on such authorization andratification and concerning the validity of bonds.

2. Matters specific to this loan are as follows:

(a) the V.G. shall have entered into the power contract withSADE and Edison,

(b) the V.G. shall have made the Assignment.

(c) SADE and Edison shall have notified the Bank of theirapproval of the Assignment.

(d) all governmental action shall have been taken and allconsents obtained to ensure that (a) and (b) arevalid and enforceable under Italian law.

(e) the Draukraftwerke shall have executed and deliveredthe mortgage.

(f) the V.G. shall have obtained all the necessary releasesto enable it to make the Assignment.

(g) the Draukraftwerke shall have obtained all thenecessary releases to enable it to execute anddeliver the mortgage.

(h) the Bank, the Guarantor and the Borrowers shall haveagreed upon a form of registered Bond and a formof coupon Bond.

(i) satisfactory legal opinion or opinions shall have beenfurnished to the Bank concerning the due authorization,ratification, execution and delivery of, and the validand binding nature of, the matters referred to under (a),(b), (d), (e), (f) and (g).

MARV 1 21CON'IDENTIAL DRAFT \\.3G \C jV

(Subject to change)June 28, 1954

Loan Number

GUARANTE AGIMEENT

(Reisseck-Kreuzeck Project)

between

PFYUBLIC OF AUSTRIA

and

INTWITATIONAL BANK FOR aECONSThUCTIONA4I DEVLOPNT

Dated

GUARAITEE AGREEIT

LGREELNT, dated , between the

REPUBLIC OF AUSTRIA (hereinafter called the Guarantor) and

INTERiiTIONiL B0NK FOR RECOISTAUCTION D DEVELOPENT (hereinafter

called the Bank).

I:EEREAS by an agreement of even date hererith between the

Bank and Osterreichische Elektrizitgtz iirtschafts -iktiengesellschaft

(Verbundgesellschaft) and Osterreichische Draukraftwerke Aktien-

gesellschaft (hereinafter called the Borrowers), which agreement

and the schedules therein referred to are hereinafter called the

Loan 9greement, the Bank has agreed to make to the Borrowers a

loan in various currencies in an aggregate principal amount

equivalent to twelve million dollars (l12,000,000), on the terms

and conditions set forth in the Loan Agreement, but only on

condition that the Guarantor agree to guarantee the payment of

the principal, interest and other charges on such loan and the

obligations of the Borrowers in respect thereof; and

7EREA5 the Guarantor, in consideration of the Bank's entering

into the Loan Agreement with the Eorrowers, has agreed to guarantee

the payment of the principal, interest and other charges on such

loan and the obligations of the Borrowers in respect thereof;

NQ1 TBEREFORE the parties hereto hereby agree as follows:

-2-

ARTICLE I

Section 1.01. The parties to this Guarantee kgreement

accept all the provisions of Loan Regulations No. 4 of the Bank

dated October 15, 1952, subject, however, to the modifications

thereof set forth in Schedule 3 to the Loan Agreement (such

Loan Regulations No. 4 as so modified being hereinafter called

the Loan Regulations), with the same force and effect as if they

were fully set forth herein.

Section 1.02. Viherever used in this Guarantee Agreement,

unless the context shall otherwise require, the respective terms

which are defined in Section 1.02 of the Loan Agreement shall

have the respective meanings therein set forth.

ARTICLE II

Section 2.01. Without limitation or restriction upon any

of the other covenants on its part in this Agreement contained,

the Guerantor hereby unconditionally guarantees, as primarr

obligor and not as surety merely, the due and punctual payment

of the principal of, and the interest and other charges on, the

Loan, the principal of and interest on the Bonds, the premium,

if any, on the prepayment of the Loan or the redemption of the

Bonds, and the punctual performance of all the covenants and

agreements of the Borrowers, all as set forth in the Loan

Agreement and in the Bonds.

-4-

ARTICLE III

Section 3.01. 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 hereafter created on governmental

assets. To that end, the Guarantor undertakes that, except as

the Bank shall othernise agree, if any lien shall be created on

any assets of the Guarantor as security for any external debt,

such lien will ipso Lcto equally and ratably secure the payment

of the principal of, and interest and other charges on, the Loan

and the Bonds, and that in the creation of any such lien express

provision will be made to that effect; provided, however, that

the foregoing provisions of this Section shall not apply to:

(i) any lien created on property, at the time of purchase thereof,

solely as security for the payment of the purchase price of such

property; (ii) any lien on commercial goods to secure a debt

maturing not more than one year after the date on which it is

originally incurred and to be paid out of the proceeds of sale of

such commercial goods; or (iii) any lien arising in the ordinary

course of banking transactions and securing a debt maturing not

more than one year after its date.

The term "assets of the Guarantor" as used in this Section

includes assets of the Guarantor, of any agency of the Guarantor,

and of the Osterreichische Nationalbank.

The Guarantor further undertakes that, within the limits of

its constitutional powers, it will make the foregoing undertaking

effective with respect to liens on the assets of any of its political

subdivisions and their agencies.

- -5-

Section 3.02. (a) The Guarantor and the Bank shall

cooperate fully to assure that the purposes of the Loan will be

accomplished. To that end, each of them shall 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 and the international balance of payments posi-

tion of the Guarantor.

(b) The Guarantor and the Bank shall from time to time

exchange views through their representatives with regard to

matters relating to the purposes of the Loan and the maintenance

of the service thereof. 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.

(c) The Guarantor shall afford all reasonable opportunity

for accredited representatives of the Bank to visit any part of

the territories of the Guarantor for purposes related to the Loan.

Section 3.03. The principal of, end interest and other

charges on, the Loan and the Bonds and the premium, if any, on the

prepayment of the Loan or the redemption of the Bonds shall be

paid without deduction for, and free from, any taxes or fees

imposed under the laws of the Guarantor or laws in effect in its

territories; provided, however, that the provisions of this

Section shall not apply to taxation of, or fees upon, payments

-6-

under any Bond to a holder thereof other than the Bank when such

Bond is beneficially owned by an individual or corporate resident

of the Guarantor.

Section 3.04. This Agreement, the Loan Agreement, the Bonds,

the 4ssignment and the Dortgage shall be free from any taxes or

fees 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 3.05. The principal of, and interest and other

charges on, the Loan and the Bonds and the premium, if any, on

the prepayment of the Loan or the redemption of the Bonds shall

be paid free from all restrictions imposed under the laws of

the Guarantor or laws in effect in its territories.

-7-

ARTICLE IV

Section 4.01. The Guarantor shall endorse, in accordance

with the provisions of the Loan Regulations, its guarantee on

the Bonds to be executed and delivered by the Borrowers. The

Minister of Finance of the Guarantor and such person or persons

as he shall designate in writing are designated as the authorized

representatives of the Guarantor for the purposes of Section 6.12 (b)

of the Loan Regulations.

-8-

ARTIClE V

Section 5.01. The following addresses are specified for

the purposes of Section 8.01 of the Loan Regulations:

For the Guarantor:

Minister of FinanceVienna IHimmelpfortgasseAustria

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N. V,.Washington 25, D. C.United States of America

Section 5.02. The Minister of Finance of the Guarantor

is designated for the purposes of Section 8.03 of the Loan

Regulations.

IN YITIESS ICEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Guarantee

Agreement to be s4gned in their re:pective names and de'ivered in

the District o: Colu ia, United States of America, as of the day

and year first above wriften.

REPUBLIC OF AUSTRIA

By

INTERNATIO1T: L -NK FORPFCONST RUCTIJN a I DEWELOPOT

By

DRAFTMay 28, 1954

International Bank forReconstruction and Development

1818 H Street, N. W.Washington 25, D. C.

Gentlemen:

I refer to Section 3.01 of Article III of the Guarantee

Agreement of even date between the Republic of Austria and Interna-

tional Bank for Reconstruction and Development.

In view of the broad scope of the term "agency" as used in

this Section, I fear that the Section may interfere with the business

of nationalized enterprises in Austria. These enterprises are organized

as commercial corporations under the Austrian Corporation Law, are not

included in the government budget, and conduct their business along the

lines of private companies.

My government therefore requests your agreement under said

Section 3.01 that said Section shall not apply to such enterprises

which have been nationalized pursuant to the Nationalization Law

No. 168 of July 26, 1946 (published in the Bundesgesetzblatt of

September 16, 1946) and pursuant to the Second Nationalization Law

No. 81 of March 26, 1947 (published in the Bundesgesetzblatt of

May 10, 1947). It would be understood that in the unlikely con-

tingency that the central gold and foreign exchange reserves of

Austria were held by any such nationalized enterprise then the

said Section would apply to that enterprise notwithstanding the

foregoing agreement.

-2-

If you can give your agreement pursuant to this request, please

do so by signing the form of confirmation on the enclosed copy of this

letter and returning it to us.

Sincerely yours,

Authorized Representative

CONFIRMD:

IWTENATIONAL BANK FORRECONSTRUCTION AND DEVELOPENT

By

DRAFTMay 28, 1954

IITRJINAL ALK FORRECU',STRUCTI'Ii AD DEVirLORENT

Tashington 25, D.C.

:Your Excellency:

I refer to the Loan and Guarantee -Agreeents (teisseck-Kreuzeckproject) 1o. of even date herewith.

Section 3.01 of the Loan Regulations '4o, 4 of the Bank as modifiedin this Loan :tgreement provides in part that withdrawals from the LoanAccount with respect to goods paid for in the currency ol' the Guarantoror acquired from sources within the territories of the Guarantor shall,in the discretion of the Bank, be made in the currency of the SwissConfederation or in the currency of the Republic of Italy. You haverequested us to take into account the prefe:rence of the Government ofthe Republic of 1-ustria in determining the particular currency orcurrencies to be disbursed under any ul thdrawal application with respectto such goods. hile we must retain -ull discretion in detcrniining theamount and the proportion of each currency to le withdrawn under anysuch uithdrawal application, I am [lad to confirm that we shall givesympathetic consideration to any such preferences which the Governmentof the Renublic of Austria may wish to express.

Yours sincerely,

H.E. Anbassador Dr. N. GruberIHead of the Austrian Delegation

washington, D. C.

DRA7 TMa3y28, 1954

SI*T JLUTIuhA.L BAlTK FORREC&JSTRU;CTION D .ELOP121T

Vashington 25, D.C.

Your Excellency:

I have the pleasure to confirm the understanding reachedbetween your delegation and the Bank that during the first twelvemonths after the proposed Loan Agreement for ieisseck-1reuzeckbecomes effective, Swiss francs disborsed under this loan willbe transferred to Austria on the basis of 50% in free Swiss francs,which are to be repaid in free Swiss francs, and 50" through theEuiropean Payments Union, which are to be repaid through 7!U or,should EIU no longer exist, through arir subsequent Austrian-SwissPayments Agreement. After the expiration of this twelve monthstperiod the Bank will review the disbursement procedure for theSwiss franc part of the loan in the light of developments in theEuro ean Payments Union and, particularly, of Austria's creditorposition within EPU, and of her overall financial situation. Itis understood that the Bank will consult with the Austrian authoritiesbefore deciding on subsequent disbursement arranenents. The dis-bursement of the lire part of the loan in question is not affectedby this letter.

Yours sincerely,

H.E. itabassador Dr. K. GruberHead of the Austrian DelegationWashington, D. C.

DPATiay28, 1954

SI:TJN3TIOAL BA IK FORREWS~UTRUCTIGN kdi L JELOPZ2NT

ashington 25, D.C.

Your Excellency:

I have the pleanure to confirm the understanding reachedbetueen your delegation and the Bank that during the first twelvemonths after the proposed Loan Agreement for ieisseck-Kreuzeckbecomes effective, Swiss francs disbursed under this loan willbe transferred to Austria on the basis of 50% in free Swiss francs,'hich are to be repaid in free Swiss francs, and 50" through theBuro-oean Payments Union, t4hich are to be repaid through EU or,should EIIU no longer exist, through arr subsequent Austrian-SwissPayments Agreement. After the expiration of this tuelve monthstperiod the Bank will review the disbursement procedure for theSwiss franc part of the loan in the light of developments in theEuropean Payments Union and, particularly, of Austria's creditorposition within EU, and of hcr overall financial situation. Itis understood that the Bank will consult ith the Austrian authoritiesbefore deciding on subsequent disbursement arrangements. The dis-bursenrent of the lire part of the loan in question is not affectedby this letter.

Yours sincerely,

H.E. Ambassador Dr. K. GruberHead of the Austrian Delegationashington, D. C.

tsterreichische Elektrizitatswirtschafts-Aktiengeseflschaft(Verbundgesellschaft)

Wien I.,Am Hof 2

May 18, 1954

International Dank forReconstruction and Development1818 H Street, N. W.Washington, D. C.

Gentlemen:

In connection with the proposud loan to the Verbundgesellschaftand the Draukraftwerke for the Reisseck-Kreuzeck power project, youhave asked us for a statement of the financial policies covering theoperations of the Verbundgesellschaft and its associated specialcompanies.

In the past the net earning-s of the Verbundgesellschaft andthe special companies have been retained and have been used forfinancing expansion. We expect to continue this policy.

The Verbundgesellschaft will from tine to time review itstariff schedules and will, whenever necessary, apply to establishedauthorities for tariff increases in amounts sufficient to enable itand its associated special companies to remain in a sound financialcondition. It is the intention of the Verbundgesellschaft that itstariff charges will be sufficient to provide income to cover, foritself and associated special companies, all operating expenses,adequate depreciation, financial charges (not including aiortization),taxes and a reasonable return on their investment.

Yours very truly,

OesterreichischeElektrizitgtswirtschafts-

Aktiengesellschaft

/s/ Stahl /s/ i intermayer

den 28. Juni, I9r4

Herrn Hini steriairatDr. Wilhelm Teufenstein

"inanzministeriumuHirneipfortgasse 8Vienna, Austria

Lieber Herr Dr. TeuiensteinI

Herr Hermann von der Verbund esellschaft hat uns vor einigen Tagengeschrieben und darum nrsucht, dass die Draukraftwerke ermchtigt werdenmchten, ;ewisse Ausgaben fUr ieisseck-hreuzeck aus dm Jahre 1 53 in dieunserer i.ank zu tbermittelnden Abrechnungen pro 1954 einzuschliessen, Eshandelt sich un oinen Bletra g von rund -45(.000.

Wir haben hier die An-ele-enheit gepr;ift und, obwohl das Begehrenauf eine Ausnahme von den vereinbarten Vertragsregeln iinausiluft, demvon Herrn Hermann ausgedriickten Wunsche zugestimmt. In der Jieilage sendsich Ihnen eine Kopie meines diesb-ziiflichen Schreibens an Herrn Hermann.Diese ZustinnrIung iiird indessen davon abhlngig gemacht, dlass auch die zu-et~nigen Osterreichischen Behrden -it die sem Zahlungsmodus einverstandensind. Tr bedeutet n~miich, das der osterreichischen Nationalbank anlsslichder ersten Auszahiung durch uneere Bank ein Mehrbetrag von rind -450.000 inLire und Schweizerfranken an-fallen wird. Bs ist denkbar, dass die aster-reichische Nationalbank oder das 6sterreichische FinanzTini terium hier:ibergewisse Iodenken haben -- wegen PU-P'spekten oder zufolge der beschrgnktenVerwndungsn~glichkeiten der Lire. Die Bank w'ire daher dankbar, die Stellung-nahm der zust~ndigen sterreichisen n Biehrden zu dieser Frage zu erfahren.

Ich hoffe, las unsere Darlehensverhandlungen in den nichsten Tagenendgiiltig zur Abachluss gebracht werden kbnnen. Wie ich kiirzlich von derhiesigen 3sterreichischen Botschafft erfuhr, wird sich das sterreichischeKabinett morgen, Dienstag, den 29. Juni, eit br ?riiung des Abkommnstextesbefassen. Dies wird uns wahrcheinlich ermbglichen noch gegen Ende dieserWoche auch unsererseits den Vertragsentwurf dem obersten Bankkomitee zuunterbreiten, den Zinssatz festlegen zu lassen und Ihnen hieriiber zu berichten.Sofern alls wunschgemss vor sich geht, so hof4fen wir, zwischen dem 10. und15. Juli die Vertragsunterzeichnung bier in Vasington vormhimn zu kUnnen.

Ich wiinsche Ihnen stets ute 'esundheit und mUchte Ihnen nochmas sagn,wie sehr wir uns gefreut haben, nit Thnen in Washington die Verhandlungen fCuhrenzu knnen. Mit meinen besten Grssen.

Ihr

Beilage see translation attached.

Translation.

A few days ago Mr. Hermann of the Verbundgesellschaft hasrequested us to authorize the Draukraftwerke to includecertain expenditures for Reisseck-Kreuzeck made in 1953 inthe accounts for 1954 to be submitted to the Bank.

We have examined this matter, and, although the requestconstitutes an exception to the regulations, we have agreedto Mr. Hermann's request. I am sending you enclosed a copyof my letter to Mr. Hermann. This agreement is, however,subject to the approval of the Austrian authorities concernedto this payments procedure. It means, namely, that the AustrianNational Bank will be credited with an additional amount ofapproximately $60 aillion in lire and Swiss francs as a con-sequence of the first disbursement. It is possible that theAustrian National Bank or the Austrian Finance Ministry wouldhave some objections -- because of EPiT aspects or because oflimited possibilities for utilizing lire. The Bank would,therefore, be grateful to obtain the opinion of the AustrianAuthorities concerning this question.

I hope that the loan negotiations will be terminated in thenext few days. As I have been informed by your Embassy inWashington, the Austrian Cabinet will examine the text ofthe Loan Agreement on Tuesday, June 29. This may enable usto submit our draft Loan Agreement to the Bank Loan Committeeat the end of this week,to have the interest rate fixed, andto inform you about it. If everything toes as planned, we hopeto sign the agreement in Washington between the 10th and 15thof July.

/mo.

Mr. V. Umbricht June 28, 1954

J. 11. Collier

Conditions to be fulfilled before the Reisseck-Kr8Useek loan

becomes effective.

1. There are the nomral provisions of sections 9.01 and 9.02 of Loan

Regulations No.4 concerning the authorization and ratification of the

Loan and Guarantee Agreements, legal opinions on such authorization and

ratification and concerning the validity of bonds.

2. atters specific to this loan are as follows:

(a) the V.0. shall have entered into the power contract with

SALE and Edison.

(b) the V.C. shall have made the Assignment.

(c) SADE, and fdison shall have notified the Bank of their

approval of the Assignment.

(d) all governmental action shall have been taken and all

consents obtained to ensure that (a) and (b) arevalid and enforceable under Italian law.

(e) the Drakraftwe'kc shall have executed and deliveredthe mortgage.

(f) the V. . shall have obtained all the necessary releases

to enable it to make the Assignment.

(g) the Draukraftwerke shall have obtained all the

necessary releases to enable it to execute and

deliver the m;ortga,:e.

(h) the Bank, the Guarantor and the Borrowers shall have

agreed upon a form of registered Bond and a form

of coupon Bond.

(i) satisfactory legal opinion or opinions shall have been

furnished to the Bank concerning the due authorisation,

ratification, execution and delivery of, and the valid

and binding nature of, the matters referred to under (a),

(b), (d), (e), (f) aric (g).

Osferreichische Elekfriziatsswirfschaffs-Akfiengeselischaft(Verbundgesel Ischaft)

Usterr. Elektrizitatswirtschafts-A. G., Wien I, Am Hof 2

International Bank forReconstruction and Developmentc/o Mr.Victor Umbricht,

1818 H Street N.W.Washington 25, D.C.

Wien 1,thre Zelchen 1he Nachricht vom Unser Zeidhen Am Hof 2 26.Juni 1954.

Setreff

Sehr geehrte Herren I

Im Zusammenhang mit der erforderlichen Redaktion des

Stromlieferungsvertrages mit den italienischen Gesellsohaften SADE

und EDISON haben neuerliche Verhandlungen stattgefunden. Wie Ihnen

bekannt, hat ein Zusatz zu dem abgeschlossenen Vorvertrag den ita-

lienischen Gesellschaften ein RUcktritterecht bis zum AbschluB des

Weltbankkredites vorbehalten, falls die Wirtschaftlichkeit des

Stromlieferungsvertrages zwischenzeitig in Frage gestellt werden

sollte.

Nach Mitteilungen der beiden italienischen Gesell-

schaften drohe dieser Fall nunmehr einzutreten, da in Italien eine

lAngst notwendige Erhdhung der Strompreise zwar jetzt vorgenommen

werden soll, jedoch sollen die Mehrerlise an eine Ausgleichskasse

abgefUhrt werden und nur jene Gesellschaften, die aus neu errichteten

Kraftwerken Strom beziehen mussen, sollen von dieser Ausgleichskasse

einen ZuschuB fUr derartige StrombezUge bis zu Lire 3.5q/kWh erhalten.

Die italienischen Gesellschaften hatten bisher ge-

hofft, daB der importierte Strom so behandelt werden wUrde, wie die

Energie aus neuen inldndischen Kraftwerken, doch sei ein diesbezUg-

liches Ansuchen in der letzten Zeit von der italienischen Regierung

abgewiesen worden.

Die SADE und die EDISON haben uns daher ersucht,

die Weltbank in ihrem und unserem eigenen Namen zu bitten, bei der

.1.Vorsitzer des AufsIchtsr-es; Sektionschef )r. Kari Straubinger

Vorstand: Dr. Rudolf Sahf (Vorsitzer, Dip! -Ing. Franx Hintermayer, Dr. Karl K6ii ker, DipL-Jog, Dr. Oskar Vas

Telegrammodresse: Telep on: Fernschreiber: Bankkonto: Creditanstait-Bankvatri, Wien 1, Schottengasse 6 4

Verbundnetz U 21.5-15 Serie Wien 1650 Osterreichische Lndarbank Aktia,,gese schaft, Wien I, Am Hof 2Postsparkassenkonfo: 18468

.'-'

I /,/I

2s

OSTERREICHISCHE ELEKTRIZITATSWIRTSCHAFTS-AKTIENGESELLSCHAFT TAG 26.Juni 1954.

International Bank for Reconstruction2 BLATT An and Development,Wahington. BETRIFFT:

italienischen Regierung vorstellig zu werden, damit diese auf

Grund langfristiger Vertrage importierten Strom analog behandle

wie Energie aus in Italien neu erbauten Kraftwerken.

Wir bitten Sie, die Ndglichkeit einer derartigen In-

tervention zu prUfen, wobei wir betonen mUssen, daB der interna-

tionale Stromaustausch als Voraussetzung und wichtiger Koeffizient

erhShter Produktivitdt von grd5ter Bedeutung ist und durch NaB-

nahmen wie die hier geschilderten schwer bedroht erscheint.

In Erwartung Ihrer freundlichen Nachrichten empfehlen

wir uns Ihnen

hochachtungsvoll

Osterrei cheE izitd. swir chafts-

enge ells aft

Luftpost.

7'

*t

<Cp

DR. RUDOLF STAHL WIEN I,AM HOF 2

GENERALDIREKTOR DER 6STERREICHISCHEN TEL.: U 21-5-15 26.Juni 1954.ELEKTRIZITATSWIRTSCHAFTS-AG.

(VERBUNDGESELLOSCHAFT)

U.

Mr.Victor U m b r i c h t

International Bank for Reconstructionand Development

1818 H Street N.W.

Washington 25, D.C.

Lieber, verehrter Herr Umbricht

Im Zuge der Verhandlungen mit den Italienern

wegen der erforderlichen Neuredaktion haben SADE und EDISON

von uns verlangt, da wir die Intervention der Weltbank in

Rom erbitten und zwar im Zusammenhang mit der Gleichstellung

importierten Stromes mit jenem aus neu erbauten italienischen

Kraftwerken.Infolge der schweren Erkrankung von Commendatore

Rossi der SADE und der Abwesenheit von Herrn Biaggi, der noch

in Washington war, schalten sich bei unseren diesbezUglichen

Verhandlungen immer wieder neue Herren in die Besprechungen ein,

wodurch immer neue Gesichtspunkte und Schwierigkeiten auftreten.

Wir k5nnen Ihnen daher den Entwurf des Stromlieferungsvertrages

noch immer nicht vorlegen, sind aber davon Uberzeugt, daB dies

in KUrze geschehen kann, sobald wir eine positive Xusserung der

Weltbank besitzen wUrden, wonach diese in Rom im angedeuteten

Sinne zu intervenieren bereit ist. Wie uns von den italienischen

Gesellschaften vertraulich mitgeteilt wurde, bestehe kein direk-

ter Zusammenhang zwischen dem Erfolg der Intervention und dem

Zustandekommen des Stromlieferungsvertrages. Trotzdem wsre es

von grosser und auch grundsdtzlicher Wichtigkeit, wenn sich die

Bank entschliessen k5nnte, das meiner Ansicht nach durchaus

vernUnftige und berechtigte Verlangen der italienischen Gesell-

schaften zu unterstUtzen.

Ich hoffe, daB wir uns in ZUrich am 2o.Juli wieder-

sehen werden und verbleibe mit herzlichen GrUssen

Ihr ergebener

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U

Junc 25, 1954

Dear Mr. rnann:

I am replying to your letter to 'r. ;anters of Jun i., 9L',concernine the expenditure of arproximately 25 million schillines by the

raukefterke which was made in 193 althogh it was os e .rogrsm for19%. uou ask whethr the ank would be prepared to include this amountfor purposes of reimbursement in spite of ection 4.01 oZ Loan Pegulations(as amended).

1e have considered this point an., for our part, have no objection.There is however, an aspct of the subject which we woulh like theVerbundsellschaft to take u1 with the Austrian authorities in Viennab fore we -Ive our final a ref rnt to this requebt. >s you LoOw, one ofthe most important ,roblems from the beginning of negotiations has con-cerned the uses to be mace by the Pustrian ational _ aiik of the foreignexchange which it will receive euring the disburscment of the loan. IfW gree to this rcquest, it will man that the amount to be disbursedby the ank under the first application will be increaed by .I0,00(approxiiiatey) of wiss francs aic Italian lire (6 of approimately~1 million). Therefore, before going aheac, we would like to be sure

that no fficuLties will arise on this account.

I am sending a copy of this letter to ir. Teufeietein for hisinformation.

"incerely yours,

V. UmbrichtDepartment of Operations

urope, I frica and ,ustralasia

errn F. Iermannisterreichische ThcktrinitAtswirtschafts-A.G.

Am Hof 2"jein 1, Austria

cc. Messrs. Kantersallie/jcdBrion

Teufenstein (Vienna, Austria)Austrian 'mbassy

clear d with Legal, Treamurer's ' Tchn. Op. iepartments.

FORM No. 58(5-48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files

DATE: June 25, 1954

FROM: V. Umbricht

SUBJECT: Austria - Telephone conversation with Dr. Lemberger, FirstCounselor of the Austrian Embassy, Friday, 2:45 P.Al.

I telephoned Dr. Lemberger that the Bank has considered theAustrian request to change in Article III, Section 3.01, paragraph2, the word "including" to the words "or of". The Bank agrees thatthe word "including" be changed to the words "and of". Dr. Lembergeris satisfied with this answer which he will cable to Vienna withoutdelay.

Mr. John S. Hooker June 25, 1954

S. R. Cope

Austria: Proposed loan in European currencies

For your information and possible subixission to the N.A.C., I

attach three copies of a general description of the proposed loan in

European currencies equivalent to $12 million for the Reissck-Kreuzeck

hydro-electric power project in Austria.

JCollier;dhc

Proposed Ioan to Austria

1. Neotiations have almost been com;>leted for a loan for a hydro-electricpower project - Reisawck-Kruzeck in Austria. The loan would be maie totwo co-borrowers, the sterriichiaehe Draukraftwyrks A.G., a Govenraent-owned power oipaniy hich is constretintg the project, and the 11storreichischeElektriaitatawirtschaft-A.G., which is aD government-owned and 4ilch hasthe overall responsibility for the plang and deveopIt the publicelectric power industry in Austria, and for the operation of the trananissions-stm ionecting several public power -wierating conpanieb. Theeatrreichische Elektrisitatswirtchafta-A.G. - generally kown as theVerbundgesellschaft - acts as the ,overrcent's truste for the shares hiOhit oas in several producing, or "special" co paies, of -hich theflraukraftwerke is ,,ne. As the Governmait own. nore than 5% of the sharesof the "Special Companed", the Ver um1lschaft has, in effect, fullcontrol of these companies and hence of the major part of the Austrianpower industry.

2. The Reisseck-Kreuseck project, wiich is situatrd in Carinthia in the BritishZone of Austria not far from the Italian border, was started in 1947 and isnow about one third copleted and partially in operation. Ahen finallycompleted it will have a capacity of 112,000 k. and an annual production of3?1 million kiwh. An important aspect of the schawe is that surplus suerpover can be used to ruxp water up to storage basins in the feisseck Aouhtains,Oiich can be used to prduce re urgently needed winter power. The totalcost of the project is estimated to be $34 millLon equivalent, of which10ilion equivalent has already been spent. The Bank loan will providethe equivalent of $12 million and the resander will be obtained fromAustrian sources. The loan will be guaranteed by the Austrian Government.

3. A tranmission line has already been constructed to connect the Austrianpoier network to that of northern Italy. The V erbundgese34sdhaft has enteredinto two contracts for the sale of power to power companies in Italy. Onecontract is for the sale of approximately 25 million kwh. annually to theSocieta Adriatica de Elettricita (SATE) of Venice, and the second is for thesale of approximately d3 million kwd annually to SAE and the Societa Edisonof Milan. The proceeds in Italian lire of the second contract are to be asindto the 3 as security for the loan.

4. The loan will consist of the equivalent of $6 million of Italian lireand $6 million of Swiss francs. The lire portion has been made availablefrom the Italian lj% subscription. Of the total $12 million about $2.2 millionWill be used to pay for imports and the mainder will be to ueBt localexpenditure in Austria.

5. The Biank loan would te for a period of 25 years. Airtisation pqymtSwould start on July 15, 1959 and would be made half-yearly so as to redothe loan by July 15, 1979. The sum of interest and principal would be dueeach half Year and wuld be a, roximately equal. The interest rate hasstill to be agreed.

June 24s 1954

June 24, 194

His ExcellencyDr. Karl (IruberAmbassador of AustriaWashington, D. C.

Dear Mr. Akbassadars

As you knOw we have been in touch with Austrian counael in order toassure that the clauses in th Loan r nt dealing with the security forthe proposed loan conform with the roquirements of Austrian law. As a re.sult of Aiustrian counsel's co tencs we think it necessary to maiQS thefollowing; chang;es in tha Juno 9, 195' draft of tha Loan Agreegmits

. we pi-opose -co add a -nww ZSuisection .03 (d) roeai as fullaviss

"No delay in emBreising, or omission to exercise, any rightor powr accruing to the Bank under the Assignment or underthe ortgage shall affect or impair any obligation of theoorrowers under the ,,oan Agreement.

2. We propose to insert in the eleventh line of Soetion 7.02 of theL"an deulations, after the coiwa, the followingt

"or delay in asserting,,"

3. We propose to delite the last sentence of Section 5.O4(a) and toinsert instead after the second sentence of such Section the f allowings

"In the event the par value of the currency of the Guarantor isreduced or the foreign exchange value of the currency of theGuarantor has, in the opinion of the Bank, depreciated to a sig-nificant extent, the 1iraukraftwerke shall from time to timepromptly upon the Bank's request execute and deliver to the Banksuch additional supplemental first mortgage or mortgages in formand substance satisfactory to the 1-ank as may be required to miathe aggregate amount in the currency of the Guarantor for whichall mortgages created hereunder may be recordable or my have beenrecorded equivalent to the aggregate amount in currencies otherthan the currency of the Guarantor required for the pqmnt of

li.E. Dr. Xarl. Grbr - 2 - June 24, W

principal of, and intervst wn, the Loan and the dspd maculatedon the basis of such redteed par value or depreciated foreignexchane value respetively, and for the purpose of such calcul-ation the pWr value or the for*4gn exchange value of the currencyof the Guarantor in terms of any such other currvey shall beas rsasonably daternmd by the Bank."l

I am of course at your disposal at any time to discuss these proposedadjustments,

5incerely yaurap

V. Umbrichtwepartment of Operations

EAurope, Africa and AustralasiA

FMOppenheimertmo

Cc. Mr. "penheimr

Original handed to Dr. Lemberger, First Counselor of Austrian Embassy,on Thursday, June 24, 5 p.m. by V. Umbricht.

Jwne 22, 1954

L r. Frnst tagner1Krntnerring; 10Vienna 1, austria

Dear Dr. Wagner:

I have just received your letter of 19th June.IBefore replying to it in detail I want to apologize forour carelessnesv in not including the remorandum and alsofor the fact that apparently your copy of the June 9 draft,which was sent you on June 9, was apparently sent throughordinary mail by mistake. I am enclosing therefore thedraft of June 9 together with two riders about which Icble~i you the other day.

bincerely yours,

Franz . Oppenheimer

Enclosures

' Apenheimer: vv

AIR MdAIL - SPECIAL LLIV l.

FORM No. 27

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: JUNE 22, 1954 CLASS OF SERVICE DESIRED

TO: NIGHT LETTER [j] CODE F7-0 ERNST WAGNERG DEFERRED K] FULL RATE

TEXT: VIENNA 1, AUSTRIA 4TLYPTEXT: TELETYPE K

THANKS YOUR ETTER JUE NMITELN STOP IN TEOR To COVER YOUR POINT

ON VALIDATION CLAUSE AS PROPOSED IN YOUR ANNEX FIVE I PROPOSE INSTEAD

TO ADD THE FOLLOWING ADDITION TO THE NEW THIRD SENTENE OF SECTION

5.04 (A) QUOTM AND FOR THE PURPOSE OF SUCH CAILCUIATION THE PAR VALUE

OR THE FOREIGN EXCHANGE VALUE OF THE CURRENCY OF THE GUARANTOR IN

TERMS OF ANY SUCH OTHER CURRENCY SHALL BE AS REASONABLY DETERlIM

BY THE BANK UNQUOTE STOP PIEASE CABLE ANY OBJECTION.

OPPENIHEIIER

AUTHORIZED BY: For Use by Archives Division

NAME F. N. Oppenheimer Checked for Dispatch

DEPT. Office of General Counsel

ORIGINAL (FILE COPY)

N,

xL x .--x -

FtRM No. 27(1.50) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: JUNE 18, 1954 CLASS OF SERVICE DESIRED

TO: DR. ERNST WAGNER NIGHT LETTER [ CODE E-- KRNTNERRING 10

VIENNA 1, AUSTRIA DEFERRED ] FULL RATE W

TEXT: TELETYPE D

THANS YOUR LETTER JUNE TENTH STOP PROPOSE FONEQUOTE

NEW SUBSECTION 5.03 (D)/O DELAY IN EXERCISING COMMA OR OMISSION TO

EXERCISE COMA ANY RIGHT OR POWER ACCRUING TO THE BAN UNER TE ,

ASSIGMENT OR UNDER THE MRTGAGE SH&LL AFFECT OR IMPAIR ANY OBLIGATION

OF THE BORROWERS UNDER THE LOAN AGREMET UNQUOTE H TWO

INSERT AFTER SECOND SENTENCE OF SECTION 5.04 (A) THE FOLUWIfG QUOTE

IN TEE EVENT TEE PAR VALUE OF TEE CURRENCY OF THE GUARANTOR IS REDUCED

OR TEE FOREIGN EXCHANGE VALUE OF THE CURREEY OF THE GUARANTOR HAS COMMA

IN TEE OPINION OF TEE BANK GOMMA DEPRECIATED TO A SIGNIFDANT EXTENT

COMM THE DRAUKRAFTWERKE SHALL FROM TIME TO TIE PROMPTLY UPON TEE BANK'S

REQUEST EXECUTE AN DELIVER TO TEE BANK SUCH ADDITIONAL SUPPLEMENTAL FIRST

ERTGAGE OR ERTGAGES IN FORM AN SUBSTAENE SLTISFATORY TO TE BANK AS MAY

BE REQUIRED TO MMU TEE AGGREGATE AMOUNT IN TEE CURREEY OF THE GUARANTOR

FOR WH31H ALL MORTGAGES CREATED HEREUNDER NAY BE RECORDABLE OR MAY HAVE

BEEN RECORDED EQUIVAIENT TO TEE AGGREGATE AMOUNT IN CURRENEIES OTHER THAN

AUTHORIZED BY: For Use by Archives Division

NAME F. No Oppenheimer Checked for Dispatch

DEPT. Office of General Counsel

FILE COPY

F#M No. 27

(1-50) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: CLASS OF SERVICE DESIRED

TO: NIGHT LETTER W CODE

DEFERRED ] FULL RATE

TEXT: TELETYPE

THE CURRENCY OF THE GUARANTOR EQUIRED FOR THE PAYENT OF PRINCIPAL OF

CONMM AM) INTERST ON COML THE IDAN AND THE BOND)S COWML CAWCUIAED ON

THE BASIS OF SUCH REDUCED PAR VAIUE OR DEP ZCIAh) FOREIGN EXCHANGE

VAIE RESPECTiVELY UNQUOTE INf LIEU OF PUMNT LAST SENTENE STOP

PIEAX CABIE ANI OBJECTIONS.

OPPENEIMER

AUTHORIZED BY: For Use by Archives Division

NAME Checked for Dispatch

DEPT.

ORIGINAL (FILE COPY)

-xx

(

-x . . :. .3 . . - . . -

- - - . -. -. . .- + ---- -:-. ---x .A-- ---v -

x - -JVJ

FoM354209 INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

GENERAL FILES DateROUTING SLIP UL

ROUTING OF INCOMING MAIL

Mr. Black 1023 Public Relations 1109

Mr. Brower 205 Mr. Riley 1201

Mr. Demuth 1013 Mr. Reamy 200A

Tech. Operations 305 Research Files 212

Mr. Garner 1002 Mr. Sommers 1113

Mr. Gregh 320

Mr. Hoar 405

Mr. Howell 1004

Mr. Iliff 1002

Mr. Johnston 203

Knapp 421

Mendels 1009

Office Services 113

Personnel Div. 1213

Mr. Poore 200

Remarks:

From: General Files & Corres. Section

Osterreichische Elektrizitatswirtschafts-AktiengeselIschaft(Verbundgesellschaft)

Osterr. Elektrizititswirfschafts-A. G., Wien L, Am Hof 2

International Bank forReconstruction and Development

1818 H Street N.W.

Washington 25, D.C.

Wien I.,lhre ZeIchen lhre Nachrichf vom Unser Zeichen Am Hof 2 16.Juni 1954.

Betreff

In Verfolg der Verhandlungen, die wir mit Ihnen in

Washington fUhren konnten, hat sich bekanntlich AvfiErMllung Ihrer

WUnsche die Notwendigkeit ergeben, unseren Stromlieferungsvertrag

mit SADE und EDISON in einigen Punkten abzutndern und hierUber haben

wir mit den italienischen Firmen Verhandlungen gefUhrt, die jedoch

infolge Verhinderung eines der italienischen Teilnehmer noch zu

keinem abschliessenden Ergebnis gefUhrt haben. Voraussichtlich werden

die Schlu~besprechungen am 22.und 23.d.M. in Venedig stattfinden.

Da wir Ihrem Wuneche entsprechend, Ihnen den Entwurf vor

Unterfertigung des Stromlieferungsvertrages Ubermitteln mchten, wUr-

de sich eine Verzdgerung in der Unterfertigung des Loan Agreements

dber den 3o.6. hinaus kaum vermeiden lassen. Es wUrde sich daher

empfehlen, entweder das Loan Agreement mit der Suspensivbedingung

zu versehen, da es erst durch Unterfertigung des von Ihnen genehmig-

ten Stromlieferungsvertrages in Kraft erwdchst oder eine kurz -fristige Verzdgerung in der Unterfertigung in Kauf su nehmen.

Wir bitten Sie uns mitzuteilen, fUr welche der beiden Alternativen

Sie sich entschliessen wollen.

Zur Vermeidung von MiBverstdndnissen bemerken wirda die

Diskussion mit den italienischen Gesellschaften nur mehr einen Punkt

betrifft und zwar geht es darum, in welchem Umfang wir durch einevorzeitige Tilgung der Lira-Tranche des Kredites eine AbkUrzung der

./.Vorsitzer des Aufsichtsrates: Sekbionschef Dr. Karl StraubingerVorstand: Dr. Rudolf Stahl (Vorsitzer), Dipl.-Ing. Franz Hintermayer, Dr. Karl K6lliker, Dipl.-Ing. Dr. Oskar V.s

Telegrammadresse Telephon: Fornschreiber: Bankkonto: Creditanstalt-Bankverein, Wien I., Schottengasse 6.8Vorbundnefz U 21 5 15 Soria Wien 1650 Osterroichische Landorbank Aktiongesellschaft,Wen I., Am Hof 2

Postsparkassenkonto: 18468

Dauer des Stromlieferungsvertrages herbeizufUhren berech-

tigt sein sollen.

Wir zeichnen

hochachtungsvoll

OsterreichischeElekt izitt swi'teschafts-A rlh

Mr. Felice Pick June 16, 1954

Martin M. Rosen

The Austrian Loan Project

Attached iz the memorandum which was given by Governor

Menichella to Mr. Wheelock in connection with the discussion

they had on the lire security for the propoued Autrian loan.

Please feel free to make a copy of it Zor your files if you wish

to do so.

MMRosen:dbs

June 15, 1954

Dear Dr. Teufenstein:

You may remember that durinf your recent stay here we had a con-

versation about the financial side of Tnteralpen and the attitude of the

Austrian CGernment towatrds the Interalpen plans. As I told you, I planto attend the next Interalpen meeting in Zurich on July 20-22, at which

the overall financial plans for Interalpen will be discussed and where I

hope to give the Interalpen memers an outline of the basic conditions

which would have to be satisfied in order to enable the Bank to take a

practical interest in due course.

Before going to Zurich, I shall take soundings in ?aris and Bonn

in order to find out what these gornments think of Interalpen and, inparticular, whether they would be willing to consider 184 releases for

its projects. Similar conwrsations have already been initiated in Rme.

I asked you to be good enough to bring this matter up for con-

sideration in the appropriate Departments of the Austrian Government. I

wonder whether you have yet been able to do so and whether you could let

me know the views held in Vienna about the Interalpen problems. Onlyafter having learned how the various governments feel about the Interalpen

proposals, shall we be in a position to decide whethcr governwnt repre-8entatives should be invited to the Zirich meeting.

As I am leaving for !Nrope today, I should appreciate it if youcould send your answer to my London address (until June 29): 57 Lyonsdown

Road, New arnet, Herts., with a copy to the Bank in Washington.

Yours sincerely,

A. S. . oarDirector of Operations

Europe, Africa and AustralasiaDr. Wilhelm TeufensteinMinistry of FinanceHiemmlpfortgasse 8Vienna, Austria

VUmbricht/ASGHoar/mct

FoRm- No, 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT(5-48)INENTOA BAKFRRCNTUTO AN DEEOM T

OFFICE MEMORANDUMTO: Files DATE: June 3.4, 1954

FROM: V. Umbricht

SUBJECT: Reisseck-Kreuzeck Loan

I rang up Ambassador Gruberts office on Friday, June 11, 3 p.m.and told them (what I had already said to Dr. Zenker) that the Bankwould be ready to discuss with him any points arising out of the DraftLoan Agreement as submitted on Thursday, June 10.

This message will be conveyed to Ambassador Dr. Gruber (who wasout both tines when I called).

VUmbricht:mo

Fo(5 -485 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Messrs. Hoar, Cope, Rosen, Collier, Spottswood DATE: June 11, 1954

/CFROM: V, Umbricht

SUBJECT: Reisseck-Kreuzeck ProjectRevised Draft Loan Agreement

Enclosed is a Draft Loan Agreement between the Bank and Austriawhich was handed to the Austrian Ambassador on Tuesday, June 10.

I also attach a memorandum by Mr. Oppenheimer, outlining themajor aspects in which this Draft Loan Agreement differs from thestandard agreements by the Banks

Enclosures

Friedrich Rermant p.Adr.

Osferreichische Eekfrizififswirfschaffs-Akfiengeselischaff(Verbundgesellschaft)

Osterr. Elektrizitatswirtschafts-A. G., Wien I, Am Hof 2

Mr.

Petrus K a n t e r s,

International Bank for

Reconstruction and Development,

W a a h i n g t o n 25, D.C.

USA

Wien I,Ihre Zeichen Ihe Nachrid t vom Unser Zeichen Am Hof 2

/Ob 11.Juni 1954.

Y , Lieber Mr.Kanters!

Ioh habe dieser Tage ausfihrliche Besprechungen mit dem kaufm~nni-

schen Prokuristen der Osterr.Draukraftwerke A.G. gehabt und dabei ist mir

folgende Sachlage sum Bewu~tsein gekommen: Im Loan Agreement Schedule 3 (e)

Modification zu Section 4.01 zur Loan Regulation wird im letzten Absats an-

gefuhrt, daS keine Ausgaben, die vor dem 1.1.1954 getatigt wurden, von der

Bank vergatet werden.

Nun entsinnen Sie sich bitte an unsere Gesprdche, in denen ich Ih-

nen mitgeteilt habe, daB die Osterr.Draukraftwerke A.G. verschiedene Leistun-

gen, die in dem der IBRD bekanntgegebenen Programm fdr 1954 vorgesehen waren,

auf das Jahr 1953 vorgezogentwr und durch Oberbruickungskredite zwischen-

finanziertL.Egrden sind) Diese Situation ist auch in der Ihnen von mir uber-

gebenen Proforma-Bilanz der Oaterr.Draukraftwerke A.G. zum 31.12.1958 unter

Aktiva 1) entsprechend dargestellt. Wir waren uns darUber einig, daS diese

vorgezogenen Aufwendungen in die Finanzierung durch die Weltbank einbezogen

werden mssen. Ich sehe nun aber in der Schedule 3 des Loan Agreement eine

Schwierigkeit und mchte Sie schr bitten, sich diese Sache zu berlegen und

mir Ihre Meinung dazu bekanntsugeben. Ich bin iiberzeugt, daB ein Modus gdzn-

den werden mug, durch welchen diese Situation beriiksichtigt wird.

?dr Ihre Bemiihungen danke ich Ihnen im vorhinein und verbleibe

mit den besten GriBenIh, ergebener

Vorsitzer des Aufslchtsrates; Sektionschef Dr. Karl Straubinger

Vorstand; Dr. Rudolf Stahl (Vorsitzer), Dip$ -ng. Franz Hintermayer, Dr. Karl Kollikef, Dipl.-lng. Dr. Oskar Vas

Telegrammadresse: Telephon: Fernschreiber: Bankkontoi Creditanstalt-Bankvervin, Wien , Schottengasse 6 a

Verbundnetz U 21-5-15 Serie Wien 1650 Osterrelchische Landerbank Aktiengesellschaft, Wien 1, Am HofPostsparkassenkonto; 18468

- - 4

e

9

JRm No. 209 INTERNATIONAL BANK FOR(3.54)

RECONSTRUCTION AND DEVELOPMENT

GENERAL FILES DateROUTING SLIP

ROUTING OF INCOMING MAIL

Mr. Black 1023 Public Relations 1109

Mr. Brower 205 Mr. Riley 1201

Mr. Demuth 1013 Mr. Reamy 200A

Tech. Operations 305 Research Files 212

Mr. Garner 1002 Mr. Sommers ll3

Mr. Gregh 320 -

Mr. Hoar 405

Mr. Howell 1004

Mr. iliff 1002

Johnston 203 ___

r. Knapp 421

Mr. Mendels 1009

Office Services 113

Personnel Div. 1213

Mr. Poore 200

Remarks:

From, General Files & Corres. Section

Friedrich Hermann, p.Adr.

Osferreichische Elekfriziftiswirfschaffs-AktiengeselIschaft(Verbundgesellschaft)

Osterr. Elektrizitatswirtschafts-A. G., Wien I, Am Hof 2

Mr.

Victor U m b r i c h t,

International Bank forReconstruction and Development,

W a s h i n g t o n 25, D.C.

USA

Wien 1,Ihre Zewher lhfe Nachricht vom Unser Zeichen Am Hof 2

/ob 11.Juni 1954.Betroff

Lieber Mr.Umbrichtl

Endlich kann ich Ihnen mitteilen, daB ich wieder gut in der

Heimat gelandet bin. Schuld an meinem versputeten Schreiben trugt die viele

Arbeit, die mich schon erwartete.

Ich muB Ihnen gleich mitteilen, daB die notwendigen Schritte

der Finalisierung des Kredites hier in Wien mit Hochdruck betrieben werden

und am 22.ds.M. die Zustimmung des Ministerrates erfolgen soll. Vor diesem

Datum werden noch die Beschlusse der Gesellschaftsorgane der beiden Kredit-

nehmer eingeholt werden.

Erlauben Sie mir nochmals meinen besten Dank fUr die freund-

liche Aufnahme privaterseits und fUr die Unterstutzung in geschftlicher

Hinsicht auszusprechen.

Mit recht herzlichen GrUBen und Empfehlungen an Ihre werte

Frau Gemahlin verbleibe ich

Ihr ergebener

Vorsitzer des Aufsachisrates: Sektionscef Dr. Karl Straubinger

Vorstand; Dr. Rudolf Stahl (Vorsitfer). Dipl-Ing. Franz Hintermayer, Dr. Karl K6l1lker, Dipl-Ing, Dr. Oskar Vas

Telogrammadresse: Telephon: Fernschreiber: gankkonto: Creditansfait-Bankvereln, Wien I, Sdottengasse 6 4

Verbundnetz U 21.5-15 Serie Wien 1650 Ostarreichische LAnderbank Akfigesel schaft, Wien 1, Am Hof 2

Postsparkassenkonto: 18468

-- I 1

June 11, 1954

Dr. Ernst WagnerKarntnerring 10Vienna 1, Austria

Dear Dr. 7agner:

Thank you for your cable of June 9. I am sending you enclosed

a memorandum to my colleagues which should have accompanied the June 9draft of the Loan Agreement which I sent you earlier this week.

Referring to your last cable and to mine of June 8, I thought it

better to explain in some detail the considerations that prompted me to

redraft Soction 5.04 of the Loan Agreement as I had before adopting the

suggestion you make i1 your cable.

I am considerably puzzled whether the requirement of Austrian law

that a mortgage can be expressed only in a definite amount of schillingsis a procedural requirement or one that goes to the substance of the

mortgage. In other words, T do not know whether in our case where the

mortgage secures a debt e-ressed in foreign currencies the requirement

Ghat t ae mortgage be recor ed in schillings is one that relates (1) onlyto the method of recording the mortgage or (2) relates to the substance

of the mortgage. In this connection I should like to refer you to the uft

Kommentar zum Allgemeinen bUrgerlichen esetzbuch, edited by Dr. Heinrich

Klang, (Vienna 1950), pages 414-417. On page 414 it is stated that the

object of the claim to be secured is generally without significance; and

that the only condition for the establishment of a pledge is that the claim

must be expressed in money. On the other hand, on the same page 414 the

author continues under paragraph 2(b) to the e&fect that the pledge may be

"entered into the public books" only for a numerically determined amount

of money and he goes on to explain why that amount must be expressed in

Austrian schillingb.

Based on all the learning I could accumulate from your letters and

cables and Mr. Klang, I came to the conclusion that Austrian law probably

recognized a mortgage securing a claim in foreign currency as a matter of

substance and that the restriction to an expression in schillings only

applied to the method of recording the mortgage; and that an increase in

the illin. emount of the mortgape therefore constitut& r': < aewor additional mortgage but simply a different formulation of an old one,

Nevertheless the ne. draft of Section 5.04 (a) shoulO, in myopinion, be estisfactorr un& r 1-th these theories. The "Mortge" isdefined s a mortgage provided for in Section 5.04 (a). Therefore ifpursusnt to the last sentence of Section 5.04 (a) +hi amount of theMortgage must be increased, the Mortgage means the mortgage coveringthat additional amount of schillings. If sn incame in the schillingamount is a matter of recordation then it is overed by subsection5.0 (c); if it is in effect the creation of a n,, rwtae (note The'Ittle m), then it should be covered by subsection 5.04 (e).

If you still think thot this is not adaquato to cover the point,please let me know. Althou-h we have of ficialy sent !he Jun 9 draftof tre Loan Agreement to the Borrowers and the Austrian Government,I do not think we are precluded from making changes of wording whichio niot change the substance of our understanding.

I shll write you soon agTin noncernln te conditions to theeffective date (ection 7.01 of- the Loan Agreement) nd in particulara-out the ort e dai t; but ,efore 7iw so I mll await your replyto my letter of June 1.

With best nersonal regards and many thanks for your prompt cable,I remain

ern sincerely yours,

Franz M. Oppenheimer

1IA~ppe he imer: vv

June 10, 195

Your EXcellenqgrl

I have the pleasure of sending you herewith 18 copies of arevised draft, dated June 9, 1954, of the Loan Agreement betesenthe oBank and the Verbundgeselischaft and the iraukraftwerke A.O.As you will notice, there are a aumber of changes in this newdraft as compared with the wording of previous drafts. We do notconsider that any of these changes affect the general tenor ofour agreement; however, I should like to draw your particularattention to Sections 5.04, 5.12, 7.02, and sub-paragraph (h) ofSchedule 3 of this new draft. I hope that the new draft will beacceptable.

There are also 18 copies of Loan Regulation No. 4 attached.

Yours sincerely,

V. UmbrichtDepartment of Operations

Europe, Africa and Australasia

Enclosures

'is Excellency Dr. K. (iruberAmbassador of Austria214h Wyoming Avenue, N. W.Washington, D. C.

VUmbricht:mo

FORM No. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: JUNE 9, 1954 1822 ROUTING

TO: OPPENHEIKER INTERNATIONAL BANK FOR ACTION COPY TOMR. OPPEEIMRECONSTRUCTION AND DEVELOPMENT

FROM: INFORMATION COPY TO

VIENNA Decoded By

TEXT:

RECEIVED LETTER AND CABLE JUNE 4 AND 9. SUGGEST FOLLOWING

ADDITION TO YOUR DRAFT OF SECTION 5.04 AND THE DRAUKRAFT-

WERE SHALL AS SOON AS PRACTICABLE EXECUTE AND DE1UIVE TO

THE BANK AN ADDITIONAL RECORDABLE MORTGAGE COVERING SUCN

REDUCTION OF PAR VALUE OR EXTENT OF DEPRECIATION RESPECTABLY

WAGNER

DUPLICATE

FORM NO. 75 INTERNATIONAL BANK FOR(3-52) RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SLIP

NA ROOM NO.

Action Note and File

Approval Note and ReturnComment Prepare Reply

Full Report Previous PapersInformation Recommendation

Initial SignatureRemarks

A // /L

h1V1

June 9, 1954

REPORT AND RECOMhENDATI(NS OF TE PRESIDENT TO TIE EXECUTIVE DIRETCTORS

ON A LOAN TO THE OESTERREICHISCHE ELEKTRIZIT7TSWIRTSCHAFTS-A.G. AND

OESTERREICHISCHE DRAUKRAFTWERE AG.

1. I submit the following report and recommendations on the application

of the Oesterreichische Elektrizitgtswirtschafts-A.G. and the Oesterreichische

Draukraftwerke A.G. for a loan of the equivalent of $12 million.

PART I - HISTCRICAL

2. The initial discussions between the Bank and Austrian representatives

concerning a possible loan for the Reisseck-Kreuzeck hydro-electric power

project took place in 1952. When it appeared that a basis for a loan might

exist two members of the staff visited Austria in August, 1953, to study the

economic situation and to obtain information on the electric power program

and the Reisseck-Kreuzeck project. After consideration of their findings the

Bank deeided that it would be possible to proceed further and make a technical

examination of the project and explore ways and means of setting up ihe loan.

A Bank mission visited Austria in November and December, 1953 with this object.

3. The Bank decided that it would be desirable to grant the loan in

European currencies and this necessitated certain preliminary negotiations

regarding the use of Italian lire and Swiss francs. When these matters had

been satisfactorily settled the Austrian Government and the electricity

companies concerned were invited to send negotiators to Washington.

4. Negotiations began in Washington on May 10, 1954, with representatives

of the Government and the Companies, and agreement has been reached in the

form in which I now present the draft Loan and Guarantee Agreements. The

-2-

Austrian Ambassador in Washington has been authorized to sign both the Loanand the Guarantee Agreements.

PART II - DESCRI-ITICN OF THE LOAN

The Borrowers

5. The Oesterreichische Elektrizitatswirtschafts-A.G. and the Oesterreichische

Draukraftwerke A.G. would be co-borrowers, both of -wh4io4-are publicly owned

companies. The Federal Law of 1947 which nationalized the power industry of

Austria established four special companies jointly owned by the Federal Government

and the Federal Provinces of Austria, in order to own and operate the larger

generating stations in the country. The Oesterreichische Draukraftwerke A.G.is one of these companies. It is constructing the Reisseck-Kreuzeck project.

The same law established the Oesterreichische Elektrizitltswirtschafts-A.G.

generally known as the Verbundgesellschaft. This company, which is 100 ;

asa; Federally owned, was established to construct, own and operate a hightension transmission system interconnecting the plants of the special companieswith the provincial networks and also to act as the Government's trustee forthe sh res which it owns in the special companies. As the Federal Government

holds over 50 et of the shares of the special companies, the Verbundgesellschaft

is in effect in full control of these companies and hence of the major part of theAustrian power industry.

The Guarantor

6. The loan would be guaranteed by the Republic of Austria,

Purvose of the Loan

7. The purpose of the loan would be to assist in the financirg of theReisseck-Kreuzeck hydro-electric power project. Approximately $2.2 million of

-3-

the proceeds of the loan would be used to pay for imported equipment while

the remainder would be used to cover local expenditure on the project within

Austria. The justification for this procedure is given in Part IV.

Amount

8. The loan would be in various currencies equivalent to $12 million.

Terms

9. The loan would be for 25 years, amortized by semi-annual payments

beginning July 15, 1959, which are calculated to retire the entire loan by

maturity by July 15, 1979, as set out in Schedule 1 of the proposed Loan

Agreement,

10. The loan would bear interest, including 1% commission, at the rate

of . per annum. The dates for the payment of interest and other

charges would be July 15 and January 15 of each year.

11. There would be a commitment charge of 3/4% per annum.

12. The loan would be secured by an original first mortgage on the

Reisseck-Kreuzeck properties and by an assignment of all rights and claims

for payment frem a power contractwhich provides for the sale and delivery

of electric energy by the Verbundgesellschaft tq,.two Italian electric power

companies, the Societa Adriatica di Elettricita of Venice and Societa Edison

of Milan.

PART III - DESCRIPTION OF THE PROJECT

13. The project would consist of the completion of the Reisseck-Kreuzeck

hydro-electric development in Southern Austria, which is now under construction

and partially completed. The potential power in a number of lakes and small

streams loceted high in the Reisseck and Kreuzeck Mountains which rise on

each side of the Valley of the Moell River, would be harnessed to produce

annually about 321 million kilowatt hours, 147 million kwh of which would

be available in the wintertime. This energy would be produced in two power

stations: One of 104,000 kw located on the Mioell River and one of 8,000 kw

located on the Reisseck M1ountains about 700 meters above the Moell River

Valley. The smaller power station would operate on a head of 225 meters

and the larger station on a head of 1,771 meters. The storage capacity of

four lakes in the Reisseck Mountains would be increased by the construction

of four dams which would provide a net storage capacity of 18 million cubic

meters. Other reservoirs would provide additional storage of 325,000 cubic

meters. In the summer when there is ample water available, a pumping station

requiring 27 million kwh for operetion would pump water up to the highest

reservoirs in the Reisseck Mountains. The water would be released in the

winter to produce 27 to 28 million kwh of wintertime energy. This efficiency

would be possible because the pumping station would Pump from an elevrtion

of 502 meters higher than the generating station located on the Moell River.

This pumping would be profitable because the energy used would be cheap

summer energy and that sold would be high priced winter energy0

14. Construction of the project was started in 1947 and at the end of

1953 was about 30% completed and partially in operation. The completed part

consists of the power station on the Moell River (known as the Kolbnitz

station) with 24,000 kw of the ultimate 104,000 kw installed and operating

with water diverted from small streams in the Reisseck Mountains. The part

of the project remaining to be completed and partially financed by the Bank

would consist of storage reservoirs on the Reisseck Mountains; the diversion

-5-

works, tun-els and other works necessary to bring the water from the storage

reservoirs of the Reisseck Mountains and small streams on both the Reisseck

and Kreuzeck Mountains to the Kolbnitz power station on the MLoell River;

the installation of 80,000 kw of additional generating capacity in this

station and the construction of the smaller 8,000 kw station (known as the

Rieckenbach station) and the pumping plant.

PART IV - APPRAISAL OF LOAN

Austria's Political Situation

15. For eight years the four Allies have beer conducting negotiations

with the object of reaching agreement on a State treaty which would lay

down the terms on which an independent Austria could be reconstituted. So

far, these efforts have been unsuccessful although a large number of con-

cessions have been made by the occupying powers. In the meantime, Austria

remains occupied, although the Government legislates freely for the whole

country and administers national laws throughout the four zones. The veto

right vested in the Allied High Commission, which has to be exercised

unanimously by the four Powers, has not been used since 1949 and there is

no cause to assume that the extensive political and economic power now

vested in the Austrian Government will be curtailed anew by the Allied High

Commission. Although the immediate prospect for unrestricted sovereignity

nay rerhaps still be uncertain, the continued absence of a State treaty,

though still a cloud on Austria's status, can no longer be regarded as an

obstacle to a loan.

16. An element of risk does exist, of course, in the partial occupation

of the country by the Soviet Union. Although recently there has been a

-6-

trend towards considerable relaxation of Soviet imposed restrictions there

is naturally no guarantee that this trend might not some day be reversed.

However, the possibility that the Soviet Union might attempt to occupy the

entire country is hardly one which can be considered apart from the overall

international implictions of such a move.

The Austrian EconoM

17. At the end of the war Austriats economic situation was extremely

grave. The task of protecting the population from hunger and cold was

beyond the capacity of what was left of the economic system. Since that

time Austria has been engaged in a program of economic rehabilitation with

the help of external aid in order to re-establish an adequate level of

production and consumption, to stabilize the financial and monetary

situation and to achieve a balance in her international accounts0 By 1953

these objectives had been achieved and the Foreign Operations Administration

was able to announce the termination of economic aid to Austria in January

of this year. The amount of U.S. aid received by Austria was $960 million,

or sufficient to finance almost half of total investment during the period.

18. These successes were not easily achieved, nor were they obtained

without a price. After 1945 there was a severe inflation and an eight-fold

increase in the price level a d it was not until 1952 that the Government ts

efforts to stabilize the schilling were in the end successful. In the early

part of the reconstruction period there were large deficits in the balance

of Austria's international payments which were met by external aid. In the

first two years of the existence of E.P.U. Austria had a steady monthly

deficit. But after the re-establishment of monetary stability in 1952 there

-7-

was a great improvement in the foreign exchange position. In July of that

year Austria achieved her first E.P.U. surplus and, apart from a short period

at the beginning of 1953, she has maintained a surplus position ever since.

At the present time Austria's accounting surplus in E.P.U. is $118.6 million,

which is $48.6 million above her quota. Altogether in 1953 the balance of

payments closed with a current surplus of $71.5 million, a great contrast

to previous years.

19. Although the continuation of such a favorable position is not to be

expected, the achievement of a balance of payments surplus demonstrates that

Austria is now capable of living within its income - even though it be with

a level of investment and employment which is not generally regarded as

satisfactory. Hence it is easy to understand the importance attached by

the Austrian Government to encouraging an inflow of capital, for this would

enable domestic economic activity and employment to be increased without

endangering the balance of payments.

20. Austria needs to obtain long-term external capital if she is to

develop her resources, particularly of hydro power, without great delay.

Until this year she was able to utilize the proceeds of U.S. aid for develop-

ment., Austrian internal savings, although they have shown a marked recovery

since the stabilization of the schilling, are not yet sufficient to cover

all the investment requirements, in power and other fields, which are

desirable. For this reason Austria has approached the Bank for a loan.

Reasons for a Local Currency Loan

21. The bulk of a loan for Reisseck-Kreuzeck is destined to cover local

expenditure - the import requirements are small, at best about $2.2 million

equivalent. The total cost of the project is estimated to be $34 million

-8-

equivalent, of which about $10 million has already been provided and

disbursed; another $12 million will be made available from Austrian

resources and $12 million is expected to come from the Bank loan.

22. There are a number of reasons which justify the Bank's making a

loan in foreign exchange to cover part of the local cost of the project.

First, the borrowers have insufficient resources and savings of their own

to complete the construction of the project, which is already well under

way. A delay in carrying it out would render the project unnecessarily

expensive and entail considerable economic drawbacks; coal imports by

Austria could not be reduced and there would be no additional power

available for export to Italy. If a Bank loan were limited to financing

the import of capital goods required for the project, it would not only

be substantially smaller than would be justified on creditworthiness

grounds, but it would be much below the borrerts needs. Further, the

project will produce direct foreign earnings through the export of power

to Italy, and Austria will thus obtain a long-term source of foreign

income. The loan will also be secured by the lire proceeds from the power

export contrect with the Italian companies, the rights of which will be

assigned to the Bank. This will make the loan self-liquidating for its

lire component. In these circumstances, and bearing in the mind that the

expenditure of the schilling counterpart of the loan within Austria will

increase money incomes and expenditure and thus lead indirectly to an

increase in imports, it is, in my opinion, appropripte to extend a loan

in foreign exchange to cover expenditure in local currency.

Currencies to be Lent

23. The proposed loan of $12 million equivalent would be disbursed in

European currencies, the equivalent of $6 million in Swiss francs and (Of

the remaining)$6 million in Italian lire. Italy has already agreed to

release $6 million equivalent in lire, the utilization of which has been

the subject of a direct Austrian-Italian understanding. The Swiss francs

disbursed during the first 12 months under this loan will be transferred

to Austria on the basis of 50% in free Swiss francs, which are to be repaid

in free Swiss francs, end 50% through the European Payments Union,which

are to be repaid through E.P.U. or through any subsequent Austrian-Swiss

payments agreements. In a yearts time the Bank will review the disburse-

ment procedure for the Swiss franc part of the loan in the light of develop-

ments in E.P.U. and, particularly, of Austria's creditor position within

E.P.U., and of her overall financial situation.

Prospects for Repayment of the Loan

24. Austria's debt record is good. Her present external debt is unusually

low at approximately $102 million. It is less than a third of the prewar

debt even in money terms so that, taking into account the fall in the value

of money and the rise in Austria's national income, the reduction in the real

burden of external debt has been even greater. Service payments on the debt

in the peak year are only 2% ad 3% of annual foreign exchange earnings so

that even if the debt were substantially increased it would still not be an

important factor in the total balance of payments.

-10-

25. Austria can therefore certainly be regarded as creditworthy for

a moderate amount of additional external debt. Although, like most small

countries, Austria's economic fortunes depend largely upon the course of

world trade, she should have little difficulty in servicing her external

debt in any circumstances which it is at present reasonable to contemplate.

In addition the Bank will be able to rely, for the repayment of the lire

portion of the proposed loan, upon the lire proceeds of power contract

between the Verbundgesellschaft and two Italian power companies. The

rights to the proceeds of this contract will be assigned to the Bank as

security for the loan.

PART V - LEGAL DOCUIENTS AND AUThORITY

PART VI - COPLIANCE WITH ARTICLES OF AGREE>ENT

(Standard)

PART VII- RECOMMENDATIONS

I recommend that the Bank make a loan to the Oesterreichische

Elektrizitatswirtschafts-A.G. and to the Oesterreichische Draukraftwerke A.G.

as co-borrowers in the amount of $12 million, or the equivalent in other

currencies, to be guaranteed by the Republic of Austria, for a total term

of twenty-five years with interest (including commission) at % per

annum, and on such other terms as are specified in the form of the Loan and

Guarantee Agreements attached hereto.

Justification of the Project

The project is a part of the general expansion program of the

Verbundgesellschaft hich is necessary in order to ensure that electric

generating cap city keeps pace with the demand for power. The Verbundgesellschaft

estimates thrt its total sales, including exports, will increase from about

3,280 million kwh in 1954 to about 5,500 million kwh in 1963 or an average of

about 7% per year during the period. This can be regarded as a reasonable

estimate. The sale of part of the power to Italy is particularly suited to

Italy's need which is for winter power.

June 9, 1954

L~r, t asncr

Xenna 2, 'usetrir

ar Dr. aner:

T sen; p m enclosed the new draft a tedune 9, 1954 of the Wen aro ent. I have trked the

aetAIons in which changes have been :01e which ar ofinterest to youu expect we will send this vraft tothe I:orrowerr pnd the governrenhtt oi or towirrow.

cre youra,

~rani .. Uppenheirmer

1nelosure

I ppe nhaier! vv

FORM No. 270-50 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: J , 1954 CLASS OF SERVICE DESIRED

TO: NIGHT LETTER E CODEDR. ERNST WAGNERKERNTNERRING 10 DEFERRED ] FULL RATE

TEXT: VIENNA 1, ASTRIA 4 'ELTE ]TEXT: TELETYPE

INSTEAD OF SECTION QUOTED PARAGRAPH THREE MY LETTER JU FOURTH PROPOSE

TO ADD FOLIQWING TO SECTION 5 .04a: WHENEVER TEE PAR VALUE OF THE CURRENCY

OF THE GUARNTOR I i REDUCED OR THE FOREIGN EXCHANGE VALUE OF THE CUEY

OF THE CU' T A IN TH 0I T THE BL COMMA DEPRECIAT

A SIGNIFICAT EXTENT COW TIE EUNT IN T CU EY OF THE GUARANTOR P

WHICH SUCH MORTGAGES AY BE RECORDABLE GO MA 0R 1'Y HVE BEEN RECORDE COM

SHALL BE I EASED CO A IF AN INCREASE IS EES Y FOR THE P COMMA

TO AN AiOUT QUIVALET TO 1ThE AGGREGATE AMOUNT IN SUCH OTHE CURR IES

AS IS REQUIIE FOR THE PAY. EN T OF PRlING IPAL 0F CO MM AND INTEREST ON COMMA

TH LWA AND THE BONDS CO IN CALJGULATED ON THE BA I 0F SUCH REDUCED PAR

VALUE CR DEP ECIATED FOREIGN EXCHANGE VALUE RESPECTIVELY.

OPPE NHE INER

AUTHORIZED BY: For Use by Archives Division

NAME F. M. Oppenheimer Checked for Dispatch

DEPT. Office of General Counsel

ORIGINAL (FILE COPY)

*I,

. . -e

*.

x - - - -

e

*

re

FoR5 N8) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files DATE: June 7, 195 4

FROM: V. Umbricht

SUBJECT: Reisseck-Kreuzeck

Oppenheimer informed me of Dr. Wagner's letter, dated June 1,according to which Dr. Stahl went to Venice on the same day to re-discuss the power contract with Sade and Edison ("um die gewinschtenAbmachungen zu treffen").

I therefore called Dr. Zenker (in the absence of Ambassador Dr.Gruber) and told him that the Bank expected to see the draft of thepower contract before it is concluded. No final arrangements shouldbe made without giving the Bank an opportunity to comment on the pro-posed power contract - as we had repeatedly and clearly stated duringthe loan negotiations and what Dr. Zenker confirmed. He said that hewould send a telegram to this effect to Vienna.

P.S. Mr. Oppenheimer was present during my telephone conversation withDr. Zenker.

cc. Messrs. HoarOppenheimer

VUmbricht:mo

FOR*4 No. 82 INTERNATIONAL BANK FORA-53) RECONSTRUCTION AND DEVELOPMENT

DEPARTMENTAL DateROUTING SLIP

DEPARTMENT OF OPERATIONSEUROPE, AFRICA AND AUSTRALASIA

Room No, Room No

Mr. Akerman Mr. Rosen

Mr. Bachem Mr. Ross

Mr. Baranyai Mrs. Ryshpan

Mr. Beecroft M Stevenson

Mr. Butcher40.0 p -ht

Mr. Collier Mr. Wheelock

Mr. Cope Mr. Williams

Mr. Fajans Mr. Zondag

Hoar

r. King

Mr. Lejeune

Mr. Paterson E RE

Mr. Rao - _____

DETACH THIS SLIP AFTER CIRCULATION SSw

Translation froi the Italian

With reference to the Vproval asked for in the memorandum of May 28,

regarding the Reisseck-Kreuzeck project and the loan to be granted by the

World Bank to Austria, the Italian Authorities declare themselves prepared

to give this approval., subject to the 'eservations and limitations as

specified hereafter.

1. The Italian consent to the substitution of guarantee does not imply

already now an obligation by the Italian Government to approve the contracts

between the Italian companies and the Verbundgesellschaft, as they will be

submitted. The Italian Government will be free in its decision when they

will examine the above mentioned contracts and the ensuing foreign exchange

obligations.

2. If the substitution clause becomes operative and if there is a

substitution of a creditor, the use of the accumulated lire by the World

nk will be subject to the same rules as apply to Austria, in accordance

with the foreign exchange regulations in effect at the time, except in case

of a special agreement that might be reached from time to time.

Rome June 3, 1954

VUmbricht:mo

June 8, 1954

JU32

Mr A. S, G. Hoar June 3, 1954

77. Ubricht

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APPUNTO

Con riferimento al consenso richiesto con il memorandum del

28 Maggio 1954, riguardante il progetto Reisseck-Kreuzeck ed il

relativo prestito consentito dalla Banca mondiale all'Austria,

le autorith governative italiane si dichiarano disposte ad accor-

darlo, con la riserva ed entro i limiti di seguito specificati:

1) Il consenso italiano alla surroga di garanzia non implica sin

d'ora un obbligo del Governo italiano di approvare i contratti

tra le societh italiane e la Verbundengesellschaft cosi come

verranno presentati. Rimangono libere le facolth del Governo Ita-

liano, in sede di esame dei detti contratti e degli obblighi va-

lutari che ne discendono.

2) Ove la clausula di surroga diventi operante e vi sia sostitu-

zione del creditore, l'uso delle lire accantonate, da parte della

Banca mondiale, dovrh essere identico a quello che avrebbe potuto

farne l'Austria, in base alle regole valutarie vigenti nel momen-

to, salvo accordi specifici che potessero di volta in volta esse-

re stabiliti.

Roma, 3/6/1954

r-

FORM NO. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: JvNE 3, 1954 1555 ROUTIN

TO: JOAR INTERNATIONAL JANK FER ACTION COPY TO Y IARRECCNSTRUCTICN AN DEVELOPMENT

FROM: INFORMATION COPY TO

R OME Decoded By

TEXT:

SIX YOUR FOUR

GOVERNMENT CONCURS MENICIELLA POSITION. LEAVING ROME

TONIGIT ARRIVING IELGRAJE SATURDAY MORNING

WI ELOCK

ORIGIN A L

FORM NO. 27

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: JUNE 2j 1954 CLASS OF SERVICE DESIRED

TO: WHEELOCK NIGHT LETTER :W CODE [IGRAND) HOTEL

DEFERRED EI] FULL RATE

TEXT: TELETYPE

YOUR FIVE STOP POSITION MENICHEALA QUITE SATISFACTORY TO BANK

HOAR

AUTHORIZED BY: For Use by Archives Division

NAME A. S. G. H Checked spatchDirector

DEPT. Operations, urope, Africa and Australasa

ORIGINAL (FILE COPY)VUmbricht:mocleared with Messrs, Cope, Rosen and Oppenheimer

ry)

- -. x. --

. .L~ . . *

Yfl

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

Mr. Umbricht:

Mr. Hoar left this with the followingmessage:

As far as he can see, the message inthe calle is all right. But wouldlike you to speak to Mr. Oppenheimerabout it, and also to Mr. Cope. Anyway,a cable to Mr. Wheelock should go outbefore the closing of office today.

M.

FORM NO. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: JUNE 2, 1954 14oo ROUTING

TO: HOAR INTERNATIONAL EANI FOR ACTION COPY TO OAR

FROM: ECCGNS.TR' 1CTION AND DEV"EL(-PMENT IFRAINCPFROM: INFORMATION COPY

RGME Decoded By

TEXT:

FIVE

MENICHELLA POSITION TODAY WHICH HE HOPES WILL E GOVERNMENT

POSITION TOMORROW FOLLOWS

ALPIA - GENERAL PRINCIPLE YOUR TEN ACCEPTAILE

BETA - MENICHELLA CAJECTED WORDING PARA SIX ACCOMPANYING

MEMCRANDtM. WOULD BE SATISFIED IF IIRD RIGHT TO DISPOSE OF

EXCESS LIRE IN CASE OF DEFAULT WERE SAME AS ASTRIA'S RIGHT

UNDER EXCHANGE REGULATIONS GOVERNING PAYMENTS TO AUSTRIA IN

EFFECT AT TIE TIME

GAMMA - ANY ADDITIONAL RIGITS FOR IBRD TO DISPOSE OF

EXCESS LIRE SHULD DE SIBJECT NEGOTIATION AT TEAT TIME AND

NOT S TSUMED ,NER QUOTE TIE GENERAL EXCHANGE REGULATIONS IN

ITALY UNQUTE PARA IF THIS POSITION ACCEPTAILE TO IIRD AND

GOVERNMENT WOULD ENTRAIN FOR IELGRADE TOMORROW NIGHT

WHEELCK

MRS. WHEELCCK HAS 3EEN NOTIFIED.

ORIGINAL

FORM No. 59(3.49)

CROSS REFERENCE SHEET

COMMUNICATION: Letter

DATED: June 2, 1954

TO: Mr. Walter Hill, Paris Office

FROM: A.S.G. Hoar

SUMMARY: Regarding itinerary in Europe and plans to attend Interalpen

meeting in Zurich from July 20 to 22.

As regards the Austrians, have spoken to Teufenstein and he

wili advise me what his Government's attitude is likely to be. There

remain the Italians & it is possible shall bring Umbricht with me with

a special charge to attend to them.

FILED UNDER: Austria - Interalpen

CROSS REFERENCE: Austria - Reisseck project

r A. o Juno 2

v. L richt

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wbhnartd on oaan,0 eecn e~ nr bTCm mI-at w.ebw s~ of the u stri ~ J at n ret rned to 1, na o nay~ o vo orL wo ter ayret;obr~Pe~~ tedl

1,1e [I.W out -ni vr ty. n loan w4 ~neotiat op nde t te ~nestand hta loan el'

muivalent in ro e d lire n1,.. wlso~~2 wros h ~et ~ x , w ltb s, s y a r Cp riok L A

rs r

ap~~1 rr7~ ~h~ ofap x !he. Siu iLn wiaGully ampd [an I. otPuvedor neIicrn

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(1) I a '<o di smeI2 po~ f~cotoeL~ o~ ~a at austr a wa oppsd hs

noc du > ~ ~ . (~ li ~A ~ s c trrent ~ .~ r-4uo Te solution eventualJ; adopted (at an Kovedh t ;s i~n fran frr~ ~ws

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ixipovs il I paid 'ur separately b h ak

(iii) ithdrawals fron the toan accoun

Th ?mstrians rquestn Lhe auk to ta :io a.eco nt te ofreI rce of the Pa srir

rover nIent u deterIn a te p articular curr eies t o h e ': bur ed nader any vi thraa. licatio, re ank stated thatI 05retain Thl tiscr en ii detra on<th ~ o ntan~ proporti on of uaci r u~ r L ~ ;rawnun-cr aty r li ccion, h-t tho it iTs nradto ive spathe t c c onsidera tion to a e ci

crrce wich a tria a wish la ere.T s xs ao Set O'a. iwAb&s ebr >

Areemn t.

b. mr o r" rrtce. T aa-trian dele -tiand f a th s ian sovmrunt ha o cJ aLoity

to m aa t erfrmance of all he covnan and

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L a rUayn thed~r 7tr 'awtopte itso s

* ~cav e ,l ') e e a a f ix. a u oatt thwe prent lu aTn 1 ed th so oth ii ativd

oub iasis ofs het b oa tdi thiea >uli..cs a >th

rrauzck as t al ~yrei fpoweD >corir 3.t) uif uxs 1et3

s nnri n e r : . t' - p

of d -tepresen l-on adrnic the oio o1 e ne.-,at.pe acorheld 2.e kv . tna u e uir e rr 3 retob

sec ttd far ettrTe loan -- st ran ounit ou islitic

subdivisins ws et ba ine thre qucoralo esiais

ranc part t th lan w:s not ono d by 3.0 o the randele -

a. *nm. net z scn tn occd -so;r .u .taelan o er eaXi e&rc

Theandr held, the k tt te red it t srtrn -o the titalr holaperuval; aaswer

franeprtofd the -llo also n eo oposed by th Auraen e

rmA in ther ask te ritht to assidn re tecuri to a trutce ortrustees for the benefit of' all bondholders.

. bje Jerbunddesellech&Ct wsrueedto rovide the ank pith

a stite:-ent c, ncerninj; the finlancial policies of the V. d. and i tsiso indsoetl c ma 3.Ibeis stat ement Wi been00 furnished and is

the mof a side letter to the reemnt.

6. A nuber of conditions have to be IM ld before the loan canbecorc cffctive; aion, o'hers a ft power ccntract satia:tor tothe lank has to be concluded between the astrian and Ital an ower

co anies. The Borrowers' ri e nder this contrac t ha to be assi(nedto the itk, the nort gage -tmt b- ea rl, executed an, delivered.

7. ;re the conditions for tce effectivene of the loan aro notecUsivel: wit in the control , t e -usrrA1 arties, t also involveital, the date fro wh h 'he coneitnnt charge is run w's fixed some-what o r tha- customary, anael: -e ptelbr 15, 1;J .

8. as soon as t e atrian -vern5aent hIs p A oMed the ra t coanA remeAt, su ect to a satis actory interest rate, they wi11 so formthe ink. T - nk will tn deter-ine the ti st rate and, after theAustri-ins have si :nied their agreement thereto, the loan contract willbe submitted to the Executive Directors. This procedure ray requireanuther 3-h weeks.

VUmbricht :mo

June i, L9A4

sAterreicische lektri7zit tswirtscha ts-Aktiengesellschaft

ir Rf 2Wi&n IAustria

ear Airs:

'Is is to ascknowled receipt of your letter of ay 21

sit" c su ncrnt us a Cry n tY ormal iproval of the

Aus~trian Foderal~ Dartent of Ariculture re )rdiflg the water-

ri hts still outstandirng 2or the Reisseck-Kreuzeck project.

Sthank you for t s- e i"cation and remain, dear Sirs,

Yours truly,

partrent of nperationsur e, Mtrica and ustralasa

Vllmbricht :mo

FORM No 5 INTERNATIONA ANK FOR RECONSTRUCTION AND VELOPMENT

OFFICE MEMORANDUM MAY 2 8 REC'D

TO: Mr. Eugene R. Black DATE: May 28, 1954

FROM: A. S. G. Hoar

SUBJECT: Austria - Bank Loan to Reisseck-Kreuzeek

1. The maturities will be payable semi-annually and for the firstthree years will be as follows:

Date PaLmnt Due Principal Payment

July 15, 1959 $ 176,oooJanuary 15, 1960 1802000 $356,000

July 15, 1960 3 185,000January 15, 1961 189000000

July 15, 1961 $ 193,000January 15, 1962 1982000 $391,000

2. As I explained this morning, the Austrians have a very livelyinterest in the proportions of lire and Swiss francs both in disbursementsby the Bank and in repayments to the Bank. This arises from their pre-occupation with the possible state of their payments relations with Italyand Switserland from time to time.

3. The Austrians would have liked us to give them an assurance on afirm 50/50 basis for repayment at each maturity but have allowed themselvesto be talked out of this claim. The Loan Agreement will thus rest on thestandard clause in the Loan Regulations and provide for the Swiss francand lire portions of the loan to be repaid as the Bank shall specify. Ithas been made clear to the Austrians that the Bank may ask for aWy re-payment instalments to be entirely in Swiss francs, entirely in lire or inboth currencies in whatever ratio it wishes.

4. When the Austrians were told, this afternoon, that there might arisethe possibility of selling early maturities out of the Bankts portfolio toSwiss banks and that in such event the Bank must be able to apply thesematurities entirely to the Swiss franc part of the loan, they made no negativecomment. Indeed, Mr. Teufenstein appeared interested and rather pleased atthat possibility.

5. The way is therefore open for you to proceed with the Credit Suisse.

6. One word of caution. It would be inadvisable to ask for the repaymentof the early maturities entirely in Swiss frances

a. because the Italians would dislike a long delay before havingany of their 18% lire repaid;

b. because we might eventually run into a position where thelire revenues of the loan were insufficient to cover the fullservice/ of the lira bonds.

May 28, 1954

No. 10

Dear Sid:

Enclosed is the memorandum concerning the problem in the Reisseck-Kreuzeck project about which we cabled you several days ago. The memorandumhas been prepared in a form in which it can be used by you for discussionwith the Italians and could be left with them if they desired you to do so.

The problem is a complicated one but we feel an unimportant one. Never-theless, in order to further good relations with Italy, we wanted to keep theItalians informed of the matter in advance,

A bit of the background and history will probably be of use to you.As you know, the original concept of the loan was that it would be a completelyself-liquidating loan in Italian lire. We hoped to be able to make the entireloan using the Italian 18% and to have the lire revenues from the power salesearmarked as security for the loan, During the course of negotiations, how-ever, the Italians reduced the amount of 18% which they were willing to makeavailable and have limited the amount to only $6 million equivalent. Thegeneral basis of the loan, however, remains unchanged and, therefore, the lirerevenues still form security for the entire loan, or for any bonds which mightbe sold, . In other words, the security arising frompayment by the Italian power companies for purchases of power from Austriaserves as security for the Swiss franc portion of the loan al. o ft

We are not sure that the Italians realize that the security would backthe Swiss franc portion of the loan and we would like to inform them of thisbefore the loan is signed. We do not think that there is any practical sig-nificance in this which should constitute a problem for the Italians. Thememorandum makes clear that we are not asking for any special convertibilityrights for the lire and the question of convertibility is a hypothetical onewhich would arise only in the case of default by the Austrians.

-2-

We advised Pick of this problem. At first he was very disturbed andsomewhat confused on the implications of the security. I believe that, withthe assurance that we would not ask for special convertibility, he is nowsatisfied that it is not a matter of practical significance. We have givenhim a copy of the relevant Sections of the loan contract (Sections 5.03 (a)and 5.03 (b)) which I believe he has sent back to his Government. The onlyother portion of the contract which is of any special interest to the Italiansis Article VII, Conditions of Effectiveness, particularly Section 7.01 (c) and7.01 (d). For your information I am enclosing a copy of the draft contractcontaining these Sections. The draft has been modified somewhat during nego-tiations with the Austrians and the remainder of it should be considered byyou as eatituting general information only but these Sections have not beenchanged.

I think if the problem is explained to the Italians, there will be noobjection on their part to the Sections of the contract with which they areconcerned. Pick has suggested that you might discuss this with Ferrari Agradiand Carli. We would be grateful if you could let us know by cable as soon aspossible what their reaction is after you have had your discussions with them.If the matter is cleared up on the basis of this first contact, please feelfree to go off to Yugoslavia as soon as you can make the arrangements. Other-wise, you should wait until you hear from us before leaving Rome.

With best regards,

Yours sincerely,

A. S. G. HoarWe are enclosing a newer draft of the contract so there will probably notbe many further changes in it but it is, of course, still a draft subjectto change.

Enclosures

Mr. Sidney P. WheelockGrand HotelRome, Italy

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DRATay 28, 1954

International Bank forReconstruction and Development

1818 H Street, N., W.Washington 25, D. C.

Gentlemen:

I refer to Section 3.01 of Article III of the Guarantee

Agreement of even date between the Republic of Austria and Interna-

tional Bank for Reconstruction and Development.

In view of the broad scope of the term "agency' as used in

this Section, I fear that the Section may interfere with the business

of nationalized enterprises in Austria. These enterprises are organized

as commercial corporations under the hustrian Corporation Law, are not

included in the government budget, and conduct their business along the

lines of private companies.

My government therefore requests your agreement under said

Section 3.01 that said Section shall not apply to such enterprises

which have been nationalized pursuant to the Nationalization Law

No. 168 of July 26, 1946 (published in the Bundesgesetzblatt of

September 16, 1946) and pursuant to the Second Nationalization Law

No. 81 of March 26, 1947 (published in the Bundesgesetzblatt of

May 10, 1947). It would be understood that in the unlikely con-

tingency that the central gold and foreign exchange reserves of

Austria were held by any such nationalized enterprise then the

said Section i would apply to that enterprise notwithstanding the

foregoing agreement.

-2-

If you can give your agreement pursuant to this request, please

do so by signing the form of confirmation on the enclosed copy of this

letter and returning it to us.

Sincerely yours,

Authorized Representative

CONFI11ED:

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPENT

By

INTERNATIONAL BANK FORRECONSTRUCTION AMD DEVELOPIENT

Washington 25, D.C.

May 28, 1954

Your Excellency:

I have pleasure in sending you enclosed a draft of thedescription of the Reisseck-Kreuzeck project to be attached asSchedule 2 to the Loan Agreement.

The Bank would appreciate it if you could submit thisdescription to the prospective borrowers in Austria, and havethem check the technical data contained therein. There are inparticular two figures in para. 3(4) and in para. 3(7) of thedescription where the data supplied to the Bank are conflicting,and therefore in need of reconciliation.

May I add for your information that the figures in theproject description are figures rounded up to the next km or so.

Yours very truly,

V. UmbrichtDepartment of Operations

Europe, Africa and Australasia

Enclosure: Description of Project

H. E. Ambassador Dr. K. GruberHead of the Austrian DelegationWashington, D..C.

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

Washington 25, D.C.

DRAFTMay 28, 1954

Schedule 2

Description of the ProJect

1. The project consists of the completion of the Reisseck-KreuzeckHydroelectric Development and of the export of electric energy to Italy.When completed the Reisseck-Kreuzeck development will have an installedcapacity of 112,000 kw in two power stations; one containing 104,000 kwand one, 8,000 kw.

2. The parts of the development already completed consist of thenecessary intakes, tunnels, penstocks, a small regulating reservoir(Gondelwiese) and other works required to bring water from severalsmall streams on the Reisseck Mountains to the partially completedpower station located on the M631 River, known as the Kolbnitz powerstation, in which two generating units with a total generating capacityof 24,000 kw have been installed.

3. Completion of the Reisseck-Kreuzeck development will consist of:

A. The following construction work on the Reisseck Mountains:

1. A storage scheme utilizing 4 natural lakes, GrosseMUhldorfersee, Kleine Mhldorfersee, Radlsee andHochalpensee, situated at an elevation ranging from2,390 to 2,284 meters above sea level, the not storagecapacity of which will be increased to 18 millioncubic meters by the construction of 4 dams;

2. The construction of the Zandlacher reservoir on theRieckenbach (Riecken Creek) at an elevation of about1,553 meters above sea level which will have a netstorage of 100,000 cubic meters;

3. Eleven intake works on various streams;

4. About 6 for 122/ kilometers of non-pressure tunnels;

5. About 540 meters of pressure tunnels;

6. About 7 kilometers of tunnels in which pipelines andtransport facilities will be constructed;

-2

7. About 6 for 1377 kilometers of pressure pipe;

8. A surge chamber with an overflow at elevation 2,380meters above sea level;

9. A high pressure penstock with diameters ranging from.95 to 1.4 meters extending from the surge chamberabout 4.3 kilometers to the Kolbnitz power station;

10. The Rieckenbach power station situated about 1,300meters above sea level in which will be installed oneFrancis type turbine operating on a head of 225 metersand one 3 phase, 50 cycle, 8,000 kw generator (at .8power factor) with conventional auxiliaries;

11. The Hattelberg pumping station located at 1,110 metersabove sea level in which will be installed two centrifugalpumps each capable of pumping .45 cubic meters of waterper second against a maximum head about 1,107 meterspowered by two synchronous motors each of about 8,200 H.P.

B. The following construction work on the Kreuzeck Mountains:

1. 12 intake works;

2. About 1.0 kilometers of covered canals;

3. About 21.0 kilometers of non-pressure tunnels;

4. About 3.0 kilometers of pressure pipe;

5. A regulating reservoir (Rosswiese) with a capacity of185,000 cubic meters;

6. A penstock with diameter ranging from 1.10 to 1.60 meters,about 1.6 km long from the Rosswiese regulating reservoirto the Kolbnitz power station.

C. The expansion of the Kolbnitz Power station and the installa-tion of:

1. 2 single jet, horizontal Pelton turbines to operate ona head of 1,770 meters at 750 r.p.m., and two three phase,50 cycle 20,000 kw generators (at .8 power factor) withconventional auxiliaries;

2. 2 two jet horizontal Pelton turbines to operate on ahead of 575 meters at 500~:r.p.m. and two 3 phase, 50 cycle20,000 kw generators (at .8 power factor) with conventionalauxiliaries;

3. 4 transformers 10/110 kv, 25,000 kva each, one transformer110/30 kv, 10,000 kva and one transformer 10/30 kv, 600 kva;

-3-

4. an outdoor switch yard with at least two collectingbars and four outgoing lines.

D. A 10 kv transmission line about 3.5 km long connectin theKolbnitz power station with the Hattelberg pumping stationand the Rieckenbach power station.

DRA'rTiiay 28, 1954

IiT 1KTIUAL 'ARK FORR3COJSTUIN riR J C 'IL PIENT

'Tashington 25, D.C.

Your Excellency:

I have the pleasure to confirm the understanding re&achedbetween your delegation and the Bank that durin, the first twelvemonths after the proposed Loan Agreerent for Reisseck-Kreuzeckbecomes effective, Swiss francs disbursed under this loan willbe transferred to Austria on the basis of 50% in free Swiss francs,which are to be repaid in free Swiss francs, and 50% through the-urooean Payments Union, which are to be repaid through E1'U or,should EU no longer exist, through arV subsequent Austrian-SwissPayrments Agreement. After the expiration of this twelve monthstperiod the Bank will review the disbursement procedure for theSwriss franc part of the loan in the light of developments in theEurolean Payments Union and, particularly, of Austria's creditorposition within EPU, and of her overall financial situation. Itis understood that the Bank will consult with the Austrian authoritiesbefore deciding on subsequent disbursement arrangements. The cis-burserr.ent of the lire part of the loan in question is not affectedby this letter.

Yours sincerely,

H.E. Ambassador Dr. K. GruberHead of the Austrian Delegation'i-ashington, D. C.

COMDNTIA DRAFT(Subject chang- WBGARCHIVESMay 28, 19 4

Loan Number

MAR I 3 2O18

GUARANTEE AGREEIENT

(Reinseck--Kreuzeek Project)

between

IEPUBLIC OF AUSTRIA

and

INTERNATIONAL BANK FOR RECONSTRUCTIONAMD DEVELOPMENT

Dated

GUARANTEE AGREMENT

AGREEIENT, dated , between the

REPUBLIC OF AUSTRIA (hereinafter called the Guarantor) and

INTERNATION4L BANK FOR RECONSTRUCTION AND DEVELOPENT (hereinafter

called the Bank).

WIEREAS by an agreement of even date herewith between the

Bank and Osterreichische Elektrizitsowirtschafts hktiengesellsch4ft

(Verbundgesellschaft) and Osterreichische Draukraftwerke Aktien-

gesellschaft (hereinafter called the Borrowers), which agreement

and the schedules therein referred to are hereinafter called the

Loan Agreement, the Bank has agreed to make to the Borrowers a

loan in various currencies in an aggregate principal amount

equivalent to twelve million dollars (?l2,OO,OQO), on the terms

and conditions set forth in the Loan Agreement, but only on

condition that the Guarantor agree to guarantee the payment of

the principal, interest and other charges on such loan and the

obligations of the Borrowers in respect thereof; and

MEREAS the Guarantor, in consideration of the Bank's entering

into the Loan Agreement with the Borrowers, has agreed to guarantee

the payment of the principal, interest and other charges on such

loan and the obligations of the Borrowers in respect thereof;

NMW THEREFORE the parties hereto hereby agree as follows:

-2 -

- AirICLE I

Section 1.01. The parties to this Guarantee kgreement

accept all the provisions of Loan Regulations No. 4 of the Bank

dated October 15, 1952, subject, however, to the modifications

thereof set forth in Schedule 3 to the Loan Agreement (such

Loan Regulations No. 4 as so modified being hereinafter called

the Loan Regulations), with the same force and effect as if they

were fully set forth herein.

Section 1.02. Wherever used in this Guarantee Agreement,

unless the context shall otherwise require, the respective terms

which are defined in Section 1.02 of the Loan kgreement shall

have the respective meanings therein set forth.

3-

ARTICIE II

Section 2.01. Without limitation or restriction upon any

of the other covenants on its part in this Agreement contained,

the Guarantor hereby unconditionally guarantees, as primary

obligor and not as surety merely, the due and punctual payment

of the principal of, and the interest and other charges on, the

Loan, the principal of and interest on the Bonds, the premium,

if any, on the prepayment of the Loan or the redemption of the

Bonds, and the punctual performance of all the covenants and

agreements of the Borrowers, all as set forth in the Loan

Agreement and in the Bonds.

ARTICLE III

Section 3.01. 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 hereafter created on governmental

assets. To that end, the Guarantor undertakes that, except as

the Bank shall otherwise agree, if any lien shall be created on

any assets of the Guarantor as security for any external debt,

such lien will ino f.cto equally and ratably secure the payment

of the principal of, and interest and other charges on, the Loan

and the Bonds, and that in the creation of any such lien express

provision will be made to that effect; provided, however, that

the foregoing provisions of this Section shall not apply to:

(i) any lien created on property, at the time of purchase thereof,

solely as security for the payment of the purchase price of such

property; (ii) any lien on commercial goods to secure a debt

maturing not more than one year after the date on which it is

originally incurred and to be paid out of the proceeds of sale of

such commercial goods; or (iii) any lien arising in the ordinary

course of banking transactions and securing a debt maturing not

more than one year after its date.

The term "assets of the Guarantor" as used in this Section

includes assets of the Guarantor or of any agency of the Guarantor,

including the Osterreichische Nationalbank.

The Guarantor further undertakes that, within the limits of

its constitutional powers, it rill make the foregoing undertaking

effective with respect to liens on the assets of any of its political

subdivisions and their agencies.

-5-

Section 3.02. (a) The Guarantor and the Bank shall

cooperate fully to assure that the purposes of the Loan will be

accomplished. To that end, each of them shall 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 and the international balance of payments posi-

tion of the Guarantor.

(b) The Guarantor and the Bank shall from time to time

exchange views through their representatives with regard to

matters relating to the purposes of the Loan and the maintenance

of the service thereof. 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.

(c) The Guarantor shall afford all reasonable opportunity

for accredited representatives of the Bank to visit any part of

the territories of the Guarantor for purposes related to the Loan.

Section 3.03. The principal of, and interest and other

charges on, the Loan and the Bonds and the premium, if any, on the

prepayment of the Loan or the redemption of the Bonds shall be

paid without deduction for, and free from, any taxes or fees

imposed under the laws of the Guarantor or laws in effect in its

territories; provided, however, that the provisions of this

Section shall not apply to taxation of, or fees upon, payments

-6-

under any Bond to a holder thereof other than the Bank when such

Bond is beneficially owned by an individual or corporate resident

of the Guarantor.

Section 3.04. This Agreement, the Loan Agreement, the Bonds,

the assignment and the mortgage shall be free from any taxes or

fees 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 3.05. The principal of, and interest and other

charges on, the Loan and the Bonds and the premium, if any, on

the prepayment of the Loan or the redemption of the Bonds shall

be paid free from all restrictions imposed under the laws of

the Guarantor or laws in effect in its territories.

-7-

ARTICLE IV

Section 4.01. The Guarantor shall endorse, in accordance

with the provisions of the Loan Regulations, its guarantee on

the Bonds to be executed and delivered by the Borrowers. The

Minister of Finance of the Guarantor and such person or persons

as he shall designate in writing are designated as the authorized

representatives of the Guarantor for the purposes of Section 6.12 (b)

of the Loan Regulations.

-8

ARTICLE V

Section 5.01. The following addresses are specified for

the purposes of Section 8.01 of the Loan Regulations:

For the Guarantor:

Minister of FinanceVienna IHimmelpfortgasseAustria

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N. W.Washington 25, D. C.United States of America

Section 5.02. The Minister of Finance of the Guarantor

is designated for the purposes of Section 8.03 of the Loan

Regulations.

IN ITITNESS IHEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Guarantee

Agreement to be signed in their respective names and delivered in

the District of Columbia, United States of America, as of the day

and year first above written.

REPUBLIC OF AUSTRIA

By

INTERNATIONAL BANK FORRECONSTRUCTION ttND DEVELOP3ET

By

FORM No. 270-.50) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: MAY 27, 1954 CLASS OF SERVICE DESIRED

TO: WHEELOCK NIGHT LETTER [j] CODEDUOMO HOTELMILAN (ITALY) DEFERRED ] FULL RATE

TEXT: TELETYPE El

TWO

LETTER CONCERNING MINOR BUT URGENT PROBLEM ON REISSECK LOAN EN ROUTE TO YOU ROME

STOP WOULD APPRECIATE YOUR DISCUSSING SOONEST POPY&IVA WITH ITALIAN AUTHOR-

ITIES STOP ACCORDINGLY COULD YOU DEFER JOINING ARMSTRONG FOR SEVERAL DAYS

HOAR

AUTHORIZED BY: For Use by Archives Division

NAME M. Rosen Checkd for Dispatch

DEPT. Oper-EAA

ce Messrs Umbricht, Bachem

M14osen/ct FILE COPY

r'2 1

FORM No. 27 f,

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: MAY 26, 1954 CLASS OF SERVICE DESIRED

TO: WHEELOCK NIGHT LETTER CODE E]

ROE (ITALY) DEFERRED [~] FULL RATE []

TEXT: TELETYPE

TWIO

LETTER CONCERNING MINOR BUT URGENT PROBLEK ON REISSECK LOAN EN ROUTE TO YOU

STOP WOULD APPRECIATE YOUR DISCUSSING SOONEST POSSIBLE WITH ITALIAN AUTHOR-

ITIES STOP ACCORDINGLY COULD YOU DEFER JOINING ARMSTRONG FOR SEVERAL DAYS

HOAR

AUTHORIZED BY: For Use by Archives Division

NAME Martin M. Rosen Checked for Dispatch

DET Operations, FAA

cc - Messrs. OppenheimerUmbricht

ORIGINAL (FILE COPY)NMRosentdbs

r

. - .. -- n -x -

AUSTRIA

Open Points

Points Position

1. Guarantee of performance Austria will accept. Austrian Government

Section 2.01 of Guarantee Agreement will ask for a counter guarantee from V.G.and Dkw.

2. EPU letter Austria will accept (they will draw up theirown minutes regarding the Bank's declaration-

3. Guarantee Agreement, Section 2.02 To be dropped

(Availability of funds)

4. Negative Pledge:

a. Political subdivisions Austria has accepted Bank's new wording

b. Federal agencies Austria has submitted new wording

5. Trustee for assignment of power contract Austria acceptedand mortgage

6. Assignment of mortgage to secure bonds Austria acceptsSection 4.03 of Loan Agreement

7. Description of properties and liens and Still under study

of project

8. Clause for release of excess lire To be incorporated in assignment letter

9. Withdrawals of loan funds Austria would like to receive a letter ofintent from Bank regarding Bank's willing-ness to consider Austrian disbursement pro-posals (Cavanaugh and Brion agree with aside letter)*

10. Which Central Banks have acceptedSection 3, para. 2 of Guarantee Agr.?

ll, Assignment of lire, Section 4.03, 5.03,5.0 4 and 5.08.

Should lire proceeds be useable fortotality of bonds?

Is there a lire exchange risk for the V.G.in respect of the excess lire?

12. Explanation of Section 3.05 of LoanAgreement "reasonably determined".

-2-

Points Position

13. Explanation of Section 3.03 of GuaranteeAgreement

14. Section 9.02 of Loan Regulations: havelegal opinions to be given immediately?

15. Duration of agreement and grace period 25 years, 5 years respectively

16. Amortization schedule and footnote

17. Schedule on pre-payment premiums

18. Approximate rate of interest

19. New list of goods

20. Disbursement procedure Expenses for imports and localexpenditure as from January 1, 1954

21. Authority for signing Loan and GuaranteeAgreement

22. Letter from V.G. about tariff policy

23. Authority for someone to sit on StatutoryLoan Committee

24. Letter from Bank to Ambassador Gruberregarding "agencies" (Section 3 of GuaranteeAgreement).

25. Payment of commitment charge 5010 of Swiss Francs through EPU

May 24, 1954

VUmbricht:mo

Osferreichische Elekfrizififswirfschaffs-AkfiengeselIschaff(Verbundgesel Ischaft)

Osterr. Elektrizifatswirschafts-A.G., Wien I., Am Hof 2

Int ernaticnal Bank forReccs truetioon and DIevelpc menit

attention 09 EZ'i to- U0 tT2CF

318 I: Street, .Wa shin gton 2 5, B.C.

U. S. A.

Wien I.,1hre Zeldien Ihre Nachricht vom Unsere Zelichen WZ / y Am Hof 2 24 .1 a i 5 4 .

Betreff

ere informed by Dr.Stohl that you wi1 to receive

form.] d~e rat4on of the 'orespOnding federal office with

rosp>ect tO water-rigt S til 1 o t in rip- for the Pei> CX-

Kireuzer k proect.

Accrdinfl, wehv __aie suCh 'f Oml 'eis on

Y.62/1 C0 - 4d C 0 an4 ro r-- sea I rmn ofA iclu

and J e ohndYou ccpy of th- e sam-e here-wIt

cu r. iruly,

terreichische1izta it s fs-

ti enge ISalshf'

1 enclosur

EinlageNr. 390.

Vorsitzer des Aufsichtsrates: Sektionschof Dr.Karl Straubinger

Vorstnd: Dr. Rudolf Stahl (Vorslizer), Dipl.-Ing. Franz Hintermayer, Dr. Karl K81liker, Dipl.-Ing. Dr. Oskar Vas

Bankkonto: Creditanstalt-Bankverein, Wien I., Schottengasse 6-8-eqr-mmadresse: Telephon: Fernschrelber; Osterrelchische Landerbank Aktlengesellschaft, Wien I., Am Hof 2Vrrbndnetz U 21-5-15 Sere Wien 1650 Postsparkassenkonto 18468

r --

1. Maantee Are ritz guarantee or perforacectionl 2.01

2. ruarantee AgreentI Section 2.02 (facilitate availabili of fd)

3. NegatiVe p3dea

a. ne ifording for "politiOal .ubdiviSion"Ub. now wordim; for rederal ajlenie0. -

h. Problem of tru ate. for assignfnt o powr..ontract and xmortgago

5. Description of properties and liens and of project.

6. Clause for release of excess lire.

7.* Conract assi rnt and ortg to secure bonds.Section 4.03 of Loan Ar nt. s

I. ePC-letter.

2. Drativn of Agorecf'nt wid grace period.

3. A)ortisatiOfn sOchd'ule and footnote.

4, rchedule on prepayiaat pre-r-ss.

5. Appr to rate of interest.

6. List of iLaortst new version.

7. *. Street: dibwrseknlt procedur; percentages.

8. A thority for signing loan an wrntet ar

9, letter from V.G. about tariff policy,

10. Athrity for sozone to sit on statutory loan ciuittee.

YU"richt: oMay 20, 1s;

1. 3uaranto. retnts guarante. oC perforac3etiofl 2.01

2. Zuarant A..*nt: Seetion 2.02 (facilita availabilty o funds)

3. Nwgativq pledge:

a. new odi f ur "polivic4a suidiviion"

b. new wod: for leea ag.ncies.

h. Problem of tute for msignrent of peswrmontract and rta.

5. ;weription of properties and i. a a of project.

7, Contract ass iaan and mabaeto ectwe bonds.# tiom 1.03 of Lan A reent.

*"ap

1. 3-1ettr,

3. Aartsatan cheuleand footnota,

14. FSchedu]* mi prep mnt rma.

5. Appr boat rate of interest,

1. G. Strsetg dislur Vetpoeue$pretgs

L. Authority for uigaing~ loan an gyarantee g

9. Ietter fron '40, about Varff policy,

10 Mthority for to sit ou statutory loan tt,

ichta

70 t419

Oslerreichische Elektrizitfaswirtschafts-AktiengeselIschaftGo. (Verbundgesellschaft)

Osterr. Elektrizititswirfschafts-A. G., Wien I., Am Hof 2

International Bankfor Reconstruction and Development

1818 H Street, N.W.

W a s h i n g t o n D.C.

Wien I.,lhre ZeIchen 1hre Nachricht vom Unsere Zeichen Am Hof 2

May 18, 1954Betreff

Gentlemen:

In connection with the proposed loan to the Verbund-

gesellechaft and the Draukraftwerke for the Reisseck-Kreuzeck

power project, you have asked us for a statement of the financial

policies covering the operations of the Verbundgesellschaft

and its associated special companies.

In the past the net earnings of the Verbundgesellschaft

and the special companies have been retained and have been used

for financing expansion. We expect to continue this policy.

The Verbundgesellschaft will from time to time review

its tariff schedules and will, whenever necessary, apply to

established authorities for tariff increases in amounts sufficient

to enable it and its associated special companies to remain in

a sound financial condition. It is the intention of the Verbund-

gesellschaft that its tariff charges will be sufficient to provide

income to cover, for itself and associated special companies, all

operating expenses, adequate depreciation, financial charges (not

including amortization), taxes and a reasonable return on their

investment.

Yours very truly,

OesterreichischeElektrizitdtswirtschafts-

A ieng ell chaft

Vorsilzer des Aufsichtsrates: Sektionschef Dr. Karl StraubingerVorstand: Dr. Rudolf Stahl (Vorsitzer), Dipl.-Ing. Franz Hintermayer, Dr. Karl K6llIker, Dipl.-Ing. Dr. Oskar Vas

Telegrammadresse Telophon: Fernschrelber: Bankkonto: Creditanstalt-Bankvirein, Wien I., Schoatengass. 6-8Verbundnetz U 21 5 15 Sari. Wien 1650 Ostrreichische Landerbank AktiengeselischaftWIen I., Am Hof 2

Postsparkassenkonto: 18468

Osterreichische Elektrizitltswirtschafts-Aktiengesellschaft(Verbundgesellschaft)

Wien I.,Am Hof 2

May 18, 1954

International Dank forReconstruction and Development1818 H Street, N. W.Washington, D. C.

Gentlemen:

In connection with the proposud loan to the Verbundesellschaftand. the Draukraftwerke for the Reisseck-Kreuzeck power project, youhave asked us for a statement of the financial policies covering theoperations of the Verbundgesellschaft and its associated specialcompanies,

In the past the net earnings of the Verbundgesellschaft andthe special companies have been retained and have been used forfinancing expansion. Ue expect to continue this policy.

The lierbundgesellschaft wrill from time to time review itstariff schedules and will, whenever necessary, apply to establishedauthorities for tariff increases in amounts sufficient to enable itand its associated special companies to remain in a sound financialcondition. It is the intention of the Verbundgesellschaft that itstariff charges irill be sufficient to provide income to cover, foritself and associated special companies, all operating expenses,adequate depreciation, financial charges (not including aortization),taxes and a reasonable return on their investment.

Yours very truly,

OesterreichischeElektrizitgtswirtschafts-

Aktiengesellschaft

/s/ Stahl /s/ intermayer

-ya 16, 1954

Kdrntuerrin 10Vienna 1, Autrie

fleer Dr. ~agner:

Thank yo for your cabl of :ay 13. I enclose . currentdraft of the loan agreaLnt, together with a copy of loan eECula-tions No. 4. I shall probably have a nuber of specific questionswith regarx to th (I draft; a1 quite.A few provisions will hove tobe changed. Therefore, pisase do not consrider this in any way as afinal draft. I an sending it along only that you have nlacwhat ofan idea olong what lines our thinking has been cryteilising.

specifically, I have to provide not only for a mortgage tobe e:xecuted by the effective date but also for later mortgages finceDr. urebs has tolt i-e that non. of the Kreuzeck properties are ownedby the Dmukraftwerke at present. The present draft was drafted onthe assumption that all of the essential land is already owned bythe _raukraftwerke.

it regar- to the Lortgug, i.e. paragraph 5 of your cable,I have the following question; Tn the event we Should attempt toenforce the mortgoge,adL in the event we obt4in a judgenent on themortgage for 300 million sc-hillings, i.e. the full amount recorded,

nd this judgment would not cover the total amount of the debt, wouldwe be precluded by the judgewent on the nortgage from proceedingagainst the uorrowers for the amount not covered by the mortgage?In other words, lo the proceedin4 under the mortgage in lieu of allother procemdings?

verY / erel~ yours,

Frans . ppenheimer

Ealosure

Fi pp 1he ire V

MAR 1321

F. M. Oprenheimer1:Qy 17, 1954Confidential Draft(Subject to change)

Loan Number

LOAN AGEEVENT

(Reisseek-Kreuzeek Project)

between

INTERNATIONAL BiNK FOR RECONSTRUCTIONAN0 DEVELOPBENT

and

OSTERREICISCHE ELEKTRIZITTSWIRTSCHaFTAKTIENGESZLLSCHAFT (VERBUIMGESELLSCHAFT)

and

OSTERREICHISCB DRAUKRAUTEERKE AKTENGESELLSCHAFT

Dated

LOAN AGREEMENT

AGREEMENT, dated , between INTEFRATIONAL BkNK

FOR RECONSTRUCTION AM DEVELOPIENT, party of the first part (herein-

after called the Bank), and OSTERREICHISCHE ELEKTRIZITNTSfIRTSCHIFT

AKTINGESELLSCHAFT (VERBUNDGESELLSCHAFT) and OSTERREICHISCIE

DRAUKRAFTWERHE AKTIENGESELISCHAFT, parties of the second part

(hereinafter collectively called the Borrowers).

5/17/54

ARTICLE I

Loan Regulations; Special Definitions

Section 1.01. The parties to this Loan Agreement accept all

the provisions of Loan Regulations No. 4 of the Bank dated October 15,

1952, subject, however, to the modifications thereof set forth in

Schedule 3 to this Agreement (such Loan Regulations No. 4 as so

modified being hereinafter called the Loan Regulations), with the

same force and effect as if they were fully set forth herein.

Section 1.02. Except where the context otherwise requires,

the following terms have the following meanings wherever used in this

Agreement or any Schedule hereto;

(a) The term "Verbundgesellschaft" means Osterreichische

Elektrizititswirtschaft Aktiengesellschaft (Verbundgesellschaft), a

company organized and existing under the Federal Law No. 81 of

March 26, 1947 of the Guarantor (2. Verstaatlichungsgesetz).

(b) The term "Draukraftrerke" means Osterreichische

Draukraftwerke Aktiengesellschaft, a company organized and existing

under said Federal Law No. 81.

(c) The term "'SADE" shall mean Societe Adriatica de Elettricita -

a company organized and existing under the laws of the Republic of Italy

having its principal office in Venice.

(d) The term "Edison" shall mean Societa Edison, a company

organized and existing under the laws of the Republic of Italy having

its principal office in Milan.

(e) The term "assignment" shall mean the assignment provided

for in Section 5.03 (b) of this Agreement.

(f) The term "mortgage" shall mean the mortgage, and any supple-

mentary mortgage, created pursuant to Section 5.04 (a) of this Agreement.

-3-

ARTICLE II

The Loan

Section 2.01. The Bank agrees to lend to the Borrowers, on

the terms and conditions in this Agreement set forth or referred to,

an amount in v rious currencico equivclent to t-,elve

million dollars (412,000,000).

Section 2.02. The Bank shall open a Loan Account on its books

in the name of the Borrowers and shall credit to such Account the

amount of the Loan. The amount of the Loan may be withdrawn from the

Loan Account as provided in, and subject to the rights of cancellation

and suspension set forth in, the Loan Regulations.

Section 2.03. The Borrowers shall pay to the Bank a commitment

charge at the rate of three quarters of one per cent (3/4 of 1%) per

annum on the principal amount of the Loan not so withdrawn from time

to time.

The date specified for the purposes of Section 2.02 of the Loan

Regulations is .ugu.t 15, 1954 or the Effective Date, whichever

shall be the earlier.

Section 2.04. The Borrowers shall pay interest at the rate of

per cent (_) per annum on the principal amount

of the Loan so withdrawn and outstanding from time to time.

Section 2.05. Except as the Bank and the Borrowers shall

otherwise agree, the charge payable for special commitments entered

into by the Bank at the request of the Borrowers pursuant to

Section 4.02 of the Loan Regulations shall be at the rate of

-4-

one half of one per cent (1/2 of JS) per annum on the principal amount

of any such special commitments outstanding from time to time*

Section 2.06. Interest and other charges shall be payable

semi-annually on jnuary 15 cnd July 15 in each yecr.

Section 2.07. The Borrowers shall repay the principal of

the Loan in accordance with the amortization schedule set forth in

Schedule 1 to this Agreement.

-5-

ARTICLE III

Use of Proceeds of the Loan

Section 3.01. The Borrowers shall apply the proceeds of the

Loan exclusively to financing the cost of goods required to carry

out the Project described in Schedule 2 to this Agreement. The

specific goods to be financed out of the proceeds of the Loan shall

be determined by agreement between the Bank and Draukraftwerke,

subject to modification by further agreement between them.

Section 3.02. The Borrowers shall use all goods financed in

whole or in part out of the proceeds of the Loan exclusively in the

carrying out of the Project.

-6-

ARTICLE IV

Bonds

Section 4.01. The Borrowers shall execute and deliver Bonds

representing the principal amount of the Loan as provided in the

Loan Regulations.

Section 4.02. The of the

Verbundgesellschaft and such person or persons as he shall appoint in

writing and the of the Draukraftwerk4

and such person or persons as he shall appoint in writing are designat-0

as authorized representatives of the Borrowers for the purposes of

Section 6.12 (a) of the Loan Regulations.

Section 4.03. If and as the Bank shall from time to time request,

any of the Bonds shall, in addition to the provisions prescribed by tLe

Loan Regulations, contain provisions satisfactory to the Bank by virtue

of which the assignment and the mortgage will equally and ratably secure

(in addition to such portion of the Loan for which Bonds have not been

theretofore executed and delivered or requested) the payment of the

principal, interest, premium, if any, on redemption, and other charges

on any of such Bonds.

5/17/54

ARTICLE V

Particular Covenants

Section 5.01. (a) The Borrowers shall carry out the Project

with due diligence and efficiency and in conformity with sound

engineering and financial practices.

(b) The Borrowers shall promptly furnish to the Bank, as the

Bank may from time to time request, the plans and specifications for

the Project and any material modifications subsequently made therein,

(c) The Borrowers shall maintain records adequate to identif['

the goods financed out of the proceeds of the Loan, to disclose the use

thereof in the Project, to record the progress of the Project (includinu

the cost thereof) and to reflect in accordance with consistently main-

tained sound accounting practices the financial condition and operatio i

of the Borrowers; shall enable the Bank's representatives to inspect

the Project, the goods and any relevant records and documents; and

shall furnish to the Bank all such information as the Bank shall reason-

ably request concerning the expenditure of the proceeds of the Loan,

the Project, the goods, and the financial condition and operations of

the Borrowers.

Section 5.02. (a) The Bank and the Borrowers shall cooperate

fully to assure that the purposes of the Loan wili be accomplished.

To that end, each of the parties hereto shall furnish to any other

such party all such information as such other party shall reasonably

request with regard to the general status of the Loan.

5/17/54

(b) The Bank and the Borrowers shall from time to time

exchange views through their representatives with regard to

matters relating to the purposes of the Loan and the maintenance

of the service thereof. The Borrowers 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.

Section 5.03. (a) As soon as practicable after the date

hereof the Verbundgesellschaft shall enter into an agreement or

agreements in form and substance satisfactory to the Bank with SADE

and Edison providing for the sale and delivery by the Verbundgesellsch-;

to SADE and Edison of electric energy and the payment therefor by

SADE and Edison. The Verbundgesellschaft shall not agree to any

modification or change of such agreement or agreements without the

prior consent of the Bank.

(b) As soon as practicable after the date hereof the Verbund-

gesellschaft shall assign to the Bank all rights and claims for pay-

ments from SAIE and Edison that the Verbundgesellschaft will have

under the agreement or agreements referred to in sub-section 5.03 (b)

above. Such assignment shall be an assignment on account of payment

(Abtretung zahlungshalber) within the meaning thereof under the laws

of the Guarantor, shall equally and ratably secure payment of the

principal of, and interest, premium, if any, on prepayment or redemp-

tion, and other charges on, the Loan and the Bonds, and shall be in

form and substance satisfactory to the Bank.

5/17/54-9-

Section 5.04 (a) As soon as practicable after the date

hereof the Draukraftwerke shall execute and deliver to the Bank an

original first mortgage in form and substance satisfactory to the

Bank covering such of the properties described in Schedule 4 to this

Agreement as will be owned by the Draukraftwerke at the date of the

execution of such mortgage. Thereafter, and as the Bank shall from

time to time request, the Draukraftvierke shall, as soon as practicable

after receipt of such request, execute and deliver to the Bank such

additional supplemental first mortgages in form and substance satis-

factory to the Bank as may be required in order to give the Bank a

first mortgage or mortgages covering the remaining properties des-

cribed in Schedule 4 to this Agreement. All such mortgages shall

secure payment of the principal of, and interest, premium, if any,

on prepayment or redemption, and other charges on, the Loan and the

Bonds.

(b) The Draukraftwerke shall duly record, register and file

and re-record, re-register and re-file the mortgage in every juris-

diction where such recordation or registration may be necessary or

or desirable in order to make the mortgage valid and enforceable.

The Bank shall have the right to record and re-record the mortgage

in the appropriate land register (Grundbuch) at any time after the

execution and delivery of the mortgage.

(c) The Draukraftwerke shall take all such other steps and

execute and deliver all such documents as the Bank may from time to

time reasonably require or request in order to render or maintain the

mortgage valid and enforceable.

5/17/54-10 -

Section 5.05. Except as the Bank shall otherwise agree, the

Draukraftwerke shall not sell, or otherwise dispose of, or permit

the creation of any lien (other than the mortgage) on, any of the

properties set forth in Schedule 4 to this Agreement.

Section 5.0"6. The Borrowers shall pay or cause to be paid

all taxes or fees, if any, imposed under the laws of the Guarantor

or laws in effect in the territories of the Guarantor on or in

connection with the execution, issue, delivery or registration of

this Agreement, the Guarantee Agreement, the Bonds, the mortgage,

or the assignment, or the payment of principal, interest, premium,

if any, on prepayment or redemption, or other charges under this

Agreement or the Bonds; provided, however, that the provisions of

this Section shall not apply to taxation of, or fees upon, payments

under any Bond to a holder thereof other than the Bank when such

Bond is beneficially owned by an individual or corporate resident

of the Guarantor.

5ection 5.07. The Borrowers shall pay or cause to be paid

all taxes and fees, if any, imposed under the laws of the country

or countries in whose currency the Loan and the Bonds are payable

or laws in effect in the territories of such country or countries

on or in connection with the execution, issue, delivery or regis-

tration of this Agreement, the Guarantee Agreement, the Bonds, the

mortgage or the assignment.

Section 5.08. The Verbundgesellschaft agrees to the

re-assignment by the Bank, at any time, of all rights that the Bank

may have under the assignment to a trustee, or trustees, or a similar

fiduciary or fiduciaries, for the equal and ratable benefit of all

5/17/54.

holders of the Bonds. The Verbundgesellschaft shall take all such

steps and execute and deliver all such documents as the Bank may

from time to time request in order to render or maintain such

re-assignment valid and enforceable.

Section 5.,09. The Draukraftwerke agrees to the assignment

by the Bank, at any time, of the mortgage to a trustee, or trustees,

or a similar fiduciary or fiduciaries, for the equal and ratable

benefit of all holders of the Bonds. The Draukraftwerke shall take

all such steps and execute and deliver all such documents as the

Bank may from time to time request in order to render or maintain

such assignment of the mortgage valid and enforceable.

Section 5.10. (a) Each of the Borrowers shall at all times

maintain its existence and right to carry on operations and shall,

except as the Bank shall otherviise agree, maintain and renew all

rights, powers, privileges and franchises owned by it and necessary

or useful in the operation of its business.

(b) Each of the Borrowers shall maintain its plants, equipR

ment and property and from time to time make all necessary renewals

and repairs thereof, all in accordance with sound business and

engineering standards; and shall at all times operate its plants

and equipment and maintain its financial position in accordance

with sound business and public utility standards.

Section 5.11. The Verbundgesellschaft shall duly perform

all its obligations under the agreement or agreements referred to

in Section 5.03 (a) of this Agreement.

LOther covenants may be added7

- 12 -

ARTICLE VI

Remedies of the Bank

Section 6.01. (i) If any event specified in paragraph (a),

paragraph (b), paragraph (e) or paragraph (f) of Section 5.02 of

the Loan Regulations shall occur and shall continue for a period

of thirty days, or (ii) if any event specified in paragraph (c) of

Section 5.02 of the Loan Regulations shall occur and shall continue

for a period of sixty days after notice thereof shall have been

given by the Bank to any of the Borrowers, then at any subsequent

time during the continuance thereof, the Bank, at its option, may

declare the principal of the Loan and of all the Bonds then out-

standing to be due and payable immediately, and upon any such

declaration such principal shall become due and payable immediately,

anything in this Agreement or in the Bonds to the contrary

notwithstanding.

5/17/54

ARTICLE VII

Effective Date; Termination

Section 7.01. The following events are specified as

additional conditions to the effectiveness of this Agreement within

the meaning of Section 9.01 (c) of the Loan Regulations:

(a) The Verbundgesellschaft shall have entered into the

agreement or agreements provided for in Section 5.03(a) hereof;

(b) The Verbundgesellschaft shall have made the assignment;

(c) SADE and Edison shall have notified the Bank of their

approval of the assignment. Such notice shall be in form and

substance satisfactory to the Bank;

(d) The Government of the Republic of Italy shall have

approved the assignment in such form as may be required to make

the assignment valid and enforceable under the laws of the Republic

of Italy;

(e) The Draukraftwerke shall have executed and delivered to

the Bank the original mortgage provided for in Section 5.04 (a)

hereof;

(f) The Verbundgesellschaft shall have obtained all such

releases from creditors, in form and substance satisfactory to the

Bank, as are required in order to enable the Verbundgesellschaft

to make the assignment;

(g) The Draukraftwerke shall have obtained all such releases

from its creditors, in form and substance satisfactory to the Bank,

as are required to enable the Draukraftwerke to execute and deliver

the mortgage to the Bank.

5/17/54-14-

Section 7.02. Opinions showing that the events specified

in Section 7.01 hereof have validly and legally taken place are

specified as additional matters, within the meaning of Section

9.02 (d) of the Loan Regulations to be included in the opinion

or opinions to be furnished to the Bank.

Section 7.03. November 15, 1954 is hereby specified for

the purposes of Section 9.04 of the Loan Regulations.

5/17/54

ARTICLE VIII

Miscellaneous

Section 8.01. The Closing Date shall be March 31, 1959.

Section 8.02. The following addresses are specified for the

purposes of Section 8.01 of the Loan Regulations:

For the Verbundgesellschaft:

Osterreichische Elektrizitutswirtschafthktiengesellschaft (Verbundgesellschaft)

Wien IAm Hof 2Austria

For the Draukraftwerke:

Osterreichische Draukraftwerke4ktiengesellschaft

KlagenfurtBaumbachplatz 2Lustria

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N. I .Washington 25, D. C.United States of America

Section 8.03. All obligations of the Borrowers under this

Agreement and the Bonds, unless such obligations shall have been ex-

pressly undertaken by only one of the Borrowers, shall be joint and

several, and the obligation of either of them to comply with any pro-

vision of this Agreement is not subject to any prior notice to, demand

upon or action against, the other. No extension of time or forbearance

given to either of the Borrowers in respect of the performance of any

of its obligations under this Agreement or the Bonds, and no failure of

the Bank or of any holder of the Bonds to give any notice or to make any

demand or protest whatsoever to either of the Borrowers, or strictly

- 16 -

to assert any right or pursue any remedy against either of them in

respect of this Agreement or the Bonds, and no failure by either

of the Borrowers to comply with any requirement of any law, regula-

tion or order, shall in any way affect or impair any obligation of

the other Borrower under this Agreement or the Bonds.

IN WITNESS WHEREOF, the parties hereto, acting through their

representatives thereunto duly authorized, have caused this Loan

Agreement to be signed in their respective names and delivered in

the District of Columbia, United States of America, as of the day

and year first above written.

IITERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By

OSTERREICHISCHE IEKTRIZITATSWIRTSCHAFTAKTIENGESELLSCHAFT (VERBUNDGESELLSCHAFT)

By

OSTERREICHISCHE DRAUKRAFTWERKEAKTIENGESELLSCHAFT

By

- 17 -

SCHEDULE 1

Amortization Schedule

PrincipalPayment of Amount OutstandingPrincipal after Each Payment(expressed (expressed in

Date Payment Due in dollars)* dollars)*

[ To be inserted J

* To the extent that any part of the Loan is repayable in a currencyother than dollars (see Loan Regulations, Section 3.02), the

figures in these columns represent dollar equivalents determinedas for purposes of vithdrawal.

- 18-

Premiums on Prepayment and Redemption

The following percentages are specified as the premiums

payable on repayment in advance of maturity of any part of the

principal amount of the Loan pursuant to Section 2.05 (b) of the

Loan Regulations or on the redemption of any Bond prior to its

maturity pursuant to Section 6.16 of the Loan Regulations:

Time of Prepayment or Redemption Premium

[To be inserted

[SCIEUIL. 2 TO BE INSERTED

- 19 -

SCMIULE 3

Modificationsof Loan Regulations No. 4

For the purposes of this Agreement, the provisions of Loan

Regulations No. 4 of the Bank, dated October 15, 1952, shall be

deemed to be modified as follows:

(a) The term "Borrower" shall mean the Borrowers; except that

as used in . such term

shall mean the Borrowers or either of them.

(b) The first two sentences of Section 3.01 shall read as

follows:

"The Draukraftwerke shall use reasonable efforts

to purchase goods with the currencies of the countries

from which such goods are acquired. The proceeds of

the Loan shall, to the extent that the Bank shall so

elect, be withdrawn from the Loan Account in the

several currencies in which goods are paid for; except

that with respect to goods paid for in the currency of

the Guarantor or acquired from sources within the terri-

tories of the Guarantor such withdrawals shall, at the

discretion of the Bank, be made in the currency of the

Swiss Confederation or in the currency of the Republic

of Italy."

(c) Section 3.04 shall read as follows:

"Currency in Which Commitment Charge is Payable. The

commitment charge shall be payable fifty per cent (5C%)

in the currency of the Republic of Italy and fifty per

cent (50%) in the currency of the Swiss Confederation."

- 20 -

(d) Section 3.05 shall read as follows:

"Valuation of Currengies. (a) For the purpose of

determining the equivalent (in terms of the currency

in which the Loan is denominated) of any part of the

Loan withdrawn in another currency, Maad4eT the- -parpose

!a-athdrawa-apilt

zithdrawr I -nther currency, the value of such other

currency shall be as reasonably determined by the Bank.

(b) For the purpose of determining the equivalent

(in terms of the currency in which a withdrawal is made)

of any part of the loan withdrawn on account of expendi-

tures in the currency of the Guarantor, the value of

the currency of the Guarantor shall be as reasonably

determined by the Bank."

(e) Section 4.01 shall read as follows:

"Withdrawal from the Loan Account. The Borrowers shall

be entitled, subject to the provisions of these Regula-

tions, to withdraw from the Loan Account:

(a) (i) Such amounts as shall be required by the

Borrowers to reimburse them for the reason-

able cost of goods that have not been paid

for in the currency of the Guarantor and

that have not been acquired from sources

within the territories of the Guarantor;

- 21 -

(ii) if the Bank shall so agree, such amounts

as shall be required by the Borrowers to

meet the reasonable cost of such goods; and

(b) Such amounts as shall be required by the Borrowers

to reimburse them for - per centum (__%)

(or such other percentages as the Bank may from

time to time agree to) of the reasonable cost of

goods that have been paid for in the currency of

the Guarantor or acquired from sources within the

territories of the Guarantor.

"I Except as shall be otherwise agreed between the Bank

and the Borrower, no withdrawals under paragraph (a) of

this Section 4.01 shall be made on account of expendi-

tures before , 1954 and no withdrawals under

paragraph (b) of this Section 4.01 shall be made on

account of expenditures prior to the Effective Date."

(c) Section 5.02 (b) shall read as follows:

"A default shall have occurred in the payment of principal

or interest or any other payment required under any other

loan agreement between the Bank and either of the

Borrowers or under any loan agreement or under any

guarantee agreement between the Guarantor and the Bank."

(g) Section 5.02 (c) shall read as follows:

"A default shall have occurred in the performance of

any other covenant or agreement on the part of the

Borrowersor either of them or the Guarantor under the

Loan Agreement, the Guarantee Agreement, the Bonds, the

assignment or the mortgage."

- 22 -

(h) Sub-section (a) and Sub-section (j) of Section 7.04

shall read as follows:

"(a) Any controversy between the Bank and the Borrowers

or either of them or between the Guarantor and the

Bank and any claim by any such party against any

other such party arising under the Loan Agreement,

the Guarantee Agreement or the Bonds which shall

not be determined by agreement of the parties shall

be submitted to arbitration by an Arbitral Tribunal as

hereinafter provided."

"(j) The provisions for arbitration set forth in this

Section shall be in lieu of any other procedure for

the determination of controversies between the parties

to the Loan Agreement and Guarantee Agreement or any

claim by any such party against any other such party

arising thereunder or under the Bonds; provided,

however, that nothing herein shall be deemed to

preclude the Bank or any holder of Bonds from

exercising, or instituting any legal or equitable

action to enforce, any right or claim arising out

of or pursuant to the mortgage or the assignment,

and submission to arbitration hereunder shall not

be deemed to be a condition precedent or in any way

to prejudice such exercise or enforcement of any

such right or claim."

(i) The following two new sub-paragraphs shall be added

after sub-paragraph (20)of Section 10.01.

- 23 -

"(21) The term "mortgage" shall have the meaning

set forth in Section 1.02 of the Loan Agreement."

"(22) The term "assignment" shall have the meaning set

forth in Section 1.02 of the Loan Agreement."

fSCHIUIE 4 TO BE ISERTEDJ

den i5. Mai, 1954

Harrn Tr. 'udul &tai)., 1t. .Aternational ;ank Cor

:Recjnsuruction and -evlonni

aun tun 23, ..

Lieb"r Herr r. 1tah1

tachdem Sic heute, Sautaq, wieder nach den sch nsn en

zurickkehran, WWhte ich ihnen doch noch saen, we senr sich Wrnne

0l oU r nd icL. pcr1inlic D'rert ha en, Sic als Ntl ed dersterreDiscienl Jerhandlun sdele-ation in srintn zu sehen. 'ir

ale 3::a naca; so ~nenehme Grneian ~stcrrmdch !a asto noer o vtt nsersn I:trreihisnhen reunden s imer vie r

a:c schbn Fay in Arnn bande surickruft.

aIr htten es ausserordentlich beyrst, wonn 71 bercits .it

Ane. rtiyen koonen nach Hause reisen kunten. Leider st Z

,:.ch~~i so. aicht lur a r ie 7-r -fTin 7tehende "it etwes

s ia ;so; auh r der 7-r 4skusslon taendn roblemc,vnro r er r" ~r r ae ec ize rant 2-aUata via ti,

hOt rawi rn . t 1i cht t 4iIc>. 1 un nr T. e _ r, i , xn 0 o- der Ia&L

unterrichtete, hbnon r 7- Wne - i" un :s- Wdis auziearbitct,welcher die 0sterr& cP W cen in T weit-st -eno d er5 'sich'i:;t.

Ich kn wn vere n, a a r Iorschla :das r ni vo: Wsehr

schwieri.en und delikaten inturnon Iesnrechunlafn darstalt im den

rch dor lank ausdrickt, 1-r Laprrichchen anore t zu ".Arden.

Icliho fe sehr, 1si auf s dliese3 Vormchlaye das ea. 7 . n ar-

lyhensabkor n 2iterveIchant ,Wrde kann. ine neuc .r1S, ung dAr Ais-

kyssion ber den t7AApekt soIlte n lichOt vorrioden werden, wenn

nicht das biAsherie rgetqis in 3ra e yqte Lt wrden soll.

Ich wnsche Anon Ani Autc nkreis nacn ion no its Die,Threr vereehrten ir'au The>in nm Uai naTh1l- eni us -en .ruu-en in

der erbundgesel .chaft neine bestn rinsce zu UberZtteln.

it den stn Wnsechen

Ihr er7cner

V. ImbrichtVlmbricht :mo

Translation(NuMMry)

Expresses his pleasure to have seen Dr. Stahl in Washington,as a member of the Austrian delegation.

Regrets that, due to the nature of problems under discussion,particularly the question of transfer of the Swiss francs quotavia EPU, negotiations could not proceed any faster and thatconsequently it is not possible for Dr. Stahl to return toVienna with a concluded agreement. As he already mentionedto Drs. Stahl and Teufenstein on Friday, May 14, a new disburse-rent procedure has now been worked out, which gives considerationto the Austrian point of view to the furthest possible extent.Hopes very much that, on the basis of this proposal, the finalloan can be signed and indicates that a re-opening of discussionson the EPU aspect should, if possible, be avoided, if the resultsarrived at so far ore not to be jeoperdized.

/mo.

FORM NO. 61

4. 48)C

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT C0NFIDENTIAL

STAFF LOAN COMMITTEE(This document is for the use of the President, Vice President and members

of the Staff Loan Committee only. Its contents should not be communicated toother persons except in the course of duty.)

~J

-4

*&

~ "-s. s

2ORM No. 21.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: M 13a 1954 ROUTING

TO: OPENIEmRZ INTERXATIONAL BANK FOR ACTION COPY TO MR. OPERP EERRECONSTRICTION AIM DEEOPNT

FROM: INFORMATION COPY TOWIE

Decoded By

TEXT:

TRANKS YOUR CABLE KAY 13. ONE NY AISTRIAN L1( PRINCIPALLY

POSSIBLE TO ASSIGN FUTURE RIGETS. COVENANT ENCLOSED M

LETTER APRIL 2 TXERFORE COULD NE MODIFIED TO POWER

VORTERTRAG. YOUR PROPOSITION FOR ASSIGNENT IN SEPARATE

DOCUMT INCLUDING ARBITRATOR APPOINTMENT CLANSE

PREFERABLE.

TWO YOUR LETTER APRIL 20 PAGE 3 SUOGSTEO TO ME TEAT DANK

GENERALLY DOES NOT DEND MORTGAGES. I R GGEBTE D MRTAGE

CONTRACT 0 DANK 1 EMPOWERED TO RECORD IF AND WEN BANK

DECIDES. MI DRAFT MORTGAGE DOCUMENT CONTAINED SOLELY TIE

PARAGRAYIS ESSENTIAL FOR GRfMIXCI RECORDING. TIREE ALL

OTXER COVENANTS CORPERIRG INSURANCE ETC ARE NOT ESSENTIAL

FOR GRU N VO RECORDING AND NE ETTER PLACED IN LOAN -

FOUR DRAFT MORTGAGE COVERS FUTURE STRICTlRES ON TRE LAXE.

FIVE AISTRIAN LAW FORBIDS RECORDING OF VALWATION CLAUSR

IN URVMIUCX ONLY, VALUATION CLAUSE AMIRSSIBLE IN LOAN

AGREENT PARTICULARLY IN GVARANTEE - AOREENT.

DR. WAGRER

DUPLICATE

x.(

FORM No. 27(1.50) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: MAY 12, 1954 CLASS OF SERVICE DESIRED

TO: NIGHT LETTER [I CODEDR. ERNST WAGERKAR'TNERIITG 10 DEFERRED FVITENNA 1, AUSTRIA ,P TDFRE I ULRT I

TEXT: TELETYPE [I]

THA1S YOURt LETTERS MAY 5 APRIL 30 STOP ONE SINCE POWER CONTRACT

NOT IN EXISTENCE ON DATE OF SIGNING LWAN AGREEENT, DO NOT UNDERSTAND

HO? LOAN AGREE NT ITSELF CA OPERATE AS ASSIGNMENT STOP PROPOSE

COVENANT IN LOAN AGREEMEN T AiT ASSIGNYT BE MADE BEFORE EFFECTIVE

DATE STOP ASSIGNENT WOULD BE SEPARATE DOCUENT INCLUDING CLAUSE

THAT VERBUNDGESELLJJSCHAFT WILL APPOINT ARBITRATOR SATISFACTORY TO BANK

IN ANY AL3ITRATION STOP T71O WHY DO YOU RECOMMEND NOT TO RECOID

NORTGAGE? STOP THREE W Y DOES YOUR DRAFT LVURTGAGE DOCUENT NOT

CONTAIN COVENANTS CONCERNING INSURANCE ETCETERA? STOP FOUR ASSUME

DRAFT IORTGAGE COVERS FUTURE STRUCTURES ON TLE LAND STOP FIVE IS

LRTGAGE FOR TBREE HUNDRED .ILLION OF ANY VAUE IF SCHILLING

DEVALUATED? SIX PLEASE CABLE REPLY.

OPPENEIMERINTBAFRAD

AUTHORIZED BY: For Use by Archives Division

NAME F. M. Oppenheimer Checked for Dispatch

DEPT. Office of General Counsel

FILE COPY

L-7.

OL

0{

FOR No 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: The Files DATE: May 12, 1954

FROM: A. D. Spottsivod

SUBJECT: AUSTRIAN NEGOT[ATIONS

Dr. Stahl of the Verbundgesellschaft, who is the spokesmanfor the Austrian delegation, requested that the term of the loan betwenty-five years including a five-year grace period. He stated that atwenty-five year loan would be beneficial in that it would permit theDKW to use some of its depreciation reserves for expansion other than theReisseek-Kreuzeok project. Dr. Teufenstein, spokesman for the Ministryof Finance, supported the request for a term of twenty-five years butpointed out that a longer term than twenty-five years would not bedesirable.

Dr. Stahl stated that a List of Goods to be imported from allforeign countries would be prepared and submitted to the Bank as requested.

During the discussion of the recommendations contained in theTechnical Operations Department's report on the project, Mr. Umbrichtrequested that I assume the chair.

Water Law Authority Approval

The first point under discussion related to the approval of theproject by the Water Law Authority. Dr. Stahl stated that the projecthad been approved in principle by this Authority and that he would get astatement from the Authority to this effect on his return to Austria.He pointed out that the approval of specific parts of the project suchas dams, tunnels, and so forth, were customarily obtained as work pro-ceeded. These detailed approvals related primarily to the designfeatures of the structures, safety factors, and so forth.

Acquisition of Land

Dr. Stahl stated that the DKW owned all the land in the valleyon which the Kolbnitz plant was located, but land for the reservoirs inthe mountains and for tunnels, and so forth, had not yet been acquired.It was customary to acquire such land only slightly in advance of itsneed for actual construction. The Company now has the right to enterupon the land for preliminary work and has the right of condemnationand can take possession of the land at any time.

Tariff Increases

The procedures for obtaining a tariff increase were discussed.Dr. Stahl stated that the VG must initiate the request for such increasesand justify them, first to the Ministry of Nationalised Industries andthen to an inter-departmental committee of the Interior M-nistry. This

The Files -2- May 12, 1954

committee was established to control prices shortly after the war. Its

authority will expire by the end of June, 1954, unless it is extended byParliament. If it should not be extended and no similar over-all priceauthority was established on a permanent basis, then the VG would be

required only to obtain the approval of the Ministryibr NationalizedIndustries.

I explained that the Bank liked to be assured that in the future

the VG would proceed with tariff increases promptly as necessary to main-

tain a sound financial condition for the Company and its subsidiariesand also in view of the fact that power rates in Austria were relativelylow to explore the possibility of some immediate increase in rates to

provide greater retained earnings for the Company.

On the second point Dr. Stahl stated that in his opinion the

present level of tariffs was adequate and that they should not be in-

creased. He pointed out that:

(a) If the VG's rates were raised, there would be some dangerthat provincial companies would consider constructingtheir own facilities.

(b) An increase in tariff would not produce very much morerevenue because of taxes and that the amount so producedby any reasonable increase in rates would not supply alarge percentage of their total annual requirements. Hestated that VG expected to spend in the next decade800 to 1,000 million schillings annually and that theincreased revenues from increased tariffs could supplyonly a small percentage of this amount.

(c) The effect on industry and industrial development inAustria would more than offset any financial gain to theCompany.

I pointed out that the nominal value of the bonds of the

energy loan of 1953 were tied to the level of electricity rates and thatthere would normally be some reluctance to increase rates because of this

relationship. Dr. Stahl pointed out that total investment in the VGsystem was in the order of 5,000 million schillings whereas the energyloan was only 400 million schillings and that he would not jeopardisethe whole system because of the relatively small energy loan.

Dr. Stahl, however, stated that he would be willing to givethe Bank an assurance that it would be the policy of his Company to applyfor such rate increases as would be required to maintain the VG andassociated companies in a sound financial condition.

We advised Dr. Stahl we would draft letters of assurance

for his approval.

The Files -3- May 12, 1954

Conversion of Long-term Debt to Equity

The question of the Government's assuming some of the VG'slong-term debt was discussed at some length. Dr. Teufenstein statedthat while this would not be impossible, it would be very difficult todo because of certain agreements on the use of counterpart funds withthe United States Government. Dr. Stahl pointed out that the re-valuation law will probably be passed this summer and upon re-evaluationof their assets the debt equity ratio of the Company wilU be improved.Dr. Tbufenstein made reference to the existing law under which theGovernment will contribute to the equity capital of the VG and associatedcompanies to the extent of 1,118 million schillings. He thought thatfurther contribution toward equity by the Government's assuming debtservice on ERP loans would probably meet with some resistance.

Dr. Stahl stated that it was the policy of the VG to operatethe system without Government subsidies and in accordance with soundbusiness and public utility practices.

cc: Dr. Rembert

A. D.Spottswood/lam

Fo NC 5/ INTRNATION1 ANK FOR RECONSTRUCTION AND -VELOPMENT

OFFICE MEMORANDUMTO: Mr. A. S. G. Hoar DATE: May Uy 19

FROM: J. H. Collier

SUBJECT: Austrian Request for Free Swiss Francs

At a meeting yesterday afternoon Dr. Teufenstein requested that theSwiss franc portion of the proposed loan be made, not in "E.P.U.Franceabut in free Swiss francs. In practice this would be equivalent tomaking a loan in dollars instead of in European currencies.

When it was pointed out that the assumption upon which the Bankhad been proceeding from the beginning was that the loan would be inEuropean currencies, Dr. Teufenstein replied that, since last fall,there had been a change in Austria' s situation - she had run into aproblem with her E.P.U. surplus.

Essentially the Austrian position is that their accounting surplusin E.P.U. has reached such a size that they wish to avoid doing anythingwhich would increase it still further. The Austrian quota in E.P.U.is $70 million. In April, 1953 their accounting surplus was $5.5 million.By July it had risen to $42.8 million. In September it passed the quotaof $70 million. It persistently increased, contrary to expectations,throughout the winter and at the end of March, 1954 it was $113.4 million.To cope with this, Austria has received three ' rallongesowhich have puttheir operative quota up to $130 million. (A "rallonge" enables them tocontinue to receive 50% of their monthly surplus in gold even thoughthey have exceeded their basic quota of $70 million.)

Dr. Teufenstein said they were afraid that if their accounting surplusincreased beyond $130 million they might not be able to w4tain afurther Orallonge* in which case they would have to extend credit to E.P4Ifor the full amount of their surplus. He added that: (a) the E.P.U.managing board might well object to a long term capital transaction beingput through E.P.U. for the benefit of a strong creditor; and (b) it hadbeen rwnoured that, in order to make the general European E.P.U. positionmore manageable, there might be some attempt to scale down accumulateddebits and credits.

The Austrian case is, therefore, put somewhat crudely, that they donot wish to receive the loan in the form of E.P.U. currencies of whichthey already have too much. (This, they say, does not apply to theItalian lire since they have made special arrangements to spend $4.8 millionof them in Italy and the remaining $1.2 are freely transferable outsideE.P.U.)

For the Bank, Mr. Kamarck and Mr. Ubricht pointed out that, if Austrianeeded to borrow abroad to obtain cq ital, it did not make sense for herto be, in effect, exporting capital to the E.P.U. debtors throughsystematic surpluses at the same time. Hence, the E.P.U. surplus position

-2-

must be regarded as temporary and furthermore it should be an objectof Austrian policy, if they really wished to import capital instead of

exporting it, to reverse the B.P.U. position. Dr. Teufensteinappeared to agree with this but seemed to think it was covered by theAustrian offer to reconsider the method of disbursing Swiss francs if,in fact, the E.P.U. position did change.

Creditworthiness

1. In favour of Austria it can be pointed out that their total

public dollar debt is only $23 million, whereas their present gold and

dollar reserves are around $250 million. The repayment of the Swissfranc portion of the loan over 15 years would be abewb the equivalentof $400,000 a year plus interest. In the past year the Austrians havebeen accumulating dollars at an average rate of $8 million a month - atotal of about $100 million of which only about $kmillion was U.S.aid. 1+0Dr. Teufenstein stated that they considered their repayment capacitywas quite sufficient to take care of the loan in free Swiss francs.

2. On the other hand, the Austrian current dollar position isuncertain. It is probable that, last year, imports, including dollarimports, were unusually low. It appears most likely that over thenext few years Austria may have to run a small dollar deficit, say$15 to $20 million, which will have to be financed from reserves. Buteven if this were to be the case, their present reserves are sufficientto give them plenty of time to try to make trade and payments adjustmentsto take care of their dollar position.

It is of course true that they obtain $25 to $30 million every yearfrom the U.S. occupation forces. Without this source of dollars theirposition would be considerably more difficult. But such an eventualitycannot be considered apart from the other effects of a State Treaty, inwhich case there would be many other changes to take into account.

On the whole, I think it would be difficult to maintain thatAustria would not be creditworthy for $6 million in dollars or freeSwiss francs.

Interalpen

The bearing of lending now upon possible future lending forInteralpen projects may be important. The Bank may be asked to providesome hard currency for these projects. We may well wish to limit ourdollar lending to Austria to a moderate total, say $25 or $30 millionapproximately. If the whole $6 million were now disbursed in free Swissfrancs for Reisseck-Kreusech it might place a certain constraint on ourfuture possibilities.

FORM No, 59

CROSS REFERENCE SHEET

COMMUNICATION: Memo

DATED: May 7. 1954

TO: Mr. Felice Pick

FROM: Mr. Hoar

SUMMARY:Expressing thanks for the willingness of the Italian Government

to release the equivalent of $6 million in 18% lire for loan

to Austria for construction of Reisseck-Kreuzeck power project.

FILED UNDER: Italy; 18%

CROSS REFERENCE: Austria Power Project.

AUSTRIAN EMBASSY -

WASHINGTON,D. C.

4163 May 6, 1954.

My dear Mr. Black

In your letter dated April 30, 1954 and

addressed to the Austrian Federal Minister of Finance

Dr. Reinhard K a m i t z, you expressed the willingness

of the International Bank for Reconstruction and Develop-

ment to open negotiations with the Austrian Government

for a long term loan for the Reisseck-Kreuzeck Hydro-

Electric Project.

I take pleasure in informing you that the

Austrian Government has named the following delegates

to these negotiations:

Dr. Karl G r u b e r , Austrian Ambassador,

as head of the Delegation;

Dr. Wilhelm T e u f e n s t e i n , Counselor

of the Austrian Federal Ministry of Finance;

Mr. Eugene R. BlackPresidentInternational Bank forReconstruction and Development1818 H Street, N.W.Washington, D.C.

4

4

-2-

Gen. Dir. Dr. Rudolf S t a h 1 of the

"Oesterreichische Verbundgesellschaft";

Dir. Dr. Karl K r e b s of the "Drau-Kraftwerke".

As the gentlemen coming from Vienna-are due to

arrive in Washington on Sunday May 9, it would be appreciated

if the preliminary negotiations could begin on Monday May 10,

1954.

Unfortunately I shall not be in the United States

between May 9 and May 16, since I shall present my Letter

of Credence in Cuba and, therefore, shall not be able to

participate in the negotiations before May 17, 1954.

However, as discussed with members of your staff,

it is assumed, that during the first week of the negotiations,

that is during my absence, no question of principal importance

will arise.

During my absence Dr. Gerhard Zenker and

Ing. Milos Franc will participate in the negotiations.

I am, my dear Mr. Black,

Sincerely yours,

j iI~

I4T

p/i

F6RM No. 75 INTERNATIONAL BANK FOR(3.52) RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SL)P

NAM ROOM NO.

Action Note and FileApproval Note and Return

Comment Prepare ReplyFull Report Previous PapersInformation Recommendationnitial Signature

Remarks

F rc

OESTERREICHISCHE BOTSCHAFT2144 WYOMING AVENUE, N. W.

WASHINGTON 8, D. C.

Dr.Gerhard ZenkerZL. 4203 A/54 TELEPHON: DUPONT 7-2477

6. Mai 1954.

HerrnViktor U m b r i c h tInternationale Bank fuer Wiederaufbau undWirtschaftsfoerderungW a s h i n g t on, D.C.

Lieber Herr Umbricht '

Ich erlaube mir, Ihnen in der Anlage

Abschrift eines Briefes Botschafter Dr. Grubers an

Praesident Eugen R. B 1 a c k zur gefaelligen Kenntnis-

nahme zu uebermitteln.

Mit bestem Gruss

1 Beilage.

A b s c h r i f t

AUSTRIAN EMBASSY

4203 May 6, 1954.

My dear Mr. Black

In your letter dated April 30, 1954 and addressed

to the Austrian Federal Minister of Finance

Dr. Reinhard K a m i t z , you expressed the willingness

of the International Bank for Reconstruction and Development

to open negotiations with the Austrian Government for a long

term loan for the Reisseck-Kreuzeck Hydro-Electric Project.

I take pleasure in informing you that the Austrian

Government has named the following delegates to these

negotiations:

Dr. Karl G r u b e r , Austrian Embassador,

as head of the Delegation;

Dr. Wilhelm T e u f e n s t e i n , Counselor

of the Austrian Federal Ministry of Finance;

Mr. Eugene R. BlackPresidentInternational Bank forReconstruction and Development1818 H Street, N.W.Washington, D.C.

-2-

Gen.Dir. Dr. Rudolf S t a h 1 of the

"Qesterreichische Verbundgesellschaft";

Dir. Dr. Karl K r e b s of the "Drau-Kraftwerke".

As the gentlemen coming from Vienna are due to

arrive in Washington on Sunday May 9, it would be appreciated

if the preliminary negotiations could begin on Monday May 10,

1954.

Unfortunately I shall not be in the United States

between May 9 and May 16, since I shall present my Letter

of Credence in Cuba and, therefore, shall not be able to

participate in the negotiations before May 17, 1954.

However, as discussed with members of your staff,

it is assumed, that during the first week of the negoatiations,

that is during my absence, no question of principal importance

will arise.

During my absence Dr. Gerhard Zenker and

Ing. Milos Franc will participate in the negotiations.

I am, my dear Mr. Black,

Sincerely yours,

Gruber m.p.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files DATE: May 5, 1954

FROM: V. Umbricht

SUBJECT: Austria

Mr. Zenker from the Austrian Embassy telephoned meto say that, according to a cable from Vienna, the Austriandelegation will be led by Ambassador Dr, Gruber and will consistof Drs. Teufenstein, Stahl and Krebs. They will arrive onSunday, May 9, and are ready to start negotiations on Monday,May 10.

VUmbricht-:mo

copy of cable received by Mr. Pick from Rome (Translation)

May 5, 1954

KINDLY INFORM INTBAFRAD AGREEMENT ITALIAN GOVERNMENT FOR LOAN

DEVOTED TO AUSTRIAN HYDROELECTRIC PLANT REISSECK FOR $6 MILLION

EQUIVALENT ON RELEASE 18% LIRE QUOTA FOR MINISTRY OF THE TREASURY

UNDERSECRETARY

MOTT.

i1 G, 19'4

of he ect RL5zi to Mmstrto regarda S lownfr heioee-ceuecabgarelCtr?1 projet, end bee tae noteQir the under' rea d betn mAtrja a Ital We

baa 1.4 the Itl Gon M rnnt to agr. to a ~r..ae of Uir

na prepared to opn ngotl.tt'I for a lng-te4r ILas tod slaaft ad thr Draurattwari. jonty, ith

te grntee of the Autrlwn ai t asout vouAbe about ~12 atll1on .qpzv.1.at, of wt ch 36 m11lUon .qa4vlent In lir n mxhtl .quWaltnt to -vlss

ThE d i#, trfor*, red/to Seev d1leation IDA t aOr the @uf E Otiti n the

opsd n mnd I shall be graweful If you wI11 let thenA to adacewo you Will he .endIng ad we they

11arr ve.

TQura vcry truly,

Re4Mee i. tla k

r.Reinbwrd *a1t3Mtister of I tnowo

ASGHoa$/mct

Apwil 29, AL

. krhrd ZanAuatrian FmbasaW

I A it miuld intrept u to has a cop

a'h stioiair which r sent a re ago to Dr,

Stahi and in which i ientinw1 t1e pointe that rquir

addition4l infxrmation.

Ourn uincerely,

V, UmbrPchV

Enclouure

Vumbrht 3MO

F 7INTERNATIONAL- JANK FOR RECONSTRUCTION AND L VELOPMENT

OFFICE MEMORANDUMTO: Mr. Eugene R. Black DATE: April 28, 1954

FROM: A. S. G. Hoar

SUBJECT: Austria: Proposed Reisseck-Kreuzeck Loan

As you may have heard, the Staff Loan Committee have agreed,after lengthy discussion yesterday, that the way is clear for usto negotiate the proposed loan for Reisseck-Kreuzeck. Theattached letter to the Austrian Minister of Finance is for yoursignature if it meets with your approval.

I have discussed with the Secretary the question of notify-ing the Board and we feel that it would be appropriate for him tocirculate the letter todaywith a covering note saying that it isyour intention to send it off on Friday. This should give theExecutive Directors enough time to raise a warning finger if theywish to. In the meantime, however, we propose to tell the AustrianEmbassy that, with appropriate reservations about the E.D.'s, weexpect to send them the letter on Friday: they can then, at theirown discretion, send a preliminary advisory cable to Vienna.

ASGHoar/mct

Secretary's Memorandum No.1-90

INTERNATIONAL BANK FOR

RECONSTRUCTION AND DEVELOPMENT

FROM: The Secretary April 28, 1954

RE: AUSTRIA

For the information of the Executive Directors the following is

a draft of a letter that the President intends to send to the Iinister

of Finance of Austria on Friday, April 30, 1954:

"Dear Lr. Vinister:

The Management of the Bank has considered the find-

ings of the recent mission to Austria regarding a loan for

the Reisseck-Kreuzeck hydroelectric project, and has taken

note of the understanding reached between Austria and Italy

which has led the Italian Government to agree to a release

of lire for the proposed loan. I am pleased to say that

the Bank is now prepared to open negotiations for a long-

term loan to the Verbundgesellschaft and the Draukraftwerke

jointly, with the guarantee of the Austrian Government: the

amount would be about 12 million equivalent, of which ,6 million

equivalent in lire and 6 million equivalent in Swiss francs.

The Bank is, therefore, ready to receive a delegation in

Washington at any time for the purpose of negotiating the

proposed loan, and I shall be grateful if you will let the

Bank know in advance whom you will be sending and when they

will arrive.

I am, dear Mr. iinister,

Yours very truly,

Eugene R. Black

His ExcellencyDr. Richard Kamitzhinister of FinanceJohannesgasse 5Vienna, Austria"

Distribution:Executive Directors and Alternates

PresidentVice PresidentAssistant to PresidentDepartment Heads

Sec.8-219

FORM NO. 6114. 481

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CONFIDENTIAL

STAFF LOAN COMMITTEE (This document is for the use of the President, Vice President and members

of the Staff Loan Committee only. Its contents should not be communicated toother persons except in the course of duty.)

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FORM No. 59(3.49)

CROSS REFERENCE SHEET

COMMUNICATION: Latter

DATED: April 23, v54

TO: Uaon Ba* of Swtsarlwad, Zwrich, iteSounds

FROM: i. S. 0. 1Uar

4p% iSUMMARY: A kowed *nltt er %5b.

xeard' as lown qwumwios, Fio a wt a Aambor.Mas *aly rocently reeveed a $25 md M rw a ta* Bank and the agrmNot

w&# &ignd an Ap.. bt&. Asstf the pmp*S! d A*g0tiatiGau fOr A I*=to Aw~tria ( ew: ;in pvobear take pbe WWMY-3 TfbMame 4=u nt1 = that fmr~hwr Awstrian lo&,. res ay be wxpwted and

we spsethe JdnerSe prJU4.

FILED UNDER: switaoSbad - Pmposed Jlat Ppsmtiom

CROSS REFERENCE: pertga- G-mwralorawa - Lan 97

Auutria - keiseeskAustria - Illurke

Form No. 60 International Bank for Reconstruction and Development(8-53) - I

( SAFF LOAN COMMITTEE 112

FROM: Office of the Secretary DATE:APri 22, l95hSecretary, Staff Loan Committee

NOTICE OF MEETING

A meeting of the Staff Loan Committee will be held on d April 27

at 1 m. , in Room 1005.

AGENDA

mae 0onnittee will con3 ier thio attached Meandum 1LC/O/665,

"Austr-ia - Reissek-Kreuzeck Project" dat&d April 22, 1J9,.

DISTRIBUTION

President General Counsel (2)Vice President Director, Economic Staff (2)Assistant to President Treasurer (2)Director, Department of Operations - Director, Technical Assistance

Asia and Middle East (2) and Liaison StaffDirector, Department of Operations -

Europe, Africa and Australasia (3)Director, Department of Operations - Secretary

Western Hemisphere (2) Director, Public RelationsDirector, Department of Technical Operations (2) Files

A -

MAR 21

COIFIDENTIALSLC70665April 22, 1954

STAFF LOAN COIJITTEE

Hemorandum from Department of OperationsEurope, Africa and Australasia

AUSTRIA: REISSECK-KREUZSCK LOAN APPLICATION

1. The Report EA-36, "Report and Recommendations of the Ilissionto Austria", which was circulated on April 16, was prepared by themission which went to Austria in mid-November 1953. The task of thismission was to prepare the ground for loan negotiations and to makea technical appraisal of the Reisseck-Kreuzeck project.

2. A detailed statement of the economic position of Austria is

presented in Report EA-37, "The Econory of Austria", and a technicalappraisal of the project is given in Report TO-51, both of whichare attached to this memorandum.

3. The Staff Loan Comittee is asked to consider the recomendationsof the mission in paragraph 48 of EA-36. It is also asked to give con-sideration to the following two questions, arising out of the TechnicalReport TO-51, for which material arguments can be advanced both for andagainst:

(a) Should the %ustrian Government be required to undertaketo give prompt increases in power rates (paragraph 83 (5))?

(b) Should a debt ceiling be imposed on the Draukraftwerkeand the Verbundgesellschaft (para raph 83 (6))?

A. S. G. HoarDirector

FOR(MNO. 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files DATE: April 22, 1954

FROM: V. Umbrich-t

SUBJECT: Austria

Dr. Zenker of the Austrian Embassy called on me on Wednesday,5 p.m., April 21, at nV request.

I showed him the cable of April 21 from Dr. Stahl and explainedthat the Bank is not in a position to send an answer to Dr. Stahlbecause, on the one hand, the final decision by the Bank regardingthe Austrian loan is not yet taken, and, on the other hand, becausethe Bank prefers to discuss such matters with the Austrian authoritiesand not with the electric companies.

As to the substance of Stahl's question, I confirmed that theBank's intention is to offset the shortfall in Italian lire by lendingSwiss francs which will be transferable to and from Austria via EPU orany subsequent Austrian-Swiss monetary agreement. A loan in free Swissfrancs would be tantamount to a loan in dollars, which would at presentnot be considered by the Bank. I confirmed that I had tentatively in-formed Dr. Teufenstein of this procedure when I met him in Zurich inJanuary last.

cc. Mr. H6ar

VUmbricht :mo

FoRM No. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 21, 1954 ROUTING

TO: IT:TE AIOA 1R REONSTRUCTION AND ACTION COPY TODE1TELOP:1TT

FROM: INFORMATION COPY TO

VIENXADecoded By

TEXT:TBASLATIOIT:

TEUXHST2IN CONCENI1Q COHVESTION WITH YOU lcARS POSSIBL SWISS

TRA1CHE EPU TIMD WHICH IS S-IIOUS PROBLEM IN VIEW OF MEAiWHIIE ARAVAS

AUSTRIAN EPU POSITION. COULD IOU AS QUICILY AS POSSIBLE GI INDICAION

FOR IWPORTAAT CONVERSATION %C "

R2?GAS STAHL

Translated byr G. AutbeGe rman4/21/54

ORIGINAL

FORM No. Z6(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 21, 1954 1108 ROUTING

TO: UMBRICT INTERNATIONAL BANK FOR ACTION COPY TO MR. UMBRICITRECONSTRUCTION AND DEVELOPMENT

FROM: INFORMATION COPY TO

VIENNA Decoded By

TEXT:

TEUFENSTEIN BEZIEMEND GESPRAECI MIT lINEN BEFUERCITET

ALLFAELLIGE SCIWEIZERTRANCNE EPU GEBUNDEN WAS GROSSES

PROBLEM ANGESICITS MITTLERWEILE VERSCIAERPTER OESTER-

REICHISCIER EPU LAGE BEINIALTET. KOENNTEN SIE MIR FUER

WICITIGES JIESIGES GESPRAECI INDIXATION RASCIEST GEBEN

GRUSS STANL

ORIGINAL

4 - - -

AA 11 'A

den 20. April, 195I-h

Herrn Dr. Rudolf Stahltsterreichische Elektrizit~tswirtschafts

Aktienge seflschaftAm Hof 2Wien 1Austria

Lieber Herr Dr. Stahlj

Mein Kollege, Herr Oppenheimer, hat heute einen Brief anHerrn Dr. Wagner gerichtet, welcher zahlreiche Fragen rechtlicherNatur aufwirft, Da sich diese Fragen weitgehend auf die Strom-lieferungsvertr7ge zwischen t7sterreich und Italien beziehen,dJirfte der Inhalt des Briefes auch fur Si- von Interesse sein,und ich gestatte mir daher, Ihnen aine Abschrift zugehen zulassen.

Ich habe heute Herrn Dr. Zenker von der 5sterreichischenBotschaft verst!;ndigt, dass die geplante Banksitzung zurI Be-handlung des Darlehens an C-sterreich leider u-n einige Tage ver-schoben werden musste. Sie wird daher kaum noch im Laufo dieserWoche, sondern erst zu Beginn der n-chsten Woche erfolgen. Diesbedeutet, dass auch die offizielle Einladung an 6 sterreich zurEntsendung einer Mission erst nachste Woche Uibermittelt werdenkann. Ich bedaure diese VersZgerung, die - was ich beifUgenmbchte -- etwa nichts mit Komplikationen in der Bsterreichischen?ra e zu tun hat.

Yit meinen freundlichsten Grissen

Ihr

Forwards information copy of aletter from Oppenheimer to Dr. Wagner,Vienna, re: legal questions concerning

V. Umbricht power deliveries between Austria andItaly. Informs Stahl that SLC meetingon loan to R.K. will take place onlynext week and that the official in-

VtUmbricht:mo vitation to Austria to send a deleg-ation to Washington will thereforeonly be submitted next week.

/mo/

den 20. April, 195

ierrn r. "'rnet WagnerK~rntnerrinr 10Wien 1Austria

nisbr xierr LJr. eazieri

u1alen iank fur hre iriefe vo 24. Airs unJ voR 1., 2., 3. uxd12. Apr il. Tch haf te gerado sine dreiseitige Antwrt auf Ihren ldriefvoit 24. Mrz diktiart, als Thr. neue erie v n Witteilungen ankam.fadurch wuTrdo -in diktierter -,riefentvurf &oerholt, da Ihre Schraibendie m in dor von mir aufgeworfenen rac ' tAhandelten.

Thr drief wo 2. , hat reino erage iibor den Cesetzesentwurfin ehr -e1- -ig 'tder eie beantwrtot. Ihre Antwort auf die irage

hat mich natriilich nicht Ibsrraecht; im Jeentail, sae erscheint mfrselbetverwtiindlich. Aber wgn der bowussteon, un lucklieh gsfasston

r1~uteirumg vnn BudgeV und Fi~nanausschuss hielt ich es trotder. fUrn~tig, etwa. E Jer dien ukt in den Akten su haben. Inzwischen habeich di. endgl~t~ige Pau~ dee Qeeetzee, die Ihrem rief vm 12. Aprilbeilag, erhalten.

Ganz bosonders vielen Dank fur ihre intwiirfo L' sine Abtretung0-klausel iAnleiheve etra schen Weltbank umd Verbundgresoschaft,

id f Ur sin SChreilbn der Sad und dison an die Weltbank, mit denen Siemeinen inschan zuvorkmn. h hoffe in den zichsten Tagen da izu zukomnien, inen itwurf fur den Anleihevertrag auf"usetuon, und Ihre or-schlge darin zu berickichtigen. Ich werde Lhnen natirLieh diesenwntvurf schicken, sobald or fertig lst.

kh glaube, es v yre einfacher, den endgfltigen Absch1uss deSYertragee Fwischen der Vrbundgesellschaft, -dison und Adriatica alseizn odingung fur die ,echtAskrftigkeit unsores Anloihevertra es in

Anleihevertrag aufsunehmn ale diesen iefCruxsvortrag bereits als ab-geechloseen in Anleihevortrag vorausmisetzen. Dieser ;tandInkt stUtztsich auf mine Annahe, dass die -sterreichische eleation wahrseheinlichnoch keinen fertig abgeschlosenen Vertrag mitbringen wird, da ja dieItaliensr seheinbar sowieso die echtskriftigkeit ihres Vertrages vorAbschlus siner Anle the machen wollen, mnd es andrers.its not-wendig lst, uns sine elegenhit zur StelmJ nah inem nouen ntirf

rrn .W- 2- den2. 2r, 1

~egeniibr I' goben. iSolto ich daiV aecht habe, so dieste wahrschejnlich"OA r Cahns [rLbudaoioLl t an aChc8llA aleeine di u zur nocht rfikit des Akihavervrmei clivrtaselbst estsolegt werden, d.h. also, sm Arlih,.rtra~ wr sich die ier-buad{ eeschaft verpflichtonz erstene, einan Jertra ie ~ix ds in A-

han aefihrton Gstervortr0 io n son und Adraica ONz,und zei tena, ikire, slch aus die er Vartrag ergebenden achte an die c4lt-bnk abzureten. aIc 'rf~ lun dieser stai 'dgne dsto dann vor Jar*chtskrftigkeit rl~ gde An3ihcvrtra es er folgen,

as iet rnir nidht entgn las ui die 'erichterkl~rng~ dar Ariaticaund er dlo aun iiwe u a odor inreden in hrm dntwrf elnas 2riefesan i eltbank auf eno a hnn, ans att dleaen ersicht in don Lieforungs-ver tra eel a aautzunehzen. ar ehd ob 1 hre o orlienrur leuch tenmr seer ein, und ich bin ihxian Air dlies. LUsuzg sehr ankbe, cia cia betixmtI'ir di italiener akaontaler let ala di., die air vorschiebte. ch hatteir vor e stelt, lass Jar ~erz ih anf liwendungen, die ; onntnianh Jer~retuna mc Uie ~erflidituan au mnatlichen ~ablungen auf unsor Konto indar na d~ Italia, alle im~ cAereru ertrag selbat entialten aein 'wirdn.xturi. ware di3 sovisso nur: glih, wnna lr Liefrn sivertrag niach damAe ver tra age schlouan viid. *ie ch bar i s ae tte, balteihdiese Aeihencol a fur 1rwrch alicher, tr tuel d uekehrte iRihen-doah4 r eratena ieerngsvertr&6, aw itons elihevertrag) manchas fiirloh hatte. La Falle aile 1Vtonieehen "ersjrechen an anere 'aak, wie inhren ~ntior , In ainsa 3rief an uns enthalton scin wurda:, so w~reg die rcht4. AtdLtiche a rkmi i di e cer Vorpfltchtung.n nach italienischea itscht au prUf en.

as : olrtra so itwrt ~ os teruu rta solbat anbetrifft, sor iv ch n , dass die italienischen Uorren bereits auf die Uacape Klamseltikel h, Ent 1h des Entwurfec vwn h.3.33) versichtot lisbn.; und dase slohde arteien Jarauf g0oinidt haben, dass die Jaedugdr Gleitklausel aufii iJ /31 aur Thtriehvung dar ~teuern wgfillt. ~Jai uneinterns Arbeita-

rm a sI h xmit fer Anleihe besclifti t, au d vorl~u igen Entcluss~okoen let, Jaws die Abtretun; dos ~ieferngsvertragea nur aur SidherstelungJes Lreto its der Anlaihe dienan soil, so diirfte nun die 3r~snordmnn dawLiefeuntsvertrages ndt den von ihnsn rwhten Ynderungen fUr iinsere Zwocko

~er einzige wichtige iankt, den ie nAicht avidhnon. erecheint rnir dierare elnar i3h1ederidht k1ue (siehe aunkt (ii) , beginnend auI' Ceito 2neies orasi vcn 13. D tn , 1I 3, "An~7of concluding Uiscussionsin ten, ~e e r 7-11, 1593. esrm otbtrifft ins natiirlih xmrindirak , erihhale i I ei rel unslos n Ablaus' des '.iefernga-verrr'ee for, *enn nioht unerl~saelirh so dolh w~nechenawert. Ich var.Ihnnn fur In Minungs~userun an diesen ankte dankbar.

~n 3auj nut Ihren !orechla , da rtikol h, Ziffor 2 A des Lirn;;s-vri a mascmssgres dahin ab~oerndert aerdn sollte, class statt darorte "aur rabienkura dar Usterreichiachen Nationalbank" die norto "auai)evienokura dar osterreichischen hationalbank" veriendet warden sollten,

errn r.a ner 3 - on 2Q. pr 1,

Sa a ab hui'iAn, das das reai aa nicht ie im utar"der eitpunkt dor redithin aI*" 3oin so1lts, sondern "'der eitpunkt der~chtekr~tigkeit (Aftoetive ~at4) JOB Anleihmvrtra~e. im ri en wireih Ihv fn r . in hk~u:Dres uorsoc e, d~h. der eueiir dee

Atu druckes " vise wankurs", dankbar,

rojekt~ isseck- rueck geh~rI en Ui en chkt nrkkmm enda~tzlich hat uns*ere aiank in afl emizwn vo~n $cdnodrn, dl> ~a r a desSaate s e n, also au c vo esell ch ten der Sf entlic ha ndn

b oren vothekarisen Si hrhei en vsrlangt. ich ein dr Au -assuns - ekowan, dass eine xaypthek Cur die aonk nur dunn adrkaich

iiinec ewert idre, 1. wenn es denkear iwire, oiae die :1irektion Mr Jrau-kraftwerke, S5i es aus Iranrssigkit, sei es mit absicht, eine mns te-

e'an - oatiiklause1 vrletsen iird, oar2. wnnu die son er esellsc atender iarbundgeselschai't in private ess lehaf en umge4 nd t vwirden (iihrendde o r der AnliThe kann riwli eien). wae wir im Aloihevertrag

deusic auntko in k' n, odi fintremmg ePaar niypotnk zugantenMr akau noren s ~ah hin vr mnen warden vfrd, so wire das moinrr

&nicht nac rum . It ir soicenn Zuaicheamug k~rnten wi r in den zwiElou in 'donen unsa ime Jypothek Cfr wilnachonasrt oracheint, die lipotheker nnxh anfordiern. J)ies setzt natirlioe dine ~ejativklausol, die die

intra pmeiner yothek af ueiseeck-kreuaeek sugunsten anderer U1~ubigarlebetet, voraus. ebh die Ihnen Cur sins Steliu nhm u dieser irage

sehr daka, u.zw. interossiert nich dazu nonh oioe, ob sino vertrag-liche derpClichtug, ant umsch in der %k~imnCV dine lltypothek ointrafen zulessen, rechtsgtultig tet und se i tens, ob e ins seolche 7ierpCli htund ins

runbuh ongtra e warden kan.rh eusa, die nt ort MCdie1 tzter r a e t nein, JOa i ir rits mittoilton, o i tauncine~r aativklaisol ins Jrran~hech in (Uterrekch unm~gich jet.

~ollte e doch hei diner ~Wothek bloiben, nehme ich an, das die Dunkt*,ais6 in sat: 5A, , ,.,0,: , u, 1 und etz9A, un a n sibeatu 3,

16& und 16 Ihres Anleihoverragsentorae bahandeln, am boston in der bypothek-urkunde und nicht im Anleihevrtra~ 1*nande1t warden k~nmten. :it anerenVorton, irh stel]. mir vor, daws die letails iiler d ie hypothokarisohe So-st. 1luv in ciner dypothekarbost1Xonveurkud feet e1.ejt werden acllten, und

da . -eor ieser ~rkunde dam Anlihevertra' ale Ahan 4i ef t wirde.

~oCfentlich warden $ie diaa -. le :ennit hatzeu, den I nhalt~ Jienas Iriafesmit don iGorrn von der lerbmnd eseelsc taft vor deren Abreise nach is btonzu bosprechen. Aies v~re natlirlich bsonode wichtig, wann dien Iierrn einanneuen -ioe nrmsvertrag mitzubrin en jadeuken,

sochwoas vielen aank I~ iha tndlI he Arbeit, hit herslichen i~ssen,

ihr

~ran N, Oppe imorFa~ppnheimer :mc

deals with details off securing the pro oedCC. Dr. dudolf Stahl Austrian loan (Reissek-Kreuz8Ck projemt and the

Verbundgesallschaft Austrian enabling legislation for a gov'. g~arantee.

den 1;. rZil, ).9%

flerWTn Dr. audolf StahlUeterreichische lktriittsirtchaits

AktieresollschaftA flof 2

rin r, AL i ria

1ebe herr 3r. Stahli

Vilen lank riir di. T'brmittlung de s trreichasch-italienisohen}rotokolls betrtefen Peiaseckareuzeek flesprochungen. Wir haben in derZwiseheneit von der Batrreichischen 3otaohaift ebonIfalls eine Kopi. diesesProtokolls in voller Version erhalten.

~Irhacen uns solbstvorst~ndlich gefreut, dase die esterreichor etchmit den Italiewrn verstndigen konnten. Das Resultat echeint recht be,friodi jan ausgefalien su sLni. s tat uin alalrdin!s nicht kanB klar,welche 3sterreichischen Zu eetz~vnisso zugunsten aba mtatseichlich

emct wurdon; abor dies tat f~fr die ~eit rbehandlung des Reaeck-1 reuseck Erojektee irrelevant.

ich tree mich sehr, -ie und Lhre lreundo bald in Washin.ton begrissenzu k~nnen. Unsere intrnen Vorbereitungen f,"r die Verhandlungen sindpraktiech abgeschlossen, und vir' werden fi uaufe der n~chsten Wodh, voraus-siehtlich a )onners oder reitag den 22 23 AprIl, unere Vorschlige

cier ohereten flanki: itung~ unverbreiten, S3ofCern diese Skiszierung der ge-plant n Verhandlnen von ovngtii t wrd -- was wir mieif lsohne an-

n -so wrden wr die 5sterreichische Botschaft hier noch :leichenTags verstwdigen, um die offisialle "inladung zur hnt endun etner3terreichiuchen Delegation nach ashington zu itbernitteln. In diesem

nr ang m hte ich n tch benrken, das4 7nser Sachbearbeiter e.ne -oihevon iragen tber die BIan der Verhund&eelschft und cer Jraukraftirkenoch atellon wollem, ebenso ein~e rio von techniachen IFragen. HerrSpottswood hat Ihnsn hieruber bereits gesohrieben. Ich glanbo es wire;iitzlich, wenn Ste anen lann, -ie beispiolwise Harn Hr ik~nnten, wicher nit dieeon 7Zaheninaelheiten doch ehr vortraut jet, Imibrigen haben wir neben ieis-ee-kKreu:eck noch ver-chiqdene andere Problejienit Ihinen zu errtern, die sich vor allem anuf Interalpen, Liinersee undYou :elexrport boziehxen. Dtise letatere Il1ktrizit~teorganiaation hat sichdurch Verittlung von Her'n yrdal in lounf an die ,aank ndt. Da uns nochdie Verbinidung;on swishen Interalpen und Yougleirort nicht geniigend klar

d, bon yir vorderhand auf eino Stellunb h erziohtet, in der

vervollts etn k~iiwten.

Sicd 1ns che hne n ua irn 31.4 en ine v te A iSe unidazoi rbi tten siah lei rau T. Stahi i n erg remnt a rii min murfen.

Vt nmbricht :no

Acknowledges receipt of report on Austrian-Italian discussions re:Reisseck-Kreuzeck. Expresses satisfaction about successful terminationof these negotiations. States that the Austrian Embassy will be in-structed to send a delegation for final loan negotiations in Washington,.as soon as proposals re: loan for R.K. will be approved by Management.A few technical questions re: V.G. and Draukraftwerkbc would still haveto be discussed in Washington. /mo/

Qan yo very nac :'or -r ir ltr 1tva th a reed - i r tP, rn l a o ocr rLt ir

A nis ter i41 to ambassador Anuiotti, r ;ardi~te im ~ cI~A e~Ck-KrUUZ8Ck,

rop>;> to wr:-t~ to ,-ox , : th r.J

3ir opAfia an~d Aurlaia

r. ~erhord axe

vrUmbicht :mo

Xe t0Z4 tnhl

ned a S

[t B or '12 t natl be ~bmi l to the~t>~ nt sx Aly 4 018 V. 1o r0 r

by anrrnt a 4Va7 aa~ o -n r e rrsert 1 'ea tovd~yensorly atr ao like :ea to e earri

1r ' ntdsr os~t dinm a e 'ott raie 4 a'out thre ta'yn 3 a c s t -,r's, o re

n Afrdg '>"t yoxwr sna f 1 ;r han; jp tiat so jpoypare the'n'atan re .irm bufr yeur repre etttves 1rave VI w'n, I V2

eocloing C shrtis inn t r ft lic t afth po nta to be 'larV'l an4uu; V'em t r dta nov deCied at, a - t' at all of the a evarsril e -sadily ev'sl ne. e ae not rt'w to you to vla I'y thce

'lents by latter as in believ st ":n ae dne wuwh bestt thron Ita a esins here a an aahngo.

an a t aW, -l r o .em o n hln tn n fla

(Approved by Dr. Rembertand Mr. Umbricht)

tilL utut ~ oncc: t. Y.i .embrt n ' -l t ra r pt:nt

1. yn 2 r oe 1 at t 3 on estimated

ont* to n n t ~~ oty ~te tyr : U i e . vr e

44

rn s4 i n i g~ ~ V~ pt ith ~ ln~

Vt n to e th o rer d

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C apadty to e in IllAd In krwv) ined a nul ntihon !n kah o w e ar err d

T )EtItdit of Vope3o

ol th e ifr -tion as bv for th tWo proteta t e eot c d

o* Thv r ao 'e tn 7 U <tlt w )otrr rr~ e

~ yh ~ '~ h e~e ree~y ta~ it

~a~~~ ~t:~ r U te tt4 sut o~~k now

0 r~ fi n3 o ~ ~4 -

V~~fl ~ ~OW MUh OI

S-

%, kva thr enaywg nrs or othr inreo. in eotsic

*t e 1 tr 8:eAcA?

7. zt ei ue .or 1% wre , imn or i i * inOerte, eVr., in - in th a 'e4 - *

;rtA te ectt1 iu - V 3.

ie- tienae <e I/I7 - :ra,'al rn -'t - e er31, 1It

M r ,ion .. tew :n f ase .)~ u1, l'. M *c- 31 3S 2e s favirr1ae o re.0 2 . ta ot ~ Zil B E~r . Qfill

onyesoni r i i a a1 / 1 ort E to t ta-"

aun ln tm10ei e ~vni 11u o t . 9 n to

~~~~~~ mt ne 9, Iinniat~~~~4 ':6, s m

) S tna 1 a t r -in

an erbe p41, L99 'aeeo e ) 1ease aj1sin &ce in fi edeeta, as It is aues: trw e U ernree of <h.369.2 nillion

Xn e; 1 notion plass *Mv - 4110%

) N anount o inenV a e -e 19r ;V shr or n a o * bok valua cet s ei ja

- siadd in T ore s ha mnce ar- t 'l wre or e. 1,$10,O9O O* 7so, t r u

9. , -e q 41 in d-e_ et ae of Necw or 31, 1 8

a 8 8e 1 eti 3 e a n s4 il1Ien,ea rni enr ier *?.4 1iionoer to :run t41o ' ar

I o *. mI i 3 mywnt or <+'. . milion59 rn. net.

fl i., no ar nas#mo ch2?. aili inshazen it'l, inidin~ . t1 ~-u a io0r *nto

t ons h- t r

b) ny uwpt o 0 t 8$tt ra lec in ~ Irn reat e o.1 1, 1re -n f ri te ur

T1 iu~.~ I I . 11,?f-2,?f0.53 i or n e loann

f tha wrte p mud b *irrntrothet ifiae re#iet in

I- eM onion

ow uL o tse or t AA in 1ir c it i t toth# 1SFAe of shrst h P arei1 er of W t a evl thengreement reace on te stlemnt of th li or c~ abeck and

Un. wrcy --en 1N 3

ut Se. 20C0 million o P toa1 is'u o nh. -

Pl ble no th Fee o uerme tw h,? dKnr

w na Pr -- r o t t y

H.~)a-1 ~Ot n, >~,,~ c s

Or O y1

tao . bute t i ual no n ofz> fr to

1 . " n h

MAO 04. Y7nin oilr 1 Y! -01~ 1 nn c- h 1 w - I A:T % t q5 , V es i c iswn rit W10. 0,--#

on n I .i.4n nu in

i~ n - r ti~ ~ t' t~ ' srr til wt ir e~ i l 3

I l r e e .. , -u et.tay - o , o i~

e bo tte i rv r r ai ~/a to :e11

WTmen: U1 J)f'. Xe y in t-7 r. nr 11 r t rm

s 4e'on nro>r'r 19e.bU t9 .Intoe ; tea

also profit and loss statements for 1953.

P. c. u iner- -1 or 1Ves

r f a lnc '.~ P a ri e r ile t in o

creit f sh. 3y,9r(IrXrh is thsa Pnv ter or abort tern creditu

1 re fman La l e et oa t .a of *eemb 19

~ uch t~ o ~ n '~~~iux oeuv~n o

57 actsa esnn 5tn up

C)on e lvuk fe cei o T In f u<e ot ., E &'<..renT o , t or~ n r Be

AUSTRIAN EMBASSY

2144 WYOMING AVENUE. N. W.

WASHINGTON 8, D. C.

REF. NO. 3392-5 TELEPHONE, DUPONT 7-2477

April 10, 1954

International Bank forReconstruction and Develo ent1818 H Street, N.W.Washington 25, D.C.

Attention: i1r. A.S. ar

Dear Mr. Hoar:

Referring to our recent conversation I have the

pleasure to transmit you enclosed copies of the Proces

Verbal and a note referring to the Austrian-Italian

negotiations regarding the utilization of $ 6 millionsin lire for Reisseck-kreuzeck from the Italian sub-

scription to the Bank's capital for a loan to Austria.

The Embassy shall appreciate your information as

soon as the management of the Bank has approved the proposals

and fixed a termin for the final negotiations.

Very truly yours;AUSTRIAN EMBASSYBy:

2 enclosures

44

Beilage 1

DEUXIBME PROCES VERBAL CONCERNANT LES CONVERSATIONS

POUR LE DEVELOPPEMENT DE LA COLLABORATION ENTRE

L'AUTRICHE ET L'ITALIE DANS LE DOMAINE HYDROELECTRIQUE

I Les conversations pr6vues 4 loccasion de la reunion

du 28 septembre 1953 h Cortina d'Ampezzo ont eu lieu '

Vienne du 18 au 30 mars 1954 entre une D641gation autri-

chienne et une D416gation italienne. Au cours de ces con-

versations on a continu6 l'examen des termes de la colla-

boration entre l'Autriche et l'Italie dans le domaine hydro-

electrique et on a pr6cis4 notamment lee conditions d'uti-

lisation de la tranche on lires de la socription italienne

au capital de la BIRD pour ltamnagement de Reisseck-

Kreuzeck.

Compte tenu des 4tudes faites et des conversations

intervenues entretemps entre lea Socidt~s autrichiennes

et italiennes int'resses ainsi que des pourparlers qui

ont eu lieu r6cemment par la voie diplomatique sur les

diff~rents aspects de la question:

1. La D616gation italienne a r6affirm6 le vif int6r&t

italien k la mise en oeuvre en commun des ressources hy-

drodlectriques autrichi.nnes, susceptibles d'int'resser

directement au point de vue geographique aussi l'Italie

et a r6itsr6 le d6sir des Autorit~s italiennes d'Stre te-

nues au courant de tout projet concernant leadites res-

sources, avant que des accords soient conclus avec des

Pays tiers.

La D616gation autrichienne a confirmd h son tour lVin.

tention d6jh manifest6e h maintes reprises par lee Auto-

rit6a autrichiennes de coop6rer dans l'esprit le plus large

-2-

avec l'Italie dans le secteur hydro6lectrique, afin de

contribuer au ddveloppement des excellentes relations

existant entre lea deux Pays.

2. La D61gation italienne a confirm6 que le Gouverne-

ment italien est dispos6 4a accorder, pour la construction

de llaizenagement do ReiBeck-Kreuzck, un vrjt, h valoir

sur la souscription en lires au capital de la BIRD, de la

contrevaleur de $ 6,000.000.- utilisable en trois ans come

suit:

a) 20% en lires librement transf6rables;

b) 80% pour des achats autrichiens an Italie en

dehors de l'Accord commercial en vigueur entre les deux

Pays, repartis en principe:

i) 6quipeent et parties d',quipement d'usines

et de rdseaux 6lectriques pour $ 2,000.000.- dont une moiti4

environ pour le Reiteck-Kreuzeck et le restant pour d'autres

amsnagements 6iectriques;

ii) autres produits industriels pour $ 1,500.000.-,

y compris des produits dont l'importation eat encore soumise

en Autriche au regime du contingentement;

iii) produits divers pour $ 1,300.000, y compris

des produits, dont l'importation eat encore soumise en

Autriche au regime du contingentement.

3. En ce qui concerne les modalit6s d'utilisation de

l'emprunt, la D414gation autrichienne et la D616gation its-

lienne se ddclarent d'accord, ' ce que:

a) lea exportations de marchandises italiennes

rdg14es dans le cadre dudit financement seront soumises au

r~gime de la "licence";

b) le rbglement financier de l'op6ration fera l'objet

d'uno entente entre la BIRD et lea bureaux comp~tents des

deux Pays.

-3-

4. La D4dlgation autrichienne s'engage b recomander

aux Autorit6s comp6tentes quo les travaux prdparatoires

n4cessaires h la .r6alisation de l'am6nagement de Dorfertal-

Huben soient acc6l6r~s. Elle a 6galement pris connaissance

des ddsid6rata italiens h l'4gard d'une collaboration do la

part de l'Italie dans ce projet, ainsi quo do son traitement

pr4fdrentiel via-b-vis des am6nagements de btztal at do Bra-

genzer Ach.

Le Gouvernement F6d6ral autrichien examinera ces d6sidd-

rata avec la meilleure volontd de venir h leur rencontre

dans l'intdrit de la collaboration soulign6e plus haut.

De son c8t6 la D614gation italienne confirms quo le

Gouvornenint italion et dispos6 h rocoumandor . la BIRD

la concession d'un autre prt a valoir sur la souscription

en lires am capital de la Baique, h utilisrr des acbats

on Italie.

5. La D616gation autrichienne St la D416gation italienne,

convenues de ce qui pr6chde, sont tombdes d'accord:

- de faire le ndcessaire auprbe de la BIRD pour quo l'emprunt

de $ 6,000.000.- pour l'amdnagement de ReiBeck-Kreuzeok

soit accord6, aux conditions pr6vues plus haut, dan le

plus bref d4lai;

- do confier aux Soci6t6a autrichiennes St italiennes int4r-

ess6es-la tiche de poursuivre la ddfinition des diff6renta

aspects techniques at financiers des questions *nvisagdes

au point 4;

- do continuer par la voie diplomatique l'examen de toutes

lea questions so r6f6rent h la collaboration austro-ita-

lienne dana le domains hydrodlectrique ot do convoquer, le

--4 -

cas dchdant, une nouvelle r6union entre repr4sentants

des deux Pays, afin d'6claireir ultdrieurement lea dif-

f~rents aspects de cette collaboration.

Fait h Vienne, en double exemplaires en langue frangaise,

le 30 mars 1954.

LE PRESIDENT LE PRESIDENTDE LA DELEGATION AUTRICHIENNE DE LA DELEGATION ITALIENNE

L e i t n e r m.p. R i a a i o m.p.

Beilage 3

DER BUNDESMINISTERFUR DIE AUSWXRTIGEN ANGELEGENHEITEN

Zi. 188.999 - Wpol/54

Wien, em 30.Mrz 1954

Herr Botschafter!

Ich beziehe mich auf das heute unterzeichnete 2.Proto-

koll Uber die Besprechungen fUr die Entwicklung der Zusam-

menarbeit zwischen Osterreich und Italien auf dem Gebiete

der ElektrizitAtswirtschaft und insbesondere auf dessen

Punkt 4, welcher die zukUnftige dsterreichisch-italienische

Zusammenarbeit far die Durchfahrung des Projektes Dorfer-

tal-Huben behandelt.

In diesem Zusammenhang muchte ich Ihnen die von der

6sterreichischen Delegation im Laufe der Verhandlungen

wiederholt abgegebene Erklarung bestAtigen, daB nach den

Mitteilungen der beteiligten Gesellechaften noch nicht

jenes Verhandlungsstadium erreicht wurde, das es gestatten

wUrde, der 5sterreichischen Regierung VorschlAge betref-

fend die DurchfUhrung des Dabaklamm-Projektes zu unterbrei-

ten, und daS bterreichischerseits zu der italienischen Be-

reitschaft, der BIRD die Gewhrung eines weiteren Kredites

im Rahmen der Zeichnungsquote in Lire bei der Weltbank fUr

KAufe in Italien zu empfehlen, im gegenwkrtigen Zeitpunkt

noch keine Stellung genommen werden kann.

Sr.ExzellenzEnrico A n z i 1 o t t ia.o. und bev. Botschafter

W i e n

-,

-2

Es wird daher erforderlich sein, daS die beiden Dele-

gationen, sobald oberwthnte Vorschldge von beiden Regie-

rungen geprUft und als zweckmdBig befunden wurden, erneut

zusammentreten, um die Verhandlungen Uber die Zusammenar-

belt zwiechen den beiden Ldndern beziglich Dabaklamm weiter-

zufUhren und zu einem dieebezUglichen Abkommen zu gelangen.

Ich bitte Sie, Herr Botschafter, Obiges zur Kenntnis

nehmen zu wollen und den Ausdrack meiner vorzliglichen

Hochachtung zu genehmigen.

F i g 1 M.p.

AP ? I 9 N4 APIv

-1 -

don 3. April, 195h

Berrn Dr. "arl KrebsTrsitz~de dos orctaides der

Oster2reichischen raukraftwrke A. c.12'enfrt, K~rnten

Astria

Liebor herr Dr. Krebs

Ich habe heute Ihr Telegraima erhalten, worin Sie die Bankersuohen, Thnen clne tclejrayhischc Linlung nach Kla terurtfur die beabsichtigten Ani iheverhandlunien in .ashlinjton iu-ko:ien zu lassen, rn dahrch die ~rt4 Ilung eines a.:erikanischenZirecevisums zu beschleunigen, lch bo6dre, Thnen mitteilenzu mie, sea s die lant o 'nc 'ccloho teledrahicho Lenach-rich tigng nicht vornehawn k' n. So'oald die Voraroeiten fur dieAi 'nahic von mleihevcrhandlu'-en abde schiosson sind, werdon wirdie hiesigo &storroechische 3otsc~ t vorstandiigen ud um die

snthendvn ei'ior 3sterreichischen Delegation ersuchen. Wor zudie ser Dlegation geh~ron wird,hinmt VOLn der iEntscheidunig derostcrreichilchen hegierung ab. Sie werden verstehen, dass unterdie sen 1umst~nden die Bank nacht direkte 1 inladungen an dsterroich-

r tretez enden karnn

as c1i Vicumsangelegenheit anbelangt, so ist wohi anzunehmen,dass sich die Osterreichischen feh~rden hie A'iir verwenden werdenund dCss Sd oierigkeiten uniahrscheinlich sind.

o minen reundlich i Grcsen eh an Ihre sehr verehrte

ran MEahln verb lbe ich a

ihr sehr ergobener

V. Umbricht

Informs Dr. Krebs that invitations to come to the finalloan negotiations to Washington cannot be sent out by theBank. As soon as the preparatory work for the starting of

V!Jnrichtimo such loan negotiations will have been completed, the AustrianEmbassy will be informed of it with the request to send adelegation. The members of such a delegation will be appointedby the Austrian Government /mof

en . April, i

"orrn iDr. Karl KrcbsVorsitzende des Voretandies dertserreichischen D)raukraftwerkce iA.d,

Kla efurt, K~rntenAi. ai

mein )anur hre lisn Zeilor v. . rA

it den ~ttuten l'lsct e ich schor Lben; Io sindandere ihlen die zu lan;sari ahien. A:er auf ieden Fallhnh'en siich die Dingoe jotzt tor ltcn gewendet: die Italienerscheinon sich zuir Bereitstellung vot (sogenmert van 6 Kblollarg in Lire entschloooen zu harn, und ich nohr be tira

an., dlass sich die Bank zur Bereitstellung des aestbetrages ine nuert von 6 lio Dollar in afrs. durohringen wird. umCjeden all tun Herr lnbricht und ich soviel wir klnnen, umdie J eiho vorisrtszutreibern.

t. h rzlichen Jirii nen co an Ihre F'rau,

Ihr

F. h. f ppinheinr

FM1Oppnheimer:mo

FORM NO. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 8, 1954 ROUT ING

TO: INT.2P3T:TIIT7AL -in,1 FOR RdOOC sTRUcTION ACTION COPY TOAND DV]ELOmi T

FROM: INFORMATION COPY TOVIENNA

Decoded By

TEXT:TRANSLATI ON:

JUST RECEIVED AGMENTT THAT IUE-GTIATION DATE POSSI3LY IN APRIL

EQUEST TEIEGRAPH INVITATION TO KLAGENFURT FOR URGENT ZKPEDITIr OF MY TRAVEL

VISA USA KATZL KREBS

Tr anslited by G. AubeGe rman4/8/54

ORIGINAL

FORM No. 26(50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 8, 1954 o6io ROUT ING

TO: UMBRICHT INTERNATIONAL BANK FOR ACTION COPY TO MR. UMBRICITRECONSTRUCTION AND DEVELOPMENT

FROM: INFORMATION COPY TO

VIENNA Decoded By

TEXT:

ERMALTE EBEN VERSTAENDICUNG DASS VERHANDLUNG TERMIN EVENTUELL

BEREITS IN APRIL ERBITTE EINLADUNG TELEGRAFISCH NACI KLAGEN-

FURT ZUR DRINGENDEN BESCALEUNIGUNG MEINES EINREISEVISUMS USA

KARL KREBS

ORIGINAL

10C Ap 11,11

APR8 OIOAI

- -

FORM No. 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files DATE: April 7, 1954

FROM: V. Umbricht

SUBJECT: Working Party Meeting on AustriaMonday, April 5, 1954

1. Economic Report on Austria.

The Working Party discussed the Report fully and suggestedvarious amendments.

2. Hortgage on Reisseck-Kreuzeck Properties.

Oppenhimer explained that taking a mortage is, under Austrianlaw, the only safe way to male a negative pledge effective. Tentativediscussions have already been held to this effect with the Austrians whovoiced no objection against such action.

The general view was that a mortgage should be taken withoutattachment to the bonds. Should this prove too complicated, however,then the request for a mortgage should be given up. The mortgage shouldtherefore not constitute a conditio sine qua non; all the more sosince the Draukeaftwerke and the Verbundgesellschaft are in factgovernment-and state- owned companies.

3. Self-liquidating Aspect oL Loan.

The Working Party confirmed that the proposed loan to Reisseck-Kreuzeck should be self-liquidating only for its lire-component; theproceeds Prom the power contracts with the Italian companies should notbe tied to the Swiss franc part of the loan.

U. Grace Period.

Spottswood stated that a grace period of 5 yoars be recommended --not four years, as previously envisaged. The change is considered justifiedby the Technical Operations Department because the disbursement of theloan should be proportional to the overall expenditure for Reisseck-Kreuzeck;this procedure would also apply to imports for i'eisseck-Kreuzeck.

Brion and the other members of the Working Party asked for time to

consider and rediscuss this disbursement procedure.

cc. Members of theWorking Party

VUmbricht: mo

FORM No. 27

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OUTGOING WIRE

DATE: APRIL 6, 1954 CLASS OF SERVICE DESIRED

TO. STAHL NIGHT LETTER CODE E:]VVINNLA DEFERRED ] FULL RATE

EUT RIA) TELETYPE

THANKS FOR CABLES ONE AND FIVE APRIL AND FOR GOOD NEWS STOP DETAILED

PROPOSALS FOR FINAL NEGOTIATIONS WILL E SUBMITTED TO BANK NANAGEIENT

NEXT FEW DAYS STOP IF APPROVED WE WILL ASK YOU TO COTE WASHINGTON STOP

HOPE THAT THIS WILL BE POSSIBLE SHORTLY AFTER EASTER STOP REGARDS

UB4I3RICHT

AUTHORIZED BY: For Use by Archives Division

NAME A. S. . O Checke for DispatchDirector

DEPT. Operation , urope, Africa & Australasia

ORIGINAL (FILE COPY)VUmbricht :mo

Cj7

FORm No. 59V3- 4,3

CROSS REFERENCE SHEET

COMMUNICATION: I*t.Wr

DATED: April 5, 3#54

TO: ID

FROM: ad,n Blnk of Sa.tsde

SUMMARY: Espressing ap cation forws..pi*s as.wds4Dr. ShsWer. In *Low .t pressan pir.wi$.1g low Intemast rates fredim and long tew lon*, we have thoqght of Austra, portugal & Newr.

FILED UNDER: l4taeor.and - Proposed Joint Operation

CROSS REFERENCE: g e - Generalb -loa 97

Aus - ais

)~ A

DR. RUDOLF STAHL WIEN 1,AM HOF 2

GENERALDIREKTOR DER USTERREICHISCHEN TEL.: U 21-5-15ELEKTR:ZITA.TSWIRTSC"AFTS- AG.

(VERBUNDGESELLSCHAFT)

114

4n --. 0000'2 r

r yi c" 4 .>

4 7 ".

: 4

1 C1 PYY~ ~

4 !- n

'4' 7T ---

3D 7 n p4 2 4'-4' ~ 4 7 ( 7

i- - - 4

-, i) 71 p}

o -

C7 74'4'"2)

T4

FORM No. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRII 5, 1954 ROUT ING

TO: I PT=ATIOCAI - AnK FOR RBC OITSTRUCtTION AND ACTION COPY TOflEVJLO13NT

FROM: INFORMATION COPY TOVIEflNA

Decoded By

TEXT: TRA1SLATION:

TEUFNSTEIN AND I APPOI1TED FOR CLOSIN NEGOTIATIONTS. BECAUSE OF

TIME COMIT1v0TS TEUFENSTEIll REQUEBSTS INDICATION WITROU OBLIGATION OF PROB4I

TINE ANID PLACE RGARDS

STAHL

T anslated by G. Aube'German4/6/54

ORIGINAL

FORM No. 26(1.50)

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 5, 1954 1833 ROUTING

APRILIO CO, T95 18334,4TO: UMBRICHT INTERNATIONAL BANK FOR ACTION COPY TO

RECONSTRUCTION AND DEVELOPMENT INFORMATION COPY TOFROM:

VIENNA Decoded By

TEXT:

TEUFENSTEIN UND ICH ZU ABSCULUSSVERHANDLUNGEN BESTIMMT.

WEGEN TERMINVERPFLICNTUNGEN BITTET TEUFENSTEIN UNVER-

BINDLICHE BEKANNTGABE VORAUSSICHTLICKEN TERMINS UND

ORTES GRUESSE

STAHL

ORIGINAL

,gf)17

AP 2I1I

FORM No, 590.-49)

CROSS REFERENCE SHEET

COMMUNICATION: Letter

DATED: April 2, 1954

TO: IBRD

FROM: Austrian Embassy

SUMMARY:Letter releases 18% of Austria fcruse in the Reisseck-Kreuzeck

Project.

"It has been provided that 4.8 million dollars in Lira are tobe used for purchases in Italy, wheras the rest of 1.2 milliondollars in Lira is for free use".

Mr. Hoar acknowledges letter on April 8, 1954 and will keep in

touch with the Embassy.

FILED UNDER: Austria 18%

CROSS REFERENCE: Austria Power Project

FORM No. 26(1.s0) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INCOMING WIRE

DATE OF WIRE: APRIL 1, 1954 1814 ROUT ING

TO: UMBRICHT INTERNATIONAL BANK FOR ACTION COPY TO MR. 1RECUNSTFUCTION AND DEVELCPMENT

FROM: INFORMATION COPY TO

VIENNA Decoded By

TEXT:

ITALIAN NEGOTIATIONS SATISFACTORILY CONCLUDED SIX MILLIONS

DOLLARS. OFFICIAL INFORMATION NEXT FEW DAYS REGARDS.

STAHL

ORIGINAL

APR I5#p.1

FORM No INTENATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Mr. A. &. G. Hoar DATE: April 1, 1954

FROM: Victor Umbricht

SUBJECT: Reisseck-Kreuzech - Austrian/Italian Power Contract

1. When the Staff Loan Comittee recommended in summer 1953 that theBank consider in principle a loan to Austria for the financing of theReisseck-Kreuzech project, it did so on the assumption that the loanwould be made entirely self-liquidating in lire, through the sale ofpower to Italy and the assignment of the sales contract to the Bank.It now appears that only half of the proposed $12 million loan -will bemade in lire and that the other half will probably be disbursed in Swissfrancs, thus detracting from the self-liquidating aspect of the loan.

2. The question thus arises whether the self-liquidating aspect ofthe loan should be limited to its lira component only, or whether theproceeds from the Italian power contract should be pledged to cover thedebt service of the Swiss franc part as well.

3. The preliminary agreement for the sale of power concluded betweenItaly and Austria in April 1953 provides for the delivery of 80 millionkwh. per annum to Italy and will become effective on condition that anIBRD loan is obtained for completion of the Reisseek-Kreusech project.Its duration will correspond to the term of the proposed loan and theannual lire income from the contract, according to a conservative estimate,will be approximately $720,000 equivalent in lire.

On the other hand, annual service and amortization payments onacco he lire component of the loan ($6 million in lire; 20 yearterm, 4 7/8 is expected to amount to approximately $570,000. The yieldof $720, from the power contract would thus amply cover the service onthe lire part of the loan, while the remaining $15D,000 would onlyconstitute slightly more than 1/4 of the sum required to service the$6 million in Swiss francs.

4. As long as EPU exists, the Austrians will be able to service theSwiss franc component through EPM; they should thus experience nodifficulty in obtaining the necessary Swiss francs required for the debtservice and there is, therefore, little justification in the Banktsretaining (in any form) the remaining proceeds from the power contract tooffset the charge on the Swiss franc part.

Should EP disappear and not be replaced by a system of freeconvertibility, then it is unlikely that lire will be freely transferableto a Swiss account. The Austrians will then have to service the Bank loanthrough the Austrian-Swiss Monetary Agreement. Holding lire in such anevent would simply mean that in case of an Austrian default in Swissfrancs, the Bank would at least have some lire in hand.

5.........

a2 s

5. It should not be overlooked, that Austria's economy has madeconsiderable progress in the last year or two. Moreover, the missionto Austria recommends that the total loan for Reisseek-Kreuzeck besecured by a mortgage on Reisseck-Kreuseck.

6. These considerations seem to justify the conclusion that the loanwill be adequately secured without tying the proceeds from the powerpontract to the Swiss franc part of the loan. It might entail an undesirablecomplication of the loan administration by holding a currency "in reserve"that may not be required and mould therefore have to be released at alater stage.

The retention of "reserve-lire" might also be interpreted as areflection on Austria' s credit standing.

7. It is important to come to an early decision on this question,because in the event that the Bank should decide to insist on a powerproject, the proceeds of which mould be sufficient to cover service and

amortization payments for the entire loan, the existing preliminaryagreements between the Austrian and the Italian companies would have tobe renegotiated in important respects. Such negotiations may be expectedto take some time# hence the desirability of an early decision.

Cleared with Mr. Oppenheimer

K.

>r. A. . J. Hoar s 26, at91

-. mbricht

2: alian hIre eoleme f:r misec-ireumeok

Telephone Conversatio. with )r. 1Jaier, X r a assy,Theraday, Mach 2,., l954, 5 ~

D)r. isaier says that,accodi to Linmtion from 'Iienra,the Astriani-Italian talkhs reg~ardin; the utilization o f nllionequivalent in lire do not prove vory difficult. Th main stuiiblinblock seeing to lie in th Italiani deand, that the abka projeettie constructed as the next plant. The Austrians are not willing to

ive such a firm pledge, as they have already rwozised the tier ansthat the nT t step would be te execution of the Linerseo project(letter of faits enclosed).

c talks are continuia .

closu~re

cc. hessr8, QppealierCpottswoodRosenCope

VUmbrich :mo

Translation frM the uerman

The Federa. Ninister for Finance Vienna, 19 February, 19 5

Cntlen:

With reference to the letter of your Diirector, Dngeneerzannfl, dated Iecember 28, 1953, and to the conversations which

have taken place in the Federal Finance inistry regarding theconstruction of the ilneraee project with a credit from theWorld Bank, I inform you that I should like to wait first forthe final conclusion of the ing loan najotiations in respectof veisseck-Kreuseck, for which I was instructed by the AustrianCsovernunt to put a loan reuest to the World k

After having erlined the creditworthinesy asv-ct of thecredit opcration proposed by :ou and a.ter consultation with theFederal inister for ransport and Nationalized Indutres andwith the National ank, I give you whrewith the assent that Ishall ask the Austrian abinot, as soon as the -orld Bank hastaken a positive decision in principle concernind the gantingof a loan to Reisseck-Lreuzeck, for authority to submIt,asa next request to the World Bank, a loan aplication for the water-p er project Lunorsoc; th ia rantee of the Federal a'verniontwll be pled;cd at the s7av tine,

You may convey the above declaration to the Lerman edoralAuthoritie/s concerned.

sours truly

Is! Kamits

Vo'arlborgor IllwsrkesBregens

P. o. BOX 1133 - TACOMA 1, WASHINGTON

Plant: 3001 North Starr StreetPhone BRoadway 0306

March 25, 1954

VIA AIR MAIL

Dr. V. UmbrichtInternational Bank for Reconstruction

and Development1818--H Street, N.W.Washington 25, D.C.

Dear Dr. Umbricht:

I wish to thank you for the detailed i ormation which

you gave me in your letter of March 17th on the subject

of equipment orders for the Reisseek-Kreuzeck Hydro-electric project. Your letter was forwarded to Tacoma

where I am staying at this moment.

I am flying from here to Mexico and from there back

east shortly before Easter. I shall be in Washington

one or two days and shall not fail to call on you.

Yours very sincerely,

HSchindler: K

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FopmN,5F5- N8 5INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

FFICE MEMORANDUMTO: Mr. R. L. r DATE: March 17, 1954

FROM: A. S. G. hoar

SUBJECT: Loan Negotiations with Austria

1. The Austrian Government addressed a loan request to the Bankfor Reisseek-Kreuzeck in July 1953. The Staff Loan Committee consideredthis request at its meetings on July 27 and September 30, 1953. Itsconclusions were that a loan to Austria be considered on a self-liquidatingbasis in lire and that the Italian Government should be approached with aview to obtaining release of $12 million equivalent of their 18% subscrip-tion. It was understood, moreover, that Austria could at best earmarkonly around $4 million for equipment orders in Italy and that the remainderof $8 million had to be in untied lire to cover local expenditure inAustria.

2. A mission headed by Mr. Prud'homme went to Vienna and Rome inNovember-December 1953 to hold talks to this effect with the Austriansand Italians. The discussions in Rome revealed very soon that the Ital-ian Government were not prepared to release a sum as large as $12 millionequivalent for Reisseek-Kreuzeck (because not enough would be left forDabaklamm or for projects in other countries). Nor were they willing torelease untied lire. They pointed out that their heavy cumulative netdeficit in EPU made it practically impossible for them to envisage an in-visible capital export.

3. The mission thereupon examined with the Austrian authoritieswhether, besides the $4 million equipment order for Reisseck-Kreuzeck,additional possibilities were open to Austria to use released lire forpurchases other than equipment. The conclusion was that the only door openfor additional imports from Italy was by stepping up some Austrian pur-chases of goods in the non-liberalized trade -- at best for another $2-3million.

4. Consequently, the proposal was put to the Italians for a lirerelease of at least $8 million on the following basis: approximately$4 million for Austrian equipment purchases, $2-3 million for addition-al Austrian imports of general trade goods and $1-2 million untied.

5. It looked at one time as if the Italians were going to agree tothis proposal. The subsequent political crises in Italy, however, de-feated these hopes. Moreover, a new difficulty arose when the Italianauthorities informed the Bank in February last that they were ready tomake available to the Bank for lending operations the whole of their un-committed 18% subscription, subject to, among other conditions, a rsingle country not obtaining more than one-fifth or $5.4 million of theuncommitted Italian quota of $26.8 million.

6. The Bank has urged the Italians to reconsider their positionin respect of releases for Austria and to hold bilateral talks with the

Austrians on the use of such releases. These talks are scheduled for

the present week in Vienna. It looks, however, that at best a release

of $6 million can be expected, of which part would be used for equipment

orders and part for the purchase of other industrial goods. Whether a

token sum will be released by Italy in untied form, as has consistently

been asked for by the Bank, appears still uncertain.

7. It is thus clear that any loan for Reisseck-Kreuzeck will be

self-liquidating in lire for $6 million at the most; any additional

amount lent will have to be provided in another European currency and

will not be self-liquidating in that currency.

8. Austria is creditworthy in EPU currencies. Since, for the time

being, there is little prospect of our obtaining untied 18% from our

European member countries, the best way of filling the gap would be to

lend Swiss francs from the Bank's own holdings. The Swiss authorities

have agreed that such francs could be transferred to, and retransferred

by, Austria through EPU, or, if EPU should disappear without being re-

placed by some other arrangement for mutual convertibility, through anycurrent Austrian-Swiss monetary arrangement. In such circumstances the

Swiss francs lose their "hard currency" character and there would be no

objection from the point of view of Austria's creditworthiness.

9. Of course, the more we use of Austria's general creditworthiness

for Reisseck-Kreuzeck, the smaller the margin for other projects, but

R-K is important as an initial step for Bank operations in Austria which

may eventually embrace quite important international power schemes. I am

still in favor of our going ahead, therefore, even though the originalconcept of complete self-liquidation in lire will not work out.

10. Reisseck-Kreuzeck is technically and economically sound as a

project.

11. I therefore recommend that, if the Vienna discussions should

work out satisfactorily, we should be prepared to negotiate on the basis

of a total amount of $12 million equivalent in European currencies, ofwhich $6 million in lire and $6 million in EPU-Swiss francs.

March 17, l95h

,,ir. h.ans Schindler,irector.aschinonfabrik uerlikon

Zurich - OerlikonSwitzerland

Subject: Equijpnt Orders for theReisseck-Kreuzeck 'lyroelectricirj0ect in Austria.

e * r 'chindler:

Kindly refer to your letter dated arch 11, 199A, on the above subject.

The fank1 s Articles of Agreement do stioulate that it shall impose noconditions that t-e proceeds of a loan Thall be ent i the territories of anyparticular member or members, except to ensure that the proceeds of the loan beused for the purpose for which the loan was granted, with due attention to con-siderations of economy and efficiency and without regard to political or othernon-econonic influences.

There are sometimes cases, as for examle in regard to the seisseck-Kreuzeckproject, where various, and quite valid reasonS, may prompt the borrower to turnpreferably to one supplying country as aginst other6. The basic elerent of theproposed loan to the Reisseck-Kreuseck project is anticipated to be Italian lireout of the Italian 1.3 subscription to the Bank's capital. The Bank' s vidlingnessto lend lire springs from the f act, that the Italian power companies will purchase,and hie- actually alrea4 concluded purchasing contracts for, considerable quan-tities of electricity from Austria, whereby their lire payments will be availablefor the amortization and servicing of the lira part of the IBRD loan. The Italian

overnment, on the other hand, will only release part of its 18, subscription forlending to Austria if the sua is mainly spent in Italy; otherwise the axport ofthe money would increase Italy's EPJ debt and result in a corresponding loss ofgold, to which course the Italian Government does not agree in prosent circu-stances.

Should a lire loan therefore materialize, it will entail Austria's placingsome equipmznt orders in Italy. This they are apparently willing to do - notonly because of the competitive Italian bids and the power contracts with theItalian companies, but also to attract Italian interests still further into futureAustrian hydroelectric projects like those represented in Interalpen.

eo' L ctr 21e ~~~t r t~ e L c-. e a. ~ o~ ~U~evEr, o Qr:av t -vi.dO itlr. la :o A Te ahe dactal been Qrr ered in Jwitzerlaini.

I oe .his oweirs your ruestions ,n the ro oed. 1' Uo~ tra.TouV yor have anyr other a ostton8, kLidly let io knowi.

Yours sincro gj

. n U~rieh

Bhao :VUmbricht :mo

iarch 16, 19$4

1)r. Paul KlePresidsntUationa. Bank of SvitzerlandZurich, Switzerland

lcar )r.

1ny thanks for your letter of March 8 in which you confirithe consent of the Swisn Authrities to the transfer to, and retransferQy Austria of up to 2 :dnion 3Vse francs via E-1U or axg otherAustrian nts a, nt in for at the ti.

The Biank appeciates t ie Swisao cooperation very mucwh indieed, andI should like to Baxpr to you and your col. a our thanks for it,

all keep you inrd of the developent of our ulks with tIhAustran rmnt,

with Eir best personal regards.

Yours sincere *

A. 3. J. Hoarcirector of 'perations

uropv, Africa and Austaasia

VUmb richt :mo

FoRm No. 57 .(5-48) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Mr. A. r. G. Hoar DATE: March 15, 1954

FROM: V, Umbricht

SUBJECT: Austria -- Reisseck-Kreuzeck

I had a conversation on Saturday, March 13, with CounselorBaier about the forthcoming Austro-Italian trade talks in Vienna*Moreover, I received a letter from 1Mr. Wietz of the Verbundgesell-schaft, Vienna, about the same subject* The position of Reisseck-Kreuzeck now seems to be as follows:

1. The Italian delegation will consist of Minister Riccio, Mr.Pierantoni (both of the Foreign Office), Mr. R. Boggia (Ministry ofIndustries), Dr. Loreto (Foreign Trade) and Prof. Visentini.

2. The Italians are apparently willing to release $6 millionequivalent, of which IO>% for equipment, 40% for other industrialproducts and 20% untied (on account of the Bank's insistence on atoken untied sum).

3. It is not quite clear in what form the Dabaklamm project willbe linked with Reisseck-Kreuzeck, but the Italians apparently wish toobtain an Austrian undertaking that Dabaklamm be given priority overany other subsequent power project.

cc. Messrs. CopeRosenOppenheimerSpottswood

FORM NO. 593.49 )

CROSS REFERENCE SHEET

COMMUNICATION: Letter

DATED: March 15, 1954

TO: Dr. Max Ikle, Ministry of Finance, Berne, Switzerland.

FROM: A.S.G. Hoar

SUMMARY: Acknowledging letter of February 17th. & data on Swiss capitalmarket.

You may have seen My. February 18th. letter to Dr. Keller aboutReisseck-Kreuzecki The Bank is going ahead with active considerationof a loan to Austria. I have just received his confirmation that Swissauthorities are agreeable to the transfer to, & retransfer by, Austriavia EU of an amount up to t25 million Swiss francs.Swiss Credits to France. Regarding Bank participation to study the

question of Cooperating in some way in a 100 million Swiss franc creditfor electrification of the Dijon-Villorde and Strassborg-Basle lines.Appropriate time for formal decision would be when French goverbrment andyourselves have come to a natural understanding to approach the Bank,however, we would welcome any opportunity for an informal exchange of views.

FILED UNDER: Switzerland - Proposed Joint Operation

CROSS REFERENCE: Austria - Reisseck-Kreuzeck

FORM N. 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Files DATE: March 12, 1954

FROM: V. Umbricht

SUBJECT: Reisseck-Kreuzeck

Dr. Baier tells me over the telephone that he received today a copyof a letter addressed by the Austrian Foreign Office to various otherAustrian Departments to the following effect:

1. Italy has at last officially indicated her willingness to bilateraltalks with Austria on Reisseck-Kreuzeck. The talks, to be held in Vienna,are to start either on Monday, March 15 or 22.

2. Italy is apparently prepared to release at best $6 million forReisseck-Kreuzeck. It is not quite clear whether for equipment only orpartly for general trade. The Austrian interpretation of the Italian com-munication is, that Italy may lend a hand to a fifty-fifty deal (halfequipment, half trade), but are not sure of it.

3. Italy wishes to discuss also the Dabaklamm project at the Viennameeting, for which they are apparently ready to consider a release of upto $10 million.

4. The Italian delegation will be headed by inister Riccio, Ministryof External Affairs.

cc. Messrs. HoarCopeRosenSpottswoodOppenheimer

VUmbricht:mo

MASCHINENFABRIK OERLIKON

D IRFE KT iO0NZURICH-OERLIKON, March llth, 1954.

Dr. V.H. Umbricht

World Bank

W a s h i n g t o n

Dear Dr. Umbricht,

When you received me last November in Washington, you told

me that the World Bank would probably give a loan to Austria for

the construction of the power station Reisseck of the Drau Kraft-

werke A.G., Klagenfurt.

Our Austrian friends inform us however that this loan will

be connected with an Italian quota and that Austria will be obliged

to place orders for electrical and hydraulic machinery and apparatus

in Italy.

According to the information you and other World Bank's

officers had given me, I was due to believe that the debtor of

World Bank's loans could decide himself where he wanted to place

orders for instance for the equipment of power stations.

I would be much obliged if you would let me know whether

an obligation to place orders in Italy will be made in the case

of Reisseck. Would it eventually be possible to replace the Italian

quota by a Swiss quota ?

Thanking you in advance for your information,

Yours very truly,

A ir Ws1 iareh U, 1V&

r. iuo. ta!Aserr4 :ris::e ~lew I* ini rtteter no

Vi t iin Wi es c7lr -t% o f 2

en1, Austria

.Clarer Dr. :t1et

This ~ill a knoil V8 ec:eipt ol yrour J.eter of 8 rmy 1.6n14 me the !nt'o'ron I reeutt in my letter oI' ei r n17 1'.

j e1ay In wkno- 18dgrinr your 1ettcr wa o tie ty ~e i e<frmte P-nX on a tr g. to Me ilo frow vhi ch I ave .1-t re4uzn&.

Your ra t rly 'n o letterein preited.

ours sirncerely,

(Cleared ~ith Dr. Rembert)

SCHWEIZERISCHE NATIONALBANK - BANQUE NATIONALE SUISSE

BANCA NAZIONALE SVIZZERAZURICH-BERNE

AARAU. BALE, GENtVE, LAUSANNE, LUCERNE, LUGANO. NEUCHATEL, ST-GALLBIENNE, LA CHAUX-DE-FONDS, WINTERTHOUR

ALTDORF. BELLINZONE. COiE. FRIBOURG. HERISAV. LIESTAL. SCHAFFHOUSE. WYZ, SION. SOLUURX. WEINFELDEN, ZOUG

DIRECTION GtkNLRALE i r ch, March 8, 1954.DEPARTEMENT I

TELEGRAMMES: DIRECTIONALTtLtPHONE No. 2.47.40 Mr. A.S.G. H o. a r e

COMPTE DE CHtQUES POSTAUX No. VIII. 989

Director of 6perations Europe, Africa andAustralasia,

International Bank for Reconstructionand Development,

W a s h i n , t o n 25, DC.

Dear Sir,

In reply to your letter of February 16 and

with reference to the previous conversation between

representatives of the Swiss Government and Mr. Ubricht,

we wish to inform you that the Swiss Authorities give

their consent to the transfer of a maximum amount of

25 million Swiss francs through the EPU to Austria. It

is understood that this amount forms nart of a loan

granted by your Bank to Austria and that it derives from

your Bank's Swiss franc holdins arising from its borrow-

ings in this country.

In addition, the Swiss Authorities are prepared

to accept, through the EPU or any other Swiss/Austrian

payments agreement that may be in force at the time, pay-

ments for interests and the reimbursements of capital,

the latter up to an amount equal to the sum transferred

through the EPU to Austria. Capital repayments are ex-

pected to begin about July 1958 and to extend over a

period of 15 to 20 years. Both interests and capital

reimbursements are to be credited to your Bankts Swiss

franc accounts.

iccording to article 2 of the Ordonnance issued

by the DDpartement politique fad6ral on May 15, 1950,

SCHWEIZERISCHE NATIONALBANK - BANQUE NATIONALE SUISSE

BANCA NAZIONALE SVIZZERA

an:r. HOar, Director, International Bank Tor Datum: arChX 8, 5E Blat2P Reconstruction and Development, vashington Date: Feuille

the Swiss Autlorities have declared their readiness to

treat, the above part in Swiss francs of your loan on

terms equal to tkhose in operation for Swiss claims de-

riving froim capital exports.

Yours sincerely,

BANU~E NTION\ALE SUISSE

!ILOVED

MAR 19 ' Ai 4

3arch , 195

Dr. Rudo3f Stahlieneraa ManagerOsterreichisehe slektrizittswirtschafteV-

Aktien esellschaftAm ilof 2Vienna, Austria

Uany thanks for your letter of iMarch I and the interesting information

and I have been instructed to sumnwariz~e the Bank's views as follows'

1. heisseck-reuzeck. W havo ben 8 ht surprised to learn thatthe i tak have noT t started; the Bank is indeedancious to push ahead with ieisseck-Kreuzeck, not only for its own sake, bitalso because it is blocki the wy to the consideration of other projects.Uur director, Mr. Hoar, has therefore once again spoken to Mr. Pick and hasexpressed the ank's desire to have word of how things stand. Mr. Pick haspromised to send ixiwdiately a cable to this effect to Ioie. We do hopethat things will uiove now.

c would appreciate it of course if you could kindly keep us infor mdof anything that happens at your end.

2. pen. The Bank feels that the most useful course regarding thedevelotof the Interalpen projects would consist in having, in due course,a full exchange of views with all the interested parties, representatives ofthe various financial authorities as well as of the power companies, where theBank would also be present. The working out of a questionnaire may thus bepreature, as long as so's basic elerents are not cleared up (like releases of1, t he Interalpen members, etc.). The Bank is agreeable to look at thisproblem once isseck-Kreuseck is out of the uay,

3, LTneree-project. The Bank has so far not had an opportunity tostudy the rsee proposal. Should the Austrian Governmnt desire to put itto the Bank, we would then certainly consider it along our traditional lines.

7,;

,. Rudolf Stahl * 2 M darch 8, 195

e ftulr aPpreciate the wish of the Austrian Authoritis to Se first theRiu0k.Krguzeed prob3eA settledl this seemto us also the beft approah.

SizoerL3y yOurs,

cc. Dr. B;ierAustrian Embassy

Mr. HilU

Vfmbricht :mo

FO#M NO. 75 INTERNATIONAL BANK FOR(3.52) RECONSTRUCTION AND DEVELOPMENT

Date

ROUTING SLIP

NAME ROOM NO.

Action Note and FileApproval Note and ReturnComment Prepare ReplyFull Report Previous PapersInformation RecommendationInitial Signature

Remarks

Fr!/ "-

Froi

FOM5.48) 57 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

OFFICE MEMORANDUMTO: Mr. A .G. Hoar DATE: March 5, 1954

FROM: V. Umbricht

SUBJECT: Reisseck-Kreuzeck Project

nclosed is a letter (and translation) from Dr. Stahl, dated3.1.54. The tone is one of deep disappointment -- almost despair.The Italian Delegation, which was expected in Vienna on February 22,had not yet arrived by March 1, without any explanations given.

He mentions moreover two separate points:

a. a Bank loan of DM 30 million for Ltnersee, in which theGermans are, as we know, very interested,

b. the future work in Interalpen, which will consist inworking out the basis for the financial participationof member countries.

cc. Messrs. CopeRosenOppenheimer

Enclosure 4.

,AX., '. cAk zz 4 , Ak 5

.~t~e .0F4 q 4 a'c~z'

<44

Uh atch 192%

ir. RudolC Stahlesterreichieche 1Elektriiitatswirtschart5-

AktiengeallschafVAj Hoff 2ien 1, Austria

M)er Dr. Stahis

I imut begin this letter with an apology for not having written

to you earlier to express y co gs i and y own sincere appeci-ation, both personally and officially, for all -hs help and hospitalityshown to our mission in Vienna. (ur stay there was certainly verypleasant and the assistance which sc weve given by you and your colleaguesprovd -most useful and complete.

Tay I also thank you for your intersting letter of ebruary 1, 19h.I learnead from Dr. Teufenstein, that the date -or the talks betwen the

Austrians and Italians has in the vantix been fixed and that ngotiationswre schduled to take place durn the week of irebrary 22 - 28 Althoughwe have so Car not heard of the outcoma, we do hope that the result willenable the Fank to .o ahead iith the loan negotiations without delay. Ican ansre you that w are fully consciovs of the importaxce of the tinefactr in your calculations.

I trust therefore that all shall soon have the pleasure of seeingyou and your friends in a n and sed you my kindest r ards.

YOurSs ic rely,

V. mAricht

VImbricht: mo

OberbauratDipl. Ing. Dr. techn. Oskar Vas Wien,am 3.Marz 1954Dozent an der Tedhihdn Hodisdhul* Wien I., Am Hof 2Vorstandsmitgled der strrdicf en Elek. Tom phn U 21-5-15 GLtrizitltswris-afts-A.G. (V.rbundgeselsdiaft)

HerrnViktor U m b r i c h t

International Bank forReconstruction and Development

1818 H Street, N.W.

V1 a s h i n g t o n 25, D.C.

Lieber Herr Umbricht!

ILre Anfrage vom 25.Februar beantworte ich schnell

wie folgt:

ausgebaut Summe Ausbaugrad31.12.1953- in Bau') 2 + 3 (Kol.4 in )

v.Kol.1 )

2 3 4 5

1 193 228 1 421 40,6

1 198 360 1 558 16,4

883 288 1 171 33,4

735 179 914 31,5

1 183 545 1 728 51,6

1 683 560 2 243 24,0

476 1 251 1 727 24,4

9 9 1,1

7 360 3 411 10 771 26,9

x) Einschliesslich der in das Jahr 1954 reichendenI:'natsanteile.

xx) Chne die aus dem Jahre 1953 in das Jahr 1954reichenden Monatsanteile.

Die Reihen und Zeilen entsprechen der Tabelle 1.

Ich hoffe, Ihnen danit Ihre Frage wunschgemdss beantwor-

tet zu haben.

Wir hoffen alle, dass die Weltbankanleihe schliess-

lich doch noch zustandekommen wird, denn wir betrachten sie

nicht nur als eine F6rderung in wirtschaftlicher Beziehung,

sondern auch als einen wesentlichen Prestigegewinn, den

wir nach den Berliner Abenteuern bei Gott natig haben.

Ich stehe Ihnen gerne zu allen Auskunften, die Sie

ben5tigen, zur Verfhgung und bleibe mit den besten Grissen

Ihr sehr ergebener

&~

I h 4

t a wt {k

I klraig7,

.wa, >

-7 2

/ 4

~~A J

are 3, 1954

Lr. I rnet ~ngnerhMirntnerrinC 10Viennai 1, atria

Sear r. a.nr

Thi. is to acknoWledge w th thanku your letter of Eebry 26enclosin the Conittee i.port, dated February 10, 1951 on amendingLaw No. 154 authorizing the FederAl Governaent to contract 1nd to

guarantee foreign 3ae4a,

I note that the original bill hsz been changed by adding a newsub.-pragraph (1) to paracraph 3 thereof, reding, in triun ltion"This ?ederal law "essee to e in force on beceuber 31, 1958." I

aea, that this liitation of the duration of the law cannot affectthe validity of muaranteee i ifl under it, ov n thkugh the tem ofth* loan guaranteed exceeds the duration of the law. ;iowever, I donot quite underntand, the aecond jra raph of the lomittes .noportwhich, if I trInolate, in sglish, about as follwet

"Ln0 vaJlidityr of vhe 1l'w-which at ithe date of the guiranteeaw t cover as long a terw ,a the CUrantee 13 to cover--iS

at preaent liwitod to becember 31, 1955."

Con~sjuently, ! wonder whether iy assunption tht the cut-off date of

the law would not inpair the valkity of a uarAntee running beyondthat date '- accurate. I realize that the subsequent remxr'ks of the

Cotittee Report run counter to e restrictive interpretation, and

should iuffice to reove any doubts, but 1 ohould n(vertheles feel

reassured if you could send ne a line on this point.

sincery yours,

i 0Cppnheior v

cc: Mr. nrbr. Ubricht

Translation from German

Dr. Rudolf StahlGeneral ManagerOsterreichischeElektrizitatswirtschafts-A.G.(Verbundgesellschaft) Vienna, 1 March 1954

Dear Mr. Umbricht:

I should like to submit to you today the following:

Some time ago the Vorarlberger Illwerke came to Vienna in order to preparea request to the Federal Government to the effect that the Government approachthe World Bank for a loan of 30'million DM for the development of the LHnerseeproject. The German electricity users insist that, as a condition for theirconsent to the construction, the financing be a 100 assured, Of the envisagedcost of 900 million (shillings) for the Linersee project, the Illwerke havealready approximately 600 millioZ at their disposal, roughly 100 million shouldcome f om other sources and 30 million DM should be the amount of the World Bankloan. ( The German Government is apparently ready to give its approval to theutilization of its 18% subscription. I hear that the Finance Minister (Mr. Kamitz)envisages a declaration which would meet the Gerpn desire; he is, indeed, con-sidering to put such a proposal regarding Lune ee before the Austrian Governmentas soon as the Teisseck credit is settled.) f

It could be of interest to the World Bank to mobil ize part of the German 18;quota. Competent authorities in Austria have also decisive economic reasons forsupporting the Linersee project. They do not think that it would lead to aweakening of the Interalpen concept -- be it only for reasons of time.

Following our last conversation in Paris, I should like to ask you to examinethe position and let me have your opinion and advice at your earliest convenience.

I have heard in the meantime through Mr. Engel that, according to Mr. Hill,the World Bank questionnaire regarding Interalpen will only be sent to us afterthe settlement of the Reisseck credit. We are engaged, for the time being, withworking out a system of contracts "as if" there existed already full agreementamong the partners. It is my intention to discuss these basic contractual prin-ciples severally with the partners as soon as they have a bit more crystalized.If you are agreeable I will send you this concept over to keep you informed onmy personal views.

The development of the bilateral negotiations between Italy and ourselveswith respect k Reisseck-Kreuzeck iscecidedly unpleasant. The Italian Governmentwas invited some weeks ago to send a delegation. Since then unofficial communic-ations from Italy have reached me which are partly contradictory; in fact, nothinghas happened so far. Whether and when the delegation will come is as uncertain asits mandate. For me this development is "odious". This method ignores simplyeverything what we, the electricity experts of half of Europe, have done so farand have intended to do in the future -- animated by our conviction for Europeanthinking and for multilateral advantages, and helped by the attitude of our govern-ments.

AkA

-2-

I know that an Italian trade deficit with Austria has developed in the lastyear -- although I personally would not rely too much on the specific statistics;but in our case the amounts involved are relatively minor; their importance lies in

the question of principle involved.

Besides that, the Italian procedure causes increasing aversion in the public

against all that what we need so urgently: international collaboration, international

credits, private and personal initiative, etc. It discourages really all the effortswhich should be forthcoming in present circumstances.

The situation will perhaps be somewhat better at the time I receive your answer,

I remain with ny best regards,

Yours sincerely,

/s/ Stahl

DR. RUDOLF STAHL WIEN 1,AM HOF 2

GENERALOIREKTOR DER OSTERREICHISCHEN TEL.: U 21-5-15ELEKTRIZFTATSWIRTSCHAFTS- AG.

(VERBUNDGESELLSCHAFT)

TT

Sebr goeerter He rr Ubri'cht

Ich wende mich hute mit folgend-n Dingn

an Sie. Vor -rzem haben die Vorarlber-gcr Illwerke hier in

W ienr vorgesp7rochen, u-m ein Ansuchen an die Bundesregierun(

vorzubereiten dahinrehend, dad die Regierung im Zusamnenhang

mit de- TUnersee-Aucbau ein Ansuclc" -- die Weltbank wegen

eires Darlheens von 30 Millionen D enzureichen veranlat

werden soll. Die deutschen Stro-abnehmer verlan gen namlich

ine annahernd loofige Sich-rheit oer Rinanzierung als Vorbe-

dinen fur ihre Zustimmun7 zur Auealua, Von den rund 9o Millio-

ncnio der Th>nerece-Ausbau koston soll, verf.gon die Tl..rre

ber -ynIhernd 6oo Millionren,unefhr 100 Millionen solen -us

anderen uel]en fin3nziert werden nd 50 illioanen DM oind c,

d id-r Weltbnkkredit 17.chen soll. Die deutesche Renierung

is angeblien bere it, er Hdreziehung der 18 Tranche zuzu-

stire-. So viel ich hire, scheint der Finanzminister eine

rklarung zu beabsichtiger, die diesem Wunsch ontsprache, in-

soferne, als er in Erwagung zieht, nach Erledigung' des Reideck-

Kredite einen Antrag bei der isterreichischen Regierung be-

tre ffnd lUnersee einzubrin-en.

Nun mag es violleicht f r die 'Jeltbank nicht

nnero~'~ent sein, oinen Tell der deutschen 18 1 Trancho zu

moriL icren. Dic in Osterrch ma3gebenden Stellen seben

ire- seits otichhaltige wirtec :'citliche Grinde frr einc Unter-

stutzung des Lrnersee-Projektes ils 7 oeben an. Sie nelien

an, da19 r:inr Schwachuung den Int emerlpn Konzentes in diesen

Zsmenhang nichlt eintreten nerde ud dies schon aus rein

zeitli<hen Grinder.

Ti Zusanrenhang mi unserer letzten Unterreiung

i: Paris bitte ich ie, die gr-schilderte Sachlagec z pr'*Unfen

und nir mi'lichet umgoh-nd Thre Veinung hieiZu und Ihren Ret

zuteil wonden zu laser.

Zwischenzeitig hdrte ich durch V.Eng 1, Mr.Hill habe

ihm gesgt, das Questionnaire der Weltbank betreffend Interalpen

werde uns erst rch Erledigurnr des Be ck--Kredites zugehen.

Win a i e einstweilen !n der Entwicklun eines Vert-ras -

systes "ols oh" schon v3liEes Einvernehnen zwischen den Part-

xern b st{jnde. Veine Absicht ist es, diesen Entwurf eines

grunldaitzlichen Vertragssystems einzelweise mit den Partnern

zu diskutieren, sobald es in Unrissen fertig ist. Wenn Sie er-

lauben, werde ich Ihnen dieses Konzept Ubersenden, nur um Sie

ilber meine persdnlichLen Gedanken unterrichtet zu halten.

Ausgesprochen unerfreulich ist die Entwicklung der

bilateralen Verhndlungen zwischen Italien un -tins in Zusammen-

hang mit Reieck. Vor etlichen Wochen wurde die italienischIe

Regierung eingeladen, eine Delegation zu entsenden, Seither

gelangen nicht autorisierte Mitteilu ngen 'us Itaien teilweise

widerspTrechenden Inhalts his z Mir, ober im Effekt hat sich

nicits ereifgnet. Oh und w eine re ietion kommen wird, ist

elen unsich er wie ihr Auftraz. 'i r ist diese Entwiclklung

p ers nich edios. Diese Methode diskriminiert einfach alles,

was wir Elektrizitsf -c)heute halb Europas bisher getan haben

und zu erreichen vorhatten - angeeifert durch den europnischen

Gedanken, durch Vorteile fUr unseren Aufgabenkreis, durch die

Haltung unserer Regierungen.

Ich wei?, dra3 wdhrend des 1etzten Jahres ein italieri-

sches Hardelspassivum gegenilber Osterreich entstanden ist -

obwO ich anz privat dem Ergebnis der spezifischen Statistik

mitraue; denn in der Levante gibt es auch nicht EPU Tnder.

Aber schlie3lich handelt es sich in konkreten Fall um relativ

kleine Betrie, denen gro~e grundsdtzliche Positionen gegeniiber-

stehen.

Von dem abgesehen, bewirkt aber diese Nicht-Prozedur

in den Augen der Offentlichkeit auch steirende Abneigung gegen

all das, dessen wir dringendst bentigen: internationale Zu-

sammenarbeit, internationale Kredite, privatwirtschaftliche

ode r pers nliche Tnitiative u.s.f. - kurz, die einzige Art

einer Entwicklung die, zum wenigsten, mein lebenselement unter

den gegenwrtigen Verh itnissen ist.

Vielleicit ist die lage etvs besser, bic ich Thre

Antwort orhalte.

ToI verleibe mit be-ten Griien

Ihr ergebener

Herrn

Vic t or Ur m b r i c h t

Tternational Bank for Reconstructionend Developnmert,Uaohineton 25, D.C.

Lt oct