Jordan - Hussein Thermal Power Project : Credit 0386 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 386 JO Project Agreement (Hussein Thermal Power Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND JORDAN ELECTRICITY AUTHORITY DATED MAY 24, 1973 CONFORMED COPY CREDIT NUMBER 386 JO Project Agreement (Hussein Thermal Power Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND JORDAN ELECTRICITY AUTHORITY DATED MAY 24, 1973 PROJECT AGREEMENT AGREEMENT, dated May 24, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and JORDAN ELECTRICITY AUTHORITY (hereinafter called JEA). WHEREAS by the Development Credit Agreement of even date herewith between the Hashemite Kingdom of Jordan (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to ten million two hundred thousand dollars ($10,200,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that JEA agree to undertake such obligations toward the Association as hereinafter set forth; and WHEREAS by a subsidiary loan agreement between the Borrower and JEA, the proceeds of the credit provided for under the Development Credit Agreement will be made available to JEA on the terms and conditions therein set forth; and WHEREAS JEA, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. JEA shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices, and 4 shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. In order to assist in the preparation of detailed designs and tender documents, evaluation of bids and supervision of construction of the Project, JEA shall at all times employ engineering consultants acceptable to the Association upon terms and conditions satisfactory to the Association, and shall at all times employ engineering consultants acceptable to the Association for the design and supervision of construction of the 132 kV transmission system between Zarqa and Amman. Section 2.03. JEA shall employ tariff specialists acceptable to the Association under terms of reference and on conditions satisfactory to the Association to study and make recommendations to JEA not later than December 31, 1974 for its wholesale tariff structure, and to the Government for a retail tariff structure to be implemented throughout Jordan. Section 2.04. JEA shall employ, not later than April 30, 1974, management consultants acceptable to the Association under terms of reference and on conditions satisfactory to the Association to advise JEA on its organizational changes resulting from the project and to make recommendations covering inter alia JEA's financial control, accounting, budgeting and management structure and procedures. Section 2.05. In carrying out Part A of the Project, JEA shall employ contractors acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.06. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972 as revised in October 1972 (hereinafter called Guidelines for Procurement), and in accordance with, and subject to, the provisions set forth in Schedule I to this Agreement. Section 2.07. (a) JEA undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by JEA to replace or repair such goods. 5 (b) Except as the Association may otherwise agree, JEA shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project until its completion. Section 2.08. (a) JEA shall furnish to the Association promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) JEA: (i) shall maintain rfcords adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; and (ii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.09. JEA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, JEA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of JEA Section 3.01. JEA shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with sound engiieering, administrative, financial and public utility practices and under the supervision of experienced and competent management assisted by experienced and competent staff in adequate numbers. To that end, but without limiting the generality of the fofegoing, JEA shall promptly after receipt furnish to the Association the recommendations of its consultants, review with the Association such recommendations without delay, and implement such recommendations as shall have been agreed between the Association and JEA to be appropriate. Section 3.02. (a) JEA shall maintain its existence and right to carry on operations, and shall take all steps necessary to acquire, maintain and renew all interests in land and other properties and all rights, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business. 6 (b) JEA shall at all times operate and maintain its plants, facilities, equipment and other property, and promptly as required make all necessary repairs and renewals thereof, in accordance with sound engineering and public utility practices. (c) Except as the Association shall otherwise agree, JEA shall not sell, lease, transfer or otherwise dispose of any of its property or assets, which shall be required for the efficient operation of its business and undertaking. Section 3.03. JEA shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. JEA shall ensure that the position of its General Manager, Chief Engineer, Chief Accountant and Superintendent in charge of Hussein Power Station shall at all times be filled by qualified and experienced persons and shall consult with the Association regarding appointments to the post of General Manager, and shall inform the Association of the names and qualifications of individuals filling the remaining posts and prospective appointments thereto. Section 3.05. JEA shall at all times maintain its salary scales at levels adequate to ensure the employment of competent staff in sufficient numbers. Section 3.06. JEA shall submit to the Association for its review the detailed proposals for its preliminary reorganization, remuneration schedules and the proposed program for recruitment and training of its staff, including the relevant cost estimates in local and foreign currencies not later than September 30, 1973. ARTICLE IV Financial Covenants Section 4.01. JEA shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. JEA shall: (i) have its accoints and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its financial statements for such 7 year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of JEA and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) Except as the Association shall otherwise agree, JEA shall take all necessary steps to establish and maintain tariffs at a level sufficient to yield an annual rate of return of not less than 9% on the value of net fixed assets. (b) For the purposes of this Section: (i) The required annual rate of return shall be calculated by using as the denominator in respect of each fiscal year the average of net fixed assets in operation for power at the beginning and at the end of each such year and as the numerator JEA's operating income for that same year. (ii) The term "net fixed assets" shall mean the gross value of such assets in operation less accumulated depreciation, all determined in accordance with sound valuation and depreciation methods, acceptable to the Association. (iii) The term "operating income" shall mean the difference between: (A) gross revenues from electric power, plus other recurring fees and charges associated with electric power; and (B) the operating and administrative expenses, including overhead and adequate provision for maintenance and repairs, provision for straight line depreciation based on the useful life of major categories of assets, and for taxes, but before provision for interest and other charges on debt. Section 4.04. Except as the Association shall otherwise agree, JEA shall not incur any debt without prior approval of the Association, unless its net revenues for the fiscal year next preceding the date of such incurrence or for any later twelve-month period ended prior to the date of such incurrence, shall be not less than 1.5 times the maximum debt service requirement in any succeeding fiscal year (including the fiscal year in which such debt is to be incurred) on all debt including the debt to be incurred. For the purposes of this Section: 8 (a) The term "debt" shall mean all indebtedness of JEA, including debt incurred by others on behalf of JEA but for the service of which JEA is responsible, maturing by its terms more than one year after the date on which it is originally incurred. (b) Debt shall be deemed to be incurred on the date of execution and delivery of a contract, loan agreement or other instrument providing for such debt. (c) The term "net revenues" shall mean gross revenues from power operations, adjusted to take account of JEA's rates in effect at all time of the incurrence of debt even though they were not in effect during all or a part of the fiscal year .or twelve-month period to which such revenues relate, less all operating and administrative expenses and provisions for taxes, if any, but before provision covering depreciation, interest and other charges on debt. (d) The term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (e) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and JEA shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and JEA shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of JEA and other matters relating to the purpose of the Credit. Section 5.02. The Association and JEA shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by either of them of its obligations under this Agreement or the performance by the Borrower and JEA of their respective obligations under the Subsidiary Loan Agreement. 9 Section 5.03. JEA shall enable the Association's representatives to examine the Project and all plants, sites, works, properties and equipment of JEA and any other relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of JEA thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a)(ii) of this Section, the Association shall promptly notify JEA of this event. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: 10 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For JEA: Jordan Electricity Authority P. 0. Box 2310 Amman Hashemite Kingdom of Jordan Cable address: SAKA Amman, Jordan Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of JEA may be taken or executed by the Chairman of the Board of Directors or such other person or persons as he shall designate in writing. Section 7.03. JEA shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of JEA, take any action or execute any documents required or permitted to be taken or executed by JEA pursuant to any of the provisions of this Agreement. Section 7.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 11 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa JORDAN ELECTRICITY AUTHORITY By /s/ Z. Mufti Authorized Representative 12 SCHEDULE 1 Procurement A. Contracts Governed by Guidelines 1. With respect to any contract for equipment estimated to cost the equivalent of $50,000 or. more: (a) If bidders are required to prequalify, JEA shall, before qualification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by JEA to the Association for its comments before the applicants are notified and JEA shall make such additions to or deletions from the said list as the Association shall reasonably request. (b) Before bids are invited, JEA shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (c) After bids have been received and evaluated, JEA shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report, by the consultants for the Project referred to in Section 2.02 of this Agreement, on the evaluation and comparison of the bids received, together with the recommendations for award of the said consultants, and the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform JEA and the Borrower, and state the reasons for such determination and advise JEA of any cancellation pursuant to the provisions of paragraph 3(c) of Schedule I to the Development Credit Agreement. (d) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. 13 (e) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 2. With respect to any other contract for equipment, JEA shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform JEA and the Borrower, and state the reasons for such determination and advise JEA of any cancellation pursuant to the provisions of paragraph 3(c) of Schedule I to the Development Credit Agreement. B. Supplemental Rules on Bid Evaluation and Comparison I. For the purpose of evaluation and comparison of bids, customs duties and other import taxes on imported goods, and sales and similar taxes on locally produced goods, shall be excluded, except to the extent hereinafter provided, and bidders shall be required to state in their bid the c.i.f. (port of entry) price for imported goods, or the ex-factory price for locally produced goods. The cost to the Borrower of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be taken into account in the evaluation of bids in accordance with paragraph 4.7 of the Guidelines for Procurement. 2. For purposes of the provisions hereinafter set forth, the following terms shall have the following meanings: (a) Preferred Domestic Bid means a bid offering goods manufactured in Jordan if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in Jordan of not less than 20% of the ex-factory bid price. (b) Non-preferred Domestic Bid means any other bid offering goods imnanufactured in Jordan. (c) Foreign Bid means any bid other than those specified in (a) or (b) above. 14 3. For goods included in Category 1 of the table set out in paragraph I of Schedule 1 to the Development Credit Agreement, a margin of preference may be granted by the Borrower to Preferred Domestic Bids. Such preference shall be granted by adding to each Foreign Bid, for the purpose only of comparison with Preferred Domestic Bids, an amount (hereinafter called "Domestic Preference Margin") equal to the smaller of (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the goods offered in the bid, or (ii) 15% of the c.i.f. bid price of such goods. 4. If Preferred Domestic Bids are received, the comparison among all evaluated bids for each contract shall be made in the stages and with the preferences indicated below: Stage Bids to be Compared Preference 1. All Preferred Domestic Bids and Non-preferred None Domestic Bids. I. (a) Lowest evaluated bid under Stage 1, if Add Domestic Preferred Domestic Bid, with all Foreign Preference Bids; Margin to Foreign Bids or (b) Lowest evaluated bid under Stage 1, if None Non-preferred Domestic Bid, with all Foreign Bids. Ill. If lowest evaluated bid under Stage 11 is not None the lowest evaluated bid under Stage 1, all Foreign Bids. 5. The bidding documents shall clearly indicate any preference which will be granted to Preferred Domestic Bids, the information required to establish the eligibility of a bid for such preference and the methods and stages that will be followed in the evaluation and comparison of bids to give effect to such preference.