Jordan - Second Hussein Thermal Power Project : Credit 0570 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 570 JO Project Agreement (Second Hussein Thermal Power Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND JORDAN ELECTRICITY AUTHORITY DATED JULY 7, 1975 PROJECT AGREEMENT AGREEMENT, dated July 7, 1975, 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 five million dollars ($5,000,000), 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; WHEREAS by a subsidiary loan agreement of even date herewith 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 4 conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. (a) In order to assist JEA in carrying out the Project, JEA shall appoint on or before July 31, 1975, consultants acceptable to the Association, upon terms and conditions satisfactory to the Association which shall include the requirement that the study described in Part B of the Project shall be completed within 12 months of the appointment of the aforesaid consultants; and (b) JEA shall discuss with the Borrower and the Association, the recommendations of the study described in Part B of the Project and the actions to be taken to implement the results of such discussions. Section 2.03. Except as the Association shall otherwise agree, the goods, works and services (other than consultants' services) for the Project shall be procured in accordance with the provisions of Schedule 1 to this Agreement. Section 2.04. (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. (b) Except as the Association may otherwise agree, all goods and services financed out of the proceeds of the Credit relent to JEA by the Borrower shall be used exclusively for the Project. Section 2.05. (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 records 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; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's representatives to visit the facilities and construction sites included in the Project, and to examine the 5 goods financed out of such proceeds and any relevant records and documents; and (iii) 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. (c) JEA shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of JEA and any rlevant records and documents. Section 2.06. 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. Section 2.07. (a) JEA shall submit periodic reports to the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and tinder the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) JEA shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by JEA of its obligations under this Agreement and inder the Subsidiary Loan Agreement. 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 engineering, administrative, financial and public utility practices and tinder the supervision of experienced and competent staff in adequate numbers. 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. (b) JEA shall at all times operate and maintain its plants, facilities, equipment and other property, and promptly as required make all necessary repairs 6 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. 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 accounts 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 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. 7 (ii) The term "net fixed assets" shall mean the gross value of such assets in operation less accumulated depreciation; these assets shall be valued and revalued from time to time in accordance with sound and consistently maintained 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: (i) 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. (ii) 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. (iii) The term "net revenues" shall mean gross revenues from power operations, adjusted to take account of JEA's rates in effect at the 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. 8 (iv) The term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt. (v) 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 Effective Date; Termination; Cancellation and Suspension Section 5.01. The Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (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 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated 9 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: 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.O. Box 2310 Amman Hashemite Kingdom of Jordan Cable address: SAKA Amman, Jordan Section 6.02. 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 its Chairman of the Board of Directors or such other person or persons as he shall designate in writing. Section 6.03. 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 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 10 IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa JORDAN ELECTRICITY AUTHORITY By /s/ Abdullah Salah Authorized Representative 11 SCHEDULE 1 Procurement A. General Procedures Contracts shall be let under procedures consistent with those set forth in 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 the Guidelines), on the basis of international competitive bidding. B. Evaluation and Comparison of Bids for Goods; Preference for Domestic Manufacturers 1. For the purpose of evaluation and comparison of bids for the supply of goods: (i) 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 domestically-manufactured goods; (ii) customs duties and other import taxes on imported goods, and sales and similar taxes on domestically-supplied goods, shall be excluded; and (iii) the cost to JEA of inland freight and other expenditures incidental to the delivery of goods to the place of their use or installation shall be included. 2. Goods manufactured in Jordan may be granted a margin of preference in accordance with, and subject to, the following provisions: (a) All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. (b) After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Jordan if the bidder shall have established to the satisfaction of JEA and the Association that the manufacturing cost of such goods includes a value added in Jordan equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other bids offering goods manufactured in Jordan. (3) Group C: bids offering any other goods. 12 (c) All evaluated bids in each group shall be first compared among themselves, excluding any customs duties and other import taxes on goods to be imported and any sales or similar taxes on goods to be supplied domestically, to determine the lowest evaluated bid of each group. Such lowest evaluated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. (d) If, as a result of the comparison under paragraph (c) above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the c.i.f. bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid, or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph (c) is the lowest evaluated bid shall be selected. C. Review of Procurement Decisions by Association 1. Review of prequalification. If prequalification is required, 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, deletions from, or modifications in, the said list as the Association shall reasonably request. 2. Review of invitation to bid and of proposed awards and final contracts. With respect to all contracts for equipment estimated to cost the equivalent of $50,000 or more: (a) 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 13 procedures 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. (b) 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 which it intends to award the contract and the reasons for the intended award and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendation for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform JEA and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked or prequalification invited. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract. 3. With respect to each contract to be financed out of the proceeds of the Credit and not governed by the preceding paragraph, JEA shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of 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 was not consistent with the Guidelines or this Schedule, promptly inform JEA and state the reasons for such determination.