Madagascar - Andekaleka Hydroelectric Project : Credit 0817 - Development Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 817 MAG Development Credit Agreement (Andekaleka Hydroelectric Project) between DEMOCRATIC REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated June 19, 1978 CREDIT NUMBER 817 MAG DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 19, 1978, between the DEMOCRATIC REPUBLIC OF MADAGASCAR (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association.) WHEREAS (A) the Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out by the Malagasy Elec- tricity and Water Corporation (hereinafter called JIRAMA) with the Borrower's assistance and, as part of such assistance, the Bor- rower will make available to JIRAMA the proceeds of the Credit as hereinafter provided; (C) by letter addressed to the Minister of Economy and Commerce of the Borrower on August 10, 1976 the Association granted an advance to the Borrower of $400,000 for the preparation of the Project; (D) pursuant to the terms of said advance, the amount thereof is to be refunded to the Association out of the proceeds of the Credit provided for in this Agreement; (E) the Borrower intends to contract a loan from the Abu Dhabi Fund for Arab Development in an amount of $5,000,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and the Abu Dhabi Fund; (F) the Borrower intends to contract a loan from the Caisse Centrale de Cooperation Economigue in an amount in French francs equivalent to $16,500,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement (hereinafter called the CCCE Loan Agreement) to be entered into between the Borrower and Caisse Centrale; (G) the Borrower intends to contract a loan from the Kuwait Fund for Arab Economic Development in an amount of $10,000,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and the Kuwait Fund; -2- (H) the Borrower intends to contract a loan from the Saudi Development Fund in an amount of $12,000,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement to be entered into between the Borrower and the Saudi Fund; (I) by an agreement dated May 23, 1977, the Canadian International Development Agency made a loan to the Borrower in the principal amount of fourteen million Canadian dollars (Can$14,000,000) to assist in financing part of the Project on the terms and conditions therein set forth, and the Borrower intends to contract from such Agency an additional loan in the amount of about Cany,3,000,000 for the same purpose; (J) by an agreement dated April 30, 1978 the Arab Bank for Economic Development of Africa agreed to make a loan to the Borrower in an aggregate principal amount in various currencies equivalent to ten million dollars ($10,000,000) to assist in financing part of the Project on terms and conditions therein set forth; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth hereinafter and in the Project Agreement of even date herewith between the Association and JIRAMA; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agreements of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: -3- (a) "Project Agreement" means the agreement between the Association and JIRAMA of even date herewith, as the same may be amended from time to time, and such term includes all schedules to the Project Agreement and all agreements supplemental to the Project Agreement; (b) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and JIRAMA pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (c) "JIRAMA" means Jiro Sy Rano Malagasy, the Malagasy Electricity and Water Corporation, created by Ordinance No. 75-024 of October 17, 1975; and (d) "Statutes" means the statutes of JIRAMA set forth in Ordinance No. 75-024 of October 17, 1975. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to thirty-three million dollars ($33,000,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Associ- ation, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) Promptly after the Effective Date, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and pay to itself the amount required to repay the principal amounts of the advance referred to in paragraphs (C) and (D) of the Preamble to this Agreement withdrawn and outstanding as of such date and to pay any unpaid charges thereon. Any unwithdrawn balance of the authorized amount of such advance shall automati- cally be cancelled on the same date. -4- Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Credit, shall be governed by the provisions set forth or referred to in Section 2.03 of the Project Agreement. Section 2.04. The Closing Date shall be December 31, 1983 or such later date as the Association shall establish after consultation with the Borrower. The Association shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Service charges shall be payable semiannually on March 15 and September 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit in semiannual installments payable on each March 15 and September 15 commencing September 15, 1988, and ending March 15, 2028, each installment to and including the installment payable on March 15, 1998, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) Without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, the Borrower shall cause JIRAMA to perform in accor- dance with the provisions of the Project Agreement and the Subsidiary Loan Agreement all the obligations therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable JIRAMA to perform such obliga- tions, and shall not take or permit to be taken any action which would prevent or interfere with such performance. -5- (b) The Borrower shall relend the proceeds of the Credit to JIRAMA under a Subsidiary Loan Agreement to be entered into with JIRAMA containing terms and conditions which shall have been approved by the Association, including, inter alia, (i) interest on the principal amount outstanding from time to time at an annual rate of seven and one-half per cent (7-1/2%); and (ii) a repayment term of twenty-five (25) years, including a five (5) year grace period during which interest shall be capitalized. (c) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. Section 3.02. The Borrower shall promptly take any action necessary on its part to enable JIRAMA to comply with the provi- sions of Sections 4.03, 4.05 and 4.06 of the Project Agreement. Section 3.03. Without limitation or restriction upon any of its obligation under Section 3.01 of this Agreement, the Borrower shall provide or cause JIRAMA to be provided with the necessary funds to finance deficits and construction requirements of the water operations of JIRAMA. Section 3.04. Except as the Association and the Borrower shall otherwise agree, (a) prior to the completion of the Project no earnings from the electricity operations of JIRAMA shall be used for the payment of dividends, and (b) after completion of the Project, dividends will be paid out of such earnings only after provision has been made for debt service and adequate reserves have been set aside for the construction requirements of such electricity operations. ARTICLE IV Remedies of the Association Section 4.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified pursuant to paragraph (h) thereof: (a) JIRAMA shall have failed to perform any covenant, agreement or obligation of JIRAMA under the Project Agreement or the Subsidiary Loan Agreement; -6- (b) An extraordinary situation shall have arisen which shall make it improbable that JIRAMA will be able to perform its obliga- tions under the Project Agreement or the Subsidiary Loan Agree- ment; (c) The Statutes shall have been amended, suspended, abro- gated, repealed or waived in such a way as to materially and adversely affect the ability of JIRAMA to carry out the covenants, agreements and obligations set forth in the Project Agreement; (d) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablish- ment of JIRAMA or for the suspension of its operations; (e) (i) Subject to subparagraph (ii) of this paragraph: (A) The right of the Borrower or of JIRAWA to withdraw the proceeds of any grant or loan made for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor, or (B) any such loan shall have become due and payable prior to the agreed maturity thereof. (ii) Subparagraph (i) of this paragraph shall not apply if: (A) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower or of JIRAMA to perform any of its obligations under such agreement, and (B) adequate funds for the Project are available to the Borrower or JIRAMA from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement and of JIRAMA under the Project Agreement. Section 4.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (d) thereof: (a) any event specified in paragraphs (a) or (e) of Section 4.01 of this Agreement shall occur and shall continue for a period of 30 days after notice thereof shall have been given by the Association to the Borrower and JIRAMA; and -7- (b) any event specified in paragraphs (c), (d) or (e) (i) (B) of Section 4.01 of this Agreement shall occur. ARTICLE V Effective Date; Termination Section 5.01. The following events are specified as addi- tional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the Subsidiary Loan Agreement has been executed on behalf of the Borrower and JIRAMA; and (b) the agreements for the provision of the balance of external funds to be obtained by JIRAMA for purposes of the Project have been signed and all conditions precedent to the disbursement of such funds, except for the effectiveness of this Agreement, have been fulfilled. Section 5.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by JIRAMA, and is legally binding upon JIRAMA in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly autho- rized or ratified by the Borrower and JIRAMA and is legally binding upon the Borrower and JIRAMA in accordance with its terms. Section 5.03. The date November 15, 1978, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 5.04. The provisions of Section 4.01 (d) of this Agreement shall cease to apply on a date twenty-six years after the date of this Agreement. -8- ARTICLE VI Representative of the Borrower; Addresses Section 6.01. The Minister responsible for Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 6.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: Ministere aupres de la Presidence de la R6publique Chargg des Finances et du Plan Antananarivo Madagascar Cable address: Telex: MINFINPLAN 22339 Antananarivo For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 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 -9- Antananarivo, Democratic Republic of Madagascar, as of the day and year first above written. DEMOCRATIC REPUBLIC OF MADAGASCAR By /s/ Rakotovao-Razakaoboana Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Andre R. Gue Acting Regional Vice President Eastern Africa - 10 - SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the Categories of items to be financed out of the proceeds of the Credit, the allocation of the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Civil Works 6,800,000 22% (2) Supply and in- stallation of: (a) Turbines, 5,000,000 100% valves, other equipment (b) Gates and 8,900,000 100% tunnel linings (c) Transformers 1,500,000 100% (3) Consultants' ser- 1,200,000 100% of foreign vices; training expenditures (4) Refunding of Proj- 400,000 100% of amount ect Preparation outstanding at Facility Effective Date t (5) Unallocated 9,200,000 TOTAL 33,000,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than the Borrower and for - 11 - goods or services supplied from the territory of any country other than the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower and for goods or services supplied from the territory of the Borrower. 3. The disbursement. percentages have been calculated in com- pliance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expendi- tures prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of $200,000 may be made in respect of Category (3) on account of payments made for such expenditures before that date but after September 1, 1977. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Association are not needed to meet other expendi- tures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. 6. If the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with - 12 - the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit and the Association may, without in any way re- stricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Associ- ation' s reasonable opinion, represents the amount of such expend- itures whica would otherwise have been eligible for financing out of the proceods of the Credit. - 13 - SCHEDULE 2 Description of the Project Part A: Construction and equipping of a hydroelectric plant on the Vohitra River, about 115 kilometers east of Antananarivo, including, inter alia: (i) construction of a concrete diversion dam about 10 meters high and about 125 meters long with an intake tower about 20 meters high; (ii) construction of a headrace tunnel of about 5.2 meters in diameter and about 4 kilometers long with an underground powerhouse with tailrace and access tunnels designed for four units of about 28 MW; (iii) provision of two Francis turbines and two gener- ators of about 28 MW each; (iv) provision of electrical and mechanical equipment; and (v) construction of a transmission line of about 150 kilometers and associated substations between the plant and Antananarivo. Part B: (i) Preparation of preliminary research and design for a storage reservoir with an approximate volume of 400,000,000 to 500,000,000 cubic meters, to be constructed at Ankorahotra, at about 45 kilometers upstream of Andekaleka, on the Vohitra river; (ii) preparation of a long-term development plan for the power sector; (iii) preparation of (a) a study for improvements in the management of JIRAMA; and (b) a study for electricity tariffs; and (iv) training of JIRAMA staff. The Project is expected to be completed by December 31, 1982.