Ceylon - Sixth Power Project : Credit 1048 - Project Agreement - Conformed

OCMENTS CREDIT NUMBER 1048 CE Project Agreement (Sixth Power Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and CEYLON ELECTRICITY BOARD Dated , 1980 CREDIT NUMBER 1048 CE PROJECT AGREEMENT AGREEMENT, dated A JA 6X ,1980, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and CEYLON ELECTRICITY BOARD (hereinafter called the Board). WHEREAS by the Development Credit Agreement of even date herewith between the Democratic Socialist Republic of Sri Lanka (hereinafter called the Borrower) and the Association, the Asso- ciation has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million five hundred thousand dollars ($19,500,000), on the terms and conditions set forth in the Development Credit Agreement; and WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and the Board, the proceeds of the credit provided for under the Development Credit Agreement will be made available to the Board on the terms and conditions therein set forth; and WHEREAS the Board, 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. The Board shall carry out the Project described in Schedule 2 to the Development Credit Agreement with due dili- gence and efficiency and in conformity with appropriate adminis- trative, financial, engineering and public utility practices. -2- Section 2.02. In order to assist the Board in carrying out the Project, the Board shall employ consultants whose qualifica- tions, experience and terms and conditions of employment shall be satisfactory to the Association and the Board. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and works to be financed out of the proceeds of the Credit, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) The Board 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, trans- portation and delivery thereof to the place of use or installa- tion, and for such insurance any indemnity shall be payable in a currency freely usable by the Board to replace or repair such goods. (b) Except as the Association may otherwise agree, the Board 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. Section 2.05. (a) the Board shall furnish to the Associa- tion, promptly upon their preparation, the plans, specifications, reports, training programs, contract documents and construction and procurement schedules for the Project, and any material modi- fications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Board: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit, and to disclose their use in the Project; (ii) shall enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such information as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. -3- (c) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Board and the Association, the Board shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Board and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit. (d) The Board shall enable the Association's representatives to examine all plants, installations, sites, works, buildings, property and equipment of the Board and any relevant records and documents. Section 2.06. The Board shall duly perform all its obliga- tions under the Subsidiary Loan Agreement. Except as the Associa- tion shall otherwise agree, the Board 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 provi- sion thereof. Section 2.07. (a) The Board shall at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) The Board 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 the Board of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of the Board Section 3.01. The Board 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. -4- Section 3.02. (a) The Board shall at all times maintain its corporate existence and the right to carry on its operations and take all steps necessary to acquire, maintain and renew all rights, powers, privileges and franchises which are necessary or useful in the conduct of its business. (b) The Board shall at all times manage its affairs, plan its future expansion and carry on its operations, all in accor- dance with sound business, financial and public utility practices, under the supervision of experienced and competent management, and with the assistance of adequate, qualified and experienced staff. (c) The Board shall at all times operate and maintain its plants, machinery, equipment and other property, and make all necessary repairs and renewals thereof, in accordance with sound engineering and public utility practices. (d) Except in the normal course of business, the Board 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. Section 3.03. The Board shall furnish to the Association, any proposal for major changes in the Board's organizational structure, prior to implementing such proposals. Section 3.04. The Board shall, by June 30, 1981, furnish to the Association a program satisfactory to the Association and the Board for the training of staff, and thereafter implement such program in accordance with a timetable satisfactory to the Asso- ciation and the Bc-rd. Section 3.05. In the event that the electrical undertakings carried on by local authorities are to be transferred to the Board, the Board shall, prior to the date of transfer, prepare and agree with the Association a program for such transfer. Section 3.06. The Board shall, after consultation with the Association, implement a program for the improvement of its management, based on the recommendations of the consultant refer- red to in Section 5.01 (c) of the Development Credit Agreement. -5- ARTICLE IV Financial Covenants Section 4.01. The Board shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. The Board 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 appropriate 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: (A) four months after the end of each such year, certified copies of its financial statements for such year; and (B) ten months after the end of each such year, 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 con- cerning the accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, the Board shall not incur any debt unless its net revenues for the fiscal year immediately preceeding such incurrence or for a later twelve-month period ended prior to such incurrence, whichever is the greater, shall be not less than 1.25 times the maximum debt service requirements for any succeeding fiscal year on all debt including the debt to be incurred. For the purposes of this Section: (a) The term "debt" means all debt of the Board, including debt for the service of which the Board 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" means gross revenues from all sources, adjusted to take account of the Board's tariffs in effect at the time of the incurrence of debt even though they were not in -6- effect during the fiscal year or twelve-month period to which such revenues relate, less all expenses of operation and maintenance in connection with the generation, transmission and distribution of electricity, administration, and taxes, if any, but before deduc- tion of provision for depreciation of assets, interest and other charges on debt. (d) The term "debt service requirements" means the aggregate amount of amortization (including sinking fund allocations, if any), of, and interest and other charges on debt. (e) Whenever for the purposes of this Section, or of Section 4.04 hereof, 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 such rate of exchange as shall be reasonably determined by the Association; such valuation shall exclude any amount to which the Borrower may be entitled or liable in accordance with Section 42 (6) of the Ceylon Electricity Board Act. Section 4.04. (a) Except as the Association shall otherwise agree, the Board shall before the start of each fiscal year review, and adjust if necessary, its tariffs, to provide suffi- cient revenue to cover operating expenses including taxes, if any, and straight-line depreciation, and to produce an annual return on the current value of its net fixed assets in service of eight per cent (8%) or such higher return as may be agreed upon between the Borrower, the Association and the Board. (b) Prior to the payment to the Borrower, of any dividend on the share capital of the Board, including any dividend referred to in Section 39 (b) of the Ceylon Electricity Board Act, or to the making of any other payment or distribution to the Borrower in respect of any such year, the Board, out of its net income, shall satisfy, or make due provision for the satisfaction of, not less than 30% of the capital expenditures incurred in respect of such year, after adding thereto or deducting therefrom the amount of any shortfall or excess in the amount so satisfied or provided for in respect of the immediately preceding fiscal year below or above 30% of the capital expenditures incurred in respect thereof. (c) For the purposes of this Section: -7- (i) the annual return shall be calculated by relating net income before interest and other charges on debt for that year to the average of the current value of net fixed assets in service at the begin- ning and at the end of that year; (ii) the term "current value of net fixed assets" means the gross value of fixed assets as initially revalued in accordance with the valuation study provided for in Part V of Schedule 1 of the Loan Agreement between the Bank and the Board dated July 28, 1969 and thereafter as annually reviewed and revalued from time to time, on the basis of appropriate methods of valuation acceptable to the Association, less the amounts accumulated in respect of: (1) depreciation of assets (as so revalued); and (2) consumers' contributions or other contribu- tions to capital expenditures all in accor- dance with proper accounting principles consistently applied; (iii) the term "net income" means all revenues of the Board except income from investments not directly related to its operations, less all operating expenses; (iv) the term "operating expenses" means all expenses of operation and maintenance in connection with the generation, transmission and distribution of electricity, and of administration, including adequate provision for depreciation, and for taxes, if any, but excluding provision for interest and other charges on debt; (v) the term "the capital expenditures" shall mean all expenditures, including interest during construc- tion but excluding operating expenses, incurred in connection with the generation, transmission and distribution of electricity either: (A) by the Board; or -8- (B) by any Government Department or body for the purpose of each Joint Scheme entered into by such Department or body as referred to in Section 12 (1) of the Ceylon Electricity Board Act; and (vi) the term "debt" and "debt service requirements" have the meanings respectively set forth in Section 4.03 of this Agreement. Section 4.05. The Board shall ensure that as at the last working day of each month the aggregate amount due to it in respect of electricity supplied by the Board for which meters shall have been read (other than amounts disputed under Section 55 of the Ceylon Electricity Board Act and any amounts duly written off in the books of the Board) shall not exceed the aggregate amount of billings issued by the Board in respect of the period of 3 months expiring on such day or, if earlier, on the latest date as at which such aggregate amount of billings is known to the Board. Section 4.06. The Board shall: (i) by December 31, 1980, complete the on-going tariff study and review its tariff structure in consultation with the Borrower and the Association; and (ii) thereafter implement any agreed recommendations in accordance with a timetable satisfactory to the Borrower, the Association and the Board. Section 4.07. The Board shall by December 31, 1982, complete the reduction of its inventories to levels satisfactory to the Association, and thereafter maintain its inventories at such levels. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Developmene Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of the Board thereunder shall terminate on the earlier of the following two dates: 9- (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 Agree- ment. (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 the Board 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 General Conditions. 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 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 herein- after 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: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 10 - For the Board: Ceylon Electricity Board P.O. Box 540 Colombo Sri lanka Cable address: Telex: KILOWATTS 1368 KILOWATTS CE Colombo Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of the Board may be taken or executed by its Chairman or such other person or persons as he shall designate in writing, and the Board shall furnish to the Association suffi- cient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several coun- terparts, each of which shall be an original, and all collectively but one instrument. 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 By5 Regional Vice President South Asia CEYLON ELECTRICITY BOARD By/5/ iJ. Authorized Representative - 11 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the "Guidelines for Procurement under World Bank Loans and IDA Credits" published by the Bank in March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, the Board shall prepare and forward to the Association as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Association shall reasonably request; the Association will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. The Board shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in - 12 - Sri Lanka may be granted a margin of preference in accordance with, and subject to, the following provisions: 1. 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. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in Sri Lanka if the bidder shall have established to the- satisfaction of the Board and the Association that the manufacturing cost of such goods includes a value added int Sri Lanka equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) GrouE C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eva- luated 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. 4. If, as a result of the comparison under paragraph 3 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 evaluated 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 - 13 - which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. C. Other Procurement Procedures Vehicles, equipment and materials, each item not exceeding the equivalent of $10,000, may be procured in accordance with the Board's procurement procedures satisfactory to the Association, provided that items to be procured shall not exceed in the aggre- gate the equivalent of $100,000. D. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equi- valent of $100,000 or more: (a) Before bids are invited, the Board shall furnish to the Association, for its comments, the text of the invitations to bid and the specifications and other bidding documents, toge- ther with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or 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, the Board 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 shall furnish to the Association, in sufficient time for its review, a detailed report on the evalua- tion and comparison of the bids received, and such other informa- tion as the Association shall reasonably request. The Association shall, if it determines that the intended award would be inconsis- tent with the Guidelines or this Schedule, promptly inform the Board 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. - 14 - (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. 2. With respect to each contract not governed by the preceding paragraph, the Board 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 the respective 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 the Board and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an extension of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 10% of the original price, the Board shall inform the Association of the proposed modification, waiver, extension or change order and the reasons therefor. The Association, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform the Board and state the reasons for its determination. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198 . FOR SECRETARY